Greater Mohali Area Development Authority, Puda Bhawan, Sector 62, Mohali v. Deputy Commissioner Of Income Tax, Circle$6(1) Mohali

IN THE HIGH COURT OK PUNJAB AND HARYANA|AT CHANDIGARH. CWP No. 26125 of 2017 (O&M)Date of Decision: 27 .04.2018 Greater Mohali Area Development Authority, PUDA Bhawan, Sector 62, Mohali .......Petitioner versus Deputy Commissioner of Income Tax, Circle$6(1) Mohali ......Respondent CORAM: HON'BLE MR. JUSTICE S.J.VAZIFDAR, CHIEF JUSTICEHON'BLE MR. JUSTICE AVNEESH JHINGAN, JUDGE|HON'BLE MR. JUSTICE AVNEESH JHINGAN, JUDGE| Present: Ms. Radhika Suri, Senior Advocate with Mr. M.S. Kanda, Advocate for the petitioner. Mrs. Urvashi Dhugga, Senior Standing Counsel for the respondent. ***** AVNEESH JHINGAN, J. The petition has been filed for quashing an order dated 27.11.2012 disposing of the petitioner’s objections to the reasons recorded for re$opening the assessment under Sections 147 and 148 of the Income Tax Act, 1961 ( for short ‘the Act’). 2. The petitioner filed a return for the assessment year 2010$11. The audited balance sheet was a part of the return. The Schedule of Current Liabilities and Provisions read as under:$ “Annual Statement of Accounts 2009-2010 GMADA” GREATER MOHALI AREA DEVELOPMENT AUTHORITY, SAS NAGAR, SCHBDULE OF CURRENT LIABILITIES AND PROVISIONS Civil Writ Petition No. 26125 of Z017 Particulars A. Current Liabilities 1 (a) to (villi) xx xXx XK XX X B. Other Liabilities: 1. xX XX xx 2. External Development Charges(From Land Developers) | 3 to 6. xx xX xx. 7. EDC Under Papra Act, 19995 8& to 12 xx XXK XX XX Previous yearCurrent year31.03.200931.03.2010Total Amount |Total amountRs.6,133,835,831.15Rs. 7,311,864,244.78 3. The Assessing Officer (A.O.) by a letter dated 27.11.2012 issued a questionnaire item 9 whereof read: “Please provide details for eachAccount amounting to Rs.7,31,18,64,244/-”. The petitioner filed a reply dated 05.12.2012. The reply, regarding the said query read as follows:$ meeDetail of sundry creditors is given as under:- Current Liabilities Year 31.03.2010 Amount (In)R%)13,074,974.59_ 8Creditors & Payables1. Creditors for supplies 1,75,530.00 2. Creditors for construction3. Other creditors4. Payable to staft9S. Provident Fund (Contributory)6. Ex-Gratia payable7. stock payable 26,926,492.28 181,701.23|(1,250,808.00Q)6,250.00294,800.22 1,103,717.00 8. Works payable TOTAL, (,"##2,657.1v 9. Detail of Current Liabilities is given as under:-_| Current LiabilitiesYear|391.03.2010AmOUbt.In RSs.8Current liabilities as per detail given inpoint no.8 |40,112,057.12.> Other liabilities |1. Miscellaneous Accounts,1,780,897.002.External Development charges (From4,556,731,248.00|Land Developers)3. Change of land use (From Developers).0.00.4. DD PO Civil Dispensary|2,995,199.005. Director Water Resources & Knvironment |0.00.6. Urban Development Fund)8,545,979.00[.EDC Under Papra Act19,997,249.00 8.LicensefeepayableTOPunjab2,020,174,188.00|Government.9. Chq. Issued but not presented for|9,699,299.01payment.|10. Security fee plots1,286,016.0011. Pollution Control Board.1,187,500.0012. Security Building Plan87,954,012.65.TOTAL,'"$##"%!(wv44.7% 4. The assessment under section 143(3) of the Act was finalized vide order dated 31.12.2012. The effect of the EDC upon the petitioner’s income was not referred to in the assessment orders. 5. On 06/07.02.2017 a notice under Section 147/148 of the Act was issued proposing to re$open the assessment as according to the A.O., the petitioner’s income chargeable to tax had escaped assessment. The reasons recorded on 12.06.2017 were supplied. As much turns on the reasons, it is necessary to refer to them in their entirety. They read as under:$ “Reasons for issue of notice under section 148 of the IncomeTax Act, 1961 for the assessment year 2010511 in the case ofGreater Mohali Area Development Authority, Sector 62,5PUDA Bhawan, Mohali (PANAAALG0872G). During perusal of records in this case, it was seen that the assessee had received External Development Charges (EDC) from Land Developers/Colonizers/Real Estate 5. On 06/07.02.2017 a notice under Section 147/148 of the Act was issued proposing to re$open the assessment as according to the A.O., the petitioner’s income chargeable to tax had escaped assessment. The reasons recorded on 12.06.2017 were supplied. As much turns on the reasons, it is necessary to refer to them in their entirety. They read as under:$ “Reasons for issue of notice under section 148 of the IncomeTax Act, 1961 for the assessment year 2010511 in the case ofGreater Mohali Area Development Authority, Sector 62,5PUDA Bhawan, Mohali (PANAAALG0872G). During perusal of records in this case, it was seen that the assessee had received External Development Charges (EDC) from Land Developers/Colonizers/Real Estate Builders/Promoters during the F.Y. 2008$09. The said External Development Charges were not brought to the ambit of tax by the assessee but were instead shown as a liability in its Balance Sheet under the head “Other Liabilities”. It is pertinent to mention here that External Development Charges are received from the Land Developers/Colonizers/Real Estate Builders/Promoters who seek approval from the assessee (i.e. Greater Mohali Area Development Authority) or other Competent Authority to develop a Residential or Commercial or Institutional Zone on their piece/chunk of land. The said amount received under the nomenclature “#$�������%�����������&������"�is supposed be used by the assessee for carrying on of External Development Works and other related jobs outside the land of the Land Developer/Colonizer/Real Estate Builder/Promoter who has paid the