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TMI Blog2012 (10) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... n 143(3) of the Act, vide assessment order dated December 23, 1998. 3. The facts in relation to Special Civil Application No. 4551 of 2002 are that the petitioner filed his return of income for the assessment year 1995-96 on March 29, 1996, declaring total loss of Rs. 7,45,759 wherein, he had, inter alia, claimed interest expenses of Rs. 39,01,689 from income from other sources under section 57(iii) of the Act. The assessment came to be framed at a loss of Rs. 3,53,622 under section 143(3) of the Act by an assessment order dated March 31, 1998. 4. Subsequently, by the impugned notices, the assessments of the petitioner for the assessment years 1996-97 and 1995-96 are sought to be reopened by the Assessing Officer. In response thereto, the petitioner addressed a letter dated March 22, 2002, to the respondent asking for the reasons for issuance of notice under section 148 of the Act. However, as the respondent neither provided the reasons nor dropped the reassessment proceedings, the petitioner has approached this court by way of the present petitions challenging the aforesaid notices. 5. In response to the petitions, the respondent has filed affidavits-in-rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tek Ltd.). To determine the clear purpose for making investments in these shares, relevant facts such as percentage holding of the assessee and his group, increase in holding, purpose of such increase, etc., are necessary. The deduction under section 57(iii) is allowable only when the expenditure was incurred wholly and exclusively for the purpose of earning the said income, i.e., dividend. (2) How income has escaped assessment : The assessee has claimed interest expenditure on fund borrowed for the purpose of making investments in shares of Mastek Ltd. The claim of such interest was Rs. 51,33,658. The provisions of section 57(iii) under which the said claim was made is quoted below : (iii) Any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income." 7. The Assessing Officer has thereafter referred to various decisions of this High Court, viz., (1) Virmati Ramkrishna (Smt.) v. CIT [1981] 131 ITR 659 (Guj) (Appendix), (2) Sarabhai Sons (P.) Ltd. v. CIT [1993] 201 ITR 464 (Guj), (3) Padmavati Jaykrishna (Smt.) v. CIT [1975] 101 ITR 153 (Guj), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not submitted the details of loans taken nor the copies of accounts from all the parties were furnished. Thus, the assessee has not discharged the primary onus of giving details of loans taken, interest paid and linking the same with the investments made in shares. The assessee nowhere submitted the investments in the shares of Mastek Ltd., is" In relation to the assessment year 1995-96, in place of the immedia- tely preceding paragraph, the reasons recorded read thus : "Details of total borrowings and their use for making investments in shares have not been submitted by the assessee. Despite specifically being asked the details of loans taken with date and amount and investments made with copy of accounts of the persons and also to link loans taken for house construction and investments and interest paid during the year, the same were not furnished. The assessee has submitted details of loans taken of Rs. 37,50,000 + Rs. 42,90,000 + Rs. 84,00,000 = Rs. 1,64,45,000. Copy of accounts from the parties were not furnished. Even interest taken on these loans at the normal rate of 21 per cent. can- not be Rs. 39.01 lakhs. The assessee nowhere submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 57(iii) of the Income-tax Act, 1961, considering the factual and legal position discussed above. As per Explanation 2(c)(i) and (iii) of section 147, such excessive allowance is deemed to be the case where income has escaped assessment. In view of this, there is sufficient reason to believe that substantial income chargeable to tax has escaped assessment. (ii) In this case, as discussed earlier, the assessee has not submitted the balance sheet, capital account, his holding in Mastek Ltd., linking of investments with the borrowings, copy of accounts of lenders, etc. These information's are very relevant to decide whether the expenses was solely incurred for the purpose of earning dividend or not. If the assessee would have disclosed the facts relating to the nature of investments in the shares of Mastek Ltd., the deduction under section 57(iii) would not have been allowed to the assessee. It is, therefore, clear that the substantial income has escaped assessment by reasons of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. In view of this, the second condition is also satisfied in the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rebutting the averments made therein. Thus, it is an accepted position that the documents annexed with the rejoinder affidavit have been submitted by the petitioner during the course of the assessment proceedings for the respective assessment years. 11. Mr. S. N. Soparkar, senior advocate, learned counsel for the petitioner submitted that, in the present case, the original assessment order was framed under section 143(3) of the Act. The impugned notices have been issued on March 11, 2002, in relation to the assessment years 1996-97 and 1995-96, which is clearly beyond a period of four years from the end of the relevant assessment years and as such, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment for the assessment years under consideration, the assumption of jurisdiction by the Assessing Officer under section 147 of the Act is without authority of law. Inviting attention to the reasons recorded, it was submitted that the Assessing Officer seeks to reopen the assessment on the ground that the petitioner had claimed interest expenses in relation to loans taken by him for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed against the dividend income. Referring to the decision of the Supreme Court in the case of CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC), it was submitted that the interest can be allowed against dividend income ; hence, the petitioner had rightly made such a claim. According to the learned counsel, controlling interest is not statutorily defined and is a matter of perception. In relation to his claim of deduction under section 57(iii) of the Act, the petitioner had filed dividend warrants, and all other information called for by the Assessing Officer during the course of assessment proceedings, like confirmations from depositors, etc., and that the Assessing Officer after being satisfied as regards the admissibility of the petitioner's claim had allowed the deduction. It was contended that the Assessing Officer cannot commence the reassessment proceedings merely because he entertains a view different from his predecessor. It was further submitted that the petitioner had dis- closed fully and truly all primary facts necessary for the purpose of assessment and on that account also, the Assessing Officer had no jurisdiction to initiate reassessment proceedings. