Gujarat Lease Financing Limited v. Deputy Commissioner Of Income Tax Circle 4 Ahmedabad

C/SCA/3048/2013 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 3048 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE Mr. JUSTICE M.R. SHAH and HONOURABLE Ms. JUSTICE SONIA GOKANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ GUJARAT LEASE FINANCING LIMITED....Petitioner(s)VersusDEPUTY COMMISSIONER OF INCOME TAX CIRCLE 4 AHMEDABAD....Respondent(s) ================================================================ Appearance:MR B S SOPARKAR, ADVOCATE for the Petitioner(s) No. 1MR MR BHATT Sr Advocate with Ms MAUNA M BHATT, ADVOCATE for the Respondent No. 1================================================================ CORAM: HONOURABLE Mr. JUSTICE M.R. SHAHandHONOURABLE Ms. JUSTICE SONIA GOKANI24th June 2013 CAV JUDGMENT (PER : HONOURABLE MS JUSTICE SONIA GOKANI) This writ petition, preferred under Article 226 of the Constitution of India, challenges a Notice dated 10th February 2012 issued by the respondent under Section 148 of the Income Tax Act, 1961 [“Act” for short] seeking to reopen the petitioner’s income-tax assessment for the A.Y 2005-06. 2.Brief facts necessary for adjudicating the issue raised in this petition are as follows :- 2.1The petitioner is a limited company, which was originally engaged in the business of leasing and financing. Later on, however, company ceased its operation. The petitioner filed its return of income under section 139 [1] of the Act on 28th October 2005 declaring the total income at Rs. NIL. On 18th October 2006, the notice under section 143 [2] of the Act was issued. During the scrutiny assessment proceedings, a notice under section 142 [1] of the Act was also issued accompanied by detailed questionnaire. The Assessing Officer also called for various explanations and clarifications which were furnished alongwith the supporting evidences by the assessee. On completing such scrutiny, the assessment came to be framed under section 143 [3] of the Act on 28th November 2007. 2.2The petitioner herein preferred appeal against such order before the Commissioner of Income-Tax [Appeals] at Ahmedabad, which decided the appeal vide order dated 24th March 2008 and allowed the appeal of assessee. 2.3The Department, aggrieved by such order, challenged the same before the Income Tax Appellate Tribunal, Ahmedabad and cross objections were filed by the petitioner, which are pending as yet for adjudication. 2.4In the meantime, the Assessing Officer reopened the assessment under section 147 of the Act, by issuing impugned notice under section 148 of the Act. 2.5At the request of the petitioner, reasons recorded have been furnished to the petitioner, which read as under :- “It is noticed that Book profit in the case of assessee was shown at Rs. 67,58,22,149/=. But taxable profit was shown at NIL as the assessee is having brought forward business loss of Rs. 67,58,00,284/= and Dividend of Rs. 21,865/=. These amounts are reduced from the Book profit. As per provision of section 115JB of the Income tax Act, 1961, the amount of unabsorbed depreciation or unabsorbed business loss, whichever is lower is to be reduced from the book profit of the assessee. In the case of assessee, the unabsorbed depreciation is NIL. Therefore, no amount is to be taxed as book profit. 2.5At the request of the petitioner, reasons recorded have been furnished to the petitioner, which read as under :- “It is noticed that Book profit in the case of assessee was shown at Rs. 67,58,22,149/=. But taxable profit was shown at NIL as the assessee is having brought forward business loss of Rs. 67,58,00,284/= and Dividend of Rs. 21,865/=. These amounts are reduced from the Book profit. As per provision of section 115JB of the Income tax Act, 1961, the amount of unabsorbed depreciation or unabsorbed business loss, whichever is lower is to be reduced from the book profit of the assessee. In the case of assessee, the unabsorbed depreciation is NIL. Therefore, no amount is to be taxed as book profit. It is also noticed that due to agreement of settlement, which was approved by the Hon’ble High Court of Gujarat the assessee need not to pay amount of Rs. 9983.98 lac. This amount is also not added to the Book profit of the assessee. Therefore, Book profit of the assessee was also under assessed by Rs. 99,83,98,000/=. Thus, Book profit of the assessee is under assessed by amount of Rs. 167,41,98,284/= [Rs.67,58,00,284 + 99,83,98,000]. In view of the above, I have reason to believe that the Book profit of the assessee is under assessed amount of Rs. 167,41,98,284/=.” 2.6The petitioner raised objections vide its communication dated 5th February 2013. Such objections, however, came to be rejected by the respondent vide order dated 22nd February 2013. Aggrieved by such disposal of the objections against notice for reopening, the present petition is preferred challenging the same on various grounds. 