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TMI Blog2013 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that the said income would be disclosed while filing the return for A.Y. 1995-96 ought to have brought such fact to the notice of the Assessing Officer. The contention that there was no obligation cast upon the petitioner to make such disclosure while filing the return of income, does not merit acceptance. Assessing Officer had made some efforts and examined the record of the previous assessment year, he may have come to know that this was a search and could have taken consequent action thereon. However, that by itself would not absolve the petitioner from the duty to disclose all primary facts before the Assessing Officer Merely because the format in which the return is required to be filed does not provide for any column wherein the assessee is required to state that this is a search case and that he had made certain disclosures during the course of search, does not mean that an assessee is not required to disclose other facts that are material for his assessment At the cost of repetition it may be stated that the fact regarding the petitioner having made a disclosure, though subsequently retracted, was material for the assessment of the petitioner for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Difference of cash found during search. Rs. 30000/- Gold ornaments (four bangles) made during marriage. Rs. 143000/- Payment made to Babulal M. Bhalodia Rs. 68753/- Excise penalty paid on behalf of Jay Shakti Chemicals. Rs. 2515753/-. In reply to question No.24 of the statement on oath recorded on 21.4.1995, it is stated by the assessee that the tax payable on the disclosed income will be paid at the time of return of income becomes due for A.Y. 1995-96. So as per above, the assessee has not only disclosed the income of Rs. 25,15,753/- but also agreed to pay the tax payable on disclosure. For A.Y. 1994-95 assessment was completed in this circle on 27.3.1997 i.e. after the search operation. The assessee was well aware that his jurisdiction lies with this circle. Even then the assessee chose to file the return of income for A.Y. 1995-96 on 26.3.1997 with the ITO, Wd.1(2), Rajkot and got his assessment completed for A.Y. 1995-96 without making any reference to the search u/s.132 which was taken in his case on 21.4.1995 which shows mala-fide inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares was disclosed, it was for the ITO to check up the correctness of the assessees' claim. 4.1 Referring to the reasons recorded, it was pointed out that according to the respondent, the petitioner had filed the return of income before the Income Tax Officer, Ward 1(2), Rajkot despite the fact that he was aware that his jurisdiction lies with the Investigation Circle - 1(1). It was submitted that the petitioner was regularly assessed by the ITO, Ward 1(2) and at no point of time was he ever informed about the change in jurisdiction. If as a consequence of the search, there was a change in the jurisdiction, the Department ought to have informed him that he should have filed subsequent returns with the Investigation Circle and not with the regular ward. Referring to the return filed by the petitioner for the assessment year 1994-95, it was pointed out that the said return was forwarded by the Assessing Officer, Ward 1(2) to the Investigation Circle. Hence, the said Assessing Officer was well aware of the fact that this was a search case. Under the circumstances, in case of the returns filed by the petitioner for the subsequent years, the petitioner should either have been to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded, it was pointed out that according to the respondent, the return of income filed by the petitioner for assessment year 1995-96 as well as the order passed under section 143(3) of the Act are without jurisdiction and have no legal sanctity. Attention was invited to the affidavit-in-reply filed by the respondent to point out that in the affidavit-in-reply, the respondent has adopted a different stand and has stated that it is not the case of the Department that the order passed by the Income Tax Officer, Ward 1(2) is bad in law. The only point is that income has escaped assessment. 4.3 Reference was made to the contents of Civil Application No.4816/2004 filed by the respondent for vacating the interim relief granted in the present petition wherein it has been stated that out of the disclosure of Rs. 25,12,753/-, the amount of Rs. 2,00,000/- being marriage expenses of daughter and value of gold ornaments being bangles amounting to Rs. 30,000/- have been taxed in the assessment year 1994-95. Further, the amount of Rs. 1,43,000/- pertains to financial year 1992-93 relevant to assessment year 1993-94. The difference of cash of Rs. 20,000/- has been taxed in the reopened assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. During the course of search proceedings which had taken place on 21st April, 1995, the petitioner had declared undisclosed income of Rs. 25,15,753/- and had stated that tax payable on the income so disclosed by him would be paid at the time when the return of income became due for assessment year 1995-96. Thus, the petitioner had not only disclosed income of Rs. 25,15,753/- but had also agreed to pay tax payable on such disclosure. It was pointed out that subsequently by a letter dated 8th May, 1995 the petitioner had retracted his disclosure made during the search. However, while filing the return of income for the year 1995-96, the petitioner had not disclosed that this was a search case, nor did he at any time during the course of assessment proceedings bring to the notice of the Assessing Officer that he had made a disclosure. All these were undoubtedly material for the petitioner's assessment and as such, evidently the petitioner has failed to disclose primary facts regarding the search. Under the circumstances, the petitioner having failed to disclose full and true facts during the course of assessment proceedings under section 143(3) of the Act, the reopening of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled his return of income for assessment year 1994-95 on 26th March, 1996 and the assessment came to be framed on 27th January, 1997. The return of income for the year under consideration, that is, assessment year 1995-96 came to be filed on 26th March, 1997. Both the returns came to be filed with the Income Tax Officer, Ward 1(2), Rajkot. In relation to assessment year 1994-95, the Assessing Officer, Ward 1(2) forwarded the return of income to ACIT Investigation (1), Rajkot. Accordingly, the proceedings in relation to assessment year 1994-95 were taken before the Investigation Circle and the assessment came to be framed on 27th March, 1997. The petitioner filed the return in relation to assessment year 1995-96 before the Assessing Officer, Ward 1(2). He, however, admittedly did not disclose the fact regarding the disclosure made during the course of the search as according to