Atma Ram Properties Pvt Ltd vs. DCIT (Delhi High Court)

DATE: (Date of pronouncement)
DATE: November 19, 2011 (Date of publication)

Click here to download the judgement (atma_ram_147_reopening.pdf)

S. 147: AO must specify what facts are failed to be disclosed. Lapse by AO no ground for reopening if primary facts disclosed

In AY 2001-02, the AO assessed advances of Rs. 1.56 crores received from a group concern as “deemed dividend” u/s 2(22)(e). In appeal, the CIT (A) held that the advances received in earlier years could not be assessed. The AO thereafter reopened the assessment for AY 1999-00 (after 4 years from the end of the AY). Though the AO alleged that there was a failure on the part of the assessee to disclose full and true material facts, he did not specify what that failure was. The reopening was upheld by the CIT (A) & the Tribunal. On appeal to the High Court, HELD allowing the appeal:

(i) In AY 1999-00, the AO inquired into the details of advances received but did not make any addition u/s 2(22)(e). If the AO fails to apply legal provisions, no fault can be attributed to the assessee. The assessee is merely required to make a full and true disclosure of material facts but is not required to disclose, state or explain the law. A lapse or error on the part of the AO cannot be regarded as a failure on the part of the assessee to make a full and true disclosure of material facts;

(ii) Though the recorded reasons state that the assessee had failed to fully and truly disclose the facts, they do not indicate why and how there was this failure. Mere repetition or quoting the language of the proviso is not sufficient. The basis of the averment should be either stated or be apparent from the record;

(iii) Explanation (1) to s. 147 which states that mere production of books is not sufficient does not apply a case where the AO failed to apply the law to admitted facts on record.

(iv) The allegation that the assessee did not disclose the true and correct nature of payment received from the sister concern nor disclosed the extent of holding of the sister concern so as to enable the AO to apply his mind regarding s. 2(22)(e) is not acceptable. The assessee had filed statement of accounts of each creditor and indicated them to be sister concerns. The primary facts were furnished. The law does not impose any further obligation of disclosure on the assessee (CIT vs. Burlop Dealers Ltd 79 ITR 609 (SC) followed).

Note: Contrast with Dalmia Pvt Ltd vs. CIT (Delhi High Court) where it was held (reopening after 4 years) that despite specific & pointed queries in s. 143(3) assessment, AO cannot be said to have formed any opinion if “explicit opinion” was not recorded

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