income escaping assessment - general
Provisions are not unconstitutional - It cannot be said that sections 147 and 148 contain delegation of arbitrary and uncontrolled power to the ITO to reopen an assessment without any reason. These sections cannot therefore be challenged as unconstitutional - Vimal Chandra Golecha v. ITO  134 ITR 119 (Raj.).
writ petition - The Supreme Court in the case of Calcutta Discount Co.
Ltd. v. ITO  41 ITR 191 has clearly indicated that a writ
petition would be maintainable to challenge invocation of proceedings for
reassessment even though it was also open to the assessee to challenge the same
before the Assessing Officer during the assessment as also challenge the same
before the appellate authorities after the reassessment proceedings were
completed. As indicated in Whirlpool’s Corpn. v. Registrar of Trade
Marks  8 SCC 1, the jurisdiction of the High Court in entertaining a
writ petition under article 226 of the Constitution would not be affected
although there exist alternative statutory remedies particularly in cases where
the authority against whom the writ has been filed is shown to have had no
jurisdiction or has purported to usurp jurisdiction without any legal
foundation. It, however, remains a matter of discretion with the court as to
whether in a particular case, it ought to interfere or not. Thus, a writ
petition challenging reassessment, cannot be thrown out at the threshold on the
ground that it is not maintainable - Techspan
Reassessment at the instance of Commissioner - Even if there is advertence in the reassessment proceedings to the direction of the superior officer, that by itself will not vitiate the resultant proceedings as long as the Assessing Officer has independently applied his mind to all the relevant aspects and has arrived at the reasons for his belief. Reminding an officer of his statutory duty and directing him to proceed in accordance with law after arriving at the requisite satisfaction under the statute cannot amount to a direction to act in a particular way. The officer to whom such a reminder is given also cannot be said to abdicate his function if he proceeds according to law uninfluenced by any direction from his superior. If the direction by the Commissioner is to reopen the assessment under section 147 bypassing the statutory formalities, that would probably amount to dictating his subordinate to act in a particular way thereby taking away the discretion vested in the subordinate - CIT v. Abdul Khader Ahamed  156 Taxman 206 (Ker.).
Burden of proof
Burden of proof is on revenue - In reassessment proceedings, the burden is on revenue to establish that there was income which escaped assessment - Tin Mfg. Co. of India v. CIT  88 Taxman 34/222 ITR 323 (All.).
Amendments of 1989 - Circular No. 549, dated 31-10-1980 issued by the Central Board of Direct Taxes makes it clear that the amended provision which came into effect on 1-4-1989, would be retrospective in the sense that it will apply prospectively in all matters pending on 1-4-1989 which had not become closed or dead. Thus, where the notice for assessment was issued after the amendment of law in 1989, the new law would govern the procedure even though the assessment was made prior to the amendment - Simplex Concrete Piles (India) Ltd. v. Dy. CIT  262 ITR 605 (Cal.).
Scope of powers
under amended provision are wide enough even to cover cases where assessee had
fully disclosed material facts
- The provisions of section 147, as amended with effect from 1-4-1989, are
contextually different and the cumulative conditions spelt out in clauses (a)
and (b) of section 147 prior to its amendment are not present in the amended
provision. The only condition for action is that the Assessing Officer should
have reasons to believe that income has escaped assessment. Such belief can be
reached in any manner and is not qualified by a pre-condition of faith and true
disclosure of material fact by an assessee as contemplated in the pre-amended
section 147(a). Viewed in that angle, power to reopen assessment is much
wider under the amended provision and can be exercised even after the assessee
has disclosed fully and truly all the material facts - Bawa Abhai Singh
v. Dy. CIT  117
Taxman 12 (Delhi) [See also Rakesh Aggarwal v. Asstt. CIT
 87 Taxman 306 (
Proceedings are for the benefit of revenue only - Since the proceedings under section 147 are for the benefit of the revenue and not an assessee, and are aimed at gathering the ‘escaped income’ of an assessee, the same cannot be allowed to be converted as ‘revisional’ or ‘review’ proceedings at the instance of the assessee, thereby making the machinery unworkable - CIT v. Sun Engineering Works (P.) Ltd.  198 ITR 297 (SC).