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel, in case the Assessing Officer, during the course of assessment, found it difficult to make the assessment in the absence of such documents, he could have called upon the petitioner to prepare the balance-sheet and to produce the same. It was submitted that in relation to the assessment year 1995-96, it appears that the Assessing Officer had called for the balance- sheet ; hence, the petitioner had prepared the same and produced them during the course of assessment proceedings. In respect of the assessment year 1996-97, no such information was called for by the Assessing Officer, who proceeded to assess the petitioner on the material before him. In the circumstances, it is clear that the Assessing Officer did not find the material necessary for assessment. In the circumstances no failure to disclose fully and truly all material facts can be attributed to the petitioner. Reliance was also placed upon a decision of the Supreme Court in the case of CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC), wherein the court had held that when all primary facts have been disclosed by the assessee, action under section 34(1)(a) of the Indian Income- tax Act, 1922, is not valid. 14. Invitin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose. It was submitted that the said decision was rendered in a totally different set of facts and would not be applicable to the facts of the present case. 16. The learned counsel further submitted that the main reason for reopen- ing, according to the Assessing Officer, is that the purchase of shares of Mastek Ltd. by the petitioner was made with the motive of gaining controlling stake in the said company and not for the purpose of earning dividend. It was submitted that assuming without admitting that the petitioner has purchased the shares with a motive to gain controlling interest, the petitioner would still be entitled to deduction under section 57(iii) of the Act, if he has purchased the shares for the purpose of earning dividend income. Reliance was placed upon the binding pre-bifurcation decision of the Bombay High Court in the case of Ormerods (India) Pvt. Ltd. v. CIT [1959] 36 ITR 329 (Bom), wherein the court held that the word "purpose" in the expression "expenditure incurred solely for the purpose of making or earning such income, profits or gains" in section 12(2) of the Income-tax Act, did not mean motive for the transaction ; much less could it mean the ulte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner was entitled to deduction under section 57(iii) of the Act. It was submitted that a fact which was necessary for arriving at a decision as regards admissibility of a claim is a material fact and as such, the petitioner has failed to disclose fully and truly all material facts. 19. Mr. Bhatt further submitted that the petitioner has failed to disclose fully and truly all material facts necessary for his assessment and as such, the Assessing Officer is justified in reopening the assessment beyond a period of four years from the end of the relevant assessment years. Inviting attention to the reasons recorded, it was submitted that in the facts of the present case, since the petitioner has purchased the shares with a view to gain controlling stake in the company, viz., Mastek Ltd., of which the peti- tioner was the promoter/director, the petitioner was not entitled to deduction under section 57(iii) of the Act and as such, he had made a false claim which amounts to non-disclosure of correct facts. According to the learned counsel the petitioner having purchased a considerable number of shares of Mastek Ltd., he was duty bound to bring the same to the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and loss account or account books will not necessarily amount to disclosure within the meaning of the proviso to section 147 of the Act. It was submitted that the case of the Department is that though interest expenditure was not allowable under section 57(iii) of the Act, in the light of the fact that the petitioner had purchased the same to gain a controlling interest in Mastek Ltd., the petitioner had failed to disclose fully and truly all material facts by not disclosing his shares in Mastek Ltd. Reliance was also placed on the decision of the Madras High Court in the case of Tamil Nadu Petroproducts Ltd. v. CIT [2011] 330 ITR 342 (Mad) for the proposition that even a wrong claim would amount to incorrect disclosure. 23. Strong reliance was placed on the decision of this High Court in the case of Sarabhai Sons (P.) Ltd. v. CIT [1993] 201 ITR 464 (Guj), for the purpose of contending that where the shares have been purchased for the dominant purpose of gaining controlling interest and not for the purpose of earning income, the expenditure was inadmissible under section 57(iii) of the Act. The learned counsel also placed reliance upon the decision of the Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 147 of the Act by issuing the impugned notices and that the petitioner having failed to disclose fully and truly all material facts necessary for his assessment for the assessment years under consideration, the assumption of jurisdiction by the Assessing Officer under section 147 of the Act is valid. 26. In the present case, the original assessments for both the assessment years in question came to be framed under section 143(3) of the Act. Evidently, both the impugned notices, which have been issued on March 11, 2002, in relation to the assessment years 1996-97 and 1995-96, respectively, have been issued after the expiry of a period of four years from the end of the relevant assessment years, the proviso to section 147 of the Act would, therefore, be clearly attracted. 27. It is by now well settled that in case where by the proviso to section 147 of the Act is attracted, two conditions have to be satisfied before the Assessing Officer acquires the jurisdiction to issue notice under section 148 in respect of an assessment beyond a period of four years from the end of the relevant assessment year, viz., that the Assessing Officer must have reason to believe that ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e those primary facts are disclosed, and all the facts which would help the Assessing Officer in coming to the correct conclusion are brought to his notice, the assessee's duty ends. From these primary facts and the further facts inferred from them, the taxing authority has to draw the proper legal inferences and ascertain on a correct interpretation of the taxing enactment the proper tax leviable (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC). 29. Bearing in mind this settled legal position, the question that arises for consideration is as to whether in this case there was any material on the basis of which the respondent could have entertained a reasonable belief that there was escapement of income from assessment on account of failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment for the year under consideration. 30. For this purpose it would be necessary to refer to the reasons recorded for reopening the assessments. In the reasons it has been recorded by the Assessing Officer that the assessee had not submitted any information as to how the interest expenditure claimed under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of earning dividend income. Therefore, the assessee had been allowed excess claim of interest to the extent noted hereinabove. 