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TMI Blog2021 (10) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... oner to furnish the documents mentioned as per the annexure to the notice. There are four items mentioned in the annexure but what we are concerned with is serial no.2 in the annexure, i.e., audited accounts, 3cd, balance sheet, P & I A/C etc. By its letter dated 14th August 2014, petitioner submitted all the documents asked for and also clarified that tax audit report in Form 3CD for the Assessment Year 2012-2013 was not applicable. 3. Petitioner, thereafter received another notice dated 10th October 2014 under Section 142 (1) of the Act calling upon petitioner to provide certain details, one of which is "details of interest expenses claimed under Section 57 of the Act". These details were provided vide petitioner's letter dated 3rd December 2014. Thereafter, there was a personal hearing granted and as per the further details sought during the personal hearing, petitioner provided further documents and details by its letter dated 17th December 2014. 4. After considering the details supplied, an assessment order dated 20th February 2015 came to be passed accepting petitioner's explanations and computation of income. Ofcourse in the assessment order certain credit for tax paid in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Thane. Hence, the interest paid on the said loan is related to assesses business and accordingly is allowable as deduction u/s 37(1) of the IT Act, 1961. Since there was no business Income during the year, the entire interest expenses of Rs. 75,59,35,292/- during the pre-construction should have been capitalized to the WIP as against claiming Rs. 7,66,66,663/- as deduction u/s 57 which is not an allowable deduction u/s 57 of the Act. 3. In view of the above, I have reasons to believe that income of Rs. 7,66,66,663/-which was chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary and therefore, this case is a fit case for reassessment within the meaning of Section 147 of the I.T. Act, 1961 and the assessment for AN 2012-13 needs to be reopened by issue of notice u/s 148 of the I.T. Act. 4. It is kindly requested hereby that since the time period of 4 years have already elapsed from the end of the relevant assessment year and the amount of income escaped exceeds Rs. 1 lakh, necessary approval may be accorded for the reopening of the A.Y. 12-13 in the case of the assessee by issuing not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f those points on which assessment is reopened, thus it can be hardly stated that Assessing Officer had formed an opinion on such points during original assessment proceedings. The Supreme Court and various High Courts have justified the reopening of the assessment where no opinion on certain points was formed by the Assessing Officer during original assessment proceedings and later on the assessment was reopened on those points. Thus, the window of reopening of assessment will remain open for Assessing Officer on those points where the Assessing Officer neither accepts nor rejects such claim; (iv) Without prejudice to what is stated above, it is also important to mention that something which is tangible need not be something which is new. Even if the Assessing Officer fails to apply his mind while framing original assessment to the points on which assessment is sought to be reopened, it can be said that the reasons for reopening of the assessment under Section 147 comes within the jurisdiction. If there is an escapement of income in consequence, the jurisdictional requirement of Section 147 would be fulfilled on the formation of a reason to believe that income has escaped assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for that assessment year. 8. It is settled law that where the assessment is sought to be reopened after the expiry of a period of four years from the end of the relevant year, the proviso to Section 147 stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary. Since in the case at hand, the assessment is sought to be reopened after a period of four years, the proviso to Section 147 is applicable. It is also settled law that the Assessing Officer has no power to review an assessment which has been concluded. If a period of four years has lapsed from the end of the relevant year, the Assessing Officer has to mention what was the tangible material to come to the conclusion that there is an escapement of income from assessment and that there has been a failure to fully and truly disclose material fact. After a period of four years even if the Assessing Officer has some tangible material to come to the conclusion that there is an escapement of income from assessment, he cannot exercise the power to reopen unless he discloses what was the material fact which was not truly and fully disclosed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening does not specifically state that there was any failure on the part of petitioner to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year, it will not be fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act. We would certainly agree with Mr. Suresh Kumar but as held in Crompton Greaves Ltd. (Supra), this is subject to the rider that there must be cogent and clear indication in the reasons supplied, that in fact there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment. If the factum of failure to disclose can be culled down from the reasons in support of the notice seeking to reopen assessment, that will certainly not be fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act. The Court held "However, if from the reasons, no case of failure to disclose is made out, then certainly the assumption of jurisdiction under Sections 147 and 148 of the Act would be ultra vires, being in excess of the jurisdictional restraints imposed by the first proviso to Section 147 of the Act". 10. Coming to the ground no.