Assessee can make claims only in respect of escaped income - While the assessee cannot reagitate claims already assessed, it is open to the assessee in reassessment proceedings to put forward claims for deduction of any expenditure which is relatable to the income which is sought to be assessed as escaped income in the reassessment proceedings - CIT v. Caixa Economica De God  119 CTR (Bom.) 250.
Proceedings under section 147 are for the benefit of revenue and not of the assessee, and hence the assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision in disguise, and seek relief in respect of items earlier rejected, or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to escaped income, and reagitate concluded matters. Allowance of such a claim in respect of escaped assessment in the case of reassessment has to be limited to the extent to which they reduce the income to that originally assessed. Income for the purpose of reassessment cannot be reduced beyond the income originally assessed - K. Sudhakar S. Shanbhag v. ITO  241 ITR 865 (Bom.).
Powers are not unbridled - The power conferred upon the ITO by sections 147 and 148 is not an unbridled one. It is hedged with several safeguards conceived in the interest of eliminating room for abuse of this power by the Assessing Officer - Sri Krishna (P.) Ltd. v. ITO  87 Taxman 315/221 ITR 538 (SC).
Powers are not plenary - The powers of the ITO to reopen assessment, though wide, are not plenary. The words of the statute are ‘reason to believe’ and not ‘reason to suspect’. The reopening of an assessment after a lapse of many years is a serious matter - ITO v. Lakhmani Mewal Das  103 ITR 437 (SC).
Assessee is not obliged to instruct ITO on questions of law - Section 147 does not cast any duty on the assessee to instruct the ITO on questions of law - CIT v. Bhanji Lavji  79 ITR 582 (SC) - Parashuram Pottery Works Co. Ltd. v. ITO  106 ITR 1 (SC).
ITO can reassess entire escaped income - Once an assessment is reopened by issuing a notice, the previous under-assessment is set aside and the whole assessment proceedings start afresh. Once the reassessment proceedings are validly initiated, the jurisdiction of the ITO is not restricted to the portion of the income that escaped assessment. Once valid proceedings are started under section 147, the ITO not only has the jurisdiction but it is his duty to levy tax on the entire income that has escaped assessment during that year - V. Jaganmohan Rao v. CIT/CEPT  75 ITR 373 (SC).
Assessee cannot reagitate questions and claims which have become final - To read the judgment in Jaganmohan Rao’s case as laying down that the reassessment wipes out the original assessment and that reassessment is not only confined to ‘escaped assessment’ or ‘under assessment’ but to the entire assessment for the year and it would start the assessment proceedings de novo giving right to an assessee to reagitate matters which he had lost during the original assessment proceedings which had acquired finality, is not only erroneous but also against the phraseology of section 147 and the object of reassessment proceedings - CIT v. Sun Engineering Works (P.) Ltd.  198 ITR 297 (SC).
must be confined to points of under-assessment and not entire assessment - The entire appellate remedy shall be denied
to the assessee if the ratio in V. Jaganmohan Rao’s case (supra)
is blown up out of all proportion. Therefore, the only pragmatic reading of
that judgment can be that the reassessment proceeding would confine itself to
the points of under assessment. It cannot embrace the entire assessment - Metal
Import (P.) Ltd. v. CIT  72 Taxman 375 (
Prior opportunity to assessee is not necessary - The ITO is not required by the section to convey to the assessee or to intimate to him the nature of the alleged escapement, or to give him an opportunity of being heard, before he decides to operate the powers conferred in the section - CIT v. Mahaliram Ramjidas  8 ITR 442 (PC).