him, there was no duty cast upon him to incorporate in the return the fact that this was a search case. 7. It is an undisputed position that the assessment in the present case is sought to be reopened after the expiry of a period of four years from the end of the relevant assessment year. Under the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn, this court in the petitioner's own case in Special Civil Application No.6557 of 2001 and other cognate matters, by a judgment and order dated 13th August, 2012 has in relation to assessment years 1997-98 to 2000-01 wherein the assessments were sought to be made under section 147 of the Act on the sole ground that the returns filed before the Income Tax Officer, Ward 1(2) were invalid returns, has held thus:- "12. In the present case, undisputed facts are that the petitioner was ordinarily assessed by Income Tax Officer, Ward 1(2), Rajkot. It was before this officer that the assessee filed his returns for the assessment year 1996-97 and later years. Such returns were accepted under section 143(1) of the Act. It is also not in dispute that previously on 21.4.1995, the assessee's premises were subjected to search operations. Before us, the Department has produced a notification dated 30.4.1991 issued under section 120 of the Act by C.B.D.T. by virtue of which, the jurisdiction in case of all persons (other than those in respect of which the DC (IT), Special Range, Rajkot has jurisdiction) where search under section 132 of the Act has been carried out on or after 1.4.1985 and res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer. It may be that for the assessment year 1994-95, the return was processed under section 143(3) of the Act by the A.C.I.T. (Investigation), Rajkot. However, the fact that being subjected to search, all subsequent returns had to go before specified officer and not the ordinary Assessing Officer having jurisdiction over the petitioner's assessment, was nowhere conveyed to him. Section 120(1) of the Act does envisage that the income-tax authorities shall exercise powers and functions as assigned to them by the Board under the Act. The fact that the Board had jurisdiction to issue notification transferring jurisdiction in specified class of cases is not in dispute. However, when the assessee filed his returns before his ordinary Assessing Officer, primarily the Assessing Officer concerned could have either refused to accept such returns or could have transferred them before the competent authority. He not having done so, after a long period of time, it would not be open for the Department to ignore such returns contending that the same were filed before the officer who had no jurisdiction and therefore, such returns were non est. Any such attempt on the part of the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the aforesaid contention, it may be pertinent to refer to the reply dated 16th January, 2003 filed by the petitioner in response to the notice dated 20th December, 2002 issued under section 142(2) of the Act wherein, in relation to the issue at paragraph (d) of the notice regarding excise duty penalty of Rs. 68,753/-, it has been stated that the same had been paid by the company M/s. Jayshakti Chemicals Pvt. Ltd. in the month of February, 1995. In relation to the issue raised vide paragraph (e) which pertains to the construction of four shops in the building known as "Panchshil", it has been stated that the said shops had been constructed by the petitioner's sisters during the period from 18th December, 1994 to 3rd March, 1995 for Rs. 54,000/-. As regards the issue raised in paragraph (g), relating to Rs. 20,00,000/- which was received by Shri Kishorbhai Andipara, it has been stated that the said amount has been paid to the company between the accounting year 1992-93 to the accounting year 1994-95. A perusal of the assessment order in respect of assessment year 1996-97, shows that the Assessing Officer has not discussed the aforesaid three items. 11. As is apparent from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer. The contention that there was no obligation cast upon the petitioner to make such disclosure while filing the return of income, does not merit acceptance. The Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191, while examining the scope of disclosure which section 147 of the Act demands, has held thus: "... The words used are "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise - the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of the sale price came within the scope of Section 10(2)(vii). That question should have been examined at the very outset for the purpose of considering whether the assessee had placed before the Income Tax Officer truly and fully all material facts necessary for the purpose of its assessment. If it is found that any portion of that sale price are profits then in our opinion the High Court was right in holding that the assessee had failed to place before the Income Tax Officer during the original assessment truly and fully all material facts necessary for the purpose of assessment. Admittedly the price realised at the sale in excess of the written down value of the assets sold, had not been included as profits in the return submitted by the assessee. It had also not shown the same in Section 'D' of Part I of the return. It may also be noted that the assessee had not shown either in its return or in any of the documents submitted to the Income Tax Officer, the written down value of the assets sold. Hence not only the Income Tax Officer was not told that the assessee had earned any profits under Section 10(2)(vii) nor even the essential fact viz. the written down value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of the previous assessment year, he may have come to know that this was a search and could have taken consequent action thereon. However, that by itself would not absolve the petitioner from the duty to disclose all primary facts before the Assessing Officer. Merely because the format in which the return is required to be filed does not provide for any column wherein the assessee is required to state that this is a search case and that he had made certain disclosures during the course of search, does not mean that an assessee is not required to disclose other facts that are material for his assessment. At the cost of repetition it may be stated that the fact regarding the petitioner having made a disclosure, though subsequently retracted, was material for the assessment of the petitioner for the assessment year under consideration. Thus, by not disclosing such material fact, evidently, the petitioner has failed to disclose fully and truly all material facts necessary for his assessment. The Assessing Officer was, therefore entitled to hold a belief as regards escapement of income chargeable to tax on the ground that there was failure on the part of the petitioner to disclose ful ..... X X X X Extracts X X X X X X X X Extracts X X X X
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