INCOME TAX ACT, 1961

Section 148

Reassessment - Reason to believe - Revenue failed to bring on record any element or aspect -

Assessee-company was engaged in business of manufacturing FMCG and claimed deductions under sections 80-IB and 80-IC. Assessee was manufacturing Parachute brand edible coconut oil, amount other items in Pondicherry and Baddi undertakings. Though Pondicherry unit extract oil from copra to a limited quantity, most of the quantity of edible coconut oil sold was processed out of raw coconut oil procured by these units. As per definition of manufacture given in section 2(29BA), deduction would not be available on sale of the edible coconut oil affected by these two units. Therefore, AO issued notice under section 148 on the reason to believe that income of assessee had escaped assessment on failure on the part of assessee to disclose fully and truly all material facts. Held: Where AO exercises power of reassessment beyond the period of four years from the end of relevant assessment year, an essential requirement was that escapement of income chargeable to tax was due to failure on the part of assessee to disclose truly and fully all material facts. Revenue was unable to bring any aspect or element which did not form part of record and on the basis of which from the reasons recorded, it can be culled out that AO had formed a belief that income chargeable to tax had escaped assessment. Therefore, there was no failure on the part of assessee to disclose truly and fully all material facts and notice under section 148 was quashed.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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