External Development Charges (EDC). Thus, it is seen that the receipt of External Development Charges by the asseseee is attributable to its regular business. Further, the receipt and expenditure of the said amount is a regular, routine and re$occurring phenomenon as External Development Charges are being regularly received by the assessee from Land Developers/Colonizers/Real Estate Builders/Promoters in every year and similarly these are being regularly expended/utilized/spent for the purpose of carrying out External Development Works and other related jobs. In light of the above, it is observed that both the receipts as well as the expenditure related to External Development Charges (EDC) are clearly revenue in nature as they are attributable to the regular business of the assessee and are also a routine, regular and re$occurring phenomenon. Accordingly, the assessee was required to credit the receipts of External Development Charges to its P&L Account and debit the expenses incurred on account of the same. Since, the assessee is following Cash System of accounting, therefore, the net amount received by the assessee during the year as External Development Charges was required to be brought to the ambit of tax by crediting the receipts earned during the year and debiting the expenses incurred on account of external development work and other related jobs. However, the assessee had failed to do so and has rather shown the External Development Charges (EDC) received as a liability in its Balance Sheet. The said failure on the part of the assessee has led to escapement of taxable income as the net income earned on account of the External Development Charges has escaped the ambit of taxation. Thus, after independent verification of records with respect to the above mentioned facts, I have reasons to believe that an income of Rs.1,27,70,37,351/$ has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. This escapement of income is due to failure of the assessee to fully and truly disclose all the material facts relating to its income and due to default on its part by not treating the amount received on account of External Development Charges (EDC) as Revenue receipt.” Thus, after independent verification of records with respect to the above mentioned facts, I have reasons to believe that an income of Rs.1,27,70,37,351/$ has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. This escapement of income is due to failure of the assessee to fully and truly disclose all the material facts relating to its income and due to default on its part by not treating the amount received on account of External Development Charges (EDC) as Revenue receipt.” 6. The petitioner filed objections. The respondent disposed of the objections vide order dated 27/30.06.2017. It was held that re$opening of the assessment was not based on a change of opinion and that the proceedings are valid. The petitioner was directed to show$cause why addition should not be made. The grounds for the objections filed and the reasons for the order rejecting them were raised before us. It is not necessary, therefore, to refer to the same here. 7. The question that arises is whether the proceedings for reassessment are maintainable in view of the petitioner’s reply dated 05.12.2012 to the respondents’ queries raised in their letter dated 27.11.2012. Section 147 of the Act is as follows:$ 22#('���2��9"��%%"%%� 4��22�)"��9�%��"�%� ����6"#�"�"��9���� 3�� )��"�)9��4"�6#"��������9�%�"%)�$"!��%%"%%�" ��2���� 3��%%"%%�" ��3"��*�9"���3*�%06@")������9"�$����%�� %��2�%")��� %��:-�����,&*��%%"%%�����"�%%"%%�%0)9�� )��"�� !� (a) (b) | also any other income chargeable to tax which has escapedassessment and which comes to his notice subsequently inthe course of the proceedings under this section, orrecompute the loss or the depreciation allowance or anyother allowance, as the case may be, for the assessment yearconcerned (hereafter in this section and in sections 148 to153 referred to as the relevant assessment year): Provided that where an assessment under sub-section|(3) of section 143 or this section has been made for therelevant assessment year, no action shall be takenunderthis section after the expiry of four years trom the end of therelevant assessment year, unless any income chargeable totax has escaped assessment for such assessment year byreason of the failure on the part of the assessee to make areturn under section 139 or in response to a notice issuedunder subsection (1) of section 142 or section 148 or todisclose fully and truly all material facts necessary for hisassessment, for that assessment year: Provided further that the Assessing Officer may assess orreassess such income, other than the income involvingmatters which are the subject-matter of any appeal,reference or revision, which is chargeable to tax and hasescaped assessment. Explanation 1.