COMMISSIONER OF INCOME TAX Vs. SKYLINE BUILDERS

JUDGEMENT

(1.) THE question raised in the appeal filed by the Revenue is whether the Tribunal was justified in confirming the order of the first appellate authority cancelling income escaping assessment made under s. 147 of the IT Act as impermissible. The assessee, a builder, claimed various items of expenditure amounting to above Rs. 6 lakhs, which were not strictly relatable to the expenses incurred during the relevant previous year. However, in the return filed, there was no specific mention about the year to which these expenses were attributable and therefore the AO believing the expenditure as those relatable to the relevant previous year allowed the claim. However, later it was noticed that various items of expenditure were for prior periods and not liability of the previous year and therefore the assessment was revised under s. 147 disallowing the claim.

(2.) WHEN the assessee filed appeal challenging reopening as well as assessee's claim of deduction on merit, the first appellate authority allowed the claim on both grounds. It is pertinent to note that the first appellate authority held that expenditure involved was disputed and the same got settled and crystallised for the previous year relevant to the assessment year in question.

(3.) THE Department filed second appeal before the Tribunal challenging the orders of the first appellate authority. Even though the findings of the first appellate authority on merits were also challenged in the appeal before the Tribunal, the Tribunal considered only the jurisdictional aspect, that is justification for reopening under s. 147. It is the finding of the Tribunal that statement of accounts contained material facts and therefore, reopening of assessment was not permissible beyond four years. Accordingly they upheld the order of the first appellate authority cancelling reassessment. Since appeal was allowed on this ground, the Tribunal did not go into the question whether the assessee was entitled to deduction of the entire items of expenditure as liability crystallised in the relevant previous year. Senior standing counsel appearing for the Department challenged the findings of the Tribunal by referring to the decision of the Supreme Court in Phool Chand Bajrang Lal vs. ITO (1993) 113 CTR (SC) 436 : (1993) 203 ITR 456 (SC). Even though facts in this case are not identical to the facts of the case decided by the Supreme Court, we are inclined to take the view that finding of the first appellate authority as well as Tribunal is not tenable on the question of jurisdiction because the assessee had nowhere stated in the statement of accounts, balance sheet, or P&L a/c, that the expenditure claimed relates to prior periods. On the other hand, the only disclosure made is only the note to the accounts produced detailing the claim of prior period expenses. We do not find this as a true and full disclosure in accounts which form annexures to the return. The AO obviously could not have taken note of the disclosure alleged to have been made by the assessee by way of note to the accounts. We are therefore of the view that the accounts do not disclose that the expenditure debited is not relatable to the previous year and the note cannot be termed as true and full disclosure of material facts. Further the Explanation to the section makes it clear that what is discernible or what the officer could have found out through due diligence cannot be said to be true and full disclosure of the information required for assessment.