32. As to what was the nature of non-disclosure on the part of the petitioner, the Assessing Officer has recorded that the petitioner had not submitted the balance-sheet and the capital account along with the return or during the assessment proceedings ; that in the absence of balance-sheet, the details of investment, source of investment, application of fund for the purpose of making investments in shares, etc., have not been disclosed by the petition. The main non-disclosure alleged is that the petitioner had not submitted at to what percentage of shares he and his group were holding in Mastek Ltd. which, according to the Assessing Officer, was very relevant in the light of the Gujarat High Court's judgment in the case of Sarabhai Sons (P.) Ltd. v. CIT [1993] 201 ITR 464 (Guj). 33. In the facts of the present case, what is now required to be examined is as to whether the action of the petitioner in not filing the balance-sheet for the assessment year 1996-97 can be said to be a non-disclosure of primary facts which has resulted into escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the petitioner has been attributed on the ground of non-furnishing of balance-sheet, capital account, details of loans with date and amount of investments made with a copy of the accounts as well as the extent of the petitioner's holding in the company, Mastek Ltd. In so far as the failure to furnish the balance-sheet and capital account, etc., is concerned, the learned counsel for the petitioner has submitted that the petitioner being an individual, is not required to maintain balance-sheet and as such, it cannot be said that there is any failure on the part of the petitioner to disclose fully and truly all material facts by not submitting the balance-sheet and capital accounts, etc. Moreover, in so far as the assessment year 1995-96 is concerned the said documents had in fact been submitted by the petitioner during the course of the assessment proceedings. 36. In this regard, it may be pertinent to refer to the decision of this court in the case of CIT v. Akbarali Jummabhai [1992] 198 ITR 69 (Guj), wherein the court held that the duty to disclose material facts necessarily postulates existence of a thing or material. If a material is not in existence or if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad assessed the petitioner under section 143(3) of the Act. At no point of time, does it appear that the Assessing Officer had called upon the petitioner to furnish the percentage of his holding in Mastek Ltd. 37. In relation to the assessment year 1996-97, the record of the case indicates that the petitioner had furnished along with his return of income and during the course of assessment proceedings, statement of his income as well as the confirmation letters of the depositors and dividend warrants to indicate earnings by way of dividend income. In relation to the assessment year 1995-96, the petitioner had submitted the statement of income along with the balance-sheet as well as other documents evidencing proof of obtainment of the loans as well as investment of the same by purchasing shares and the income derived by way of dividend. Since, in the assessment year 1996-97, no fresh loans had been availed of, it appears that the Assessing Officer did not call for the aforesaid details and placed reliance upon the earlier assessment made for the assessment year 1995-96. On the basis of the assessment for the assessment year 1995-96, the Assessing Officer has framed assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot certainly mean a motive for a transaction. Much less can it mean the ulterior motive or the ultimate object of purchasing the shares by the company. The only possible way to read what Mr. Joshi has described as the express and explicit finding of the Tribunal is, in our opinion, no more than a finding by the Tribunal as to the ulterior motive or ultimate object in purchasing the shares. But the purpose of the purchase is a different matter. All that the Tribunal has recorded is that the shares were not purchased with a view to trading in them. Incidentally, we may mention that the Income-tax Officer had observed that the investments were not for a proper business consideration nor for any 'sound investment consideration'. But we are concerned with the finding of the Tribunal and not what the Income-tax Officer may have said. There is, therefore, in our view, no finding by the Tribunal that these shares were not purchased solely for the purpose of making or earning income, profits or gains. Now, the Tribunal has found that these purchases were investments of the assessee-company. On the facts of the case and the finding recorded by the Tribunal the only possible conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave initiated reassess- ment proceedings principally because he thinks that certain items of expenditure were 'wrongly allowed'. This, therefore, is a case in which reassessment has been undertaken merely on a change of opinion. Besides, the affidavit-in-reply filed by the respondent discloses complete non-application of mind in relation to an item upon which he has relied. The respondent, therefore, does not appear to have carefully looked into the record of the original assessment proceedings before he satisfied himself that there was escapement of income on account of failure on the part of the petitioner to fully and truly disclose material facts during the course of the original assessment proceedings. Under these circumstances, in our opinion, no conclusion is possible other than that the reassessment proceedings have been initiated without the very conditions precedent for the exercise of power having been in existence. In the result, the writ petition succeeds and is allowed. The impugned notice, exhibit D, issued by the respondent is quashed and set aside and the respondent is restrained from initiating proceedings for reassessment against the petitioner in pursuance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tern found that the petitioner had in all, over the years purchased 9,16,150 shares out of the total authorized capital of 50,00,000 shares and total issued and subscribed paid-up capital of 30,56,200 shares, which, according to him, was a pointer to the fact that the petitioner had purchased the shares to gain the con- trolling stake and not to earn dividend income and as such was in the nature of capital investment and not for the purpose of earning income. 41. As noticed earlier, from the statement of income filed by the petitioner it is apparent that a major portion of his income is from dividend income. Under the statute, there is no obligation on a person acquiring shares to state the percentage of shares he has acquired in a company. In the circumstances, as has been rightly contended by the learned counsel for the petitioner, the issue involved is a question of difference of perception of the assessee and the Assessing Officer, but that merely because, according to the Assessing Officer, the motive for purchasing the share is different than what is stated by the petitioner, would not give rise to a reason to believe that the petitioner had not disclosed fully and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid out or expended wholly and exclusively for the purpose of making or earning such income. The words "wholly and exclusively used for the purpose of making or earning such income" mean that the expenditure should be wholly incurred for the purpose of earning such income, that is to say, the expenditure should not have been made for any