S. 147 Reopening For AY 2000-01 valid despite Proviso to s. 14A. Material facts must be disclosed during assessment proceedings
For AY 2000-01, the assessee filed a return on 30.11.2000. As s. 14A was inserted subsequently by FA 2001 (w.r.e.f 1.4.62) and was tabled in Parliament on 28.2.2001, the assessee did not make any disallowance u/s 14A. The AO also did not make a disallowance in the s. 143 (3) order passed on 7.3.2003. After the expiry of 4 years, the AO sought to reopen the assessment to make a disallowance u/s 14A. The assessee challenged the reopening on the ground that (i) under the Proviso to s. 14A, a reopening u/s 147 for AY 2001-02 & earlier years was not permissible, (ii) as s. 14A was not on the statute when the ROI was filed, there was no failure to disclose & (iii) as the AO had also sought to rectify u/s 154, he could not reopen u/s 147. HELD dismissing the Writ Petition:
(i) The Proviso to s. 14A bars reassessment but not original assessment on the basis of the retrospective amendment. Though the ROI was filed before s. 14A was enacted, the assessment order was passed subsequently. The AO ought to have applied s. 14A and his failure has resulted in escapement of income. The object and purpose of the Proviso is to ensure that the retrospective amendment is not made as a tool to reopen past cases which have attained finality;
(ii) The assessee has “accepted and admitted” that it has not given details with regard to proportionate expenses relatable to tax free income and argued that it was not required to disclose the same as s. 14A was not in the statute book when the ROI was filed. However, the details ought to have been given at the stage of the assessment proceedings & the failure to do so is a “failure to disclose material facts”. It is the duty of the assessee to bring to the notice of the AO particular items in the books of account or portions of documents which are relevant. Material facts are those facts which if taken into accounts they would have an adverse affect on assessee by the higher assessment of income than the one actually made. The assessee is a multinational company and it is difficult to perceive and accept that its tax or the legal department was not aware and did not have knowledge about s. 14A (Consolidated Photo 281 ITR 394 (Del) followed);
(iii) Though the AO also invoked s. 154, the assessee (rightly) claimed that there was no apparent mistake & s. 154 was not applicable. Accordingly, the fact that there were s. 154 proceedings is not a bar to the s. 147 proceedings. Further, the scope of s. 154 & 147/148 are different and it cannot be said as a general principle that if notice u/s 154 is issued, then notice u/s 147/148 is barred or prohibited (Hindustan Unilever Ltd 325 ITR 102 (Bom) distinguished).