: Showing transport subsidy received during year as increase in transport sub

IT : Showing transport subsidy received during year as increase in transport subsidy reserve in audited accounts is deemed as full and true disclosure for the purposes of proviso to section 147 and Explanation 1 to section 147

FACTS

• Transport subsidy received by assessee was duly disclosed by him in audited accounts for financial year 1996-97 as credit/increase to transport subsidy reserve in Balance sheet.

• Balance in said reserve as on 31-3-1996 was Rs.35,00,030 and as at 31-3-1997 was Rs. 59,70,889.

• Same was not credited to Profit & Loss account nor offered by assessee for tax in his income-tax returns for Assessment Year 1997-98.

• The difference of Rs.24,70,559 was added by Assessing Officer to assessee's income in reassessment order dated 10.03.2005

HELD

• When assessee had disclosed very clearly and thoroughly that his transport subsidy reserve as on 31-3-1996 was Rs.35,00,030 and as at 31-3-1997 was Rs. 59,70,889, Department cannot say that he did not fully and truly disclose all material facts which were necessary for making valid assessment of income

• Explanation 1 to section 147 clarifies that mere fact that Assessing Officer could have with due diligence discovered the escapement of income from materials produced before him shall not "necessarily" amount to disclosure for section 147 purposes

• The word 'necessarily' in Explanation 1 implies that that it would depend on facts of a given case if Explanation 1 can be said to have been attracted

• Conversely, Explanation 1 will not condone lapse on part of Assessing Officer who due to sheer recklessness or negligence omits to take note of taxable income which was "fully and truly' disclosed by the assessee

• Mere fact that excessive relief was granted to assessee would not allow reopening of assessment after 4 year time limit unless such excessive relief can be attributed to assessee's failure to fully and truly disclose material facts necessary for assessment

• Neither Explanation1 nor Explanation 2 override conditions precedent embodied in proviso to section 147.

• Revenue's appeal was dismissed.


[2013] 32 taxmann.com 32 (Gauhati)

HIGH COURT OF GAUHATI

Commissioner of Income-tax, Guwahati - 1

v.

Sonitpur Solves Ltd.