9911796707
TMI Blog1978 (2) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 29,770 and the claim was based on s. 80-I of the I.T. Act,1961 (hereinafter referred to as " the Act "), in view of the fact that the assessee was a priority industry. The assessee had also claimed deduction in the sum of Rs. 2,775, the said amount being expenses incurred by it in earlier years. The relief under s. 80-I was granted but the deduction on account of previous years' expenses was disallowed by the assessing authority. On February 17, 1973, a notice under ss. 154 and 155, Ex. B, was issued to the petitioner intimating that the assessment for the assessment year 1966-67 was required to be amended as there was a mistake apparent from the record and the petitioner was asked to show cause. The mistake which, according to the notice, was required to be rectified, related to the grant of relief under s. 80-I. The assessee showed cause by its reply dated March 8, 1973. It is not necessary to go into the details of this aspect of the case inasmuch as the rectification proceedings were not prosecuted and they appear to have been dropped. On March 31, 1975, the respondent issued a notice, Ex. D, stating that he had reasons to believe that the income of the petitioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult would be a loss; (3) that the petitioner had not disclosed all material facts truly and fully at the time of original assessment proceedings inasmuch as, (a) in the profit and loss account the company had debited an amount of Rs. 16,006 on account of expenditure incurred for construction of an earthen dam at river Kaveri, and since that expenditure was in the nature of capital expenditure, it was not allowable as revenue expenditure, (b) on a close scrutiny of the accounts for the accounting year, it was found that an amount of Rs. 2,774 was debited to the profit and loss account as expenses of earlier years and this expenditure was not allowable during the accounting year in question, (c) the company had paid a sum of Rs. 8,888 to the Government of Gujarat and it was not clear as to whether it was in the nature of donation or capital expenditure and this fact was not fully disclosed in the original assessment and as a result thereof it was wrongly allowed, and, (d) the petitioner had claimed relief in the sum of Rs. 29,224 under s. 80-I claiming that it was running a priority industry whereas, in fact, the industry was not a priority industry since it manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has done that, his duty ends. It is for the ITO to draw correct inferences from those primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If the ITO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessments. What facts are material and necessary for assessment will differ from case to case. But once those primary facts are disclosed, and all the facts which would help the ITO 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)]. One more thing also requires to be noted. There is necessarily an element of error in cases of income escaping assessment mentioned in s. 147. However, for the applicability of s. 147, what is necessary to be shown is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this aspect of the case. This is, therefore, merely a case of change of opinion and it would not give jurisdiction to the respondent to reopen the assessment. The next ground which appears to have weighed with the respondent is that the profit and loss account contained an item of Rs. 4,05,000 which amount was refunded to the petitioner on account of excess recovery of excise duty and was added to the business income of the company, which, according to the respondent, was not permissible. If the said amount was excluded, the result would be loss for the year in question with the further consequence that no relief under s. 80-I could have been claimed and allowed. In terms, the respondent has stated in the affidavit-in-reply that under those circumstances the relief was " wrongly allowed " and that " the same was liable to be withdrawn ". On this aspect also, there was no failure on the part of the petitioner to disclose fully and truly the material facts at the stage of the original assessment. The amount of excess duty refunded was reflected as such in the profit and loss account which was produced before the ITO. It was for the ITO to consider at that stage whether this amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that this again discloses a mere change of opinion, there is a still greater infirmity disclosing total non-application of mind. From the assessment order made in the course of the original assessment proceedings, it appears that the item of expenditure in question was actually disallowed by the ITO. It would thus appear that one of the grounds on which the satisfaction of the respondent is based is totally non-existent. The third item on which reliance has been placed relates to a sum of Rs. 8,888 paid by the assessee to the Government of Gujarat. It appears that in the course of the original assessment proceedings this item of expenditure was allowed as revenue expenditure. It appears to have been the view of the respondent that the nature of expenditure, that is to say, whether it was in the nature of donation or capital expenditure, was not " fully disclosed " in the original assessment and that as a result thereof it was " wrongly allowed ". Now, here again there is no dispute that this item of expenditure was disclosed by the petitioner during the course of the original assessment and that it was claimed and allowed, as business expenditure. All the primary facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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