—Production before the Assessing Officer ofaccount books or other evidence from which materialevidence could with due diligence have been discovered bythe Assessing Officer will not necessarily amount todisclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, thefollowing shall also be deemed to be cases where incomechargeable to tax has escaped assessment, namely :— where no return of income has been furnished by theassessee although his total income or the total income ofany other person in respect of which he is assessable underthis Act during the previous year exceeded the maximumamount which is not chargeable to income-tax ; where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by theAssessing Officer that the assessee has understated theincome or has claimed excessive loss, deduction, allowance or relief in the return; (c) |where an assessment has been made, but— (i)income chargeable to tax has been under assessed; or (11)such income has been assessed at too low a rate ; or | (111)such income has been made the subject of excessive reliefunder this Act; orunder this Act; or where no return of income has been furnished by theassessee although his total income or the total income ofany other person in respect of which he is assessable underthis Act during the previous year exceeded the maximumamount which is not chargeable to income-tax ; where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by theAssessing Officer that the assessee has understated theincome or has claimed excessive loss, deduction, allowance or relief in the return; (c) |where an assessment has been made, but— (i)income chargeable to tax has been under assessed; or (11)such income has been assessed at too low a rate ; or | (111)such income has been made the subject of excessive reliefunder this Act; orunder this Act; or (iv)excessive loss or depreciation allowance or any other|allowance under this Act has been computeqd.allowance under this Act has been computeqd. 8. The petitioner was assessed under Section 143(3) of the Act. Notice has been issued beyond four years from end of the relevant Assessment Year. The case is, therefore, covered by the first proviso to Section 147. As Mrs. Suri, the learned senior counsel for the petitioner rightly submitted, there are two pre conditions for assuming jurisdiction to re$open the case viz. (i) Reason to believe that income chargeable to tax escaped assessment; and (ii) failure on the part of assessee to disclose fully and truly all material facts. (A) In Assistant Commissioner of Income Tax Versus Rajesh)Jhaveri Stock Brokers P. Ltd. 291 ITR 500(SC), the Supreme Court held:$ “section 14/7 authorizes and permits the assessingofficer to assess or reassess income chargeable to tax if|he has reason to believe that income for any|assessment year has escaped assessment. The word|“reason” in the phrase “reason to believe” would mean|cause or justification. If the assessing officer has causeor justification to know or suppose that income had|escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The|expression cannot be read to mean that the assessing|officer should have finally ascertained the fact by legal|evidence or conclusion. The function of the assessing|officer is to administer the statute with solicitude for|the public exchequer with an inbuilt idea of fairness totaxpayers. As observed by the Supreme Court) in|Central Provinces Manganese Ore Co. Ltd.VioITO. (1991)|191 ITR 662] for initiation of action under Section|147(a) (as the provision stood at the relevant time)Jhaveri Stock Brokers P. Ltd. 291 ITR 500(SC), the Supreme Court held:$ “section 14/7 authorizes and permits the assessingofficer to assess or reassess income chargeable to tax if|he has reason to believe that income for any|assessment year has escaped assessment. The word|“reason” in the phrase “reason to believe” would mean|cause or justification. If the assessing officer has causeor justification to know or suppose that income had|escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The|expression cannot be read to mean that the assessing|officer should have finally ascertained the fact by legal|evidence or conclusion. The function of the assessing|officer is to administer the statute with solicitude for|the public exchequer with an inbuilt idea of fairness totaxpayers. As observed by the Supreme Court) in|Central Provinces Manganese Ore Co. Ltd.VioITO. (1991)|191 ITR 662] for initiation of action under Section|147(a) (as the provision stood at the relevant time) Civil Writ Petition No. 26125 of Z017 Civil Writ Petition No. 26125 of Z017 fulfilment of the two requisite conditions in that|regard is essential. At that stage, the final outcome otfthe proceeding is not relevant. In other words, at the|initiation stage, what is required is “reason to believe’,but not the established fact of escapement of income.At the stage of issue of notice, the only question is|whether there was relevant material on which ahreasonable person could have formed a requisite belief.Whether the materials would conclusively prove the|escapement is not the concern at that stage. This is so|because the formation of belief by the assessing officer|is within the realm of subjective satisfaction |seeITOVLselected Dalurband Coal Co. (P) Ltd.(1996) 217 ITR097 SC 5Raymond Woollen Mills Ltd.V~.ITO| : (1999)236 ITR 34(SC) |.) The scope and effect of Section 147 as|substituted with effect from 1-4-1989, as also Sections148 to 152 are substantially different from _ thprovisions as they stood prior to such substitution.