TaxTMI 
TaxTMI 
2010 (12) TMI 736
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....ort "the Act"), notice dated 11.5.2010 (Annexure P-2) issued under Section 143(2) of the Act and order dated 23.8.2010 (Annexure P-3) passed by the respondent disposing of the objections to the validity of initiating reassessment proceedings in respect of the return of income for the assessment year 2003-04. 3. The brief facts for adjudication as narrated in the petition are that the petitioner is a Public Limited Company and is engaged in the business of manufacture and sale of bicycle, bicycle parts and steel tubes. It filed its return for the assessment year 2003-04 on 1.12.2003 declaring an income of Rs.3,60,30,500/-. The return was accompanied by the audited financial results, tax audit report under Section 44AB, audit report under Section 80HHC and deductions under Section 80-IB of the Act. The assessee claimed deduction of Rs.10,77,813/- under Section 80HHC and Rs.3,57,44,297/- under Section 80-IB of the Act. The Assessing Officer vide order dated 28.3.2006 computed the income of the petitioner at Rs.3,81,08,270/-. The Assessing Officer apart from making minor disallowance, allowed deduction of Rs.10,46,375/- under Section 80HHC, Rs.3,57,44,297/- under Section 80-I....
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....as paid its interest on borrowed funds. Hence, I have reasons to believe that interest of Rs.82,92,260/- debited to P/L account attributable to the investment made by the assessee in bonds, the income of which does not form the part of total income and interest attributable to loan advanced to Sh. Arun Kapoor, has escaped assessment and therefore the provisions of section 147 of IT Act are attracted. And also re-assess, any other income found to have escaped assessment, during the course of reassessment u/s 148 of the IT Act. Necessary approval for issue of notice u/s 148 has been accorded by the worthy Commissioner of Income Tax vide its F. No. CIT/Judl./6460 dated 25.02.2010. In view of the above, issue notice u/s 148 of the IT Act for the A.Y. 2003-04." A perusal of the above reasons recorded clearly spells out that proceedings for reassessment had been initiated as, according to the assessing officer, following income had escaped assessment:- (a) The assessee had declared borrowed funds of Rs.35,34,06,759/- on which interest amounting to Rs.3,54,79,130/- had been charged to profit & loss account. Therefore, in view of Section 14A of the Act, intere....
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....3(3) of the Act were the other grounds of challenge to the reassessment proceedings. Further where an assessment is made under Section 143(3) of the Act, the presumption is that every issue arising in the assessment proceedings has been considered. Support has been drawn from the following decisions:- (a) Commissioner of Income Tax v. Foramer France 264 ITR 566 (SC). (b) CIT v. Kelvinator India Limited, 228 CTR 488 (SC). (c) Jindal Photo Films Vs. CIT, 234 ITR 170 (Del). (d) CIT Vs. Kelvinator of India Limited 256 ITR 1 (Del) (FB). (e) M/s Transworld International Inc. v. JCIT, 273 ITR 242 (Del). (f) United Electrical Co. Pvt. Ltd. v. CIT, 258 ITR 317 (Del). (g) KLM Royal Dutch Airlines v. Assistant Director of Income Tax, 292 ITR 49 (Del). (h) Techspan India Pvt. Ltd. v. ITO, 283 ITR 212 (Del). (i) Satnam Overseas Ltd. v. Addl. CIT 33 DTR 81 (Del). (j) CIT v. Goetze India Ltd., 229 CTR 167 (Del). (k) CIT v. Mittal Castings, 124 Taxman 16 (Del). (l) Sheth Bros v. JCIT, 251 ITR 270 (Guj). (m) Delhi Farming & Const. v. ACIT, 240 ITR 127 (Del). (n) Andhr....
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....Co. Ltd. v. ACIT) decided on 30.11.2010 in support of his submissions. He further submitted that the judgments relied upon by the learned counsel for the assessee has no relevancy with respect to the controversy as Explanation I to Section 147 of the Act was not under consideration in any of those judgments. 12. We have heard learned counsel for the parties. 13. The primary issue in these petitions is whether in view of Explanation 1 to Section 147 of the Act, could the mere production of documents and other evidence before the Assessing Officer during the regular assessment proceedings, amount to true and full disclosure within the meaning of Section 147 of the Act. 14. The said issue came up for consideration before this Court in a recent judgment dated 30.11.2010 in M/s R.N. Gupta & Co. Ltd's case (supra), wherein, it was held as under:- "8. The question that arises for determination in this petition is whether the assessee is entitled to challenge validity of initiation of reassessment proceedings under Section 147 of the Act after expiry of four years on the ground of lack of jurisdiction with the Assessing Officer even where the assessee had p....
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....ent proceedings where after having adopted a particular opinion during original assessment proceedings, on second thought, he wishes to conclude otherwise. In other words, change of opinion is no ground for initiating reassessment proceedings. According to the explanation, the duty cast upon assessee to disclose truly and fully all material facts does not get discharged by mere production of the account books or other documents. Even where, the Assessing Officer could have with due diligence deduced the truth if he had been circumspect, still it will amount to non-disclosure of material facts within the meaning of Section 147 of the Act. The fiction created by the said explanation is to ensure that the Assessing Officer who is to act fairly and reasonably for the public exchequer as well as the tax payers cannot be imputed knowledge and consciousness to the entire bulky record produced by the assessee during assessment proceedings unless there has been conscious deliberations with regard to such an issue in the assessment order." 15. Answering identical question, the Allahabad High Court in EMA India Ltd's case (supra) observed :- "3.2. Explanation 1 to proviso ....
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....ld have found out the truth, he is not on that account precluded from exercising the power to reassess the escaped income [see, Kantamani Venkata Narayana & Sons vs. Addl. ITO (1967) 63 ITR 638 (SC); Sowdagar Ahmed Khan vs. ITO (1968) 70 ITR 79 (SC); ITO & Ors. vs. Lakhmani Mewal Das 1976 CTR (SC) 220: (1976) 103 ITR 437 (SC), 445]. 3.6. The fact that the AO could have found out the correct position by further probing the matter does not exonerate the assessee from the duty to make a full and true disclosure of the material facts." 16. Applying the aforesaid principles to the facts of the present case, it cannot be held that there was true and full disclose made by the assessee. A perusal of the assessment order, no where suggests that the Assessing Officer had dealt with the issues on which reassessment is sought to be made while determining the taxable income of the assessee. Once it is held that mere production of account books and the documents where from the Assessing Officer could have gathered the details of escaped income, would not amount to true and full disclosure within the meaning of Section 147 of the Act, necessarily, it is to be held that the action tak....