TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 506
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction claimed by the assessee. The case was reopened on the ground that while calculating deduction u/s 80HHC, deduction allowed u/s 80IB was not reduced in view of the provisions of Section 80IA(9). Thus, even as per Assessing Officer, escapement of income was on account of non-application of a particular provision of law. There is no mention in the reasons recorded that there was failure on the part of the assessee to disclose fully and truly any material fact. He, therefore, submitted that the reopening of assessment beyond the period of four years was not permissible. In support of this contention, he relied upon the following decisions of Hon'ble Jurisdictional High Court :- (i) Haryana Acrylic Manufacturing Co. Vs. CIT - [2009] 308 ITR 38 (Delhi). ii) CIT Vs. Sonitpur Solvex Ltd. - [2013] 362 ITR 305 (Gauhati). 4. Learned DR, on the other hand, argued at length. He also furnished the written submissions, which read as under :- "Gr. 1 and 2(The reasons recorded did not point out that there was failure on part Assessee of the assessee to disclose material facts): 1.1 This is ground is liable to be rejected because: i) The assessee raised objections vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee in mandatory Form No. 10CCB ) has not been made considering provisions in section 80IA(9) rws 80IB(13).Therefore, the provisions of explanation 1 to section 147 are attracted which are reproduced as under: "........ Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso." 2.5 Two ratios of judgment of Hon'ble SC in case of Sri Krishna (P.) Ltd. Vs. ITO [1996] 87 Taxman 315 (SC) is squarely applicable which states that i) the obligation on the assessee to disclose the material facts-or what are called, primary facts-is not a mere disclosure but a disclosure which is full and true. A false disclosure is not a true disclosure. The disclosure must not only be true but must be full- 'fully and truly'. Ii) the enquiry at that stage of the validity of the notice under section 148/ 147 is only to see whether there are reasonable grounds for the ITO to believe and not whether the omission/failure and the escapement of income is established. The re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....persons] were found to be bogus. On that basis, he seeks to re-open the assessment. It is necessary to remember that we are at the stage of re-opening only. The question is whether, in the above circumstances, the assessee can say, with any justification, that he had fully and truly disclosed the material facts necessary for his assessment for that year. Having created and recorded bogus entries of loans, with what face can the assessee say that he had truly and fully disclosed all material facts necessary for his assessment for that year. True it is that ITO could have investigated the truth of the said assertion - which he actually did in the subsequent assessment year - but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, is true or false, is a material fact - and not an inference, factual or legal, to be drawn from given facts. In this case, it is shown to us that ten persons [who are alleged to have advanced loans to the assessee in a total sum of Rs. 3,80,000 out of the total hundi loans of Rs. 8,53,298] were established....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee to disclose fully, and truly all material facts necessary for his assessment. The Hon'ble Supreme Court has held that the issue whether there was such non-disclosure of primary facts as had escaped assessment of income was essentially a question of fact. The Hon'ble Court further held that it was well-settled that the obligation of the assessee was to disclose only primary facts and not inferential facts. If some material for the assessment lay embedded in the evidence, which the revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the Assessing Officer. The assessee knows all the material and relevant facts-the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent but that is immaterial. 2.8 The reliance is placed on the order of ITAT Mumbai in case of ACIT Vs. Manubhai Sons & Co. [2007] 18 SOT 297 (MUM.) which in turn rely upon the above stated ratios of judgments of Hon'ble SC in cases of Kantamani Venkata Narayana & Sons v. Addl. ITO, Rajahmundry(supra) and Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT(supra). The relevant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty of the assessee to bring it to the notice of the Assessing Officer. The assessee knows all the material and relevant facts-the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent but that is immaterial." 3.1 The case law in of Calcutta Discount company [1961] 41 ITR 191 does not help the cause of the assessee because issue at hand in that case was that AO alleged that assessee failed to disclose its 'true intension behind sales of shares'. The Hon'ble SC held that finding 'intension' is a matter of 'inference' which could be different for different people. Therefore, it is duty of the AO to draw inference from primary facts. 3.2 The Hon'ble SC observed that from primary facts more inferences than one could be drawn, therefore, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. The Hon'ble SC wondered as to how could an assessee be charged with failure to communicate an inference, which he might or might not have drawn. In this back ground, the Hon'ble SC held that Explanation has nothing to do with "inferences" ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces 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 disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....43(3) on 31.3.2003. Deduction u/s 80IB was allowed at Rs. 93,31,872 as against assessee's claim of Rs. 97,43,578/-. Deduction u/s 80HHC was allowed at Rs. 1,82,08,386/- against assessee's claim of Rs. 1,83,14,935/-. It is seen that while calculating deduction u/s 80HHC the amount of deduction u/s 80IB was not reduced from the profit of export business in view of the provisions of section 80IA(9) which provides that where as amount of profits and gains of an industrial undertaking is claimed and allowed as deduction u/s 80IB, the profits to that extent should not qualify for deduction for any assessment year under any other provisions of Chapter VI A and in no case shall exceed the profit of Industrial undertaking. In view of the above facts the deduction u/s 80HHC works out to Rs. 11184667 as against claim of deduction made by the assessee at Rs. 18314935/- and deduction allowed by the A.O. at Rs. 18208386 while completing the assessment by way of excess deduction of Rs. 7130268/- allowed to the assessee u/s 80HHC, has escaped assessment for A.Y. 2001-02. It is therefore necessary to take action u/s 147/148 in this case to the said assessment year. Sd/- (Aseem Sharma) Assista....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not indicate the failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year 1998-99. While in the reasons supplied to the petitioner there was no mention of the allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts, in the reasons shown in the said form to the counter-affidavit there was a specific allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries raised from one of the companies to the extent of Rs. 5 lakhs. Thus, one of the conditions precedent for removing the bar against taking action after the said four year period remained unfulfilled. Consequently, the notice under section 148 based on the recorded reasons supplied to the petitioner as well as the consequent order were without jurisdiction as no action under section 147 could be taken beyond the four year period." 7. That the ratio of the above decision of Hon'ble Jurisdictional High Court would be squarely applicable to the facts under appeal before us. 8. Similar view is reiterated by....