The Delhi High Court ruled that the onus lies on Revenue to show failure on part of assessee to fully and truly disclose all material facts.
The dispute originates from the return of income filed by the respondent, Superior Film Pvt. Ltd. under Section 139 (1) of the Income Tax Act, 1961 for the assessment year 2004-05 on 11.01.2004. The said return was selected for scrutiny and a notice under Section 143 (2) of the Act was issued by the Assessing Officer to the respondent. The same resulted in Assessment Order making an addition of Rs.96,36,129/- to the taxable income of the respondent after calculating depreciation and adjusting the brought forward losses of previous assessment year under Section 72 of the Act, the income of the respondent was assessed at Rs.10,46,779/-.
The respondent challenged the Assessment Order before the Commissioner of Income Tax (Appeals)-XII. The Commissioner of Income Tax (Appeals)-XII was pleased to allow the appeal vide order dated 30.01.2009 and a relief of Rs.12,94,257/- was granted to the respondent. It is only on 22.03.2011 that a notice under Section 148 of the Act was issued by the Assessing Officer to the respondent claiming that a deduction of franchise fee of Rs.2,40,00,000/- paid by the respondent to M/s Satyam Cineplex Limited was wrongly allowed as it gave an enduring benefit to the respondent and was an expense of capital nature. It was stated that allowing depreciation at the rate of 25% amounting Rs.60,00,000/-, balance amount of Rs.1,80,00,000/- should have been added to the income of the respondent for the Assessment Year 2004-05. The said proceedings resulted in an Assessment Order on the same terms.
Mr.Kunal Sharma, counsel for the appellant submits that in terms of the third proviso to Section 147 of the Act a four-year period provided in the first proviso to the said section would commence only on the final adjudication of the appeal filed by the respondent, which in the facts of the present case was disposed of by the Commissioner of Income Tax (Appeals). He submits that therefore, the notice under Section 148 of the Act issued was within the four-year period as provided in the first proviso to Section 147 of the Act.
The division bench of Justice Navin Chawla and Justice Manmohan held that onus is on Revenue to show that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment for that assessment year and in the instant case, Revenue has failed to discharge this onus. When it is not the case of the Revenue that there was failure on the part of the assessee to disclose all material facts fully and truly, Revenue cannot violate the statutory protection enjoyed by the assessee under proviso to section 147 of the Act.
The Court opined that third proviso to Section 147 does not in any manner extend the period within which action under Section 147 of the Act can be initiated by the Department. It merely empowers the Assessing Officer to assess or re- assess such income, which is not involved or is the subject matter of any appeal, reference or revision, and has escaped assessment. It does not grant any further extension of time to the Department to initiate a proceeding under Section 147 of the Act.Subscribe Taxscan AdFree to view the Judgment