Full and true disclosures must mean what the statute says and requires specific disclosure of each fact – Bombay HC

The Indian Hume Pipe Co Ltd vs. ACIT (Bombay High Court)- Full and true disclosures must mean what the statute says. These disclosures cannot be garbled or hidden in the crevices of the documentary material which has been filed by the assessee with the Assessing Officer. The assessee must act with candor and the disclosure must be full and true. A full disclosure is a disclosure of all material facts which does not contain any hidden material or suppression of fact. A true disclosure is a disclosure which is truthful in all respects. Just as the power of the Revenue to reopen an assessment beyond a period of four years is restricted by the conditions precedent spelt out in the proviso to Section 147, equally an assessee who seeks the benefit of the proviso to Section 147 must make a full and true disclosure of all primary facts. The assessee in the present case did refer to the fact that the capital gains had resulted from the transfer of a capital asset and in the course of the computation did provide for the cost of acquisition notionally as of 1 April 1981. An exemption was claimed under Section 54­EC. All the necessary facts on the basis of which the claim to an exemption are founded must be disclosed. As the assessee failed to do so, the Revenue in the present case would be justified in reopening the assessment on the ground that income has escaped assessment. Clause (c) of Explanation 2 to Section 147 provides for cases where income chargeable to tax is deemed to have escaped assessment.Among those cases are cases where an assessment has been made but (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed to a lower rate; or (iii)such income has been made the subject of excessive relief under the Act; or (iv)an excessive loss or depreciation allowance or any other allowance under the Act has been computed. The Assessing Officer in the present case has not exceeded his jurisdiction in reopening the assessment. We, however, clarify that in the view which has been taken it has not been necessary for the Court to furnish its interpretation of the provisions of Section 54­EC which really do not fall for consideration at this stage. For the reasons aforesaid, we do not find any reason to exercise the extra­ordinary jurisdiction of this Court under Article 226 of the Constitution.The ground that s. 54EC exemption is allowable even to investments made pre-transfer as per Circular No. 359 dated 10.5.1983 and so there can be no “reason to believe” was not argued. Contrast with Kelvinator 256 ITR 1 (Del)(FB) (affirmed in 320 ITR 561 (SC)) where it was held that a s. 143(3) assessment meant that the AO was “deemed to have applied his mind to all aspects” and that a reopening based on “reappraisal of existing material” was not permissible.

HIGH COURT OF BOMBAY

WRIT PETITION NO. 1017 OF 2011

The Indian Hume Pipe Co. Ltd. Vs The Assistant Commissioner of Income Tax,

8 November 2011.