|Under the old provisions of Section 147, separate|clauses (a) and (b) laid down the circumstances underwhich income escaping assessment for the pastassessment years could be assessed or reassessed. Toconfer jurisdiction under Section 147(a) two conditionswere required to be satisfied, firstly, the assessing|officer must have reason to believe that income, profitsor gains chargeable to income tax have escaped|assessment, and secondly, he must also have reason|to believe that such escapement has occurred by|reason of either omission or failure on the part of the|assessee to disclose fully or truly all material facts|necessary for his assessment of that year. Both these|conditions were conditions precedent to be satisfied|before the assessing officer could have jurisdiction to issue notice under Section 148 read with Section|147(a) but under the substituted Section 147 existenceof only the first condition suttices. In other words if theassessing officer for whatever reason has reason to|believe that income has escaped assessment it confers|jurisdiction to reopen the assessment. It is however to Civil Writ Petition No. 26125 of Z017 be noted that both the conditions must be fulfilled ifthe case falls within the ambit of the proviso to Section147. The case at hand is covered by the main provisionand not the proviso. so long as the ingredients of Section 147 are|fulfilled, the assessing officer is free to initiate|proceeding under Section 147 and failure to take stepsunder Section 143(3) will not render the assessing|officer powerless to initiate reassessment proceedings|even when intimation under Section 143(1) had been|issued.” (B)In Duli Chand Singhania v. Assistant Commissioner of Income IQax (2004) 269 ITR 192 P&H, this Court held:$ "...... In other words, in order to assume jurisdiction|under section 14/7, in a case where assessment hasbeen made under sub-section (3) of section 143 of the|Act, two conditions are required to be satisfied, viz.: (i) The Assessing Officer must have reason to believe|thatincomechargeableTOTAX|hasescapedassessment; and (ii) He must also have a reason to believe that such|escapement occurred by reason of failure on the part ofthe assessee either: (a) to make a return of income under section 139 or in|response to notice issued under sub-section (1) of|section 142 or section 148; or (b) to disclose fully and truly all material facts|necessary for his assessment for that purpose. The aforementioned requirements of law must be|held to be conditions precedent for invoking the|jurisdiction of the Assessing Officer to reopen the|assessment under section 14/7 ot the Act in caseswhich are covered by the proviso. Both the conditions|are cumulative and must co-exist. Thus, in cases|where assessment has been made under section 143(3)of the Act and action under section 147 is sought to betaken after the expiry of four years from the end of the (a) to make a return of income under section 139 or in|response to notice issued under sub-section (1) of|section 142 or section 148; or (b) to disclose fully and truly all material facts|necessary for his assessment for that purpose. The aforementioned requirements of law must be|held to be conditions precedent for invoking the|jurisdiction of the Assessing Officer to reopen the|assessment under section 14/7 ot the Act in caseswhich are covered by the proviso. Both the conditions|are cumulative and must co-exist. Thus, in cases|where assessment has been made under section 143(3)of the Act and action under section 147 is sought to betaken after the expiry of four years from the end of the relevant assessment year, it is necessary that conditionNo. (i) and either of conditions Nos. (1i)(a) or (11)(b) must|co-exist. In case, any of the said two conditions is not|satisfied, the very initiation of proceedings under|section 14/7 of the Act shall be wholly withoutjurisdiction." (c) In Hindustan Liver Ltd v. RB. Wadkar AssttCommissioner ofIncome Tax,(2004) 268 ITR 332 (Bom.), the Bombay High Court held:$ Commissioner ofIncome Tax,(2004) 268 ITR 332 (Bom.), the Bombay High Court held:$ "Reading of proviso to section 147 makes it clear that if|the Assessing Officer has reason to believe that any|income chargeable to tax has escaped assessment for|any assessment year, he may, subject to the provisionsof sections 148 to 153, assess or reassess such incomeand also any other income chargeable to tax which hasescaped assessment and which comes to his notice|subsequently in the course of the proceedings under|section 147, or re-compute the loss or the depreciation|allowance or any other allowance, as the case may be|for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has|been made for relevant assessment year, no action canbe taken under section 147 aiter the expiry of four|years from the end of the relevant assessment year,|unless any income chargeable to tax has escaped|assessment for such assessment yearby reasons of thefailure on the part of the assessee to disclose allmaterial facts necessary for his assessment for thatassessment year. (Emphasis supplied by us)"the Assessing Officer has reason to believe that any|income chargeable to tax has escaped assessment for|any assessment year, he may, subject to the provisionsof sections 148 to 153, assess or reassess such incomeand also any other income chargeable to tax which hasescaped assessment and which comes to his notice|subsequently in the course of the proceedings under|section 147, or re-compute the loss or the depreciation|allowance or any other allowance, as the case may be|for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has|been made for relevant assessment year, no action canbe taken under section 147 aiter the expiry of four|years from the end of the relevant assessment year,|unless any income chargeable to tax has escaped|assessment for such assessment yearby reasons of thefailure on the part of the assessee to disclose allmaterial facts necessary for his assessment for thatassessment year. (Emphasis supplied by us)" In our view, both the conditions precedent are satisfied. 9. Mrs. Suri also rightly submitted that it is essential that the Assessing Officer had reason to believe that income chargeable to tax escaped assessment and that a mere change of opinion is no ground to initiate proceedings for reassessment. Civil Writ Petition No. 26125 of Z017 (A) In Commissioner ofIncome tax Versus Kelvinator of[India Ltd.