Reopening – Beyond four years – Assessment completed u/s 143(3) – A mere bald assertion by the A.O. that the assessee has not disclosed fully and truly all the material facts is not sufficient – Reopening is not valid

6. M/s. Anand Developers vs. Asst.
Commissioner of Income Tax Circle-2(1) [Writ Petition No. 17 of 2020] Date of order: 18^th February,
2020 Bombay High Court (Goa Bench)

Reopening –
Beyond four years – Assessment completed u/s 143(3) – A mere bald assertion by
the A.O. that the assessee has not disclosed fully and truly all the material
facts is not sufficient – Reopening is not valid

The petition challenged the
notice dated 29^th March, 2019 issued u/s 148 of the Income-tax Act,
1961 and the order dated 17^th December, 2019 disposing of the
assessee / petitioner’s objections to the reopening of the assessment in
pursuance of the notice dated 29^th March, 2019.

The
petitioner had submitted its return of income within the prescribed period for
A.Y. 2012-13 declaring total income of Rs. 62,233. The case was selected for
scrutiny through CASS and notice was issued u/s 143(2) of the Act and served
upon the petitioner on 28^th August, 2013. Based on the details
furnished by the petitioner, the A.O. passed the assessment order dated 16^th
March, 2015 u/s 143(2).

It was the case of the
petitioner that vide its own letter dated 20^th February, 2015
in the course of the assessment proceedings before the A.O., it had itself
submitted that a few flats may have been allotted to persons in violation of
Clause 10(f) of section 80IB. It was also contended that this ought not to be
regarded as any breach of the provisions of section 80IB; in any case, this
ought not to be regarded as any breach of the provisions of section 80IB in
its entirety and at the most benefit may be denied in respect of the
transfers made in breach of Clause 10(f) of section 80IB.

The petitioner submitted that
through this letter it had made true and complete disclosures in the course of
the assessment proceedings itself. It was upon consideration of these
disclosures that the A.O. finalised the assessment order of 16^th
March, 2015 u/s 143(3). Under the circumstances, merely on the basis of a
change of opinion, the A.O. lacked jurisdiction to issue notice u/s 148 seeking
to reopen the assessment. Since there was absolutely no failure to make true
and full disclosures, there was no jurisdiction to issue such notice u/s 148
after the expiry of four years from the date of assessment.

The Department submitted that
since the petitioner had admitted vide its letter dated 20^th
February, 2015 that it had violated the provisions of section 80IB and further
failed to make true and full disclosures, there was absolutely no
jurisdictional error in issuing the impugned notice or making the impugned
order.

The High Court observed that
the factum of the address of the letter dated 20^th February,
2015 is indisputable because the respondents had themselves not only referred
to it but also quoted from it in the show cause notice dated 17^th December,
2019 issued to the petitioner along with the impugned order of the same date by
which the objections of the petitioner to the reopening of the assessment came
to be rejected. Even the impugned order dated 17^th December, 2019
rejecting the petitioner’s objections makes a specific reference to the
petitioner’s letter of 20^th February, 2015 submitted during the
assessment proceedings u/s 143(3). Both the show cause notice dated 17^th
December, 2019 and the impugned order of the same date specifically state that
the petitioner in the course of the assessment proceedings had furnished a list
of flat-owners to whom flats were sold in the project ‘Bay Village’.

The notice and the impugned
order proceed to state that upon perusal of this list, coupled with the letter
dated 20^th February, 2015, it transpires that there was non-compliance
on the part of the petitioner with the provisions of section 80IB at least
insofar as some of the sales were concerned. Since it is virtually an admitted
fact that the petitioner had submitted a list of the flat-owners and vide
its letter dated 20^th February, 2015 pointed out that there may be
breach insofar as the sale of some of the flats are concerned, it cannot be
said by the respondents that there was no truthful or complete disclosure on
the part of the petitioners in the course of the assessment proceedings itself.

The Court observed that
merely making of a bald statement that the assessee had not disclosed fully and
truly all the material facts is really never sufficient in such matters. In the
present case as well, apart from such a bald assertion, no details have been
disclosed as to the material which was allegedly not disclosed either truly or
fully. Rather, the record indicates that the entire list of flat-owners was
disclosed. Further, vide the same letter disclosures were made in
relation to the sale transactions and it was even suggested that some of the
transactions may not be compliant with the provisions of Clause 10(f) of
section 80IB. Clearly, therefore, the Department had failed to make out any
case that there was no true and full disclosure.

Further, section 147 of the
IT Act empowers the A.O. who has reason to believe that any income chargeable
to tax has escaped assessment for any A.Y. to reassess such income, no doubt
subject to the provisions of sections 148 to 153 of the Act. The proviso
to section 147, however, makes clear that where an assessment under sub-section
(3) of section 143 has been made for the relevant A.Y., no action shall be
taken u/s 147 after the expiry of four years from the end of the relevant
assessment year unless any income chargeable to tax has escaped assessment for
such assessment year by reason of failure on the part of the assessee, inter
alia ‘to disclose fully and truly all material facts necessary for its
assessment for that assessment year’. This means that normally, the limitation
period for re-assessment u/s 147 is four years. However, in a case where the
assessment has been made u/s 143(3) where, inter alia, the assessee
fails to disclose fully and truly all material facts necessary for assessment
for that assessment year, re-assessment can be made even beyond the period of
four years in terms of section 148. Therefore, in order to sustain a notice
seeking to reopen assessment beyond the normal period of four years it is
necessary for the respondents to establish, at least prima facie, that
there was failure to disclose fully and truly all material facts necessary for
the assessment for that assessment year.

In the present case, the
respondents have failed to establish this precondition even prima facie.
Rather, the material on record establishes that there were full and true
disclosures of all material facts necessary for the assessment for the A.Y.
2012-13. Despite this, the impugned notice seeking to reopen the assessment for
that year has been issued beyond the normal period of four years. On this short
ground, the impugned notice dated 29^th March, 2019 and the impugned
order dated 17^th December, 2019 were quashed and set aside. The
Court relied on the decisions of the Division Bench of this Court in the case
of Mrs. Parveen P. Bharucha [(2012) 348 ITR 325] and Zuari Foods and
Farms Pvt. Ltd. (WP No. 1001 of 2007 decided on 11^th April, 2018).

The Court
observed that the decision in Calcutta Discount Co. Ltd. [(1961) 41 ITR
191 (SC)] in fact assists the case of the petitioner rather than the
respondents. In that decision, the Hon’ble Supreme Court has held that it is
the duty of the assessee to disclose fully and truly all primary relevant
facts, and once all primary facts are before the assessing authority, he
requires no further assistance by way of disclosure and it is for him to decide
what inference of facts can be reasonably drawn and what legal inferences have
ultimately to be drawn. However, if there are some reasonable grounds for
thinking that there had been under-assessment as regards any primary facts
which could have a material bearing on the question of under-assessment, that
would be sufficient to give jurisdiction to the ITO to issue notice for
re-assessment. In the present case, as noted earlier, there is absolutely no
reference to any alleged material facts which the petitioner failed to disclose
in the course of the assessment proceedings. Rather, the impugned notice refers
to the list as well as the letter issued by the petitioner itself which is
sought to be made the basis for the reopening of the assessment. For the
aforesaid reasons the petition is allowed and the impugned notice dated 29^th
March, 2019 and the impugned order dated 17^th December, 2019
are quashed and set aside.