3.We have heard learned counsel appearing for the parties for final disposal of this petition. 4.Learned senior counsel Shri S.N Soparkar appearing for the petitioner has fervently submitted that the impugned notice is given beyond the period of four years from the end of relevant assessment year as this concerns A.Y 2005-06 and the reasons furnished by the respondent indicate nowhere that there is any failure on the part of the assessee to disclose truly and fully all facts which were necessary to be disclosed. He emphasized that the reasons also indicate that from the very record available with the Assessing Officer, the information has been extracted and on the strength thereof, reopening of the assessment is sought for. He urged further that at the behest of the petitioner, the reasons have been furnished and neither of the reasons is indicative of the failure on the part of the assessee to disclose truly and fully any material fact and therefore, the very basis of impugned notice lacks validity. He further made a grievance that the decision of the Supreme Court rendered in case of GVK Driveshafts [India] Limited v. Income Tax Officer & Ors., reported in 259 ITR 19 was essentially with a view to act as a check-post to prevent arbitrary exercise of powers by the Assessing Officer and the Assessing Officer in the present case has failed to take note of the objections and he has mechanically disposed of the same without assigning the reasons as to why he holds a belief that there has been no true disclosure of all material facts. It is emphasized that after scrutiny assessment under section 143 (3) of the Act, the assessment had been completed on 28th November 2007 and subsequently, the same had been challenged before the appellate forums as prescribed under the law, and therefore also, reopening of the assessment on the very same grounds is impermissible as it is nothing but a change of opinion. In this context, learned senior counsel sought to place reliance on the following decisions :- [a]Patel Alloys Steel [P] Limited v. Asstt. Commissioner of Income Tax Circle 5, Ahmedabad [Special Civil Application No. 3047 of 2013 :: Decided on 7[th] May 2013] [b]Kanak Fabrics v. Income Tax Officer [Special Civil Application No. 335 of 2001 :: Decided on 3[rd] March 2011]; [a]Patel Alloys Steel [P] Limited v. Asstt. Commissioner of Income Tax Circle 5, Ahmedabad [Special Civil Application No. 3047 of 2013 :: Decided on 7[th] May 2013] [b]Kanak Fabrics v. Income Tax Officer [Special Civil Application No. 335 of 2001 :: Decided on 3[rd] March 2011]; [c]Jivraj Tea & Industries Limited v. Asstt. Commissioner of Income Tax [Special Civil Application No. 2120 of 2013 :: Decided on 8[th ]April 2013] [b]Reckitt Benckiser Healthcare India Limited v. Asstt. Commissioner of Income Tax Circle 5, Ahmedabad [Special Civil Application No. 3049 of 2013 :: Decided on 29[th]April 2013]. 5.Per contra, learned senior advocate Shri M.R Bhatt appearing for the Revenue emphasized on Explanation 1 to Section 147 of the Income-tax Act, 1961. He urged that the case of the petitioner would fall under Explanation 1 of Section 147 as it is the subjective satisfaction of the Assessing Officer who holds a reason to believe that the income has escaped assessment and this would empower him to exercise his discretion for issuance of notice under section 148 of the Act. He urged that at this stage, when the impugned notices are under challenge, the belief of the Assessing Officer requires to be prevailed. According to learned counsel, the Supreme Court in case of GKN Driveshafts [India] Limited [Supra] has created a stage which was not there in the provision of the Act, permitting raising of the objections by the assessee. However, while dealing with such objections, it is not expected of the Assessing Officer to carry out full-fledged re-assessment as that stage would come only after the objections are disposed of. He therefore urged the Court that the reasons recorded shall have to be considered at the stage at which such challenge is made to the impugned notice and the Court may not expect re-assessment in case of petitioner as that may also give rise to the allegations of the Assessing Officer having pre-judged the entire issue. He further urged that the regular channel would be available to the petitioner, if in case he is aggrieved by the order of assessment and therefore also, at this stage of issuance of the notice, the Court may not interfere. On the scope of Article 226 of the Constitution also, particularly in a case for reopening of assessment, he at length addressed this Court. Learned counsel placed reliance on the following authorities, which are - [a]Calcutta Discount Company Limited v. Income-tax Officer, CompaniesDistrict-I, Calcutta & Anr., AIR 1961 SC 