(2010) 320 ITR 561 SC,the Supreme Court held:$ In our view, both the conditions precedent are satisfied. 9. Mrs. Suri also rightly submitted that it is essential that the Assessing Officer had reason to believe that income chargeable to tax escaped assessment and that a mere change of opinion is no ground to initiate proceedings for reassessment. Civil Writ Petition No. 26125 of Z017 (A) In Commissioner ofIncome tax Versus Kelvinator of[India Ltd.(2010) 320 ITR 561 SC,the Supreme Court held:$ "On going through the changes, quoted above,|made to Section 147 of the Act, we find that, prior to|the Direct Tax Laws (Amendment) Act, 1987, reopening|could be done under the above two conditions and|fulfillment of the said conditions alone conferred|jurisdiction on the assessing officer to make a back|assessment, but in Section 147 of the Act (with effect|from 1-4-1989), they are given a go-by and only one|condition has remained viz. that where the assessing|officer has reason to believe that income has escaped|assessment,conters jurisdictionTOTCOpey)theassessment. Therefore, post-1-4-1989, power to reopenis much wider. However, one needs to give a schematicinterpretation to the words “reason to believe” failing|which, we are afraid, Section 14/7 would give arbitrarypowers to the assessing officer to reopen assessments|on the basis of “mere change of opinion”, which cannot be.per se‘reason to reopen. We must also keep in mind)the conceptual difference between power to review and|power to reassess. The assessing officer has no power|to review; he has the power to reassess. But'reassessment has to be based on fulfillment of certain|precondition and if the concept of “change of opinion”|is removed, as contended on behalf of the Department,then, in the garb of reopening the assessment, review|would take place. One must treat the concept of|“change of opinion” as an in-built test to check abuse|of power by the assessing officer. Hence, after |1-4-1989, the assessing officer has power to reopen,|provided there is “tangible material” to come to the|conclusion that there is escapement of income from|assessment. Reasons must have a live link with the|formation of the belief. Our view gets support from thechanges made to Section 147 of the Act, as quoted|hereinabove. Under the Direct Tax Laws (Amendment)Act, 1987, Parliament not only deleted the words|“reason to believe” but also inserted the word “opinion” Civil Writ Petition No. 26125 of Z017 in Section 147 oft the Act." (B) In State Bank ofPatiala Versus Commissioner ofIncomeTax and others (2015) 375 ITR 109 (P&H), this Court held:$ Tax and others (2015) 375 ITR 109 (P&H), this Court held:$ "The reason for reopening, thus, being merely a changeof opinion on account of the assessment being made|for the subsequent years would not give the Assessing|Officer the jurisdiction to reopen as he would, thus, bereviewing his earlier decision which has been held not|to be permissible. Thus, keeping in view the above, writpetitions are allowed and the notice dated March 27,|2012 (annexure P3) and the order dated March 25,|2013 (annexure P1) are, accordingly, quashed." (C) In Commissioner of Income Tax Versus ITW India Ltd. (2015)377 ITR 195 (P&H), this Court held:$ 377 ITR 195 (P&H), this Court held:$ "The reason tor reopening, thus, being merely a_|change of opinion on account of the subsequent|judgment of the Hon'ble Apex Court would not give theAssessing Officer the jurisdiction to reopen as he|would, thus, be reviewing his earlier decision which|has been held not to be permissible. Similarly, in the|absence of allegations that the assessee failed to|disclose fully and truly all material facts, the|assumption of jurisdiction was not justified." (C) In Commissioner of Income Tax Versus ITW India Ltd. (2015)377 ITR 195 (P&H), this Court held:$ 377 ITR 195 (P&H), this Court held:$ "The reason tor reopening, thus, being merely a_|change of opinion on account of the subsequent|judgment of the Hon'ble Apex Court would not give theAssessing Officer the jurisdiction to reopen as he|would, thus, be reviewing his earlier decision which|has been held not to be permissible. Similarly, in the|absence of allegations that the assessee failed to|disclose fully and truly all material facts, the|assumption of jurisdiction was not justified." 10. The reasons for re$opening which we quoted earlier clearly indicate that the Assessing Officer had reason to believe that income on account of EDC had escaped assessment. The assessment order, as we noted, did not deal with EDC or its effect upon the petitioner’s income. The reasons on the other hand deal in considerable detail with the concept of EDC, the purpose of EDC, the manner in which it is paid and received and then accounted for and utilized. None of these aspects are even remotely adverted to in the assessment order and as we will indicate later, in the assessment proceedings that preceded it. Based on these facts, the Assessing Officer drew his inferences of law viz. that EDC is revenue in nature. We do not for a moment suggest that the reasons draw the correct inferences. All that we say is that the Assessing Officer had reason to believe though not to hold that income on account of EDC had escaped assessment. 11. We will shortly deal with the question whether the reasons constituted a mere change of opinion. 