Proceedings cannot be initiated ignoring return showing income below taxable limit - A return showing income below taxable limit is a valid return. The ITO cannot therefore ignore such a return and issue a notice for reassessment - CIT v. Ranchhoddas Karsondas  36 ITR 569 (SC).
Mere change of opinion cannot form the basis - When the primary facts necessary for assessment are fully and truly disclosed, the ITO will not be entitled on change of opinion to commence proceedings for reassessment. Similarly, if he has raised a wrong legal inference from the facts disclosed, he will not, on that account, be competent to commence reassessment proceedings - CIT v. Bhanji Lavji  79 ITR 582 (SC).
Having second thoughts on the same material, and omission to draw the correct legal presumption during original assessment do not warrant the initiation of a proceeding under section 147 - ITO v. Nawab Mir Barkat Ali Khan Bahadur  97 ITR 239 (SC).
Where it was clear from the original assessment orders as well as order made by the appellate authority that the Assessing Officer was well aware about the primary facts, viz., the claim made by the assessee, the circumstances under which the claim was made, and the provisions of law which could be applied while granting the benefits, and the Assessing Officer consciously considered the facts and arrived at a decision, the assessment cannot be reopened merely because subsequently the Assessing Officer changes his opinion or some other officer takes a different view. A decision is right or wrong is none of the concern of the subsequent officer. If the primary facts were not available or there was concealment or there was no application of mind at all, then a case for reopening the assessment could be made out - Sita World Travel (India) Ltd. v. CIT  140 Taxman 381 (Delhi).
Reassessment based on new views on same facts is not permissible - Income-tax department cannot be permitted to bring fresh litigations because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstances - Sirpur Paper Mills Ltd. v. ITO  114 ITR 404 (AP).
Ignorance of law cannot form the basis - Where the relevant materials or facts were admittedly already available in the concerned original assessment proceedings and there were no new facts which came to the possession of the assessing authority, the said officer could not be heard to say that the legal position was not known to him even though the relevant facts and materials were available. Ignorance of law would be no ground or any excuse for the ITO concerned to reopen the assessment - Century Enka Ltd. v. ITO  143 ITR 629 (Cal.).
Statements by third parties cannot form the basis - A mere confessional statement by a third party (who is a lender of the assessee) that he was a mere name-lender and that all his transactions of loans were bogus, without naming the assessee as one who had obtained bogus loans, would not be sufficient to hold that the assessee’s income had escaped assessment - S.P. Agarwalla alias Sukhdeo Prasad Agarwalla v. ITO  140 ITR 1010 (Cal.).
Some opinion must have been formed by ITO at original stage - There should be something positive to show that there was in fact such formation of opinion at the original assessment stage. If initially no opinion was formed, the question of change therein could not be said to take place - Nawabganj Sugar Mills Co. Ltd. v. CIT  123 ITR 287 (Delhi).
Supreme Court decision cannot be the basis - The ITO cannot seek to reopen an assessment under section 147 on the basis of a Supreme Court decision in a case where the assessee had disclosed all material facts - Indra Co. Ltd. v. ITO  80 ITR 559 (Cal.).
Ignorance of Board circular is not sufficient - The mere fact that the ITO was not aware of the circular of the Board is not sufficient to reopen an assessment - Dr. H. Habicht v. Makhija  154 ITR 552 (Bom.).
Omission to notice facts by oversight cannot be the basis - When at the time of the original assessment primary facts were already before the ITO and after some routine enquiry the ITO could have assessed the income on the basis of such information, it is not open to him to invoke the provisions of section 147 and reopen the assessment even though he may have omitted to notice the facts mentioned in the return by oversight - Lokendrasingh v. ITO  128 ITR 450 (MP).
Proceedings are not barred when rectification proceedings are dropped - There is no provision in the Act which bars the initiation of proceedings under sections 147 and 148 in cases where proceedings initiated earlier under section 154 had been dropped - G.P. Agarwal v. Asstt. CIT  208 ITR 795 (All.).
