9911796707
TMI Blog1990 (11) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment the assessee was allowed depreciation of Rs. 5,36,468 and investment allowance of Rs. 5,83,202 as claimed by the assessee in the return. It appears that during the course of assessment proceedings for assessment year 1978-79 the assessee furnished a copy of inventory valuation report dated June 1977 prepared by M/s. ABC Consultants Pvt. Ltd. This report was prepared by the aforesaid consultants at the instance of New Bank ofIndiato undertake the study on their behalf to establish a proper system of valuation of inventories in respect of the assessee firm. It seems that the New Bank ofIndiaspent a sum of Rs. 10,000 on the said report which it recovered from the assessee firm. It was in the context of getting a deduction of that sum of Rs. 10,000 or so for assessment year 1978-79 that the assessee produced a copy of the report before the Inspecting Assistant Commissioner, who was then seized of the proceedings under section 144B of the Act.Para45 of the said report reads as under :-- " During verification of plant and machinery, we observed that some of the machines have not been used at all or used only sparingly. For instance, Horizontal Boring Milling Machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147(a) by the assessing officer was fully justified. The CIT(Appeals) observed that the Punjab Haryana High Court has held that the disclosure must not only be full, but also true. It was further observed by him that by claiming that the machinery was installed and used during the year the assessee had given false information and the facts disclosed were not true. 6. Shri G.C. Sharma, the learned counsel for the assessee, made detailed submissions in this behalf and vehemently argued that on the facts and circumstances of the case the assessing officer could not have initiated proceedings under section 147(a) of the Act. It was pointed out that in its letter dated 4-2-1980 (page 1 of the assessee's compilation) the assessee had pointed out to the Income-tax Officer that the horizontal boring milling machine required particular foundation which was already constructed before the receipt of the machine and as soon as the machine was received the same was put on foundation and was installed by 27-2-1977. The other machines were just required to be put on the concrete floor which was already available and did not require any further installation. It was pointed out that the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphasised that the aforesaid report of the consultants only gave rise to inferential facts as distinguished from primary facts and the assessee was not supposed to disclose the inferential facts because on the basis of primary facts it was the duty of the assessing officer to draw the necessary inferences. It was also submitted that at the time of re-opening the proceedings the Income-tax Officer had not proved that the earlier evidence filed was false or incorrect. It was vehemently argued that while the assessing officer might have validly initiated proceedings under section 147(b) of the Act, he had no jurisdiction to invoke the provisions of section 147(a) of the Act in the instant case. Shri Sharma went to the extent of saying that even if the information produced or the evidence filed was false, and if the Income-tax Officer had applied his mind he did not have power later on to reopen the proceedings under section 147(a) of the Act. The learned counsel relied on the following decisions in support of his submissions : 1. Sujir Ganesh Nayak Co. v. ITO [1976] 104 ITR 524 (Ker.) ; 2. Sharad L. Patel v. K.J. Chacko, Third Addl. ITO [1986] 159 ITR 791 (Bom.) ; 3. Gemini L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment. Such belief must be held in good faith and should not be a mere pretence or change of opinion on inferential fact or facts extraneous or irrelevant to the issue and the material on which the belief is based must have a rational connection or live link or relevant bearing on the formation of the belief. 9. Reverting to the facts of the instant case, it may be pointed out that the assessee had produced some evidence at the stage of original assessment on the basis of which the Income-tax Officer was led to believe that the aforesaid machinery had been installed and/or put to use during the year relevant to assessment year 1977-78. Later on the assessee itself filed a copy of the report prepared by M/s. ABC Consultants to the New Bank of India who after visiting the assessee's premises had reported that one machinery which represented a major item was still lying packed in June 1977 and the other machinery had been put to use only in the second week of June 1977. On the basis of this report which was filed by the assessee itself, though in a different context and perhaps out of lack of alertness, any reasonable man would entertain a tentative belief that the information discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at though a mere change of opinion on the same material on which the original assessment was made will not be sufficient to initiate proceedings for re-assessment under section 147(a) of the Act, if some information comes to the possession of the Income-tax Officer and he has reason to believe that income chargeable to tax has escaped assessment because of the assessee not having fully and truly disclosed all material facts, section 147(a) will be fully applicable. Explaining the scope of section 147(a) and 147(b) at page 75 of the report, it was observed by the High Court that the real distinction between the provisions of section 147(a) and (b) is that where the assessee is found to be lacking in disclosing fully and truly all material facts necessary for the assessment in question, the provisions of section 147(a) of the Act will be attracted, but in case where the assessee is not guilty of suppression of material facts, and has given the said facts fully and truly, but the income of the assessee has escaped assessment, then in consequence of the information received by the Income-tax Officer, if he has reason to believe that the income chargeable to tax has escaped assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of the Hon'ble Jurisdictional High Court are a complete answer to the various submissions made by Shri Sharma. Respectfully following the aforesaid decisions of the Jurisdictional High Court, we hold that the assessing officer was justified in invoking the provisions of section 147(a) of the Act for assessment year 1977-78. 