Assessment cannot be reopened after a period of four years without a failure on the part of the Assessee to declare true and full disclosure of the material facts for assessment.

JAYANT PATEL, J.

1. Rule. Mr.Mehta, learned Counsel for the respondent, waives service of notice of Rule.

2. The learned Counsel appearing for both the sides are heard for final disposal.

3. The short facts are that on 27.7.2008, return of income was filed by the Assessee for the assessment year of 2008-09, declaring the total income of Rs.90,540/-. Notice under Section 143(2) of the Income Tax Act (hereinafter referred to as the “Act”) was issued, commencing regular assessment proceedings on 18.8.2009. Thereafter, as per the Assessee, all relevant details, including the date on which the property was acquired and the sale deed were submitted. Ultimately, the assessment order was passed assessing the income of Rs.90,540/-. On 25.3.2014 Notice under Section 148 of the Act was issued for reopening of the assessment. On 9.4.2014, letter was addressed by the Assessee to the respondent demanding reasons. On 2.6.2014, reasons recorded were furnished to the Assessee. On 10.6.214, the Assessee submitted objections against the reasons for resisting the reopening of the assessment. On 19.8.2014, order was passed by the respondent, rejecting the objections for reopening of the assessment. Under these circumstances, the present petition before this Court.

4. We have heard Mr.Divatia, learned Counsel for the petitioner and Mr.Mehta, learned Counsel for the respondent.

5. As such, it is an admitted position that the period of four years from the end of the assessment year has expired on the date when the assessment was proposed to be reopened. Therefore, in our view, the case may fall in the proviso (1) to Section 147 of the Act. As per proviso (1) to Section 147 of the Act, assessment can be reopened even after four years if it is found that there was failure on the part of the Assessee to disclose fully and truly all material facts necessary for his assessment for that year.

6. It appears that in the return of income, the Assessee had had mentioned the statement of long- term capital gain, wherein the date for purchase of the property was shown as 1.4.1981 and thereafter income tax cost was considered and the capital gain was arrived at. In the assessment proceedings, when the reply was submitted for computation, Vide Item No.5, computation of capital gain and the copy of the sale deed was also enclosed. Thereafter, it appears that the final assessment order was passed on 6.9.2010. At the first brush, one may say that the details pertaining to the transaction of sale of the property with the support of sale deed were produced. In the reasons recorded by the respondent, there is no clear opinion expressed or the reasons recorded that there was escapement of income in the assessment, but it appears that the re-computation of the capital gain on the basis of the ‘Will’ was considered as the basis and it was expressed that as per the provisions of Explanation 3 to Section 48 of the Act, the cost index of 2006-07 i.e. the year in which the property was acquired by ‘Will’ by the Assessee was to be considered as the basis and thereafter the long-term capital gain was to be computed.

7. We may record that for invoking the powers under Section 147 of the Act, it is necessary for the competent authority to record the reasons for arriving at the opinion that there was escapement of income for assessment. Such powers could be exercised within the outer limit of four years, but if the power is to be exercised beyond the period of four years, then as per the proviso (1) to Section 147, reasons are also required to be recorded that there was failure on the part of the Assessee to declare true and material facts for the assessment. No such reasons are specifically recorded by the respondent.

8. At this stage, we may record that this Court in the case of Sky Diamonds Vs. Assistant Commissioner of Income Tax in Special Civil Application No.18004 of 2014 decided on 21.1.2015 had observed thus:-

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