other purpose. In the present case, it is not the case of the Department that the petitioner has expended any part of the loan amount on the interest of which deduction is claimed under section 57(iii) of the Act for any purpose other than purchasing shares which have yielded dividend income. The manifest and immediate purpose for obtaining the loan is to purchase shares for earning dividend income. It is obvious that if the petitioner would not have paid interest on the loan raised by him he would not have been able to get the dividend income. In these circumstances, therefore, there was a direct nexus between the expenditure of Rs. 51,33,658 and Rs. 39,01,689 respectively incurred by the petitioner as interest and the earning of dividend income, on which the petitioner has paid income-tax. Thus, as has been rightly contended on behalf of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of two years. Ten per cent. of the price was to be paid on the date of purchase and the balance amount was to be paid in instalments ranging from twelve to twenty four months with interest at nine per cent. to be paid on the outstanding amount. The assessee met with some difficulties in acquiring 2,522 shares as there was resistance from the owners of those shares. Meanwhile, a proposal was put forward by KPPL to purchase all the shares of SOML. Pursuant to that proposal, the assessee sold 46,454 shares equity shares of SOML to KPPL on April 25, 1968, at the same purchase price, viz., Rs. 197.5 per share. The purchase price was to be paid by KPPL partly in cash at the time of delivery of shares and the balance amount was to be paid in two instalments. Interest at the rate of nine per cent. was to be paid by KPPL on the balance amount. During the financial year which ended on March 31, 1969, the assessee paid by way of interest Rs. 6,05,291 to the shareholders from whom it had purchased shares. It received Rs. 3,18,195 as interest from KPPL for the unpaid price of the shares which it had sold to KPPL. The assessee claimed net deficiency in the interest account calculated on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without right to participate in profits) holding not less than ten per cent. of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereinafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. Thus, by enacting section 2(22)(e) of the Act the Legislature had created a deeming fiction and has made the payments referred to therein as "dividend" for the purposes of the Act. By virtue of the said provision, a person who obtains loans from a company, in which he holds not less than 10 per cent. voting power, the payment received by such perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no obligation on the petitioner to disclose his shareholdings in Mastek Ltd. as the same was not a material fact necessary for his assessment for the purpose of deciding his claim for deduction under section 57(iii) of the Act. 47. The decision of the Madras High Court in the case of Tamil Nadu Petro- products Ltd. v. CIT [2011] 330 ITR 342 (Mad), also does not carry the case of the respondent any further as in the facts of the present case it cannot be said that the petitioner has made a false claim. In the light of the decision of the Supreme Court in the case of CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC), the petitioner was fully justified in making the claim under section 57(iii) of the Act. 48. Reliance placed on behalf of the respondent on the decision of the Bombay High Court in the case of Dr. Amin's Pathology Laboratory v. P.N. Prasad, Joint CIT (No. 1) [2001] 252 ITR 673 (Bom) is misconceived, inasmuch as there was no obligation on the part of the petitioner to draw the attention of the Assessing Officer to the extent of his shareholding in Mastek Ltd. as the same was not a material fact for the purpose of computing the income of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner had attended the case. There- after, the Deputy Commissioner of Income-tax, Circle-4, Ahmedabad, had determined the total income of the petitioner at Rs. nil, as per the assessment order dated December 23, 1998, passed under section 143(3) of the said Act. The petitioner, thereafter, received the impugned notice dated March 11, 2002, from the respondent issued under section 148 of the said Act, proposing to reopen the assessment for the assessment year 1996-97, and calling upon the petitioner to file a return within the prescribed time limit for the said assessment year. In response to the said notice, the petitioner addressed a letter dated March 22, 2002, to the respondent requesting that the return filed on November 29, 1996, for the assessment year 1996-97 be treated as return in response to the notice, and that the reasons recorded for the reopening of the assessment be communicated to him. The said letter dated March 22, 2002, appears to have been received in the office of the Joint Commissioner of Income-tax, Ahmedabad, on April 2, 2002 (annexure C). According to the petitioner, the respondent did not provide him the reasons, nor dropped the assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. However, before adverting to the said submissions, it would be necessary to advert to the contentions raised by the respondent in his reply about the alternative remedy being available to the petitioner and about the petition having been filed at a very premature stage. The court is alive to the legal position to the effect that once the petition is admitted, it should not be dismissed at the time of final hearing only on the ground of the same being premature or on the ground of the existence of alternative remedy being available to the petitioner. The court is also alive to the legal position settled by the hon'ble Supreme Court in many cases to the effect that the existence of alternative remedy itself would not be an absolute bar to the maintainability of the petition, if it is found that the authority has acted wholly without jurisdiction or that the impugned notice per se appears to be illegal or bad in law or suffers from mala fides, etc. 58. However, it may be stated that the hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) ; [2003] 179 CTR (SC) 11, while upholding the order of the Division Bench of the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 147 of the Act is also appealable before the appellate officer and the order of the appellate officer is further appealable before the Appellate Tribunal. The aggrieved assessee or the Commissioner, as the case may be, could also require the Appellate Tribunal to refer to the High Court any question of law arising from such orders. Hence, when the judicial and quasi-judicial statutory authorities have been established under the Special Act, the normal course of action to be followed by the assessee would be to approach such authorities and ventilate his grievances. Further, whenever the matters are referred to the High Court under the Income-tax Act, the High Court exercises advisory jurisdiction and decides the questions of law raised therein. However, whenever the original writ jurisdiction of the High Court, which is extraordinary in nature, is invoked under article 226 of the Constitution, by the assessee challenging the legality and validity of the notice under section 148 of the Act, a number of disputed questions of facts are raised. In such petitions, the High Court is expected to decide as to whether there was any failure on the part of the assessee to disclose fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are being decided on the merits also. 63. As stated earlier, the present petitions have been filed challenging the validity of the impugned notices issued by the respondent under section 148 of the Act, proposing to reopen the assessment after the expiry of four years from the end of the relevant assessment years. The impugned notice dated March 11, 2002, for the assessment year 1996-97 is challenged in Special Civil Application No. 4549 of 2002 and similar notice for the assessment year 1995-96 is challenged in Special Civil application No. 4551 of 2002. The reasons recorded by the respondent-Assessing Officer before issuing the said notices as contemplated under section 148(2) of the Act are produced on record along with the affidavits-in-reply filed by the respondent to these petitions. 