12. Mrs. Suri also rightly submitted that once the relevant material has been disclosed and the Assessing Officer’s attention thereto has been drawn, it is no part of the assessees’ duty to enumerate the possible interference that arise or may arise therefrom. (A) In Calcutta Discount Co. Ltd. v. Income Tax Officer, AIR1961 SC 372, the Supreme Court held:$ 1961 SC 372, the Supreme Court held:$ "(12) It may be pointed out that the Explanation to|sub-section has nothing to do with "inferences" and|deals only with the question whether primary material|factsnotdisclosedcouldstillbe|saidTobe|constructively disclosed on the ground that with due|diligence the Income-tax Officer, could have discovered|them|from the|factsactuallydisclosed.TheExplanation has not the effect of enlarging the section|by casting a duty on the assessee to. disclose"inference" to draw the proper inferences being the|duty imposed on the Income-tax Officer. 13-14) We have therefore come to the conclusion that|while the duty of the assessee is to disclose fully and|truly all primary relevant facts, it does not extend|beyond this.” (B) In Commissioner ofIncome Tax, Calcutta Versus BurlopDealers Ltd. 79 ITR 609 SC,the Supreme Court held:$ 22We are of the view that under Section 34(1)(a) if theassessee has disclosed primary facts relevant to the|assessment, he is under no obligation to instruct the|Income Tax Officer about the inference which the. Civil Writ Petition No. 26125 of Z017 Income Tax Officer may raise from those facts. The|terms of the Explanation to Section 34(1) also do not|impose a more onerous obligation. Mere production ofthe books of account or other evidence from which|material facts could with due diligence have been|discovered does not necessarily amount to disclosure|within the meaning of Section 34(1), but where on the|evidence and the materials produced the Income Tax|Officer could have reached a conclusion other than theone which he has reached, a proceeding under Section|34(1)/a) will not le merely on the ground that the|Income Tax Officer has raised an inference which he|may later regard as erroneous. Civil Writ Petition No. 26125 of Z017 Income Tax Officer may raise from those facts. The|terms of the Explanation to Section 34(1) also do not|impose a more onerous obligation. Mere production ofthe books of account or other evidence from which|material facts could with due diligence have been|discovered does not necessarily amount to disclosure|within the meaning of Section 34(1), but where on the|evidence and the materials produced the Income Tax|Officer could have reached a conclusion other than theone which he has reached, a proceeding under Section|34(1)/a) will not le merely on the ground that the|Income Tax Officer has raised an inference which he|may later regard as erroneous. The assessee had disclosed his books of account andCVIGeENCEfrom|whichmaterial factscouldbe.discovered; it was under no obligation to inform the|Income Tax Officer about the possible inferences whichmay be raised against him. It was for the Income Tax|Officer to raise such an inference and if he did not do|so the income which has escaped assessment cannot|be brought to lay under Section 34(1)(aen (C) In [.TO. I[-Ward, Hundi Circle, Calcutta and others v. Madnani Engineering Works Ltd. 118 ITR I SC, the Supreme Court held:$ "It will thus be seen that according to this judgment,|there was no obligation on the assessee to disclose thatthe partnership agreement produced by it was bogus|and that the entries made by it in its books of accountswere false. The assessee discharged the obligation|which lay upon it by disclosing its books of account|and evidence from which material facts could be!discovered and it was for the Income Tax Officer to decide whether the documents produced by the|assessee were genuine or false. Here also. therespondents produced all the hundis on the strength ofwhich it had obtained loans from creditors as also|entries in the books of account showing payment of|interest and it was for the Income Tax Officer to.investigate and determine whether these documents|were genuine or not. The respondent could not be said Civil Writ Petition No. 26125 of Z017 to have failed to make a true and full disclosure of the|material facts by not confessing before the Income Tax|Officer that the hundis and the entries in the books otaccount produced by it were bogus. We do not see any|distinction at all betweenBurlop Dealers caseand thepresent one and the language of Section 147(a) being identical with that of Section 34(1)(a), the ratio of thedecision inBurlop Dealers case» must govern thedecision of the present case. We must, therefore, hold|that there was no failure on the part of the respondent|to disclose fully and truly all material facts necessary|for.itsassessmentand|theconditionfor.theapplicability of Section 147(a) was not satisfied."material facts by not confessing before the Income Tax|Officer that the hundis and the entries in the books otaccount produced by it were bogus. We do not see any|distinction at all betweenBurlop Dealers caseand thepresent one and the language of Section 147(a) being identical with that of Section 34(1)(a), the ratio of thedecision inBurlop Dealers case» must govern thedecision of the present case. We must, therefore, hold|that there was no failure on the part of the respondent|to disclose fully and truly all material facts necessary|for.itsassessmentand|theconditionfor.theapplicability of Section 147(a) was not satisfied." (D) In Winsome Textile Industries Ltd. v. Union of India andothers (2005) 278 ITR 470 (P&H), this Court held:$ (D) In Winsome Textile Industries Ltd. v. Union of India andothers (2005) 278 ITR 470 (P&H), this Court held:$ %%The limitation of four years provided in the proviso to section 14/7 has been made applicable only to caseswhere assessments have already been completed undersub-section (3) of section 143 or under section 147.