Re-assessment under Section 147 of the Income Tax Act is not valid if there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, as stipulated in the proviso to Section 147.

B. Rajendran, J.

The assessee has filed its return of income for the assessment year 1999-2000 and the Department has also completed the assessment under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). Later on, the Department found that there was some reasons to believe that the income chargeable to tax had escaped assessment and initiated the proceedings for re-assessment, after issuing notice under Section 148 of the Act.

2. The main reason put forth by the Department was that the assessee has claimed deduction of excise duty on stock in bonded warehouse under Section 43B of the Act from the excise duty on closing stock. Later on, the Department found that the said excise duty was not actually paid during the relevant year as the goods had not been cleared before the close of the previous year and therefore, the contention of the Department is that such a deduction could not be claimed for that assessment year and therefore the Assessing Officer disallowed the said deduction in the re-assessment on the re-opening of the case. It is pertinent to point out that such re-assessment is beyond the period of four years.

3. Aggrieved by the orders of the Assessing Officer, the assessee has filed an appeal before the Commissioner of Income Tax (Appeals), who held that the assessee had disclosed fully and truly all material facts necessary for completion of assessment while filing the return and as such the re-opening beyond four years is bad in law and without any jurisdiction.

4. Aggrieved by the orders of the Commissioner of Income-tax (Appeals), the Revenue filed an appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal also held that the re-assessment, having been initiated after four years from the end of the assessment year and there being no finding that there was any failure on the part of the assessee to make a full and true disclosure of material facts, the re-assessment is bad in law and accordingly, dismissed the appeal preferred by the revenue.

5. Aggrieved by the orders passed by the Appellate Tribunal, the revenue has filed this appeal before this Court.

6. We heard Mr. Arun Kurian Joseph, learned counsel appearing for the appellant. On a cursory perusal of the order of the Tribunal clearly indicates that section 147 of the Act empowers the Revenue to reopen the assessment. In the proviso, which clearly stipulates the reason for reopening in the case which falls under the category that there was a concealment and only in certain cases, the Authority is empowered to reopen the case. It also clearly makes it mandatory that there should be a failure to disclose fully and truly all material facts. The proviso is extracted below:-

" Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."

7. Relying upon the aforesaid proviso, the Tribunal has given a clear finding that when there was no failure on the part of the assessee to disclose the material facts, such assessment cannot be re-opened after expiry of four years from the end of the relevant assessment year, if the original assessment was completed under Section 143(3) of the Act.

8. At this juncture, it is pertinent to point out that it was not the case of the department that the assessee had not at all revealed the payment of excise duty, but what they have stated is that they have shown the expenditure, claiming exemption under Section 43B of the Act.