64. It is needless to say that the court has to consider the relevant provisions of the Act as prevailing at the time of the relevant assessment years. In the instant cases, relevant to the assessment years are 1995-96 and 1996-97, and the assessment order was passed on March 31, 1998, for the assessment year 1995-96 and on December 23, 1998, for the assessment year 1996-97. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act. The assessee did not submit the details relating to his controlling interest or his total holding in Mastek Ltd. The assessee is a director in Mastek Ltd. and increase in the shareholding in Mastek Ltd. is not for the purpose of earning dividend but for acquiring controlling stake in the company (Mastek Ltd.). To determine the clear purpose for making investments in these shares, relevant facts such as percentage holding of the assessee and his group, increase in holding, purpose of such increase, etc., are necessary. The deduction under section 57(iii) is allowable only when the expenditure was incurred wholly and exclu- sively for the purpose of earning the said income, i.e., dividend. (2) How income has escaped assessment : The assessee has claimed interest expenditure on fund borrowed for the purpose of making investments in shares of Mastek Ltd. The claim of such interest was Rs. 51,33,658. The provisions of section 57(iii) under which the said claim was made is quoted below : '(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital 30,00,000 30,56,200 The above data has been culled from and the comparison has been derived from the details of the income-tax returns of the company Mastek Ltd. in which the abovenamed assessee is a director and it can be safely deduced that the shares were purchased with clear purpose of object of getting controlling interest over the company and the only purpose or even the dominant purpose was not the earning dividend income. In the absence of balance-sheet and other relevant information, the real nature of investments could not be decided and as such, income has escaped assessment by way of excessive deduction. In view of the non-allowable interest of Rs. 51.33 lakhs claimed by the assessee from dividend income taxable income to that extent has escaped assessment within the meaning of Explanation 2(c)(i) and (iv) of section 147 of the Income-tax Act, 1961. (3) Legal aspects of reopening the assessment : For reopening an assessment completed under section 143(3) of the Income-tax Act, 1961, beyond four years, the following conditions need to be satisfied : (i) The Assessing Officer should have reason to believe that any income chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening the assessment are satisfied in the assessee's case." 67. The respondent, after considering the relevant judicial decisions, recorded the following conclusions : "5. Conclusion It can be seen from the return of the income that the assessee has claimed interest payments of Rs. 51,33,658 on the borrowed (capital) fund for acquiring the shares of the company Mastek Ltd., in which the assessee is a managing director. The assessee has no intention to earn income by investing the borrowed capital for the purchase of shares of the company in which the assessee is a promoter director. Thus, the assessee has borrowed the money for the investment purpose and, hence, the interest paid is not allowable as expense under section 57(iii) of the Income-tax Act, 1961. In view of the above, I am of the firm belief that substantial income has escaped assessment within the meaning of section 147, for which assessments need to be reopened." 68. So far as the reasons are concerned, it is pertinent to note that though it is mandatory on the part of the Assessing Officer to record reasons under section 148(2) of the Act before issuing the notice seeking reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC) ; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC))." 70. From the above observations made by the hon'ble Supreme Court, it is clear that the formation of belief by the Assessing Officer is within the realm of his subjective satisfaction, and that the Assessing Officer before initiating the action under section 147 of the Act, should have reason or justification to believe that the income chargeable to tax had escaped assessment. The expression "reason to believe" cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. Therefore, lets us examine the facts of these cases in the light of the submissions made by the learned advocates for the parties, to decide as to whether the respondent-Assessing Officer before issuing the impugned notices, had reason to believe that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after April 1, 1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." 73. In this regard, it is also pertinent to note that in the case of Ess Ess Kay Engineering Co. P. Ltd. v. CIT [2001] 247 ITR 818 (SC), it was observed by the hon'ble Supreme Court, while not interfering with the decision of the High Court, that merely because the case of the assessee was acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner charge- able to tax had escaped assessment, it could not be said that the respondent was reviewing the earlier assessment or was seeking to reopen the assessment on the basis of "mere change of opinion". As rightly submitted by Mr.Bhatt, once the reasonable nexus between fresh material and the formation of the belief is established in the reasons recorded by the Assessing Officer, the court should not go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Assessing Officer. 