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TMI Blog2013 (4) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the Tribunal was justified and correct in law in quashing the reassessment order passed by the Assessing Officer U/s.l43(3)/147 of the Income Tax Act, 1961 on the ground that the reassessment proceeding initiated was barred by limitation? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in quashing the reassessment order passed under section 147 of the Income Tax Act, 1961?" 3. We have heard Mr. A. Hazarika, learned Standing Counsel, Income Tax Department, for the appellant, and Mr. R. Goenka, learned counsel, for the respondent. 4. Considering the fact that both the substantial questions of law, formulated in this appeal, are inter-woven and insevereably connected with each other, we take up both these questions for decision together. 5. Presenting the case on behalf of the appellant, Mr. A. Hazarika, learned Standing counsel, submits that in the case at hand, though a period of four years had elapsed from the date of making of the assessment, the power of re-assessment was correctly exercised by the Assessing Officer inasmuch as the assessee had not included, in the total income of the assessee, the amount of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aces reliance on Associated Stone Industries Ltd. v. CIT, Rajasthan, reported in [1997] 224 ITR 560 (SC), Calcutta Discount Company Ltd. v. ITO, Companies District, I, and another, reported in [1961] 411 ITR 191 (SC), Parashuram Pottery Works v. ITO, reported in 106 ITR 1(SC), Assam Co. Ltd. v. Union of India, reported in 275 ITR 609 (Gau), and Dulichand Singhania v. ACIT, 269 ITR 192 (P & H). 8. Before we proceed to determine the correctness and/or validity of the learned Tribunal's order, which stands impugned in the present appeal, it is appropriate to take note of the material facts, which have given rise to the present appeal. The material facts may, in brief, be set out as under: (i) The respondent-assessee submitted its return of income, for the assessment year 1997-1998, declaring total taxable income as NIL. The respondent-assessee was accordingly assessed by the Assessing Officer by his order, dated 05.05.99, in exercise of power under Section 143(3) of the IT Act. The period of four years from the date of the original assessment, as stipulated by Section 147 of the IT Act, expired on 31.03.2002. Thereafter, a notice, dated 28.11.2003, under Section 148 of the IT Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceeding under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case any be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year) Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year Explanation 1.- production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the forgoing proviso. Explanation 2.- For the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of an Assessing Officer, who, due to his sheer recklessness or negligence, omits to take note of an income, which was, otherwise, chargeable and had been 'fully and truly' disclosed by the assessee. 14. Sub-Clause (iii) of Clause (c) of Explanation 2, which, in the present case, the Revenue relies upon, shows that where the income, which had escaped assessment, led to excessive granting of relief, which an assessee was not, otherwise, entitled to, then, such an income can be reopened for assessment. The question is: Does Sub-Clause (iii) of Clause (c) of Explanation 2 allow an assessment to be re-opened merely because excessive relief had been received by an assessee, because of escapement of assessment? Here, again, the mere fact that there was granting of excessive relief to the assessee would not allow an assessment to be re-opened unless granting of excessive relief can be attributed to the failure, on the part of the assessee, to disclose 'fully and truly' all material facts necessary for his assessment. 15. To put it a little differently, the conditions precedent for re-opening of an assessment, as contemplated by the proviso to Section 147, is that a taxable inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is added) 19. In support of its above conclusions, the Supreme Court referred to, and relied upon, its decision, in Calcutta Discount Company Ltd. v. ITO, Companies District, I, and another, reported in [1961] 411 ITR 191 (SC), wherein the Constitution Bench had observed as under: "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" (Emphasis is added) 20. Having posed to itself the question as to whether the duty of disclosure, on the part of an assessee, extends beyond the full and truthful disclosure of all primary facts, the Supreme Court observed, in Calcutta Discount Company Ltd. (supra), that the answer to this question must be in the negative and so long as the primary facts are before the Assessing Authority, he requires no further assistance by way of disclosure from the end of the assessee inasmuch as it is for the Assessing Officer to decide what inference can be reasonably drawn and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, come to the conclusion that while the duty of the assessee is to disclose 'fully and truly' all primary relevant facts, it does not extend beyond this." (Emphasis supplied) 22. In Parashuram Pottery Works v. ITO 106 ITR 1(SC), while interpreting the words, 'omission or failure to disclose 'fully and truly' all material facts necessary for his assessment for that year', the Supreme Court pointed out that these words postulate a duty on the assessee to disclose 'fully and truly' all material facts necessary for the purpose of his assessment and what facts are material and necessary for assessment would differ from case to case. The Supreme Court also pointed out, in Parashuram Pottery Works (supra), that in every assessment proceeding, the assessing authority is required to know all the facts, which would help him in coming to the correct conclusion and help him to draw correct inference. The relevant observations read: "The words "omission or failure to disclose 'fully and truly' all material facts necessary for his assessment for that year" postulate a duty on the assessee to disclose 'fully and truly' all material facts necessary for his assessment. What facts are materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons of failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose 'fully and truly' all material facts necessary for the assessment for that assessment year." (Emphasis supplied) 25. Unless, therefore, there is an omission or failure, on the part of an assessee, to disclose, fully and truly, all material facts, which were necessary for his assessment for a given assessment year, the power to re-open assessment, under Section 147, cannot be taken resort to. Merely on the ground that the assessee has received greater reliefs, than what he was entitled to, cannot give jurisdiction to the Assessing Officer to make a re-assessment. 26. What becomes abundantly clear from the above discussion is that neither Explanation 1 nor Explanation 2 to Section 147 enlarges the scope of the proviso to Section 147. If, therefore, there is no omission or failure, on the part of an assessee, to disclose 'fully and truly' all material facts, which were necessary for his assessment for a given assessment year, the Assessing Officer cannot reopen an assessment by taking resort to either Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee, was duly disclosed by the assessee in the audited accounts and statements submitted by the assessee along with the assessee's return of income for the assessment year 1997-1998. In fact, the Paper Book, filed before the Tribunal, contains copies of the assessee's audited balance sheet and statement submitted along with the return. The balance sheet, admittedly, contains the details of receipt of transport subsidy. 29. To be more precise, it may be pointed out that the transport subsidy reserve, shown by the assessee as on 31.03.96, was Rs. 35,00,330/-. By 31.03.97, the transport subsidy reserve rose up to Rs. 59,70,889/-. The difference of Rs. 24,70,559/- has been added by the Assessing Officer in the total income of the assessee, while re-assessing the assessee's income by re-assessment order, dated 10.03.2005. When the assessee had already disclosed, very clearly and thoroughly, that his transport subsidy reserve was, as on 31.03.96, Rs. 35,00,330/- and that by 31.03.97, this amount had risen to Rs. 59,70,889/-, the appellant cannot say that the assessee did not disclose all such material facts, which were necessary for making a valid and effective assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as because of the omission or failure, on the part of the assessee, to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year. A finding to the effect that there was omission or failure on the part of the assessee to make return under Section 139 or in response to a notice issued under Sub-Section (1) of Section 142 or 148 or to disclose 'fully and truly' all material facts necessary for his assessment, for that assessment year, is sine qua non for assumption of jurisdiction by the Assessing Officer for re-assessment of income, which escaped disclosure. We are fortified in taking this view from the decision in Dulichand Singhania v. ACIT 269 ITR 192 (P&H). 33. In the present case, re-assessment proceeding was initiated beyond the period of limitation of four years as prescribed by Section 147. This could have been overridden had there been, on the part of the assessee, omission or failure to disclose 'fully and truly' all material facts necessary for his assessment for the given assessment year. 34. Since the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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