Honda Siel Power Products Ltd Vs DCIT (Supreme Court) – Failure on the part of the AO to apply section 14A of the Act when he passed the original assessment order had prima facie resulted in escapement of income. The object and purpose of the proviso to section 14A of the Act is to bar reassessment/ rectification of past cases which have attained finality and not an original assessment on the basis of retrospective amendment in the statute book. The AO was, therefore, required to disallow expenses incurred for earning exempt income in the original assessment itself.
The full and true disclosure of all material facts is not restricted to disclosures in the income-tax return or the tax audit report but also applies at the stage of the assessment proceedings.The burden is on the assessee to make full and true disclosure of material facts during the course of assessment proceedings.Explanation 1 to section 147 of the Act stipulates that mere production of books of account or other evidence is not sufficient. Therefore, merely because the information lies embedded in documents/ evidence produced before the AO, which the AO could have uncovered but did not uncover, is not a good basis to strike down a notice for reassessment. This view finds support from the SC decisions in the case of Kantamani Venkata Narayana & Sons4 and Malegaon Electricity Co. (P.) Ltd.5. There was an omission and failure on the part of the assessee to point out the expenses incurred for earning exempt income which prima fade have been claimed as a deduction in the income and expenditure account. Therefore, the assessee failed to disclose fully and truly all material facts.
In the present case, section 14A was on the statute book when the original assessment proceedings were in progress.When mistakes are apparent from record, the AO should invoke section 154 of the Act but in cases where mistakes are not apparent from the record, the AO can reopen assessment under section 147 of the Act when the pre-conditions are satisfied.The words ‘reasons to believe’ when income chargeable to tax has escaped assessment has a different connotation and requirement and cannot be equated with the powers under section 154 of the Act to rectify mistakes apparent from the record. Pre-requisites of reassessment are not controlled, curbed and regulated with the requirements of a mistake which is apparent from the record. Issue of notice under section 148 of the Act on a particular issue cannot be barred after issue of notice under section 154 of the Act on the same issue.
Issue of notice under section 148 of the Act on a particular issue cannot be barred after issue of notice under section 154 of the Act on the same issue.
SUPREME COURT OF INDIA
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (Civil) No(s). 19085/2011
(From the judgement and order dated 14/02/2011 in
WP No. 9036/2007 of
The HIGH COURT OF DELHI AT N. DELHI)
HONDA SIEL POWER PRODUCTS LTD. – Petitioner(s)
DY. COMMR. OF I.T & ANR – Respondent(s)
(With prayer for interim relief and office report)
This Petition was called on for hearing today.
HON’BLE THE CHIEF JUSTICE
HON’BLE MR. JUSTICE K.S. RADHAKRISHNAN HON’BLE MR. JUSTICE SWATANTER KUMAR
For Petitioner(s) Mr. Ajay Vohra, Adv.
Ms. Kavita Jha, Adv.
UPON hearing counsel the Court made the following O R D E R
In our view, the re-opening of assessment is fully justified on the facts and circumstances of the case. However, on the merits of the case, it would be open to the assessee to raise all contentions with regard to the amount of Rs.98.46 lakhs being offered for tax as well as it’s contention on Section 14A of the Income Tax Act, 1961.
Subject to above, the special leave petition is dismissed.
[T.I. Rajput] [Madhu Saxena]
A.R.-cum-P. S. Assistant Registrar
Read High Court Judgment