75. It was next contended by the learned senior advocate, Mr. Soparkar, that the pre-requisite condition that the escapement of income was on account of failure on the part of the assessee to disclose fully and truly all materials necessary for his assessment for reopening of the assessment, was not satisfied in these cases, inasmuch as the petitioner, at the relevant time of the proceedings of original assessment, had furnished all the details to the concerned Assessing Officer showing the expenses incurred towards the payment of interest amounts on the loans taken for the purchase of shares of Mastek Ltd. and other companies, as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently prepared and furnished during the course of original assessment, as sought to be submitted by Mr. Soparkar, on the instructions of the petitioner, the petitioner would not have stated on oath in the rejoinder that the said information or details were never called for by the then Assessing Officer. Further, if the said documents were not in existence and were not maintained by the petitioner, the same would not have been produced by the petitioner along with his return of income, as stated by him in his affidavit-in-rejoinder. Such inconsistent statements in the affidavit-in-rejoinder made by the petitioner, does not inspire confidence to hold that the petitioner had furnished the material documents along with his return of income or during the course of original assessment. Be that as it may, from the said record of the petitions, it could not be said that the present respondent had expected from the petitioner to produce such documents which were not in existence or not within the knowledge of the petitioner. Under the circumstances, the decision in the case of CIT v. Akbarali Jummabhai [1992] 198 ITR 69 (Guj) relied upon by Mr. Soparkar has no relevance to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance. 78. Heavy reliance was placed upon the judgment of the hon'ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) by Mr. Soparkar, and also in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), in the case of CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC), to submit that the only duty which is cast upon the assessee under the Act, is to make true and full disclosure of all primary facts at the time of original assessment, and thereafter, it is for the Assessing Officer to draw correct inferences from the primary facts. According to Mr. Soparkar, it is not the duty of the assessee to advise the Assessing Officer as to what inference he should draw from the primary facts furnished by the assessee, and if the Assessing Officer draws an inference which appears subsequently to be erroneous, that would not justify the initiation of action against the assessee for reopening the assessment. In the instant cases, runs the submission of Mr. Soparkar, the petitioner had already furnished all primary facts and materials like details of expenditure incurred on the payment of loans taken by the petitioner for the purchase of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares, but the said expenditure was incurred for the purpose of getting the controlling interest in Mastek Company, as has been found by the present respondent now. Mr. Bhatt submitted that the said material fact being very primary, non- furnishing of the same by the petitioner at the time of process of original assessment had resulted into failure on the part of the petitioner to disclose truly and fully all material facts necessary for his assessment and therefore, the respondent had rightly initiated the action for reopening of the assessment. 80. In order to appreciate the rival contentions raised by the learned advocates for the parties, it would be beneficial to reproduce the relevant part of the observations made by the hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), wherein the Supreme Court while considering the scope of disclosure, duty of the assessee and that of the Assessing Officer, etc., has observed as under (pages 199 to 202) : "Before we proceed to consider the materials on record to see whether the appellant has succeeded, in showing that the Income-tax Officer could have no reason, on the materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e account books, or the particular portions of the documents, which are relevant, will amount to 'omission to disclose fully and truly all material facts necessary for his assessment'. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions ; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them-including particular entries in account books, particular portions of documents, and documents and other evidence which could have been discovered by the assessing authority, from the documents and other evidence disclosed. Does the duty, however, extend beyond the full and truthful disclosure of all primary facts ? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Indo-Aden Salt Mfg. and Trading Co. Pvt. Ltd. v. CIT [1986] 159 ITR 624 (SC), as under (page 628) : ". . . mere production of evidence before the Income-tax Officer was not enough, that there may be omission or failure to make a true and full disclosure, if some material for the assessment lay embedded in the evidence which the Revenue could not have uncovered but did not, then, it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts-the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then, subject to the other conditions, jurisdiction to reopen is attracted. It is sufficient to refer to the decision of this court in Calcutta Discount's case [1961] 41 ITR 191 (SC) where it had been held that if there are some primary facts from which reasonable belief could be formed that there was some non-disclosure or failure to disclose fully and truly all material facts, the Income-tax Officer has jurisdiction to reopen the assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conside- ring the said reasons recorded by the Assessing Officer, supported by the legal position, it could not be said that the belief of the respondent that there was failure on the part of the petitioner to disclose fully and truly material facts, was not well founded or was erroneous. As held by the hon'ble Supreme Court in the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC), the expression "reason to believe" in section 147 cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion, what is required is the reason to believe but not the established fact of escapement of income. 84. It was then sought to be submitted by Mr. Soparkar, placing heavy reliance on the decision in the case of Ormerods (India) Pvt. Ltd. v. CIT [1959] 36 ITR 329 (Bom) that the purpose of purchase of shares made by the petitioner should not have been mixed up with the motive for the purchase of shares, as sought to be done by the present respondent, inasmuch as the word "purpose" cannot mean a motive for a transaction, much less can it mean ulterior motive or the ultimate object of purchasing the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 57(iii), the emphasis is on the expression "wholly and exclusively" which precedes the words "for the purpose of making or earning such income". Therefore, for claiming deduction under section 57(iii) of the Act, the expenditure must not be expended for the purpose other than the purpose of earning income or for the mixed purpose of earning income and other extraneous purpose. In the instant cases, the respondent had deduced a belief from the fresh tangible material that the expenditure incurred by the petitioner was not expended wholly and exclusively for the purpose of earning income from shares, but such expenditure was incurred also for the purpose of gaining controlling interest over the company, the said purpose could not be said to be the exclusive or sole purpose, and hence, the deduction under section 57(iii) of the Act was not permissible. 