TaxTMI 
TaxTMI 
2010 (12) TMI 890
X X X X Extracts X X X X
X X X X Extracts X X X X
....6-87 and notice under section 148 for reopening of the assessment was issued on 27-3-1997. That the original assessment was completed under section 143(3) vide order dated 28-3-1989. Thus, on the above facts, proviso to section 147 would be applicable because the original assessment was completed under section 143(3) and the assessment was reopened after more than four years from the end of the relevant assessment year. As per the proviso to section 147 unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the assessment cannot be reopened. In the case of the assessee, the assessment was reopened on the ground that as on 31-12-1985 the cost of various assets of the firm were revalued and increased amount on the revaluation of the asset amounting to Rs. 12,67,119 was credited to the accounts of the eight partners of the dissolved firm. Similarly, self-generated assets amounting to Rs. 5,62,800 was credited to the account of the respective partners. The assessee-firm was dissolved on 31-12-1985 and the business of the firm was taken over by one of the partners viz., M/s. Industrial Linings (Baroda) (P.) Ltd.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Industrial Lining, i.e., the assessee was liable to pay capital gain tax on the difference between the market value of the assets and the WDV and the proceedings under section 147 was required to be initiated against the firm, M/s. Industrial Lining. This order of the CIT(A) had become final because neither the assessee nor the "ILBPL" challenged the above finding of the CIT(A). In view of the above, the Assessing Officer initiated the proceedings under section 147 for reopening of the assessment. He further submitted that there was no true and full disclosure by the assessee because the assessee never disclosed that the "ILBPL" would claim the depreciation on the enhanced value. Similarly, the assessee also did not disclose the tax implication of the revaluation of the assets on the dissolution of the firm. He therefore submitted that there was no true and full disclosure on the part of the assessee. The escapement of income is also evident as per the decision of the Hon'ble Apex Court in the case of A.L.A. Firm, (supra) and the direction of the CIT(A) in the case of the "ILBPL" which has become final. 4. In the rejoinder, it is stated by the learned counsel that it is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Admittedly, in this case, the original assessment was completed under section 143(3) and the notice for reopening of the assessment was issued after more man four years from the end of the relevant assessment year. Now the only question remains whether there is a failure on the part of the assessee to disclose fully and truly all the material facts. Reasons recorded for reopening of the assessment reads as under:- "Annexure - 'A' Reg:- M/s. Industrial Linings 254 GICD Estate Makarpura, Baroda Reasons for reopening the assessment 1. The above assessee firm was in existence up to 31 -12-1985. On 31-12-1985, the firm was dissolved and the business of the firm was taken over by one of the partners' viz., M/s. Industrial Linings (Baroda) Pvt. Ltd., Baroda. According to the dissolution deed, dated 31-12-1985, no consideration was paid by the receiver company to other partners on the ground that all the assets and liabilities were taken up by the private limited company. 2. On the other side, as on 31-12-1985, the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or reassess such income, other than the income involving matters which are the subject-matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1:- Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2:- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is no chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cuments which were produced before the Assessing Officer in the original assessment. At page No. 3 of the paper book, there is a computation of the income of the relevant year and at page No. 5 there is note forming part of the computation of income. This note reads as under:- "2. The assessee has revalued land, building and plant and machinery as on 31-12-1985. The assessee has also considered the goodwill of the firm as on the date of balance sheet. The credit for such entry has been given to respective part in their profit share ratio. 3. The assessee has not claimed depreciation on various assets at revalued figure. The assessee has for bifurcated the building into two portions namely office building and factory building. The assessee has claimed depreciation at an appropriate rate of the said assets. 4. The assessee has dissolved the said firm with effect from 31-12-1985. One of the partners of the firm M/s. Industrial Linings (Baroda) Pvt. Ltd., has taken over the entire running business along with all assets and liabilities with effect from 12-1-1986. This will be treated as a notice of closure of the firm under section 176 of the Act and you ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DR that the assessee has not disclosed the fact that the "ILBPL" will claim the depreciation on the revalued amount of the assets. In my opinion, on what amount depreciation will be claimed by the buyer of the assets is not the discretion of the assessee and moreover, so far as the assessee's case is concerned, it is not relevant on what amount the depreciation is claimed by the buyer of the assets. It was also contended by the learned DR that the assessee has not computed capital gain on the revaluation of the assets and the taxability of such capital gains was not disclosed by the assessee. In my opinion, the assessee is required to disclose primary facts and not the inference which is to be drawn from such primary facts. When the assessee has disclosed the fact that it has revalued the assets and such assets are taken over by the partners of the firm on the dissolution of the firm at revalued amount, it was for the Assessing Officer to decide whether the assessee is liable to capital gain tax or not. Duty of the assessee ends with the disclosure of the primary facts. While taking this view, I derive support from the decision of the Hon'ble Apex Court in the case of Calcutta Disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts along with the original return disclosing full details of the interest suspense account, there was no failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment; and section 147(a) had no manner of application and was not attracted to the facts of the case." 7. The learned DR has relied upon the decision of the Hon'ble Bombay High Court in the case of Girilal and Co. v. S.L. Meena, ITO [2008] 300 ITR 432. However, the facts in that case were different because in that case, the question was about the size of the plot of land which was not disclosed by the assessee, but this fact was available in the valuation report of such plot. On this fact, Their Lordships of the Hon'ble Bombay High Court held that the assessee has not disclosed true and full particulars in the return of income. However, the facts in the case of the assessee before me are altogether different. In this case, all relevant facts with regard to the revaluation of the assets and the dissolution of the firm are disclosed by way of note in the computation of income, balance sheet and the partners' capital account. Deed of dissolution was also furnished. More....