1999 (8) TMI 38 - HC - Income Tax

Court quashes assessment reopening due to petitioner's full disclosure.

The court found that the petitioner had fully and truly disclosed all material facts necessary for assessment, and the Assessing Officer's failure to ... Reassessment, Failure To Disclose Material Facts, Compulsory Acquisition Of Land, Reassessment Proceedings Issues Involved:1. Validity of notices issued under section 148 of the Income-tax Act, 1961.2. Alleged failure of the petitioner to disclose material facts.3. Jurisdiction of the Assessing Officer to reopen assessments.4. Application of section 147(a) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Validity of Notices Issued Under Section 148:The petitioner challenged the validity of notices dated March 30, 1989, issued under section 148 of the Income-tax Act, 1961, for reassessment of the assessment years 1972-73 to 1983-84. The notices proposed to reassess the petitioner to include the amount of interest received on compensation for land acquisition. The petitioner argued that it had made a full and true disclosure of all primary facts necessary for assessment, and thus, the notices were illegal and without jurisdiction.2. Alleged Failure of the Petitioner to Disclose Material Facts:The Assessing Officer contended that the petitioner failed to disclose that it was fighting for enhanced compensation with interest and did not inform about the decision of the High Court in its favor. The reasons recorded for reopening the assessments stated that the petitioner did not include the interest income on accrual basis in the returns, either with reference to the date of the Additional District Judge's order or the date of receipt of the amount.3. Jurisdiction of the Assessing Officer to Reopen Assessments:The court examined whether the petitioner had disclosed all the information regarding the receipt of compensation and interest thereon. The petitioner provided extracts from directors' reports, balance sheets, and profit and loss accounts, which were part of the returns of income for the relevant assessment years. The court found that these documents disclosed the pendency of appeals for enhanced compensation and the amounts received. The court concluded that the petitioner had disclosed every material fact necessary for assessment, and the failure of the Assessing Officer to apply the correct principles of law could not justify reopening the assessments under section 147(a).4. Application of Section 147(a) of the Income-tax Act, 1961:The court highlighted that under section 147(a), the twin conditions of the Assessing Officer having reason to believe that income chargeable to tax had escaped assessment, and such escapement was due to the assessee's omission or failure to disclose fully and truly all material facts, must be satisfied. The court referred to the Supreme Court's decision in Calcutta Discount Co. Ltd. v. ITO, which held that the obligation of the assessee is to disclose primary facts and not inferential facts. The court found that the petitioner had disclosed all primary facts and that the Assessing Officer's failure to apply the correct legal principles could not be attributed to the petitioner.Conclusion:The court held that the reasons assigned by the Assessing Officer did not fulfill the statutory pre-conditions necessary for issuing notices under section 148. The petitioner had disclosed fully and truly all material facts necessary for assessment, and there was no omission on its part. Consequently, the court quashed all the impugned notices issued under section 148 and allowed the petitions, making the rule absolute with no order as to costs.