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TMI Blog2017 (1) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... asons recorded, the Assessing Officer has not mentioned that there was any failure on the part of the assessee to disclose fully and truly all material facts. Learned DR tried to justify the action of the Assessing Officer on the ground that in the order dated 2nd December, 2008 passed by the Assessing Officer rejecting the assessee’s objection against the reopening of assessment, he has clearly mentioned that there was failure on the part of the assessee to disclose fully and truly all material facts. He, therefore, stated that the reasons recorded should be read along with Assessing Officer’s order wherein the assessee’s objection has been rejected. We find that the identical situation was considered by Hon'ble Jurisdictional High Court in the case of Haryana Acrylic Manufacturing Co. (2008 (11) TMI 2 - DELHI HIGH COURT). Thus we hold that the reopening of assessment beyond the period of four years from the end of the relevant assessment year was not justified because – (i) there was no failure on the part of the assessee to disclose fully and truly all material facts and (ii) there was no whisper in the reasons recorded that there was any failure on the part of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B). While disposing off the objections, the AO pointed out that plain reading of the reasons recorded would bring out that it is case of the AO that there was failure on part Assessee of the assessee to disclose material facts. ii) The AO pointed out that assessee had failed to disclose before authorities the material facts. The AO pointed out that the assessee failed to disclose before the AO that he was not eligible for further deduction u/s 80HHC on the same profit in respect of which deduction had already been claimed u/s 80IB. The AO also observed that the assessee presented wrong information in respect of quantum of claim. iii) It is has been recorded in the satisfaction note(#88/PB) that the assessee made deduction of ₹ 18314935/- and actual deduction works out to be 1,11,84,667/- . It has also been pointed out that this difference is mainly because of not reducing the amount of deduction claimed u/s 80IB while claiming calculating deduction under 80HHC. This action of reducing was supposed to done by assessee as there is provisions in section 80IA(9) rws 80IB(13). iv) The fact cannot be ignored that the assessee filed a certificate from the Charted acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of material facts fully and truly - to put it in the words of the Court - was the failure of the assessee to disclose 'the true intention behind the sale of the shares'. The assessee had stated during the assessment proceedings that the sale of shares during the relevant assessment years was a casual transaction in the nature of mere change of investment. The ITO found later that those sales were really in the nature of trading transactions. The case of the revenue was that the assessee ought to have stated that they were trading transactions and that his assertion that they were casual transactions, in the nature of change of investment, amounted to 'omission or failure to disclose fully and truly all material facts necessary for his assessment for that year' within the meaning of section 34. This contention of the revenue was rejected holding that the true nature of transaction, being a matter capable of different opinions, is not a material or primary fact but a matter of inference and, hence, it cannot be said that there was an omission or failure of the nature contemplated by section 34 on the part of the assessee. Now, what needs to be emphasised is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the subsequent assessment year Does it not furnish a reasonable ground for the ITO to believe that on account of the failure - indeed not a mere failure but a positive design to mislead - of the assessee to disclose all material facts, fully and truly, necessary for his assessment for that year, income has escaped assessment ? We are of the firm opinion that it does. It is necessary to reiterate that we are now at the stage of the validity of the notice under section 148/147. The enquiry at this stage is only to see whether there are reasonable grounds for the ITO to believe and not whether the omission/failure and the escapement of income is established. It is necessary to keep this distinction in mind. (emphasis supplied). 2.6 The reliance is placed on the ratio of Judgment of Hon ble SC in case of Kantamani Venkata Narayana Sons v. Addl. ITO, Rajahmundry [1967] 63 ITR 638 in which it has been held that the assessee does not discharge his duty to disclose fully and truly material facts necessary for the assessment for the assessment year in question by merely producing book account or other evidence. He has to bring to the notice of the Assessing Officer particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion here a decision of the Hon ble Supreme Court in Kantamani Venkata Narayana Sons v. Addl. ITO, Rajahmundry [1967] 63 ITR 638 in which it has been held that the assessee does not discharge his duty to disclose fully and truly material facts necessary for the assessment for the assessment year in question by merely producing book account or other evidence. He has to bring to the notice of the Assessing Officer particular items in the books of account or portions of documents, which are relevant. Even if it is assumed that, from the documents produced, the Assessing Officer, if he had been circumspect, could have found out the truth, he is not on that account precluded from exercising the power to assess income, which had escaped assessment. Thus, the aforesaid judgment is in authority for the proposition that mere disclosure in the books of account or in other evidence does not necessarily mean that the assessee has disclosed fully and truly all material facts necessary for his assessment for the assessment year in question. 7. In Indo-Aden Salt Mfg. Trading Co. (P.) Ltd. v. CIT [1986] 159 ITR 6242 (SC), the assets on which the assessee sought to claim depreciation consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The relevant portion of the judgment is reproduced as under, .. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee To meet the possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example- I have produced the account books and the documents: You, the assessing officer, examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account books and the documents. His omission to bring to the assessing authority's attention those particular items in the account books, or the particular portions of the documents, which are relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inferences -to draw the proper inferences being the duty imposed on the Income-tax Officer. We have, therefore, come to the conclusion that while the duty of the assessee is to disclose fully and truly all relevant facts, it does not extend beyond this. The position, therefore, is that if there is in fact some reasonable grounds for thinking that there had been non- disclosure as regards any primary fact, which could have a material bearing on the question of under-assessment , that would be efficient to give jurisdiction to -the Income- tax Officer to issue the notices under section 34. Whether these grounds were adequate or not or arriving at the conclusion that there was a non-disclosure of material facts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax Officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some non-disclosure of material facts. (emphasis supplied). 3.3 It may be seen that the ratio of Calcutta Discount company(supra) clearly supports the cause of revenue. 5. We have carefully considered the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax Circle 25(1), New Delhi. 6. From the above, it is evident that the Assessing Officer has nowhere mentioned that there was any failure on the part of the assessee to disclose fully and truly all material facts. The Assessing Officer has mentioned the facts and figure relating to deduction u/s 80HHC and 80IB claimed by the assessee and allowed by the Assessing Officer in the order u/s 143(3). Thereafter, the Assessing Officer has mentioned It is seen that while calculating deduction u/s 80HHC the amount of deduction u/s 80IB was not reduced from the profit of export business in view of the provisions of section 80IA(9) . Thus, the alleged escapement of income was on account of non-application of a certain provision of law by the assessee as well as Assessing Officer. However, non-application of certain provision of law cannot be equated with the failure on the part of the assessee to disclose fully and truly all material facts. Moreover, in the reasons recorded, the Assessing Officer has not mentioned that there was any failure on the part of the assessee to disclose fully and truly all material facts. Learned DR tried to justify the action of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps of Hon'ble Jurisdictional High Court in the case of Sonitpur Solvex Ltd. (supra), wherein it was held as under :- Held, dismissing the appeal, that the assessee had disclosed, very clearly and thoroughly, that its transport subsidy reserve was, as on March 31, 1996, ₹ 35,00,330 and that by March 31, 1997, this amount had risen to ₹ 59,70,889. The Revenue could not say that the assessee did not disclose all such material facts, which were necessary for making a valid and effective assessment of income for the purpose of realization of tax. The reason assigned by the Assessing Officer showed that the information regarding transport subsidy was available in the audited accounts and statements furnished by the assessee to the Assessing Officer along with the assessee s return. These details being available before the Assessing Officer, the Assessing Officer could not say that there was omission or failure on the part of the assessee to make the 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 its assessment, for that assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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