Case Note & Summary
The appeal was filed by the Commissioner of Income Tax-3 (revenue) under Section 260A of the Income Tax Act, 1961 against the order dated 22/9/2009 of the Income Tax Appellate Tribunal (Tribunal) relating to assessment year 2000-01. The respondent-assessee, Reliance Industrial Infrastructure Ltd., had declared total income of Rs.52.45 lacs under normal provisions and Rs.1.01 crores under Section 115JA of the Act. In its return, the assessee appended a note stating that long-term investment in equity shares at an aggregate cost of Rs.12,00,00,000 was sold during the year, and the difference between the carrying amount and sale proceeds of Rs.29,52,96,000 was credited to Capital Reserve, as the shares were held as participating promoter's investment. During the assessment proceedings, on a specific query, the assessee by letter dated 7/3/2003 explained that the sale of shares was correctly credited to the reserve account and relied on the Supreme Court decision in Apollo Tyres Ltd. v. CIT (255 ITR 273) to contend that the Assessing Officer could not go behind the net profit shown in the profit and loss account for computing book profit under Section 115JB. The Assessing Officer accepted the submission and completed the assessment under Section 143(3) of the Act, recording a note that the assessee had credited Rs.29.52 crores to Capital Reserve and that the same was not taxable. Subsequently, the Assessing Officer issued a notice under Section 148 of the Act for reassessment. The Tribunal held that the reassessment notice was bad in law as the assessee had disclosed all facts truly and fully during the original assessment proceedings. The revenue appealed, raising the question of law whether the Tribunal was justified in so holding. The High Court examined the facts and found that the assessee had disclosed the sale of shares and the crediting of the difference to capital reserve in its return and in response to a specific query. The Assessing Officer had accepted the treatment and completed the assessment. The court held that the Tribunal's finding that there was full and true disclosure was a finding of fact, not perverse, and therefore the reassessment notice was invalid. The appeal was dismissed.
Headnote
A) Income Tax - Reassessment - Section 148 of Income Tax Act, 1961 - Validity of Notice Within Four Years - The revenue challenged the Tribunal's order holding that the reassessment notice issued under Section 148 was bad in law because the assessee had disclosed all material facts during the original assessment. The court upheld the Tribunal's finding that the assessee had disclosed the sale of shares and the crediting of the difference to capital reserve, and the Assessing Officer had accepted the same after a specific query. Held that the reassessment notice was invalid as there was no failure to disclose material facts (Paras 1-6).
Issue of Consideration
Whether the Tribunal was justified in holding that the reassessment notice issued under Section 148 of the Income Tax Act, 1961 within a period of four years from the date of completion of original assessment was bad in law as the assessee had disclosed all facts truly and fully during the original assessment proceedings.
Final Decision
The appeal is dismissed. The Tribunal's order dated 22/9/2009 is upheld. No order as to costs.
Law Points
- Reassessment notice under Section 148 of Income Tax Act
- 1961
- within four years of original assessment requires failure to disclose material facts fully and truly
- if assessee has disclosed all primary facts
- reassessment is invalid
- Tribunal's finding of fact on disclosure is final unless perverse.
