Brief of the Case:
The hon’ble High Court of Bombay and Goa held in the case of Betts India Pvt. Ltd. V/s DCIT that when all the material facts necessary for assessment has been truly and full disclosed, the assessment can not be re opened after the expiry of time limit on the basis of inference drawn from reasons not recorded by the Assessing Officer.
Brief Facts of the Case:
The assessee is engaged in the manufacture and sale of plastic and laminated collapsible tubes for dental and health care products. For the AY 2004-05, the assessee re-evaluated the estimated useful life of some of the plant and machinery and claimed additional depreciation of Rs.5.03 crores which was duly pointed out in the notes to accounts of the assessee. The above return was assessed under section 143(3) of the Income Tax Act and as consequence of adjustment the income was enhanced to Rs.4.77 crores from Rs.4.08 crores. Later on, the notice under section 148 of the Act has been issued on 22/03/2011 and the reasons recorded for the same states that the additional depreciation charged on account of revision of useful life should be added back to the profits calculated under section 115JB of the Act.
Question of Law:
Whether Notice U/s 148 of the Act can be issued after expiry of 4 years from the end of the relevant assessment year when all facts have been truly and fully disclosed at the time of assessment?
Contention of Revenue:
The Ld. Counsel for the revenue submitted that all the facts necessary for the assessment has been “fully” disclosed but for the excess depreciation charged the facts are not “truly” disclosed. The requirement under the law for issuing notice beyond period of 4 years is there must be failure to disclose all the facts “fully and truly” necessary for assessment. Thus, the notice is within jurisdiction of the Assessing Officer.
Contention of Assessee:
The assessee filed its detailed objection to the reasons recorded by a petition and contented that the notice has been issued beyond 4 years from the end of the relevant assessment year and also there was no failure to disclose all the material facts necessary for assessment. Further, the proposed reopening is only change of opinion and the reasons recorded are contrary to the provision of section 115JB of the Act. In particular, the petitioner pointed out that all the facts and materials relevant for assessment were disclosed by the petitioner and the same is evident from the reason recorded in the impugned notice itself. Thus the impugned notice were without jurisdiction.
Held by High Court:
The Hon’ble High court in this case held that, there was no failure to disclose fully and truly all material facts necessary for assessment in this case as is evident from the reasons recorded in the notice. It is true, as held by court in Allanasans Ltd. Vs. Dy. CIT,369 ITR 648 that the mere absence of the words ‘failure to disclose’ in the reasons by itself would not be fatal to the notice. The word ‘truly’ would necessarily imply that either the assessee has declared falsely or has practiced ‘supresso very suggesto falsi’. The reasons recorded for reopening does not even whisper that there has been any false declaration made by the petitioner. This claiming of higher deprecation whether eligible or not is completely different from not disclosing fully and truly material facts necessary from assessment.
The Ld. Counsel for the revenue also submitted that we are not able to understand what facts were not truly disclosed that is either falsely declared or were so disclosed that the true facts were suppressed in the form of suppresso very. Thus, no inference can be drawn for falsely material facts from the reasons recorded in the notice.
It is also held in the case of Hindustan Lever ltd. V/s. Assistant Commissioner of Income Tax
“ The reasons recorded by the Assessing officer nowhere states that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. No inference can be allowed to be drawn from the reasons not recored. It is for the Assessing officer to disclose and open his mind through reasons recorded by him. He has to speak trough his reasons. The reasons recorded must be self explanatory and should not keep the assessee guessing for the reasons. The reasons recorded must be based on evidence. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year.”
In view of the above, it is not permissible to the Revenue to draw inferences from the reasons recorded that all material though fully disclosed not truly disclosed.
In the absence of failure on the part of revenue to show the facts which have not been truly disclosed by the appellant, the impugned notices are without jurisdiction. Accordingly, both the petitions are allowed. No order as to costs.