Law:

Section:

I. Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General - Assessment year 1996-97 - Assessment could not be reopened to scrutinise assessee's claim for bad debt on account of embezzlement of funds when all necessary details in respect of said claim had been furnished by assessee during original assessment proceedings [In favour of assessee] By issue of notice under section 148, beyond period of four years from end of relevant assessment year, the Assessing Officer sought to reopen assessment to scrutinize assessee's claim for bad debt on account of embezzlement of funds by accountant. Held that in the entire reasons recorded there was not even a whisper as regards any failure on the part of the assessee to make full and true disclosure of all material facts as contemplated under the proviso to section 147. Under the circumstances, the conditions precedent for assumption of jurisdiction under section 147 beyond a period of four years from the end of the relevant assessment year were clearly not satisfied. Further, the Assessing Officer after considering the submissions had accepted the same and had allowed the set-off of loss incurred on account of embezzlement of funds. Thus, it was apparent that all necessary particulars had been furnished by the assessee during the course of assessment under section 143(3). Besides, the Assessing Officer wanted to reopen the assessment to scrutinize the assessee's claim for bad debts. An assessment can be reopened under section 147, if the Assessing Officer is of the belief that income chargeable to tax has escaped assessment and not to carry out a fishing inquiry to ascertain as to whether or not income chargeable to tax has escaped assessment. Therefore, even on the merits the reopening of assessment was not valid. II. Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General - Assessment year 1996-97 - Assessment could not be reopened on ground that pre-operative expenses, which were of capital nature, had been wrongly allowed as revenue expenditure in original assessment, when it was specific case of Assessing Officer that all material in relation to that claim was on record…

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