Completion of assessment to get over time-bar cannot be a valid ground - Where there was no suppression or concealment on the part of the assessee, but the ITO passed the assessment order without investigating the matter in detail on the only ground that the assessment proceedings were getting time-barred, it could not be said that the assessee had concealed or suppressed any material so as to warrant reopening of the assessment - Adarsh Chemicals & Fertilizers Ltd. v. IAC  122 CTR (Guj.) 53.
Non-cognizance of revised return will not vitiate ITO’s jurisdiction - Once jurisdiction to make reassessment is conceded, one cannot perceive any reason how the non-cognizance of the subsequent revised return on the basis of a particular view taken by the Officer in respect of the revised return can destroy the initial jurisdiction which the notice under section 148 has activated - CIT v. Banshidhar Jalan & Sons  207 ITR 488 (Cal.).
Valuation report cannot by itself form the basis - Where apart from the valuation report which was relied upon by the ITO there was no material before him to come to the prima facie conclusion that the assessee had received a higher consideration than what had been stated in the sale deed, reassessment would not be justified - ITO v. Santosh Kumar Dalmia  208 ITR 337 (Cal.).
Valuation is always a question of opinion and unless there is a clear finding on the basis of the materials that the assessee invested in the construction of a house property more than what had been shown by her in the course of assessment proceedings, the ITO cannot proceed merely on the basis of the Valuation Report of the Department Valuer - Smt. Uma Devi Jhawar v. ITO 1994 Tax LR 78 (Cal.).
Loss cannot be determined in reassessment - From a reading of clause (d) of the Explanation, one can clearly visualise a prohibition on determination of loss for the first time in a proceeding under section 147, on the basis of a return of loss filed in pursuance of a notice under section 148 - Koppind (P.) Ltd. v. CIT  207 ITR 228 (Cal.).
Loss cannot be computed and carried forward - In reassessment proceedings, which are always for the benefit of Revenue, the assessee cannot claim that assessment should be completed and loss should be determined to enable him to claim the benefit of carry forward and set off against income of the subsequent years. In such a case, the proper course for the ITO would be to drop the proceedings under section 147 - CIT v. State Agro Development Corporation  248 ITR 487 (J&K).
Assessing Officer cannot launch inquiry on grounds not covered in reassessment notice - Where the Assessing Officer initiated proceedings for reassessment on the only ground that the assessee had claimed excess depreciation by adopting a higher rate as against the normal rate, he would not be justified in launching inquiry into issues which were not connected with the claim for depreciation. A letter issued to the assessee requiring the assessee to furnish information on issues in respect of which there was no allegation of any escapement or under assessment of income either in the reasons recorded or during the course of proceedings under section 147 would tantamount to reviewing the whole assessment, which is not permissible. The letter was therefore vacated - Vipan Khanna v. CIT  122 Taxman 1 (Punj. & Har.).
When Commissioner sets aside the assessment, and assessment is yet to be reframed - When the Commissioner acting under section 263 has set aside the original assessment and has directed the Assessing Officer to reframe the assessment on a particular issue after examining all the facts of the case and after providing reasonable opportunity of hearing to the assessee, it cannot be said that income has escaped assessment. When the reassessment proceedings pursuant to the order of the Commissioner are pending and the Assessing Officer is entitled to examine all the aspects of the matter on the issue involved, the question of income escaping assessment does not arise and consequently the question of reopening the assessment on the ground that the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment does not arise at all. So long as the assessment proceeding in respect of certain income subsists, the income cannot to be said to have escaped assessment. Such a proceeding, if initiated, will have to be held as invalid ab initio void and illegal - Ador Technopack Ltd. v. Dr. Zakir Hussein, Dy. CIT  271 ITR 50/140 Taxman 16 (Bom.).
