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2004 (9) TMI 22

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....m on the ground that it has reason to believe that the income of the respondent chargeable for the assessment year 1996-97 had escaped assessment. Pursuant to the notice issued under section 148, the respondent filed a fresh return of income on March 28, 2003, before the assessing authority. Thereafter, the respondent on March 31, 2003, wrote a letter to the assessing authority requesting it to convey the reasons on the basis of which it had formed an opinion that the income of the respondent chargeable for the assessment year 1996-97 had escaped assessment. Not receiving any response from the assessing authority, the respondent on November 29, 2003, again wrote a letter to it requesting it to furnish the reasons. It appears that the communication had the desired effect as the reasons for reopening the assessment were furnished to the respondent by the assessing authority by its letter dated December 5, 2003. The letter dated December 5, 2003, reads as follows: "It is noticed that the assessee has claimed lease rent on accrual basis. On examination of the account, it revealed that the claim represented principal amount and interest. The principal amount has not been allowed in the....

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.... notice to the respondent under section 148 of the Income-tax Act and the impugned order of the learned single judge quashing the notice was not sustainable in law. On the other hand, learned counsel for the respondent submitted that the assessing authority issued the aforesaid notice under section 148 of the Income-tax Act after a period of four years from the date of the end of the relevant assessment year and, therefore, in order to take advantage of section 149(1)(b) of the Income-tax Act, which stretches the period of limitation beyond four years, it must be demonstrated from the reasons for issuance of the notice that the assessing authority was satisfied that the assessee had omitted or failed to disclose fully and truly all material facts necessary for assessment. According to learned counsel, the assessing authority without having reason to believe that on account of the failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment, issued the notice under section 148 of the Income-tax Act after the period of four years from the date of the end of the relevant assessment year 1996-97, which it was not competent to do. As p....

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....ly amount to disclosure within the meaning of the proviso. In the present case, the facts show that the Assessing Officer overlooked the aforestated item. That, he noticed it subsequently. That, at the time of passing the original order of assessment, he could not be said to have opined on the above item. Therefore, there was no change of opinion. Therefore, in the present case, the impugned notice is sustained." In Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), it was observed that if some material for the assessment lay embedded in the evidence, then, it is the duty of the assessee to bring it to the notice of the assessing authority because the assessee knows all the material and relevant facts that the assessing authority might not. The question whether disclosure was made fully and truly depends upon the facts and circumstances of each case. Where primary facts lie hidden or embedded in the record including the books of account, which are filed along with the return, it may require detailed exercise and deep study to discern or uncover the same. This kind of disclosure cannot be said to be a true and full disclosure of primary facts. In the instant case, the asse....

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....nd fully. Thus, the reason recorded by the assessing authority has nexus with the formation of belief by the assessing authority for taking action under section 147 of the Income-tax Act. Therefore, section 149(1)(b), read with section 147 has been invoked by the assessing authority for reopening the assessment. It is well settled that the sufficiency of the reasons for forming the belief is not for the court to judge. The final order which may be passed by the assessing authority under section 147, if it goes against the respondent, is appealable under section 246 of the Income-tax Act. The respondent cannot be allowed to short-circuit the procedures prescribed by law. In GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 the Supreme Court, while declining to interfere with the order passed by the Delhi High Court dismissing as premature the writ petition filed by the noticee challenging the notice issued to it under sections 148 and 143(1) of the Income-tax Act without filing reply thereto, held as follows: "We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income-tax Act is issued, the p....