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TMI Blog2010 (3) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... 009 by which the assessment for the assessment year 2003-04 has been sought to be reopened. The assessee has moved these proceedings under article 226 of the Constitution inter alia to challenge the notice for reopening of the assessment and the consequential orders. 2. In respect of the assessment year 2003-04 the petitioner filed a return of income on December 1, 2003 by which it returned a total income of Rs.6.14 crores. The return was accompanied by a copy of the audited accounts for the year ending March 31, 2003 and a tax audit report under section 44AB. In the income and expenditure account the petitioner disclosed an interest income of Rs. 4.91 crores. In the computation of income the petitioner reduced an interest amount of Rs. 50.14 lakhs which was shown separately as income from other sources. In the notes to the computation of income the petitioner disclosed that the interest income represented interest received under section 244A, net of interest paid under section 220. During the course of the assessment proceedings a query was addressed by the Assessing Officer on December 20, 2004 by which inter alia an explanation was called for with reference to the following: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Assessing Officer's communication dated March 2, 2009 which is as follows: "It is seen from the records that during the year, the assessee has credited interest amount of Rs. 4,91,33,466 to the income and expenditure account, which includes interest under section 244A amounting to Rs. 50,14,633 on account of interest on tax refund, net of interest paid under section 220(2) of the Income-tax Act amounting to Rs. 1,01,11,960. The assessee in the note to the computation of income has stated that the interest income represents interest received under section 244A, net of interest paid under section 220(2). As per the provisions of section 40(ii) of the Income-tax Act, any sum paid on account of any rate, or tax levied on the profits or gains of any business or profession are not deductible from the income of the assessee. Therefore, the interest charged under section 220(2) amounting to Rs. 1,01,11,960 is not an admissible expenditure for deduction from the total income of the assessee. I have, therefore, reason to believe that the interest paid by the assessee under section 220(2) amounting to Rs. 1,01,11,960 claimed as deduction chargeable to tax has escaped assessment." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material evidence could have been discovered with due diligence by the Assessing Officer will not necessarily amount to a disclosure within the meaning of the proviso to section 147. 6. The material on the record before the court shows that in the statement of total income the assessee had disclosed an interest income of Rs. 50.14 lakhs as income from other sources. In the note appended to the statement of computation, under the heading "Interest income" the assessee stated that this represented interest received under section 244A of the Income-tax Act, 1961 net of interest paid under section 220, based on the ratio of certain judgments to which it may not be necessary to refer at this stage. As noted earlier, during the course of the assessment proceedings the Assessing Officer called the assessee by his letter dated December 20, 2004 to explain with details the interest of Rs. 4.91 crores which was credited to the interest and expenditure account. Details of the interest received were sought together with an explanation for the shortfall in the current year as opposed to the earlier year. The assessee in its reply dated December 28, 2004 annexed a statement containing details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, a full disclosure by the assessee of all the material facts and as noted earlier the attention of the Assessing Officer was specifically brought to bear on the fact that the interest income of Rs. 50.14 lakhs constituted the net difference between interest received under section 244A and interest paid under section 220(2). 8. Hence, the condition precedent to the exercise of the jurisdiction to reopen the assessment beyond a period of four years, when an assessment has been completed under section 143(3) has not been fulfilled. The condition precedent as spelt out in the proviso to section 147 is that the income must have escaped assessment by the failure of the assessee to fully and truly disclose all material facts necessary for assessment for that assessment year. Absent compliance with the statutory condition precedent, the reopening of the assessment cannot be sustained. The judgment of the Division Bench in the case of Dr. Amin's Pathology Laboratory [2001] 252 ITR 673 (Bom) is distinguishable. In that case, the assessee had been following the accrual system of accounting for all items of expenditure except for all collections which were on cash basis. The Division Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X
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