Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts - Assessment years 1991-92 to 1994-95 - Whether where assessee had disclosed fully and truly all material facts necessary for purpose of assessment, a notice, issued after expiry of four years from relevant assessment year under section 148 to invoke provisions of section 147, on basis of mere change of opinion of Assessing Officer that a larger sum ought to have been disallowed under original assessment, failed to satisfy conditions as prescribed in proviso to section 147 - Held, yes FACTS The assessments of the petitioner for the relevant assessment years were completed under section 143(3). The Assessing Officer disallowed 10 per cent of the tax-free interest earned on the bonds on the ground that it related to the expenditure incurred by it in earning the said interest. Subsequently, the Assessing Officer issued a notice under section 147, read with section 148 for reopening the assessment on the ground that the petitioner had paid interest on borrowings, on one hand, and invested the said borrowed amount to earn tax-free income from bonds, on the other hand. Hence, a sum larger than 10 per cent should have been disallowed under the original assessment. The petitioner challenged the validity of the said notice by taking a plea that a period of four years had expired from the end of relevant assessment year and the said notice failed to satisfy the conditions as contemplated in proviso to section 147. HELD In the reasons for reopening of assessment, it had not been alleged that there had been omission or failure on the part of assessee to disclose fully and truly all the material facts necessary for assessment. The reason itself indicated that the assessee had disclosed fully and truly all the facts about the borrowing of funds as well as investments made in tax-free public sector undertaking bonds. The reason to believe that income had escaped assessment was that the Assessing Officer had not given conscious consideration to the aspect that if the assessee had not invested in tax-free bonds, there would not have been any necessity for borrowing of funds by…

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