|There is a specific purpose behind it. Where the return|is processed under section 143(1)(a), the Assessing|Officer has no jurisdiction to examine the genuineness|oft the claims made in the return of income. He hasonly limited powers of making adjustments on the|basis of information available in the return. However,|when an assessment is made under section 143(3) ofthe Act, the Assessing Officer has very wide power to examine the genuineness of the claims made in the|return and require the assessee to furnish whatever|information the Assessing Officer deems necessary. In the present case, the assessment had been made|under section 143(3) of the Act and if the Assessing|Officer was of the view that he required profit and lossaccount and depreciation charts of the assessment|years 1995-96 and 1996-97 for examining the|correctness of the claim under section 8O-IA of the Act,he could have required the assessee to produce the|same. Failure of the Assessing Officer to do so, cannot|be treated at par with the failure of the assessee to| disclose fully and truly all material facts necessary for|its assessment." 13. The reasons furnished by the Assessing Officer do not indicate that the decision to initiate proceedings under sections 147/148 was on account of the petitioner not having informed the Assessing Officer the effect of the receipt of EDC on its income. Indeed the petitioner was not likely to say that it was income revenue in nature and liable to be taxed. In the reasons for reopening the assessment, the Assessing Officer has drawn his own inferences albeit only tentative. The Assessing Officer never drew any inferences regarding the petitioner’s receipts of EDC in the original assessment proceedings. 14. We will proceed on the basis that the mere fact that the assessment order does not indicate that the Assessing Officer had considered the effect of EDC on the petitioner’s income would not indicate that the Assessing Officer had not considered it. Mrs. Suri relied upon the following judgments:$ (A) In Commissioner of Income Tax v. Usha InternationalLtd. (2012) 348 ITR 485 Delhi HC Full Bench, Delhi High Court held:$ "The reason is that experience shows that the)Assessing Officers do examine several aspects and_raise queries but when the written opinion is expressedin form of the assessment order, there is no discussion|or elucidation on certain aspects and issues decidedor |held in favour of the assessee. Assessee is not the|author of the assessment order and has no contro]|over what the Assessing Officer wants to state or'mention. It is in this context that Delhi High Court in Commissioner of Income TaxViEicher Ltd., (2007) 294,ITR 310, observed as under: “THHari Iron Trading Co,VioCommissioner ofIncome Tax, (2003) 263 ITR 437, a Division|Bench of Punjab and Haryana High Court) that: "The reason is that experience shows that the)Assessing Officers do examine several aspects and_raise queries but when the written opinion is expressedin form of the assessment order, there is no discussion|or elucidation on certain aspects and issues decidedor |held in favour of the assessee. Assessee is not the|author of the assessment order and has no contro]|over what the Assessing Officer wants to state or'mention. It is in this context that Delhi High Court in Commissioner of Income TaxViEicher Ltd., (2007) 294,ITR 310, observed as under: “THHari Iron Trading Co,VioCommissioner ofIncome Tax, (2003) 263 ITR 437, a Division|Bench of Punjab and Haryana High Court) that: observed that an assessed has no control over|the way an assessment order is drafted. It was|observed that generally, the issues which are|accepted by the Assessing Officer do not find|mention in the assessment order and only such|points are taken note of on which the assessee's|Explanationsa TErejectedandadditions/disallowances are made. We agree.Applying the principles laid down by the Full|Bench of this Court as well as the observations|of the Punjab and Haryana High Court, we find|that if the entire material had been placed by theassessed before the Assessing Officer at the timewhen the original assessment was made and theAssessing Officer applied his mind to that|material and accepted the view canvassed by theassessed, then merely because he did express|this in the assessment order, that by itself wouldnot give him a ground to conclude that income|has escaped assessment and, Therefore, the|assessment needed to be reopened. On the other|hand, if the Assessing Officer did not apply his|mind and committed a lapse, there is no reason|why the assessed should be made to suffer theconsequences of that lapse.” It is, therefore, clear from the aforesaid position (1) Reassessment proceedings can be validlyinitiated in case return of income is processed|under.Section|143(1)|andT1Oscrutinyassessment is undertaken. In such cases there is|no change of opinion; (2) Reassessment proceedings will be invalid incase the assessment order itself records that the|issue was raised and is decided in favour of the|assessee. Reassessment proceedings in the said|cases will be hit by principle of “change of|opinion” (3) Reassessment proceedings will be invalid incase an issue or query is raised and answered by the assessee in original assessment proceedings|but thereafter the Assessing Officer does not|make any addition in the assessment order. In|such situations it should be accepted that the|issue was examined but the Assessing Officer didnot find any ground or reason to make addition|or reject the stand of the assessee. He forms an opinion.Thereassessmeng_will.be.invalidbecause the Assessing Officer had formed