87. Though Mr. Soparkar, learned senior advocate for the petitioner, has sought to distinguish the judgment of our High Court relied upon by Mr.M. R. Bhatt, learned senior advocate for the respondent, in the case of Sarabhai Sons [1993] 201 ITR 464 (Guj), in the opinion of this court, the ratio laid down in the said case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, it could not be said that the assumption of jurisdiction exercised by the respondent under section 147 of the Act after expiry of four years from the end of the relevant assessment years was bad, illegal or invalid. There being no infirmity or illegality in the impugned notices issued by the respondent under section 148 of the Act proposing to reopen the assessment for the assessment years 1995-96 and 1996-97, it does not warrant any interference of this court exercising extraordinary writ jurisdiction under article 226 of the Constitution of India and, therefore, both the petitions deserve to be dismissed. 89. However, it is clarified that it will be open for the petitioner to file his objections against the reasons recorded by the respondent, and the respondent shall decide the said objections, if any, submitted by the petitioner, by passing a speaking order in accordance with law, as held by the hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) and without being influenced by the observations made in this judgment. 90. For the foregoing reasons, the petitions are dismissed with no order as to costs. Interim relief, if an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst dividend income from Mastek Ltd." Such claim was not disturbed by the Assessing Officer in his scrutiny assessment, of course without any elaborate discussion in the assessment order and the assessment was taken in scrutiny. The Assessing Officer framed assessment on March 31, 1998, assessing a total loss of Rs. 3,53,622. During the assessment, the Assessing Officer had raised certain queries. The petitioner replied to such queries under communication dated February 15, 1998. In the said letter, he had stated that he had founded a company, viz., Mastek Ltd. and is currently the director of the said company. In the letter, the assessee provided the details of new investments during the year. He stated that the assessee had invested in shares of some of the companies. In the statement at schedule A, the assessee gave details of such investments. 98. The Assessing Officer thereupon proceeded to frame the assessment as noted above by the order dated March 31, 1998. In the assessment order itself, he referred to the letter dated February 15, 1998, of the assessee. 99. It was this assessment which the Assessing Officer desired to reopen, for which he issued notice d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 11, 2002, issued by the Assessing Officer seeking to reopen assessment previously framed after scrutiny for the assessment year 1996-97. For the said assessment year, the assessee had filed his return of income on November 29, 1996, declaring total income nil. The case of the petitioner was taken in scrutiny. During the assessment, the Assessing Officer raised certain queries. The assessee replied to such questions of the Assessing Officer under his communication dated December 14, 1998, in which he stated that, "the assessee has been assessed under section 143(3) for the assessment years 1992-93, 1993-94, 1994-95 and 1995-96. Initially, loan was taken for acquiring shares of Mastek Ltd. and, thereafter, loans were taken to repay earlier loans taken". Along with the letter, he also produced interest conformation of various parties. 102. On December 21, 1998, the assessee wrote yet another letter to the Assessing Officer along with which he produced the proof of payment of interest to various parties. He further stated that, "I request you to refer to para . . . . of my letter dated . . . submitted for the assessment year 1995-96, explain regarding the purpose of loan, etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopening the assessment is misconceived." 107. In short, she held in favour of the petitioner on both counts, viz., that there was no failure on the part of the assessee to disclose truly and fully all material facts and, therefore, assessment previously framed after scrutiny could not be reopened beyond the period of four years from the end of the relevant assessment year. She also held that the claim of deduction under section 57(iii) of the Act was valid and that, therefore, the very basis for reopening the assessment that income chargeable to tax had escaped assessment was absent. 108. The hon'ble Ms. Justice Bela Trivedi, however, was unable to adopt the view of her colleague. She, under a separate dissenting order, came to the conclusion that the petitioner should have availed of alternative remedy. She referred to the decision in the case of GKN Driveshafts (India) Ltd. v. ITO reported in [2003] 259 ITR 19 (SC). She also observed that the petitions involved a number of disputed questions of facts as regards non-disclosure of material facts and escapement of income chargeable to tax. On these grounds, she believed that the petitions were not required to be ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 (SC), wherein the decision in the case of V. D. M. Rm. M. Rm. Muthia Chettiar [1970] 74 ITR 183 (SC), came up for consideration before the apex court. The apex court did not find it necessary to refer the issue to the larger Bench. (3) The learned counsel also relied on a decision in the case of Ormerods (India) Pvt. Ltd. v. CIT [1959] 36 ITR 329 (Bom), wherein the claim of the assessee for deduction of interest paid on the borrowed funds for investment for the purpose of earning income came to be disallowed by the Tribunal. The Bombay High Court was of the opinion that 'The motive for the purchase of shares and the purpose for purchase of the shares should not be allowed to be mixed-up'. The counsel pointed out that the said decision of the Bombay High Court was approved by the apex court in the case of CIT v. Rajendra Prasad Moody and Raghunandan Prasad Moody [1978] 115 ITR 519 (SC). 112. On the other hand, learned senior counsel, Mr. Manish Bhatt, submitted that the Assessing Officer had recorded detailed reasons for reopening the assessment. The assessee had not disclosed full facts about his investments and the purchase of shares in Mastek Ltd. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, "Profits and gains of business or profession" the amounts representing the shares of the husband and minor daughter of the assessee in the profits of the two partnership firms. The assessee, however, failed to disclose these amounts in the return submitted by her and there was, plainly and manifestly a breach of the obligation imposed by section 139, sub-section (1), requiring the assessee to furnish a return of her income in the prescribed form. To accept the contention that despite the note the assessee was still not liable to show in the return the amounts representing the shares of her husband and minor daughter in the two partnership firms would render the note meaningless and futile and turn it into a dead-letter and that would be contrary to all recognised canons of construction. The assessee was guilty of concealment of this item of income which plainly attracted the applicability of section 271 sub-section (1) clause (c).' (2) Reliance was also placed on the decision in the case of CIT v. Abdul Rahim Khan M. Pathan [2000] 243 ITR 409 (Guj). In the said case, the court held that income of the step-child would have to be clubbed with the income of the assessee, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id, is to be judged on the basis of material on record. If the assessee had discharged his primary duty, obviously, the Assessing Officer would, thereafter, have no jurisdiction to reopen the assessment beyond a period of four years. 