WHETHER WITHOUT MENTIONING DEFECT, A.O. CAN TREAT A RETURN AS INVALID RETURN?

Respected Members

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Short note of today's case law for quick reference:

[2024] 461 ITR 159 (SC)

[IN THE SUPREME COURT OF INDIA]

MANGALAM PUBLICATIONS

v.

COMMISSIONER OF INCOME-TAX

1. Assessment completed for A.Y 1988-89 to 1993-94 u/s 143(3) without assessee submitting balance sheet because documents seized by department during search, and not returned.

2. Assessing officer obtained, there after balance sheet as on 31.03.1989 from bank and compared it with partners capital as on 31.03.1993 & issued notice u/s 148 & completed assessment u/s 147.

3. CIT(A) held that balance sheet furnished to bank not reliable.

4.  A.O. could not have placed reliance on that.

5. No other material coming into possession of A.O. to entertain belief that income of assessee for 3 assessment years had escaped assessment.

6. While framing initial assessments for years in question, assessing officer on independent analysis of incomings & outgoings of assessee passing assessment order u/s 143(3).

7. No case that assessee has made false declaration.

8. Returns not accompanied by balance sheet not treated as defective by Assessing Officer.

9. Subsequently subjective analysis of A.O. mere change of opinion & reassessment not justified.

10. A return filed without the regular balance sheet and profit & loss account may be defective one but not invalid.

11. A defective return cannot be regarded as an invalid return.

12. The A.O. has the discretion to intimate the assessee about the defects and it is only when the defects are not rectified within the specific period that the A.O. may treat the return as an invalid return.

13. Ascertaining the defects and intimating them to the assessee for rectification are within the realm of discretion of the A.O.

14. It is for the A.O. to exercise the discretion, the burden is on the A.O.

15. If he does not exercise the discretion, the return of income can not be construed as a defective return.

16. The word true qualifies a fact of averment as correct, exact, actual genuine or honest.

17. The word full means correct.

18. True disclosure of concealed income must relate to the assessee concerned.

19. Full disclosure, in the context of financial documents, means that all material or significant information should be disclosed.

20. Therefore, the meaning of full and true disclosure is the voluntarily filling of return of income that the assessee earnestly believes to be true.

21. Production of books of accounts or other material evidence that could ordinarily be discovered by the A.O. does not amount to a true and full disclosure.