an|opinion in the original assessment, though he|had not recorded his reasons.case an issue or query is raised and answered by the assessee in original assessment proceedings|but thereafter the Assessing Officer does not|make any addition in the assessment order. In|such situations it should be accepted that the|issue was examined but the Assessing Officer didnot find any ground or reason to make addition|or reject the stand of the assessee. He forms an opinion.Thereassessmeng_will.be.invalidbecause the Assessing Officer had formed an|opinion in the original assessment, though he|had not recorded his reasons. In the second and third situation, the Revenue isnot without remedy. In case the assessment|order is erroneous and prejudicial to the interest|of the Revenue, they are entitled to and can|not without remedy. In case the assessment|order is erroneous and prejudicial to the interest|of the Revenue, they are entitled to and can| invoke power under Section 263 of the Act." (B) In Bedmutha Industry Ltd. Vs. Dy. Commissioner ofIncomeTax,Writ Petition No. 10655 of 2011 Bombay HC, Bombay High Court Tax,Writ Petition No. 10655 of 2011 Bombay HC, Bombay High Court held:$ In the second and third situation, the Revenue isnot without remedy. In case the assessment|order is erroneous and prejudicial to the interest|of the Revenue, they are entitled to and can|not without remedy. In case the assessment|order is erroneous and prejudicial to the interest|of the Revenue, they are entitled to and can| invoke power under Section 263 of the Act." (B) In Bedmutha Industry Ltd. Vs. Dy. Commissioner ofIncomeTax,Writ Petition No. 10655 of 2011 Bombay HC, Bombay High Court Tax,Writ Petition No. 10655 of 2011 Bombay HC, Bombay High Court held:$ "It was submitted that the issue regardingdepreciationOT]soodwilland|setoftoT unabsorbeddepreciationWaSallissueconsidered by respondent No. 1 in order dated.thdepreciationOT]soodwilland|setoftoT unabsorbeddepreciationWaSallissueconsidered by respondent No. 1 in order dated.th18December, 2006 and was not reviewed by.him. The only basis for the above submission is.that the order of assessment does not discuss|the issues raisedfor.the PUTPOSESofreassessmeng. him. The only basis for the above submission is.that the order of assessment does not discuss|the issues raisedfor.the PUTPOSESofreassessmeng. This very issue as raised by the counsel for the|Revenue has been considered by this court in thematter|OT|IdeaCellularLtd.VeDeputyCommissioner of Income taxin 301 [TR 407.wherein it has been held as follows: “It was also sought to be contended that since|the Assessing Officer had not expressed any|opinion regarding this matter in his original|the Assessing Officer had not expressed any|opinion regarding this matter in his original| assessment order, it could not be said that therewas any change of opinion in this case. In our|view, once all the material was before the)Assessing officer and he chose not to deal with|the several contentions raised by the Petitioner|in his final assessment order, it cannot be said}that he had not applied his mind when all the|material was placed before him To a similar eftect is the decision of the Full|Bench of Delhi High Court in the matter of|Commissioner of Income TaxVeKelvinator of IndiaLtd.Reported in 256 ITR 1 and the division benchof Gujarat High Court in the matter ofCIT.V.Nirma Chemical Worksreported in 309 ITR 67. In|view of the above, the submission of the Revenuethat the reopening is not on account of change ofopinion as no opinion was expressed in the order.oft Assessment dated 1[th]. December 2OO6 mustbe negatived.'' 15. The mere absence in the assessment order of a reference to the EDC received by the petitioner is not conclusive. What is important is the reason for its absence. In our view it was on account of the assesses failure to disclose fully and truly all material facts. The words “all material facts are significant”. Moreover, section 147 requires the assessee to declare the material not merely fully but also “truly”. In our view these requirements were not met either in the return or in the answer to the query relating to EDC. 16. A questionnaire was indeed issued during the assessment proceedings. There was, however, no specific question with regard to EDC. The petitioner was requested to provide “details of current liabilities for each Account amounting to Rs.7,311,864,244.78”. Although the Assessing Officer called upon the petitioner to provide details of current liabilities for each account, the petitioner merely forwarded the details mentioned in the said schedule to the balance sheet. The manner in which these details were forwarded is important. Let us first proceed on the basis that the details were forwarded strictly as stated in the balance sheet. As we noted earlier, the balance sheet included a “SCHEDULE OF CURRENT LIABILITIES AND PROVISIONS”. The Schedule was divided into two parts $ ‘A’ and ‘B’. The caption of part A was “Current Liabilities” and the caption of part$B was “Others Liabilities”. The query related only to part ‘A’ i.e. current liabilities. As the query was with respect to current liabilities it is Although the Assessing Officer called upon the petitioner to provide details of current liabilities for each account, the petitioner merely forwarded the details mentioned in the said schedule to the balance sheet. The manner in which these details were forwarded is important. Let us first proceed on the basis that the details were forwarded strictly as stated in the balance sheet. As we noted earlier, the balance sheet included a “SCHEDULE OF CURRENT LIABILIT