1974 (4) TMI 12 - HC - Income Tax

Supreme Court emphasizes disclosure of facts for accurate tax assessment

The Supreme Court denied the applications for leave to appeal against the Calcutta High Court's order, emphasizing the non-disclosure of material facts by ... Assessment Proceedings, High Court, Leave To Appeal To Supreme Court, Reassessment Proceedings, Writ Petition Issues: Application for leave to appeal to the Supreme Court against the order of a Division Bench, Jurisdiction under section 147 of the Income-tax Act, Non-disclosure of material facts by the assessee, Interpretation of section 147 of the Act, Substantial questions of law of general importance.Analysis:The judgment pertains to two applications seeking leave to appeal to the Supreme Court against the order of a Division Bench of the Calcutta High Court. The petitioner, a company incorporated in the UK with its principal place of business in India, received notices under section 148 of the Income-tax Act for various assessment years. The Income-tax Officer sought to reopen assessments based on the claim for deduction of London management fees. The single judge initially ruled in favor of the petitioner, stating that the conditions for assuming jurisdiction under section 147 were not fulfilled. However, the Division Bench overturned this decision, emphasizing the non-disclosure of material facts by the assessee regarding the allocation of management fees. The court held that the existence of the auditor's certificate, concealed by the assessee, constituted a jurisdictional fact for issuing notices under section 148.The Income-tax Officer's report highlighted discrepancies in the management fees claimed by the assessee compared to the auditor-certified percentage. The failure to produce similar certificates for earlier years led to the conclusion that the allocation of management fees was arbitrary and aimed at tax avoidance. The non-disclosure of correct facts by the assessee resulted in the income escaping assessment, justifying the reopening of assessments. The petitioner contended that the appeal raised substantial questions of law, particularly regarding the non-disclosure of material facts and the interpretation of section 147 of the Act.Dr. Pal argued that the non-disclosure of the auditor's certificate should not be considered a non-disclosure of a material fact under section 147. However, the court referred to the Supreme Court's decision in Calcutta Discount Co. Ltd. v. Income-tax Officer, emphasizing the duty of every assessee to fully and truly disclose all material facts necessary for assessment. The court concluded that the grounds raised did not constitute substantial questions of law requiring Supreme Court intervention, as the law was clear on the matter.In the final decision, both judges concurred in rejecting the applications for leave to appeal, maintaining the status quo for eight weeks and ordering no costs. The judgment underscores the importance of full and truthful disclosure of material facts by taxpayers for accurate assessment under the Income-tax Act.