9911796707
TMI Blog2007 (2) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner under the Act. For the assessment year 1999-2000, the petitioner had filed its return of income on December 31, 1999. In the return filed the petitioner had disclosed in its note No. 5(b) that the excise duty paid amounting to Rs. 7.92 crores in respect of the inventories of finished goods had been treated as a pre-payment and included other advances which were treated as a fiscal levy on manufacture and not as an element of manufacturing cost for the purpose of valuation of such inventories. The petitioner had not debited the profit and loss account of this amount and therefore had not claimed any deductions either in account or in the computation of income. 4. In the annual accounts the petitioner in its note No. 9(b) had disclosed : (a) that the company had discovered some fraudulent invoicing by a transporter during 1997-98 and 1998-99, a part of which was recovered ; and (b) that the remaining amount aggregating to Rs. 1.55 crores for the current year and the preceding years was not recoverable and hence had been written off in the profit and loss account in the respective years. 5. In the company's tax audit report the petitioner had disclosed : (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the petitioner, had submitted on the basis of the abovementioned facts, that the impugned notice dated March 13, 2006, under section 148 of the Act, to reopen the assessment for the assessment year 1999-2000 is invalid, improper, without jurisdiction, time-barred and without proper sanction under section 151 of the Act and is therefore liable to be quashed and set aside as bad in law. In support of this learned counsel for the petitioner submitted that it is a well-settled principle of law that the existence of a valid "reason to believe" is a sine qua non to exercise the jurisdiction under section 147 of the said Act, which provides for the assessment or reassessment of any income chargeable to tax subject to sections 148 to 153 of the Act, if the Assessing Officer has reason to believe that such an income has escaped assessment for any assessment year. Mr. Pardiwalla stated that this court and the hon'ble Supreme Court in a number of cases have held that "reason to believe" postulates that a bona fide belief that income has escaped assessment and must be founded on material which is not irrelevant or arbitrary. 10. Learned counsel for the petitioner, Mr. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r failed to furnish his return or had not made a full and true disclosure of all material facts. He further contended that the recorded reasons for reopening stated that the discrepancies were found from the case records, which consist of documents filed by the petitioner starting from the return of income till the completion of the assessment proceedings and up to the issue of notice under section 148 of the Act. Hence, he contended that there cannot be any failure on the part of the petitioner to disclose the material facts necessary for the assessment truly and fully. He submitted that merely by stating in the recorded reasons for reopening the assessment that there was a failure to disclose fully and truly all the material facts for the assessment did not satisfy the ingredients of the provisions relating to the reassessment proceedings and that the reasons recorded should have brought out what the material facts were which had not been disclosed by the assessee. With reference to the three fold reasons recorded for the reopening of the assessment, learned counsel claimed that all the relevant materials had been disclosed by the petitioner. Mr. Pardiwalla contended that respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered at this stage. Learned counsel for the Revenue also cited the Supreme Court judgments to substantiate this argument. The notes of the petitioner were initially accepted by the respondent which implies that the disclosure was made complete on being accepted by the respondent. We do not see any reason why the petitioner should not be protected by the statutory provision of the proviso to section 147 of the Act. 17. Learned counsel for the petitioner Mr. Pardiwalla contended that under the proviso to section 151(1) of the Act, the Commissioner of Income-tax had to be satisfied on the reasons recorded by the Assessing Officer that it was a fit case for the issue of notice under section 148. It was also submitted that the satisfaction granted was not applying the mind to the case records as a bare perusal of the assessment proceedings, assessment order, appellate order showed that all the material facts were not only duly disclosed but were also inquired into during the original assessment and also by the audit wing by the Department and hence the notice under section 148 issued which was based on such mechanical sanction ought to be quashed and set aside. 18. Mr. Pardiwalla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue went on to submit that the assessee had already availed of the deduction of expenditure which was never incurred for the purpose of business and hence this amount of Rs. 5,26,03,000 should have been credited to the profit and loss account rather than debited. Instead the assessee had later claimed defalcation of Rs. 4,29,98,694 which as per the petitioner, amounts to double deduction for the same amount. This, as submitted by learned counsel certainly led the respondent to believe that the income of the petitioner had escaped assessment. 22. After hearing both sides, and after perusal of all the relevant orders, we find that the petitioner had disclosed all the material facts and there is no failure to disclose fully and truly all material facts, and therefore, reopening of the assessment beyond four years from the end of the relevant assessment year cannot be sustained. 23. With respect to the valuation of opening stock read with section 145A, the Assessing Officer in his order had denied the benefit of increase in value of opening stock which was further carried in appeal up to the Tribunal stage where the stand of the Department had been accepted. The additions made dur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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