When intimation under section 143(1) is issued - So long as ingredients of section 147 are fulfilled, Assessing Officer is free to initiate proceeding under section 147 even where intimation under section 143(1) has been issued; as intimation under section 143(1)(a) is not ‘assessment’ there is no question of treating re-assessment in such a case as based on change of opinion - Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd.  161 Taxman 316/291 ITR 500 (SC).
Others - During pendency of the return filed under section 139 along with refund application under section 237, action cannot be taken under section 147/148 - Trustees of H.E.H. the Nizam’s Supplemental Family Trust v. CIT  109 Taxman 193/242 ITR 381 (SC).
It is trite law that when an assessee challenges a notice to reopen assessment under section 147 on ground that no reasons under section 148 had been recorded or disclosed, court must call for and examine the reasons - Comunidado of Chicalim v. ITO  113 Taxman 331 (SC).
Merely because the case of the assessee was accepted as correct in original assessment for relevant assessment year, it does not preclude the ITO to reopen the assessment of an earlier year on the basis of his findings of fact made on the basis of fresh materials in the course of assessment of the next assessment year - Ess Ess Kay Engineering Co. (P.) Ltd. v. CIT  247 ITR 818 (SC).
Where the petitioner-bank received money under the Portfolio Management Scheme from one of the customers under an oral understanding that the customer would require a fixed return, and later the petitioner earned more than the fixed amount and retained the excess amount over the amount paid as fixed return but did not offer such excess amount to tax, the department would be justified in reopening the assessment due to the petitioner’s failure to apprise the department of the said oral understanding, which was a material fact - Citibank N.A. v. S.K. Ojha  257 ITR 663 (Bom.).
‘Reason to believe’
Belief should not be arbitrary or irrational but based on relevant and material reasons - The important words under section 147 are ‘has reason to believe’ and these words are stronger than the words ‘is satisfied’. The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court cannot of course investigate into the adequacy or sufficiency of the reasons which have weighed with the ITO in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 - Ganga Saran & Sons (P.) Ltd. v. ITO  130 ITR 1 (SC); ITO v. Nawab Mir Barkat Ali Khan Bahadur  97 ITR 239 (SC)/Raymond Woollen Mills Ltd. v. ITO  236 ITR 34 (SC).
Belief must be in good faith, and cannot merely be a pretence - The expression ‘reason to believe’ does not mean a purely subjective satisfaction on the part of the ITO. The belief must be held in good faith; it cannot merely be a pretence - S. Narayanappa v. CIT  63 ITR 219 (SC).
Suspicion, gossip or rumour should not form the basis - The words ‘reason to believe’ suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds, and that the ITO may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The ITO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section - Sheo Nath Singh v. AAC  82 ITR 147 (SC).
Extraneous and irrelevant material should not be basis for conclusion - There should be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which that conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of fact - CIT v. Daulat Ram Rawatmull  87 ITR 349 (SC); ITO v. Lakshmani Mewal Das  103 ITR 437 (SC).
Disclosure of primary facts
Every disclosure is not and cannot be treated to be a true and full disclosure - Every disclosure is not and cannot be treated to be a true and full disclosure. A disclosure may be a false one or true one. It may be a full disclosure or it may not be. A partial disclosure may very often be a misleading one. What is required is a full and true disclosure of all material facts necessary for making assessment for that year - Sri Krishna (P.) Ltd. v. ITO  87 Taxman 315/221 ITR 538 (SC).
Assessee must disclose all primary facts fully and truly - The words ‘omission or failure to disclose fully and truly all material facts necessary for his assessment for that year’ postulate a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision on the question before the assessing authority lies on the assessee - Calcutta Discount Co. Ltd. v. ITO  41 ITR 191 (SC); Indian Oil Corporation v. ITO  159 ITR 956 (SC); Parashuram Pottery Works Co. Ltd. v. ITO  106 ITR 1 (SC); ITO v. Lakhmani Mewal Das (supra).
must not only be ‘full’ but also ‘true’ - The material should not only be full, but also be true - K.P.