372; [b]GVK Gautami Power Limited v. Assistant Commissioner of Income Tax & Anr.,336 ITR 451 ; [c]Dishman Pharmaceuticals & Chemicals v. Deputy Commissioner of Income Tax , 346 ITR 228 [Guj]; [d]Sun Pharmaceutical Industries Limited v. Deputy Commissioner of Income Tax, 353 ITR 450 [e]Indo Aden Salt Mfg. & Trading Company Limited v. Commissioner of Income Tax, Bombay 159 ITR 624 (SC); [f]Phool Chand Bajrang Lal & Anr. v. Income Tax Officer & Anr., 203 ITR 456; 5.1Learned counsel also has further addressed this Court on larger issues to which we shall come at a later stage in this judgment. He had, in a rejoinder, sought to place reliance upon the following authorities :- [a]Calcutta Discount Company Limited v. Income-tax Officer, CompaniesDistrict-I, Calcutta & Anr., AIR 1961 SC 372; [b]Ketan B Mehta v. Assistant Commissioner of Income Tax, 346 ITR 254; [c]Parashuram Pottery Works Company Limited v. I.T.O Circle I, Ward-A, Rajkot, 106 ITR 254 Parashuram Pottery Works Company Limited [d]Officer & Ors., 259 ITR 19. GKV Driveshafts [India] Limited v. Income Tax 6.Upon thus hearing both the sides and on extensive examination of the material on record, this petition is being decided. Before adverting to the facts in the matter on hand, the law on the subject requires scrutiny at this stage. 6.1Section 147 of the Act reads as follow :- [a]Calcutta Discount Company Limited v. Income-tax Officer, CompaniesDistrict-I, Calcutta & Anr., AIR 1961 SC 372; [b]Ketan B Mehta v. Assistant Commissioner of Income Tax, 346 ITR 254; [c]Parashuram Pottery Works Company Limited v. I.T.O Circle I, Ward-A, Rajkot, 106 ITR 254 Parashuram Pottery Works Company Limited [d]Officer & Ors., 259 ITR 19. GKV Driveshafts [India] Limited v. Income Tax 6.Upon thus hearing both the sides and on extensive examination of the material on record, this petition is being decided. Before adverting to the facts in the matter on hand, the law on the subject requires scrutiny at this stage. 6.1Section 147 of the Act reads as follow :- “147.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 provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 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 the relevant assessment year, no action shall be taken under this section after 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 year 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 his assessment, for that assessment year.” 6.2This provision, when read with Section 148 of the Act, authorizes the Assessing Officer to make reassessment, if he is of the belief that any income chargeable to tax has escaped assessment for any assessment year. He can assess or reassess such income and also any other income chargeable to tax which has escaped the assessment; if it comes to his notice during the course of proceedings under this section. However, proviso provided that no action shall be taken after expiry of four years from the end of relevant assessment year unless income chargeable to tax has escaped assessment for such assessment year on account of failure on the part of the assessee to make a return under section 139 or in response to a notice under sub-section (1) of Section 142 or Section 148 or he has failed to disclose fully and truly all material facts necessary for such assessment. 6.3 This Court, while dealing with this issue of reopening of the assessment r beyond the period of four years in case of Kanak Fabrics v. Income Tax Office[Supra] has held that when the assessment is framed under section 143 (3) of the Act, the same can be reopened beyond the period of four years, only if the income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to make a return under section 139 or in response to notice under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts, necessary for such assessment. Relevant observations made in para 7 of the decision are aptly produced hereunder :- 6.3 This Court, while dealing with this issue of reopening of the assessment r beyond the period of four years in case of Kanak Fabrics v. Income Tax Office[Supra] has held that when the assessment is framed under section 143 (3) of the Act, the same can be reopened beyond the period of four years, only if the income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to make a return under section 139 or in response to notice under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts, necessary for such assessment. Relevant observations made in para 7 of the decision are aptly produced hereunder :- “7. Examining the facts of the present case in the light of the aforesaid legal position, a perusal of the reasons recorded shows that there is not even a whisper to the effect that income has escaped assessment on account of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. Even in the affidavit in reply filed by the respondent, there is no allegation of any such failure on the part of the petitioner. In the circumstances, it is apparent that the requirements of the proviso to section 147 of the Act are not satisfied. Consequently, in the absence of any satisfaction having been recorded by the Assessing Officer that income has escaped assessment by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the assumption of jurisdiction under section 147 of the Act, is invalid. The impugned notice under section 148 of the Act, therefore, cannot be sustained.” 