15. However, before parting with the matter, we may discuss and deal with some of the decisions relied upon by the learned counsel for the assessee though there is no alternative, but to follow the decisions of the Jurisdictional High Court cited supra. 16. It may be mentioned that the decisions in Sujir Ganesh Nayak Co.'s case and Burlop Dealers Ltd.'s case were considered by the Punjab Haryana High Court in the case of Ess Ess Kay Engg.Co.(P.) Ltd. and distinguished and nothing further need to be said in this regard. 17. In the case of Tolaram Gangaram the facts were different inasmuch as the assessee had disclosed all material facts necessary for his assessment fully and truly and on those facts the Gujarat High Court held that the provisions of section 147(a) of the Act could not be invoked. 18. As regards the case of Dinkarrai Anantrai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that omission can arise only if assessee had knowledge of material fact. In the instant case whether the machinery had been installed or not was very much within the knowledge of the assessee and it need not have to depend upon a report given by M/s. ABC Consultants for coming to know a fact which was already within its knowledge. What the consultants did in this case was that they merely reported a fact to the bank authorities that the major machinery had not been installed and was lying packed up and the other machinery had been installed only in the second week of June, 1977. This case also, therefore, does not support the case of the assessee. 22. In the case of Basanta Ram Kedarnath Calcutta High Court has held that it is not for the assessee to invite a rejection from the Income-tax Officer by confession that his return, as filed, is not true or correct or that he has concealed material fact or has made untrue statements. Apart from the fact that this case runs counter to the ratio of the decision laid down by the Calcutta High Court in the case of H.A. Nanji Co. which incidentally has not been noticed by the Calcutta High Court in the subsequent decision, the ratio o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, we hold that the reopening of proceedings under section 147(a) of the Act in the instant case for assessment year 1977-78 was justified and this ground vehemently argued by Shri Sharma is, therefore, rejected. 27. Now we come to the merits of the case. Shri Sharma submitted that there was copious evidence submitted at the time of original assessment which clearly went to show that the machinery in question had been installed during the year relevant to assessment year 1977-78. It was argued that nothing had happened in the meantime, which would suggest that the earlier report of M/s. Blue Star who had actually erected and installed the machinery was unreliable. It was pointed out that the assessing officer had not advanced any reasons as to why the first report should be dismissed or the second report should be acted upon. It was submitted that the machinery had come for which there was evidence, the machinery had been installed for which there was a certificate, the money had been paid to M/s. Blue Star Co. as erection charges and there was no mala fide intention for claiming the investment allowance and depreciation in this year because the assessee would have in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Shri K.S. Khosla, Director of M/s. Hindustan Hydraulics Pvt. Ltd. had cross-examined him. It was also submitted that the statement of Shri P.C. Roy, Senior Consultant who had made the study and submitted the report on behalf of M/s. ABC Consultants could not be recorded because he had left the concern and was not available for examination. It was also pointed out that enquiries were made from Shri P.J. Bahadur, Director of M/s. ABC Consultants Pvt. Ltd., who certified that the machines were verified to be lying in packed condition. It was vehemently argued that on the basis of the evidence which came to the possession of the Departmental authorities was of such a clinching nature that the only possible conclusion was that the machinery had neither been installed nor used in the year relevant to assessment year 1977-78 and that the assessing officer was justified in withdrawing the investment allowance and the depreciation wrongly allowed at the time of original assessment. 29. We have carefully considered the rival submissions as also the facts on record. Whether a machinery is installed or not is a matter of physical verification. The contemporaneous evidence in the form of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee at the time of original assessment had camouflaged the real facts. In this context we consider it appropriate to extract the observations of the Hon'ble Punjab Haryana High Court in the case of Kirpa Ram Ramji Dass at page 75 of the report which are to the following effect : " In fact the more copious the materials disclosed in a case like this, the more solid is the crust covering up the real facts. " We also do not subscribe to the view that there was no tax effect by claiming investment allowance and depreciation in one years i.e. assessment year 1977-78 vis-a-vis the subsequent year. This is the case of a firm and not of a company where the rate of tax is linked with the income earned. We are also not impressed by the argument of Shri Sharma that the assessing officer himself allowed the expenditure of more than Rs. 1,90,000 as revenue expenditure. We find that the assessing officer in fact did not allow any such expenditure as Revenue expenditure and even if he made a mistake in allowing the aforesaid expenditure as capital expenditure, that would not advance the case of the 30. Taking the entire facts and circumstaance of the case into consideration, we find su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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