2004 (7) TMI 72

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....tly amalgamated with the petitioner-company filed its return of income claiming loss of Rs. 55,82,920. In the said return, DSPL had stated that DSPL had calculated investment allowance and depreciation on capitalization of interest payable on Rs. 33,87,725 over contracted periods on term loans received from the GIIC and GSFC. DSPL had inserted the following note as Note No. (2) below the statement of computation of assessable loans: "(2) The company has calculated investment allowance and depreciation on capitalisation of interest payable of Rs. 33,87,725 (including paid during the year Rs. 8,03,435) over contracted periods on term loans received from GIIC and GSFC, utilised on fixed assets calculated on proportion of term loan and fixed assets, as liabilities accrues or arises at the time of availment of loans". The assessment of DSPL was framed under section 143(3) read with section 144B of the Act. Against the assessment order dated January 28,1984 (annexure C), DSPL preferred an appeal before the first appellate authority, in sofar as the assessment order was against DSPL and DSPL succeeded in those proceedings but the same has nothing to do with the controversy involved in t....

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....vestment allowance has been allowed to the petitioner-company. In view of these reasons, after obtaining prior approval, I have issued the notice under section 148 which is legal and valid." At the hearing of the petition, Mr. Tushar Hemani, the learned advocate for the petitioner, has submitted that the impugned notice for reopening of the assessment came to be issued on the last day of the 10th year from the expiry of the assessment year. It is submitted that the Assessing Officer can issue notice for reassessment under section 147 of the Act if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for the relevant year and escapement of such income is by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year. The assessee had made the return under section 139 and there was no notice issued under sub-section (1) of section 142 or section 148 of the Act and the only provision invoked by the Assessing Officer was that,....

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....considerable substance in the submissions made on behalf of the petitioner. Sections 147 and 149 of the Act at the relevant time read as under: "If- (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). 149. (1) No notice under section 148 shall be issued, - (a) in cases falling under clause (a) of section 147- (i) fo....

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....and put to use, the assessee had failed to disclose all material facts. On the contrary, the assessee would have got the benefit of the entire interest amount for the post-installation period as revenue expenditure which would have been much higher than the amount of investment allowance and depreciation allowance taken together. In CIT v. Navnitlal Sakarlal [1980] 125 ITR 67, this court held that when the assessment was opened on the ground of declaration of law by this court, it cannot be said that the plea as to escapement of income chargeable to tax from assessment was not entertained by the Assessing Officer on the ground that there had been failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment. Hence, no proceedings could have been initiated under section 148 of the Income-tax Act beyond the expiry of four years from the end of the relevant assessment year. This case is squarely covered by clause (b) of section 147 and not by clause (a) of section 147. In CIT v. Hindustan Electro Graphites Ltd. [2000] 243 ITR 48 (SC) in the context of applicability of the provisions of section 143(1A) of the Act, the apex court quote....