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TMI Blog2003 (6) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 (hereinafter for short 'the Act'), in regard to the assessment years 1991-92, 1992-93, 1993-94 and 1994-95 and the challenge to the notices is mainly on the ground that these have been issued after the expiry of four years from the end of the relevant assessment year even though the conditions as contemplated under section 147 of the Act were not satisfied. The relevant facts briefly stated are: The petitioner is a public limited company incorporated under the Companies Act, 1956, and is the successor of the erstwhile Oil and Natural Gas Commission whose entire undertaking was transferred to the petitioner vide the "Oil and Natural Gas Commission (Transfer of Undertaking and Repeal) Act, 1993" with effect from February 1, 1994. The assessment for the relevant assessment years were completed under section 143(3) of the Act. The Assessing Officer made a disallowance of 10 per cent. of the tax free interest earned on bonds on the ground that it relates to the expenditure incurred by the petitioner in earning the said interest. The petitioner's appeal was decided by the Commissioner (Appeals) partly in its favour for the assessment years 1991-92, 1992-93 and 1993-94 and fully fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1.--Production before the Assessing Officer of account books or other evidence from whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt-Assessing Officer has cogent reason to believe that the income has escaped assessment in view of the fact that the assessee has invested substantial amount in PSU bonds for which assessee had to use funds borrowed on high rate of interest and in a situation like this the expenditure incurred on the exempt income is not allowable expenditure under the provisions of the Act. Learned counsel also submitted that this aspect was neither examined by the Assessing Officer at the time of the original assessment nor the assessee, has made a truthful disclosure in his original return of income as such. The reference was made to the notice under section 148 of the Act, annexure 2 to the counter affidavit, also reproduced in the petition by the petitioner. For all the assessment years similar notices were given. We find it expedient to reproduce the same here: "Reasons for issue of notice under section 148 in the case of Oil and Natural Gas Commission for the assessment year 1991-92 The assessee filed its return of income of Rs. 439,49,86,580 and assessment under section 143(3) was completed at income of Rs. 812,37,78,325. It was noticed from the computation of income that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons shown do not satisfy the conditions as envisaged under the proviso to section 147 for reassessment. On behalf of the petitioner reliance was placed on the apex court decision in Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1, in support of the contention that for failure of the Assessing Officer in assessing the taxable income recourse to section 147 of the Act cannot legally be taken. The apex court in the reported decision has observed that: "The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to as supportive of the changed opinion of the assessing authority, which as stated above would not justify reassessment. Even otherwise in the said case the assessee-company had advanced loans to its directors for non-business purposes. In the instant case details of cash profits, free reserves and investments in PSU bonds as at the end of the relevant financial periods referable to the assessment years in question, as set out in annexure Ext. 1 to the petition, reveal that the petitioner had huge reserves and cash profits facilitating investments in PSU bonds. Ext. 1, for the sake of convenience is also reproduced below: Details of cash profits, free reserves and investment in PSU bonds as at the end of financial periods (Rupees in crores) ------------------------------------------------------------------------------------------------- Financial Assessment Cash profits Free reserves Total of cash Balance of invest year year profits and ments in tax free free reserves PSU bonds ------------------------------------------------------------------------------------------------- 1990-91 1991-92 2,553.11 10,367.43 12,920.54 1,546.42 1991-92 1992-93 1,651.52 10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion the factum of the existence of the grounds for the belief and in any case, it is not in relation to the adequacy of the grounds of such belief. As things stand the facts of the case are glaring enough to show that the reasons or ground for reopening of the assessment as envisaged by the proviso to section 147 of the Act are totally non-existent. Learned counsel for the respondents submitted that non-disclosure of any fact which has a material bearing on the question of assessment confers power on the assessing authority to exercise jurisdiction under sections 147 and 148 of the Act and since in the instant case the petitioner has failed to disclose fully and truly the material facts with regard to the investments in tax free bonds which had necessitated borrowing of funds by it the assessing authority has reason to believe that the income has escaped assessment. In support of his contention, learned counsel referred to Indo-Aden Salt Manufacturing and Trading Co. P. Ltd. v. CIT [1986] 159 ITR 624 (SC); Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638 (SC); CIT v. Miss Esther P. Carvalho [1999] 237 ITR 549 (Bom); Zohar Siraj Lokhandwala v. M.G. Kamat [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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