COMMISSIONER OF INCOME TAX vs. VLS FINANCE LTD.


not even a whisper was made that the assessee had suppressed any facts or had not disclosed full and true facts, on the basis of which the assessee made claim for deductions under Section 35D of the $\Delta$ ct. This decision of CIT( $\Delta$ ) has been upheld by the Tribunal also giving the same reason, in the following words: -

"As per proviso to sec. 147 of the Act if an assessment has been made u/s 143(3) for a particular assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment in such assessment year by reason of failure on the part of the assessee to make a return u/s 139 or in response to a notice issued under subsection (1) of 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. A time limit has been prescribed for opening a completed case and thereafter only on default on the part of the assessee. This is so because the policy of law is that there must be point of finality in all legal proceedings. In the reasons recorded for both the years, there is not even an allegation by the ΛO that the assessee failed to disclose fully and truly all material facts necessary for its assessment. Nothing of this sort has been alluded to in the reasons recorded. The conjunction "and" used between fully and truly is important and has to be interpreted The material as a strict prescription of law. disclosed should not only be full, out also be true. It is not enough if it is only fully, for, it may contain untrue material. It is not equally enough if it is true, for, equality it may not be full. Therefore, the two elements prescribed by statute, namely, the fullness and truthfulness of the materials should


certain expenses relating to public issue and advertisement, etc., as revenue expenditure. All the details were made available to the AO. The AO did not allow this expenditure as revenue expenditure; however, he allowed the same being 1/10^th of the total expenditure in the A.Y. 1995-96 u/s 35D. Then, in subsequent years, the assessee claimed 1/10^th of this expenditure u/s 35D. Now, coming to the claim of bad debts for A.Y. 1997-98, the details with regard to bad debts were called for by the AO and the same were filed by the assessee vide letter dated 15.03.2000. Thereafter, the AO allowed the claim of the assessee. Thereafter, no material has come into the possession of the department that there was some falsity in the claim made by the assessee. For both these years the reasons recorded u/s 147 of the Act for reopening the assessments there is not even a whisper that the assessee had not disclosed the material facts truly and fully, which is clear from the reasons as recorded by the AO. In the case of Garden Silk Mills Ltd. v. CIT, 1995 Tax LR 1205(Guj), the High Court held that condition precedent for acquiring jurisdiction by the assessing authority for issuing notice u/s 147 after the expiry of four years from the end of the relevant assessment years did not exist as the ITO had also not held any belief that such escapement has arisen on account of any failure or omission on the part of the assessee as envisaged u/s 147 and therefore, he did not acquire any jurisdiction to issue notices, other case laws supporting this proposition of law (i) Parsharam Pottery Works Co. Ltd. v. ITO, 106 ITR (SC); Siesa Inds. v.CIT, 178 ITR 437; and (ii) Berger Paints India Ltd. & Ors. v. JCIT, 245 ITR 645(Cal)."


making a claim under Section 35D on the premise that it was an industrial undertaking clearly amounted to not making true disclosure and therefore the assessment could be re-opened even beyond the period of four years and the proviso to Section 147 of the Act was not applicable in a case like this. However, we are not able to accept this submission of the learned counsel. Again she could not dispute that in so far as the supply of information about the nature of business of the assessee is concerned, all necessary facts, completely and truly, were The assessee made full and complete disclosed by the assessee. disclosure, clearly stating that it was a hire-purchase company. On that basis, it had made a claim under Section 35D of the Act as the submission of the assessee was that such activity would make the assessee an 'industrial undertaking'. This was, it appears that, accepted by the Assessing Officer and for this reason the Assessing Officer allowed the claim under Section 35D of the Act. Whether the assessee should have been treated as an industrial undertaking or not is entirely a different issue. We are concerned here with the question as to whether the assessee had made a complete, full and true disclosure of the material facts or not. It cannot be disputed that this was so done. If on the basis of the opinion supplied by the assessee, it is treated as an industrial undertaking and claim under Section 35D is allowed that would only mean that on the basis of the facts disclosed by the assessee, the

2010:DHC:10940-DB


conclusion/opinion is wrong that cannot be the basis of re-opening of the assessment after a period of four years, unless it is shown that there was no full and true disclosure of the information which led to escaping the income tax.

No question of law arises. The appeals are accordingly dismissed.

A<del>.K. SI</del>KRI (JUDGE)

レー リューア REVA KHETRAPAL (JUDGE)

August 18, 2010 sk