Arthanariswamy Chettiar v. First ITO  84 ITR 51 (
‘Disclose’ postulates that assessee has knowledge of facts - The duty to disclose fully and truly arises only when an assessee has knowledge of facts. An assessee who does not have the knowledge of the facts cannot possibly disclose such facts - Canara Sales Corporation Ltd. v. CIT  176 ITR 340 (Kar.).
‘Disclosure’ can be only of facts/materials existing at relevant time - The assessee can disclose only such facts or materials as are in existence at the relevant time and which are known to him - CIT v. Shri Satyanarain Lohia  204 ITR 894 (Cal.).
Where transaction itself is bogus, its disclosure cannot be said to be full and true - Where transaction itself, on basis of subsequent information, is found to be a bogus transaction, mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the ‘true’ and ‘full’ facts in the case and ITO would have jurisdiction to reopen concluded assessment in such a case - Phool Chand Bajrang Lal v. ITO  203 ITR 456 (SC).
facts’ mean primary facts only
- It is practically a settled position of law that ‘material facts’ used in
section 147 refer only to primary facts which have been disclosed by the
assessee showing the sale, purchase and profit supported by the account books.
As such in the absence of any case of suppression, misrepresentation or
falsification of documents, it cannot be said that the provisions of section
147 are attracted - Oriental Carpet Mfrs. (
A distinction has to be made between primary facts and collaterial facts. Where full details are filed by the assessee of the interest account of a creditor including interest paid to such creditor in the relevant accounting year, mere non-production of the loan account of the creditor which constituted merely an evidence of the primary transaction of the loan could not amount to non-disclosure of primary facts - Dinesh Kumar Gordhandas v. CIT  140 ITR 211 (MP).
Mere production of books/documents/evidence will not suffice - After the insertion of Explanation to section 147 the position remains that so far as primary facts are concerned, it is assessee’s duty to disclose all of them, including particular entries in account books, particular portions of documents as well as documents and other evidences which could have been discovered by the assessing authority from the documents and other evidence disclosed. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of fact can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences, whether of fact or of law, should be drawn. Indeed when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of fact of law - he would draw from the primary facts - Calcutta Discount Co. Ltd. v. ITO  41 ITR 191 (SC).
Action under section 147 is permissible even if the Assessing Officer gathers his reasons to believe from the very same record as has been the subject-matter of the completed assessment proceedings. The argument that production of the account books and other documentary evidence relevant for assessment must imply a full and true disclosure of all material facts, must be rejected out of hand in the light of the provisions of Explanation 1 according to which mere production of the books of account or other evidence from which the Assessing Officer could have, with due diligence, discovered the material evidence, does not necessarily amount to a disclosure within the meaning of the proviso. The submission that even when the order of assessment does not record any explicit opinion on the aspects sought to be examined in reassessment, it must be presumed that those aspects were present in the mind of the Assessing Officer and have been held in favour of the assessee, could not be accepted. There might indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy have been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In the cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment - Consolidated Photo & Finvest Ltd. v. Asstt. CIT  151 Taxman 41 (Delhi).
Mere production of evidence before the ITO is not enough. There may be omission or failure to make a true and full disclosure. If some material for the assessment lay embedded in the evidence which the assessee could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts. Whereas the assessing authority may not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent. That is immaterial. But if there is omission to disclose the material facts, then subject to the other conditions, jurisdiction to reopen is attracted - Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT  159 ITR 624 (SC).
Mere fact that ITO could have found out factual affairs is no reason for exonerating assessee from making full and true disclosure - The assessee cannot be exonerated from the duty to make a full and true disclosure of material facts merely because the ITO could have in the original assessment proceedings found out correct factual affairs by probing into the material or evidence placed before him but he failed to do so - Ram Prasad v. ITO  82 Taxman 199 (All.).
