1991 (2) TMI 31 - HC - Income Tax

Court upholds Revenue's reassessment power under section 147(a) due to assessee's failure to disclose interest income.

Allahabad Bank Limited Versus Commissioner Of Income-Tax

Allahabad Bank Limited Versus Commissioner Of Income-Tax - [1992] 194 ITR 575, 104 CTR 218, 69 TAXMANN 66 Issues:Assessment based on bad and doubtful debts, Reopening of assessment under section 147(a), Disclosure of interest income, Validity of reassessment proceedings, Application of proviso to section 145, Appeal against reassessment order, Jurisdiction of Income-tax Officer, Non-disclosure of primary facts, Escapement of income, Duty of assessee to disclose fully and truly all material facts.Analysis:The case involved a reference under section 256(1) of the Income-tax Act, 1961, for the assessment year 1962-63. The main issue was whether the assessee had omitted to disclose fully and truly all material facts, leading to interest income escaping assessment and the initiation of proceedings under section 147(a). The original assessment was based on bad and doubtful debts, with no interest charged or credited to the suspense account. The reassessment was initiated by the Income-tax Officer under section 148, adding an estimated sum of interest to the assessment. The Commissioner of Income-tax (Appeals) canceled the reassessment, citing decisions supporting the assessee's position. However, the Tribunal set aside the Commissioner's order, stating that the Income-tax Officer had valid reasons to believe that the assessee had not fully disclosed material facts.The Tribunal held that the Income-tax Officer had jurisdiction under section 147(a) to initiate proceedings as the assessee had failed to disclose fully and truly all material facts. The Supreme Court decisions in Indo-Aden Salt Mfg. and Trading Co. P. Ltd. v. CIT and Indian Oil Corporation v. ITO were cited to emphasize the duty of the assessee to disclose all material facts necessary for assessment. The Court highlighted that the assessee's duty is to disclose primary facts, and if there is an omission to disclose material facts, the jurisdiction to reopen assessment is warranted. In this case, the Court found that the assessee had failed to disclose the interest income on 'sticky advances,' which led to escapement of income from assessment. The Court concluded that the Income-tax Officer had validly assumed jurisdiction under section 147(a) due to the assessee's failure to disclose all material facts.In conclusion, the Court answered the reference question in the affirmative and in favor of the Revenue. The judgment emphasized the importance of the assessee's duty to disclose all material facts for assessment purposes, as failure to do so can lead to income escaping assessment and the initiation of reassessment proceedings.