The Tax Publishers2020 TaxPub(DT) 5009 (Karn-HC)

INCOME TAX ACT, 1961

Section 147

Where AO recorded a finding that due to non-disclosure of transaction of joint development agreement entered into by assessee towards transfer of land, the income escaped assessment within the meaning of section 147; the Tribunal was not justified in holding that the AO did not mention that the assessee failed to disclose truly and fully all material facts necessary for computing its income due to which the income had escaped tax. Therefore, the order passed by the Tribunal suffered from the vice of non-application of mind and hence, the same was liable to be quashed.

Reassessment - Assessee failed to disclose truly and fully all material facts - Non-disclosure of transaction of joint development agreement entered into by assessee -

AO completed assessment under section 143(3) in case of assessee-company. Subsequently, the AO noticed that the assessee entered into a joint development agreement and in consideration, the assessee was to receive 28% of saleable constructed area and the assessee handed over the possession of the land in pursuance of joint venture agreement. Accordingly, the AO held that handing over the possession of the land would amount to transfer under section 2(47), which escaped assessment. Therefore, the assessment was reopened and the transaction relating to transfer of land was brought to tax under 'Long-Term Capital Gains'. However, Tribunal held that the assessment had been reopened after expiry of four years and the AO had not mentioned that the assessee failed to disclose truly and fully all material facts necessary for computing its income. Accordingly, the order of reassessment was set aside by the Tribunal. Held: From perusal of the reasons recorded by the AO while reopening the assessment, it was evident that the AO recorded a finding that due to non-disclosure of transaction of joint development agreement entered into by assessee towards transfer of land, the income escaped assessment within the meaning of section 147. Once the AO records the reasons that he has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. However, the Tribunal in a cryptic and cavalier manner without adverting to the reasons assigned by the AO, held that the AO had not mentioned that the assessee failed to disclose truly and fully all material facts necessary for computing its income due to which the income escaped tax. Therefore, the order passed by the Tribunal suffered from the vice of non-application of mind and hence, the same was accordingly, quashed.

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2004-05



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