Omission to disclose cannot be inferred from valuation report obtained subsequently - By no stretch of imagination can the assessee’s omission or failure to disclose any fact be inferred from a revised departmental valuation report which came into being only subsequently and not any time earlier - Kamala Properties v. IAC 1994 Tax LR 468 (Cal.).
Disclosure in wealth-tax proceedings will not suffice - Arun Kumar Maheshwari v. ITO  144 Taxman 651 (All.).
Illustrative cases where disclosure was held to be not full and true - A firm did not show in its return of income its income from a branch, but showed that income as the income of an independent firm - S.C. Prashar v. Vasantsen Dwarkadas  49 ITR 1 (SC).
u The assessee had not disclosed factum of current account in the name of his father-in-law as well as cash advanced to party, and had further not shown income from properties in the names of his sons, wife and daughter though many of the properties were purchased by him in their names - Sowdagar Ahmed Khan v. ITO  70 ITR 79 (SC).
u The assessee-firm took a company as a partner and sold some shares to it, but did not file the sale deed, nor did it disclose the sale price or the cost price of the shares - CIT v. Gillanders Arbuthnot & Co.  87 ITR 407 (SC).
u In respect of the sale of the assessee-company to another company, the assessee-company did not disclose the surplus price realised by it over and above the written down value of the assets sold, nor did it inform the ITO the price realised as well as the written down value of the assets sold - Malegaon Electricity Co. (P.) Ltd. v. CIT  78 ITR 466 (SC).
u The assessee did not return the share income from the firm, but pleaded that at the time of filing the original return he was not aware of the share income whereas the ITO had knowledge about the assessee’s interest in the firm - Baladin Ram v. CIT  71 ITR 427 (SC).
u The ITO relied upon the fact as found by the customs authorities that the assessee had under-invoiced certain exported goods, and the assessee had not produced the books of account relating to its foreign head office nor the original contracts of sale as well as the accounts relating to the foreign buyers - Central Provinces Manganese Ore Co. Ltd. v. ITO  191 ITR 662 (SC).
u In respect of investments in the money-lending business of the assessee-HUF which showed considerable increase, the assessee explained that the HUF had received considerable cash on the partition of the bigger HUF, and that the karta of the HUF had received gifts from his father-in-law which had not been invested earlier. The assessee however did not produce the partition deed. The books of account for earlier year were also not produced on the plea that they were all lost. The assessee did not also adduce any evidence to show that his father-in-law had sufficient means to make the gifts and had in fact made the gifts - Kantamani Venkata Narayana & Sons v. First Addl. ITO  63 ITR 638 (SC).
u The ITO reopened the assessment on the ground that the commission paid by the assessee to a party was a bogus payment, and that the purchase made from another party was not genuine, as evidenced by the facts coming to his notice after the completion of assessment which disclosed that the materials furnished by the assessee earlier were untrue - IAC v. V.I.P. Industries Ltd.  191 ITR 661 (SC).
Illustrative cases where disclosure was held to be full and true - The ITO relied upon his own records for determining the quantum of depreciation admissible to the assessee, but in the process lost sight of the initial depreciation allowed, with the result that the aggregate depreciation allowed including the initial depreciation was not restricted to the original cost - Parashuram Pottery Works Co. Ltd. v. ITO  106 ITR 1 (SC).
u After completion of assessment, the ITO came to know that members of the assessee-HUF had encashed high denomination notes, and on that basis, reopened the assessments of the HUF as well as of the individual members so as to exclude a portion of the amount in the hands of the HUF and the balance in the hands of the individual members. Two days later, the ITO initiated another reassessment proceedings against the HUF for assessing the entire amount in the hands of the HUF - CIT v. Hemchandra Kar  77 ITR 1 (SC).
u The assessee had executed three trust deeds in favour of three ladies who were described as his wives. During assessment, the ITO accepted the assessee’s explanation that the three ladies were only ‘ladies of high position’ but were referred to as wives in view of the special favour bestowed upon them. The ITO was apparently satisfied with this explanation, and did not invoke the clubbing provisions while completing the assessment. Later, the ITO sought to reopen the assessment on the ground that, under the personal law governing the assessee, the ladies were the legal wives of the assessee, and that hence the clubbing provisions were attracted - ITO v. Nawab Mir Barkat Ali Khan Bahadur  97 ITR 239 (SC).
