TaxTMI 
TaxTMI 
2010 (3) TMI 322
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....come the petitioner reduced an interest amount of Rs. 50.14 lakhs which was shown separately as income from other sources. In the notes to the computation of income the petitioner disclosed that the interest income represented interest received under section 244A, net of interest paid under section 220. During the course of the assessment proceedings a query was addressed by the Assessing Officer on December 20, 2004 by which inter alia an explanation was called for with reference to the following: "(b) Interest of Rs. 4,91,33,466 is credited to the income and expenditure account. Please furnish details of interest received, giving the names and addresses of the parties from whom interest has been received. Perusal of records indicate that in the preceding assessment year, you have disclosed Rs. 5,65,65,826. Kindly explain the reasons for shortfall in the current year with necessary cogent evidence." 3. In reply to the query the petitioner addressed a communication on December 28, 2004 inter alia furnishing details in respect of the interest income. A statement which is annexed to the reply contained a disclosure in item 6 that the interest on tax refund (net of interest paid un....
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....count of any rate, or tax levied on the profits or gains of any business or profession are not deductible from the income of the assessee. Therefore, the interest charged under section 220(2) amounting to Rs. 1,01,11,960 is not an admissible expenditure for deduction from the total income of the assessee. I have, therefore, reason to believe that the interest paid by the assessee under section 220(2) amounting to Rs. 1,01,11,960 claimed as deduction chargeable to tax has escaped assessment." 4. On behalf of the assessee the reopening of the assessment is questioned on the following grounds : (i) admittedly the notice under section 148 has been issued beyond the expiry of four years of the end of the relevant assessment year 2003-04 ; (ii) the condition precedent to the exercise of the power to reopen an assessment beyond four years of the expiry of the relevant assessment year, where the assessment proceedings were completed under section 143(3) is that there is a failure on the part of the assessee to fully and truly disclose all the material facts necessary for the assessment for that assessment year ; (iii) in the present case, during the course of the assessment proceedings t....
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....e. As noted earlier, during the course of the assessment proceedings the Assessing Officer called the assessee by his letter dated December 20, 2004 to explain with details the interest of Rs. 4.91 crores which was credited to the interest and expenditure account. Details of the interest received were sought together with an explanation for the shortfall in the current year as opposed to the earlier year. The assessee in its reply dated December 28, 2004 annexed a statement containing details of interest income earned during the assessment year 2003-04. Serial No. 6 of the statement contained a disclosure of interest on tax refund which was described as being net of interest paid under section 220. Thus, it is evident that during the course of the assessment proceedings not merely was there a full disclosure by the assessee of the material fact that the interest income of Rs. 50.14 lakhs represented the difference between interest received under section 244A and interest paid under section 220 but, that in addition the attention of the Assessing Officer was also specifically brought to bear on this aspect following the query which was raised on December 20, 2004. In these circumsta....
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....isclose all material facts necessary for assessment for that assessment year. Absent compliance with the statutory condition precedent, the reopening of the assessment cannot be sustained. The judgment of the Division Bench in the case of Dr. Amin's Pathology Laboratory [2001] 252 ITR 673 (Bom) is distinguishable. In that case, the assessee had been following the accrual system of accounting for all items of expenditure except for all collections which were on cash basis. The Division Bench observed that a reading of the assessment order showed that the Assessing Officer failed to notice an important item viz. an amount of Rs. 6.70 lakhs which represented unpaid purchases. It was in this context that the Division Bench observed that the mere production of the balance-sheet, profit and loss account or account books would not necessarily amount to a disclosure within the meaning of the proviso. The facts in that case showed that the Assessing Officer had inadvertently overlooked an entry representing unpaid purchases in respect of which he had wrongly granted a reduction and at the time when he passed the original order of assessment, he could not be said to have opined on that item.....