Income Tax Act, 1961

--Reassessment --Full and true disclosure Notice under section 148 issued after expiry of four years--Assessee was engaged in the business of development and construction of real estate. Assessee claimed deduction under section 80-IB(10) with regard to profit earned from housing project. Deduction under section 80-IB(10) was as such allowed by assessing officer while completing assessment under section 143(3). However, subsequently assessment was reopened after a period of four years from end of relevant assessment year on the ground that built-up area of shops and other commercial establishment of the project is 7.96 per cent which is far more exceeding the statutory limit of 5 per cent of the aggregate built-up area of the housing project of 2000 sq. fts. which ever is less as laid down under sub-section (d) of section 80-IB(10). Thus assessee is not eligible for claiming deduction under section 80-IB(10). Held: Not justified. As details regarding built-up area, commercial area, etc., were before assessing officer at the time of passing order under section 143(3), as such reopening of assessment after the expiry of 4 years from the end of relevant assessment year was not justified as assessee had made full and true disclosure of all primary facts.

It is clear that the assessing officer allowed deduction under 80-IB(10) at 100% of profit on sale of tenaments after considering the facts and material before him. In respect of sale of the shops, no deduction was allowed for the reason that the assessee had shown the profit on sale of shops by giving total sale price without giving any supporting evidence. The profit on sale of shops was therefore added in the income. There is, therefore, no gainsaying that the assessing officer considered and applied his mind to the facts relating to the housing project developed by the petitioner, the shops and the profit earned there from. He thereupon qualified the deduction in the assessment order. [Para 5] The phrase 'material facts' contemplated in the proviso to section 147 connotes 'primary facts' necessary for assessment in relation to the year of assessment. The expression material facts was considered by the Supreme Court in the context of section 34(1)(a) of the IT Act, 1922 in Associated Stone Industries (Kotah) Ltd. v. CIT 1997 TaxPub(DT) 1055 (SC) : (1997) 224 ITR 560 (SC). The expression material facts refers to only primary facts. It was observed that there is not duty cast on the assessee to indicate or draw attention of the Income Tax Officer to what factual, legal or other inference can be drawn from the primary facts disclosed. [Para 6.1] The nature of duty on the part of the assessee to disclose the necessary facts, and the assessing officer's enjoinment towards the facts disclosed are thus well settled in law. Applying the primary facts disclosed, the assessing officer may draw inferences. He may deduce certain other facts from the facts disclosed. He may even call for certain additional facts as may be required by him for the purpose of his assessment for the assessee. The task of the assessing officer is to apply those facts in accordance with legal provisions of assessment. The petitioner was not expected to disclose the facts in a manner so as to indicate how those facts will fit in for his claim. It really explain the process of assessment to be undertaken by the assessing officer on the basis of facts before him. [Para 7] In the present case, the assessee disclosed the factum of housing project, the construction of shops and the profit derived therefrom. These were the primary facts sufficient for the assessing officer to proceed in its assessment process. He had undertaken such process and applied the facts to the provisions of law by applying his mind. Whether the built-up commercial area/the area of shops conformed the requirement of section 80-IB(10), if that section was applicable, was an aspect to be examined by the assessing officer. It was a subsidiary fact to be searched out in the assessment process for which the primary facts were available with the assessing officer. An error, a slip, an omission or a mistake on part of the assessing officer in that regard would not furnish a ground to reopen. For, the reopening proceedings are not rectification proceedings. Nor the concluded assessment can be reviewed under the garb. [Para 7]