u The assessee had at the time of original assessment produced all the hundies on the strength of which it had obtained loans from creditors as also entries in the books of account showing payment of interest. The ITO allowed the interest paid as a deduction, but later reopened the assessment to withdraw the deduction on the basis of his belief that the transactions were not genuine and that the creditors were bogus, without setting out any material to support his belief - ITO v. Madnani Engg. Works Ltd.  118 ITR 1 (SC).
u The assessee sold shares acquired before 1-1-1954 in respect of which it received bonus shares after 1-1-1954, and the option to substitute the market value as on 1-1-1954 exercised by the assessee was accepted by the ITO while computing the capital gains. Later the ITO reopened the assessment on the ground that the market value as on 1-1-1954 required adjustment because of the issue of bonus shares - Shekhawati General Traders Ltd. v. ITO  82 ITR 788 (SC).
u An investment company sold certain shares, and disclosed full details of the sales. It stated that the sales were casual transactions and were in the nature of mere change in investments, and this was accepted by the ITO. Later the ITO reopened the assessment on the ground that the company had failed to disclose the true intention behind the sale of the shares - Calcutta Discount Co. Ltd. v. ITO  41 ITR 191 (SC).
u While completing a best judgment assessment after rejecting the books of account of the assessee, the ITO had written a detailed order, and in respect of certain bank drafts not mentioned in the assessee’s books he had collected all the requisite details and had even obtained the statement of one of the partners. However, the ITO later reopened the assessment on the ground that the assessee had utilised certain drafts for making purchases and that the transaction had not been disclosed in the assessee’s books - Gemini Leather Stores v. ITO  100 ITR 1 (SC).
u Eleven individuals who were members of three different HUFs filed their returns of income for the assessment years 1943-44 and 1944-45 in the status of individuals. The ITO however assessed the income in the hands of the respective HUFs and passed orders of ‘No assessment’ in respect of the individuals. Later, when the Tribunal held for the assessment year 1943-44 that the income was assessable only in the hands of individuals, the ITO reopened the assessments for the assessment year 1944-45 - CIT v. Onkarmal Meghraj (HUF)  93 ITR 233 (SC).
u Where Assessing Officer made assessment under section 147(a) on ground that land in question was not agricultural land and, hence, capital gains income chargeable to tax had escaped assessment and apart from statement in communication to Commissioner seeking sanction that he had reason to believe that income escaped assessment, there was no material on record to indicate that land was not agricultural land, and reassessment was set aside by Commissioner (Appeals) and Tribunal holding that land in question was agricultural land, High Court could not be said to be justified in setting aside Tribunal’s order - Ram Bai v. CIT  103 Taxman 121/236 ITR 696 (SC).
u When there was no omission or failure on the part of assessee to make a return under section 139 as contemplated in clause (a) of section 147 nor was there any information in the possession of the Assessing Officer obtained by him subsequent to the assessment order, reopening of assessment the on basis of AAC’s order in another assessee’s case could not be sustained - CIT v. Tarajan Tea Co. (P.) Ltd.  102 Taxman 697/236 ITR 477 (SC).
u Where assessment was reopened to treat income from mining and management contracts as fee for technical services while in original assessment it was treated as business income and notice for reassessment was issued after expiry of four years from the end of relevant assessment year, it was held that since admittedly there was no failure on the part of petitioner to make return or to disclose fully and truly all material facts necessary for assessment, proviso to new section, which bars issue of notice under section 148 after expiry of four years from end of relevant assessment year, squarely applied to facts of instant case and, therefore, impugned notice was barred by limitation - CIT v. Foramer France  129 Taxman 72 (SC).