116. Such question would go to the root of the matter and strike at the very jurisdiction of the Assessing Officer to reopen the assessment. Only upon jurisdictional facts being established that the Assessing Officer can proceed to reopen the assessment. It is well-settled through a series of decisions of this court as well as of the apex court that where there is lack of inherent jurisdiction in the Authority, an alternative remedy, even if available, would not be a bar to entertain a writ petition. In the case of Garden Finance Ltd. v. Asst. CIT reported in [2004] 268 ITR 48 (Guj) it was held as under (page 87) : "On a perusal of the aforesaid decisions, it appears to me that prior to the GKN case [2003] 259 ITR 19 (SC), the courts would entertain the petition challenging a notice under section 148 and permit the assessee to satisfy the court that there was no failure on the part of the assessee to disclose fully and truly all materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till completion of the reassessment proceedings which would have entailed the liability to pay tax and interest on reassessment and also to go through the gamut of appeal, second appeal before the Income-tax Appellate Tribunal and then reference/ tax appeal to the High Court. Viewed in this light, it appears to me that the rigour of availing of the alternative remedy before the Assessing Officer for objecting to the reassessment notice under section 148 has been considerably softened by the apex court in the GKN case in the year 2003. In my view, therefore, the GKN case does not run counter to the Calcutta Discount's case [1961] 41 ITR 191 but it merely provides for challenge to the reassessment notice in two stages, that is- (i) raising preliminary objections before the Assessing Officer and in case of failure before the Assessing Officer, (ii) challenging the speaking order of the Assessing Officer under section 148 of the Act." 117. The decision in the case of the GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC), was rendered after the notices for reopening assessments were issued by the Assessing Officer and challenged by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s escaped assessment ; and (b) that the same was occasioned, on account of either failure on the part of the assessee to make a return of his income for that assessment year, or to disclose fully and truly all material facts necessary for assessment of that year ; (ii) both the above conditions are conditions precedent and must be satisfied simultaneously before the Income-tax Officer can assume jurisdiction to reopen the assessment beyond four years of the end of the assessment year ; (iii) such reasons must be recorded and if the reasons recorded by the Assessing Officer do not disclose satisfaction of these two conditions, reopening notice must fail ; (iv) there is no set format in which such reasons must be recorded. It is not the language but the contents of such recorded reasons which assumes importance. In other words, a mere statement that the Assessing Officer had reason to believe that certain income has escaped assessment and such escapement of income was on account of non-filing of the return by the assessee or failure on his part to disclose fully and truly all material facts necessary for assessment would not be conclusive. Nor absence of any such statement would be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income from Mastek Ltd. was very much within the knowledge of the Assessing Officer in the original return, itself. Moreover, in response to the queries raised by the Assessing Officer, the assessee filed further documents. Vide letter dated February 15, 1998, the assessee made further disclosures in which in the first paragraph itself he stated that he had worked for two years with NOCIL after which he cofunded Mastek Ltd. He was currently the director of Mastek Ltd. He gave details of various investments made by him in shares. He supplied the details at schedule A to the letter. After taking into account such material, the Assessing Officer, passed his order of assessment. In the assessment order, he referred to the assessee's letter dated February 15, 1998, and the contents of such letters also. Some of the claims of the assessee were disallowed and the original loss of Rs.7.45,759 was reduced to Rs. 3,53,622. Significantly, however, no additions were made with respect to the claim of deduction on the interest paid for funds used for purchase of shares of Mastek Ltd. 123. In the next assessment year, i.e., the assessment year 1996-97, once again, the return of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tek Ltd. and recorded the reasons for the same. He, therefore, opined that the assessee was not entitled to deduction under section 57(iii) of the Act since such expenditure cannot be held to have been incurred exclusively for the purpose of earning such income. 127. Whether the Assessing Officer is justified in holding such, prima facie, belief is not an issue, on which I need to make any conclusive statement. The question is whether did the assessee fail in his duty to disclose fully and truly all primary facts. This question is important since the Assessing Officer sought reopening of the assessment beyond a period of four years from the end of the relevant assessment year. 128. To my mind, considering the facts emerging from the record, it cannot be stated that the assessee failed in his duty. His duty was to make the disclosure about the investments as well as the interest paid for borrowings for making such investments. On the basis of such material, if the Assessing Officer was of the opinion that any further inquiry was necessary to examine the nature of such investments and to ascertain whether the investment was made for the sole purpose of earning dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be based on mere change of opinion. However, the present case is related to reopening of assessment beyond a period of four years. Reopening notice must, therefore, be quashed. 132. I am, however, unable to concur with the view of the hon'ble Justice Devani when she holds that even on the merits, no additions could have been made. She examined the nature of interest paid by the assessee, the nature of investment made in purchase of shares of Mastek Ltd. and came to the conclusion that the interest paid on borrowed funds, which were utilized for the purpose of shares for earning dividend would fall within the parameters of section 57(iii) of the Act. 133. With profound respect, I am unable to adopt such a line. Such an issue, in my opinion, was wholly within the purview of the Assessing Officer. The material necessary to examine the nature of investment made by the asses- see in purchasing shares of Mastek Ltd. had to be brought on record. Its effect on the claim towards expenditure in the form of interest paid on the borrowed funds had to be judged on the basis of various facts and circumstances. Such facts have not yet been brought on record. What would be the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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