Case Law Details
AO bound to demonstrate that the assessee has failed to disclose material facts fully and truly which has resulted in escapement of income. If he fails to demonstrate this aspect, then, in the case where scrutiny assessment has been made and four years have expired, he cannot take action under section 147 of the Income Tax Act.
The ld.DR relied upon the order of the AO and submitted that the ld.AO has rightly recorded reasons that the assessee has claimed excessive short term capital loss which was not admissible to the assessee. On the other hand, the ld.counsel for the assessee contended that this issue was examined by the AO in the original assessment proceedings, and after due application of mind, he accepted the claim of the assessee. The ld.counsel for the assessee drew our attention towards page no.3 9 of the paper book where the copy of the original assessment order dated 27.11.2006 passed under section 143(3) of the Act has been placed on record.
We have duly considered rival contentions and gone through the record carefully. The assessment year involved herein is Asstt.Year 2004-05. The assessment in the first round was made under section 143(3) on 27.11.2006. A notice under section 148 of the Act has been issued after 25.10.2010 i.e. the AO has recorded reasons on 25.10.2010, meaning thereby, notice under section 148 of the Act was issued after expiry of four years from the end of the relevant assessment year i.e. Asstt.Year 2004-05. Section 147 of the Income Tax Act contemplates that if the AO has reason to believe that no income chargeable to tax has escaped assessment for any assessment year, he may subject to proviso of sections 148 to 153 assess or re-assess such income, and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently……………. Proviso appended to section 147 puts an embargo upon the powers of the AO for reopening of the assessment in case where an assessment was made under section 143(3) of the Income Tax Act for relevant assessment year and four years have expired from the end of the assessment year. In such cases, no action shall be taken under section 147 unless it is established that income chargeable to tax has escaped on account of failure of the assessee to disclose fully and truly all the material facts necessary for his assessment. Thus the AO was bound to demonstrate that the assessee has failed to disclose material facts fully and truly which has resulted escapement of income. If he fails to demonstrate this aspect, then, in the case where scrutiny assessment has been made and four years have expired, he cannot take action under section 147 of the Income Tax Act. A perusal of the reasons (extracted supra) would indicate that the AO has nowhere demonstrated this fact. Apart from the above, a perusal of the assessment order passed under section 143(3) would indicate that all these facts have duly been considered and the AO has accepted the stand of the assessee. The finding recorded by the AO in the original assessment order is worth to note. It reads as under:
“4. During the year under consideration the assessee has shown total Long Term Capital Gain of Rs.58,76,830/- and has shown a short term capital loss of Rs.26,44,800/-. Thus totaling net Long Term Capital Gain Rs.32,32,030/-. After setting off by the last year capital gain of Rs.6,21,547/- but assessee has shown total capital gain of Rs.26,10,483/- for taxation. The assessee was asked to explain the reason for such a huge loss and the reasons why he needed to sale of such stock during the year. The assessee vide his letter dated 17-10- 2006 has stated that :–
1. Our above named client Shri S. Venkataraman lyer was a Director and Share Holder of M/s. Manish Packaging Pvt. Ltd., M/s. Vikas Metalizers Pvt. Ltd. and M/s. Manish Multi Packfilms Pvt. Ltd. In these companies, he himself and his family members were holding about 25% shares whereas the majority share holding in all these companies were held by Patel family group. Our client family was also having shares in different partnership firms with 25% share and the said Patel family was having 75% share. During the conduct of the affairs of the companies and partnership firms some differences had arisen and therefore, they decided to separate on settlement of accounts. It is quite obvious that our client and his family members were in minority and therefore they had very little y on terms and conditions of settlement.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
