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TMI Blog2013 (10) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in respect of the above said refund amount. The assessee explained that the recall of the refund amount is challenged in the said writ petitions and that the refund amount is shown as current liability in the returns filed for the relevant period. Thereafter, the Assessing Officer issued notice under Section 148 for reassessment and concluded the assessment under Section 41(1) of the Income Tax Act, 1961 ('the said Act' for short) bringing the said amount to tax. The C.I.T. (Appeals) confirmed the order of the Assessing Officer. 3. The Appellate Tribunal has found that the notice issued under Section 148 does not conform to the requirements of law to enable the reopening of the assessment and thus set aside the order of the C.I.T. (Appeals). The Revenue aggrieved by the said order has filed this appeal. 4. This Court, while admitting the appeal framed the following substantial question of law for consideration:- "Whether the Tribunal was correct in holding that the reopening of assessment for the current assessment year was not correct in law and the basis of re-opening of assessment that excise duty refund received by the assessee should be brought to tax unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment is urged for the first time in the appeal and also that the proviso to sec.151(1) does not apply when the assessment is reopened by the Deputy Commissioner who is the Assessing Authority. 8. The counsel for the respondent per contra submitted that objection with regard to jurisdiction for reopening was urged and argued before the CIT appeals. The said contention was also urged before the Appellate Tribunal. The Tribunal without reference to the said contention granted relief to the respondent herein on a different ground. Therefore, the contention that the jurisdiction to reopen the assessment is urged only for the first time in appeal before this court is untenable. 9. In order to appreciate the proposition of law regarding the jurisdiction for reopening the assessment, it is necessary to refer to the provisions contained in Section 151 of the I.T. Act. The said section came to be amended w.e.f. 1.4.1990. Therefore, the provision of law in sec. 151 prior to 1.4.1990 and subsequent to 1.4.1990 is extracted hereunder for convenient reference:- Sanction for issue of notice 151. (1) In a case where an assessment under sub-section (3) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rank of Asst. Commissioner and Deputy Commissioner could reopen scrutiny assessment within the period of four years by issuance of notice. If it is, beyond the period of four years, it is necessary that the Chief Commissioner or Commissioner can permit reopening on satisfaction of the reasons recorded by the assessing officer that it is a fit case for issuance of notice. b) After 1.4.1990, if the assessing officer is below the rank of Asst. Commissioner i.e., I.T.O. notice for reopening can be issued within four years provided the Deputy Commissioner is satisfied of the reasons recorded by the Assessing Officer for issuance of notice. c) After 1.4.1990 by implication, there is no embargo upon the assessing officer when he is in the rank of Asst. Commissioner or the Deputy Commissioner to reopen the assessment within the period of four years. But for the period beyond four years, the approval of the Chief Commissioner or Commissioner is necessary. d) Insofar as Sec. 151(2), the proposition of law remained unaltered and the said provision applies to non-scrutiny assessment. If the assessing officer is below the rank of Deputy Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Commissioner as required under provision to Sec. 151 which stood after 1.4.1990 and prior to 1.10.1998. Therefore, the notice issued for reopening is bad in law and the first question of law is answered against the revenue. 15. Insofar as the second point regarding failure to disclose fully and truly all material facts, the learned counsel for the assessee has relied upon the decisions in (1985) ITR 155 748 (Kar) Vijayalakshmi Oil Industries V/s. Income Tax Officer, (1999) 240 ITR 77 (Gujrat) Vareli Weaves Pvt Ltd., v/s.deputy Commissioner Of Income Tax, (2008)171 TAXMAN 379 (DELHI) Commissioner Or Income Tax V/s. Indian Farmers Fertilizer Co-op Ltd; (2011) 335 ITR 234 (Gujrat) Aayojan Developers V/s. Income Tax Officer and W.P.No.2786/2011 of the High Court of Bombay disposed off on 24-1-2012 to contend that the notice to be issued U/s. 148(2). Proviso to Section 147(1) mandates that in cases of escaped assessments, the Assessing Officer gets jurisdiction only when he is satisfied and records his reasons specifically to the effect that the assessee has failed to disclose fully and truly all material facts. In the present case, notice issued U/s. 149 only makes a statement tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his Possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise-the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. There can be no doubt that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to demand that the assessee must disclose what inference - whether of facts or law-he would draw from the primary facts. If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated if to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? 7. It may be pointed out that the Explanation to the sub-section has nothing to do with "inferences" and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose "inferences" - to draw the proper inferences being the duty imposing on the Income-tax Officer. 8. We have therefore come to the Conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise Authorities paid back or distributed to ultimate beneficiaries, the amount is trading receipt in the hands of assessee. Assessee would get deduction as and when the same is paid. The refund of Excise Duty was not shown as income during the year. Hence, income escaped assessment. Accordingly, notice u/s.148 issued to reopen the assessment u/s.147". 19. The Assessing Officer has set out all the material facts relating to the refund. He has specifically stated that the said amount is a trade-in-receipt in the hands of the assessee and that unless and until the amount if refunded to the Excise Authorities or distributed to the ultimate beneficiaries, it would be an income of the assessee during the assessment year in question and non-disclosure is said to be the "income escaped from assessment." The words "income escaped from assessment" has definite legal connote in the provisions of Section 147. Failure of the Assessing Officer in not specifically employing the words "failure to disclose the all the material facts fully or truly", and the verbatim in the order as recorded in the proviso to Section does not appear to be fatal and it cannot be said that there is no compliance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outcome of the appeal before this court. It is also stated that, as regards another part of the liability, the issue is pending before the Tribunal. It would, therefore, appear that no cessation of liability can be postulated until the Tribunal has decided the matter. There is no prejudice to the Department if the assessment is modified depending upon the outcome of the decision of this court as well as the final outcome of the proceedings, which are not pending before the Tribunal. This leaves only the first question for consideration. 21. Sri.K.V.Aravind, learned counsel appearing for the revenue relied upon the decision of this court and the decision of the Hon'ble Supreme Court in the case of Commissioner Of Income Tax V/s Thirumalaswamy Naidu & Sons reported 230 ITR 534 in paragraph 2 and 3, the following observations are made: 2. The assessee in the course of sale of its products, collected sales-tax from the purchasers. The assessee, in its turn, was assessed under the Central Salestax Act and paid the tax. The sales-tax collected by the assessee has to be treated as its income, according to the ruling of this Court in the case of Chowringhee Sales Bureau Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a relevant consideration. Once the assessee gets back the amount which was claimed and allowed as business expenditure during the earlier year, the deeming provision in s. 41(1) of the Act comes into play and it is not necessary that the Revenue should await the verdict of higher Court or Tribunal. If the Court or Tribunal upholds the levy at a later date, the assessee will not be without remedy to get back the relief. 12. Though, the conclusion of the High Court which was affirmed by this Court cannot be legally faulted, we cannot, however, approve of the following analysis of the section occurring in the judgment, "in short, what this provision means is that if an assessee has been allowed a deduction in the computation of its total income of any liability on account of loss or expenditure and if, subsequently, the liability of the assessee on account of such loss or expenditure is remitted or ceases, that part of the liability which is remitted or ceases shall be treated to be the income of the assessee of the previous year in which such remission or cessation takes place." The High Court proceeded on the assumption that the words 'remission and cessation there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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