To apply limitation of 16 years for reopening assessment, then in the notice or at least in the reasons in support of the notice, the assessee should be put to notice that the revenue invokes second proviso of Sec 147; SC.

Supreme Court of India

Justice Deepak Gupta & Justice L. Nageswara Rao

The SC on April 3, 2020 {NEW DELHI TELEVISION LTD. v. DEPUTY COMMISSIONER OF INCOME TAX} held that an assessing officer can only re­open an assessment if he has ‘reason to believe’ that undisclosed income has   escaped   assessment.  It was held that mere   change   of   opinion   of   the assessing   officer   is   not   a   sufficient   to  meet   the   standard   of ‘reason to believe’. 

It was further held that Information which   comes   to   the   notice   of   the   assessing   officer   during proceedings for subsequent assessment years can definitely form tangible   material   to   invoke   powers   vested   with   the   assessing officer under Section 147 of the Act.  

It was accordingly held that in present case  there   were   reasons   to   believe   that   income   had   escaped assessment in this case.  

The fate of the present appeal was decided by the SC on the question i.e. whether there was failure on   the   part   of   the   assessee   to   make   a   full   and   true disclosure of all the relevant facts. The same was answered in favour of the appellant/ assessee, and it was precisely the reason for allowing the present appeal. 

It was held by the SC that as per the dicta of Constitution Bench it is the duty of the assessee to disclose full  and truly all material facts which it termed as primary facts.   Non disclosure of other facts which may be termed as secondary facts is not necessary. 

It was held that the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. It was held that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn   from   the   facts   of   the   case. It was held that in   the   present   case   the assessing officer on the basis of the facts disclosed to him did not doubt the genuiness of the transaction set up by the assessee. It was held that the other facts relied upon by the revenue are the proceedings before the DRP and   facts   subsequent   to   the   assessment   order. It was held that cannot lead to the conclusion that there is non­disclosure of true and material facts by the assessee.

It was held that if the revenue is to rely upon the second proviso and wanted to urge that the limitation of 16 years would apply, then in the notice or at least in the reasons in support of the notice, the assessee should have been put to notice that the revenue relies upon the second proviso. It was held that the assessee could not be taken by surprise at the stage of rejection of its objections or at the stage of proceedings before the High Court that the notice is to be treated as a notice invoking provisions of the second proviso of Section 147 of the Act.   Accordingly, it was held that the notice issued to the assesse and   the   supporting   reasons   did   not   invoke   provisions   of   the second proviso of Section 147 of the Act and therefore at this stage the revenue cannot be permitted to take benefit of the second proviso.

Accordingly, the SC allowed the appeal by holding that the notice issued to the assessee shows sufficient reasons to believe on the part of the assessing officer to reopen the assessment but since the revenue has failed to show non­disclosure of facts the notice having been issued after a period of 4 years is required to be quashed. It was therefore quashed by the SC.