(i) for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 148. Even where the jurisdictional facts prescribed under Section 147 exist and all conditions laid down under Section 147 and the proviso thereto are satisfied, the notice under Section 148 can be issued only after the Assessing Officer has recorded his reasons for doing so under Sub-section (2) of Section 148 and has further obtained the necessary sanction for issuance of the notice as required under Section 151 of the Act. ..... The restriction ....... of a period of four years, ...... In the present case, the reasons which have been recorded by the Assessing Officer for reopening of the assessment do not disclose that the assessee had failed to disclose fully and truly all material facts necessary for the purpose of assessment. No doubt in the last paragraph of the reasons, the first respondent has stated: I am satisfied that due to furnishing the false particulars of the income by way of incorrect certificate which means failure on the part of the assessee to disclose fully and truly all material facts required for the assessment, income of Rs. 6,10,10,272 had escaped assessment. The said statement is clearly made only as an attempt to take the case out of the restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond the full and truthful disclosure of all primary facts. 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 of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else far less the assessee to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - 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 it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Incometax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above., In view of the Explanation, it will not be open to the assessee to say, for example-" I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents". His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for thinking that there had been any nondisclosure as regards any primary fact, which could have a material bearing on the question of "under assessments that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under Section 34. Whether these grounds were adequate or not for arriving at the conclusion that there was a non disclosure of material facts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some nondisclosure of material facts. ................. Both the conditions, (i) the Income-tax Officer having reason to believe that there has been under assessment and (ii) his having reason to believe that such under assessment has resulted from nondisclosure of material facts, must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiry of 4 years. The argument that the Court ought not to investigate the existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that under asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the cheques were sent to Porbandar. We do not think that any more detailed disclosure was necessary to comply with the requirements that the assessee had fully and truly disclosed all the material facts necessary for the purpose of assessment. The Income-tax Officer may, if he is satisfied, that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, income has escaped assessment, he may assess or re-assess the income. But when the primary facts necessary for assessment are fully and truly disclosed, he is not entitled on change of opinion to commence proceedings for reassessment. The Income-tax Officer was apprised of all the primary facts necessary for assessment, and he proceeded to "drop the assessment proceedings". He may have raised a wrong legal inference from the facts, disclosed but on that account he was not competent to commence re-assessment proceedings under Section 34(1) (a) for the two assessment years. (emphasis supplied) Section 34 of the Indian Income Tax Act, 1922 corresponds to Section 147 of the Act then in force. 15. In Gemini Leather Stores V/s. Income Tax Officer (1975) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable income alongwith MAT (minimum alternate tax) calculation as per provisions of Section 115JB, audited annual financials including auditor's report, balance sheet, profit and loss account and notes to accounts, annual tax statement in Form 26AS under Section 203AA of the Act in response to the notices received under Section 142 (1) and 143 (2) of the Act. Petitioner also explained how the borrowing costs that are attributable to the acquisition or construction of assets have been provided for, what are the short term borrowings and from whom have been provided for. Petitioner also gave details of interest expenses claimed under Section 57 of the Act in response to further notice dated 10th October 2014 under Section 142 (1) of the Act, attended personal hearings and explained and gave further details as called for in the personal hearing vide its letter dated 17th December 2014 and after considering all that, the assessment order dated 20th February 2015 was passed accepting the return of income filed by the assessee. The Assessing Officer had in his possession all primary facts, and it was for him to make necessary enquiries and draw proper inference as to whether from the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udited accounts of petitioner. In the reasons for reopening, there is not even a whisper as to what was not disclosed. In the order rejecting the objections, the Assessing Officer admits that all details were fully disclosed. In our view, this is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment is sought to be reopened on account of change of opinion of the Assessing Officer about the manner of computation of the deduction under Section 57 of the Act. In a similar case where the notice to reopen the assessment was founded entirely on the assessment records and the entire basis for reopening the assessment was the disclosure which has been made by the assessee in the course of the assessment proceedings and where no material to which a reference was to be found, a Division Bench of this Court in 3i Infotech Limited V/s. Assistant Commissioner of Income Tax (2010) 192 Taxman 137 (Bombay) relied upon by Mr. Pardiwalla, in paragraph 12 held : 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as income-tax assessment orders are concerned, they cannot be reopened on the scope of income escaping assessment under Section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, 'this cannot be said in the present case. The appeal is consequently allowed; the judgment of the High Court is set aside and the impugned notices are quashed. The parties in the circumstances shall bear their own costs throughout. 19. As already mentioned, it cannot be said in the present case that there was an omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It cannot be stated that the condition precedent to the reopening of an assessment beyond a period of four years has been fulfilled. The statement in the reasons for reopening "I have reasons to believe that income of Rs. 7,66,66,663/- which was charge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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