6.4 In case of Patel Alloy Steel [P] Limited [Supra], similar question was being examined. It was noticed that the Assessing Officer has based his reasonings on verification of the material already on the record during the original assessment. In the reasons recorded or the notice issued for reopening, it was not even alleged that there was any failure on the part of the assessee to disclose truly and fully all material facts. On such short ground, the Division Bench allowed the petition. 6.5In case of Jivraj Tea & Industries Limited [Supra], while dealing with the notice for reopening beyond the period of four years, in absence of any failure on the part of the assessee to disclose truly and fully all material facts and when in the original assessment proceedings, the Assessing Officer had examined the claim in detail after raising queries which were duly answered by the assessee, this Court quashed the impugned notice by holding thus - “9. Thus, the observations of the Assessing Officer found in the reasons recorded are based on the assessment records of the year under consideration. It is not even the case for the Revenue that full details pertaining to the assessee’s claim for deduction under section 80IA were not furnished. It is not in dispute that the petitioner alongwith the return filed statutory declarations including the audited accounts. The assessment records of the earlier year 2002-03 and 2004-05 were very much available to the Assessing Officer. It is not even the case of the Revenue that in such return necessary details were not supplied. Merely because while framing assessment for the subsequent year 2007-08, the Assessing Officer noticed certain irregularity in the claim by itself would not be sufficient to satisfy the requirements of the proviso to Section 147 of the Act. 10.In addition to above conclusions, that there was no failure on the part of the assessee to disclose truly and fully all material facts, we also find that during the original assessment proceedings, the Assessing Officer had examined the claim in detail. Various 10.In addition to above conclusions, that there was no failure on the part of the assessee to disclose truly and fully all material facts, we also find that during the original assessment proceedings, the Assessing Officer had examined the claim in detail. Various queries were raised which were duly answered by the petitioner-assessee. May be that the specific angle of the depreciation earlier claimed to be set off against the income of the current year of the eligible business may not have been in the mind of the Assessing Officer. Nevertheless, the entire claim of the assessee for deduction under Section 80IA of the Act was before the Assessing Officer and such claim was also processed.” 6.6In the case of Reckitt Benckiser Healthcare India Limited [Supra], the notice for reopening was quashed, when it was noticed that the first ground of reopening lacked validity. In the words of the Bench; “7.From the above, it emerges that insofar as the first ground is concerned, the petitioners case all throughout has been that the amount in question was never treated as revenue expenditure. Such ground, thus, lacks validity. Such contention raised in the objections raised by the petitioner was dismissed by the Assessing Officer merely observing that the assessee had not given any proof that while computing its return, it had correctly treated the said expenditure. We are afraid that on such basis the reopening would not be permissible. The petitioner has all throughout been contending that the expenditure was not claimed as revenue expenditure and the question of disallowing it as such would not arise. If the Assessing Officer had any doubt about such statement, he could have easily verified the correct facts from the return filed and other accompanying documents brought on record during the assessment proceedings. She simply could not have, in our opinion, brushed aside such a contention on the ground that such aspect was not examined by the Assessing Officer.” 6.7In the case of Vodafone West Limited v. Assistant Commissioner of Income Tax, reported in (2013) 33 Taxmann.com 67 (Gujarat) [Supra], the impugned notice of reopening was quashed by examining in detail various case laws and the material on record. All the grounds raised for reopening were held to have failed as nothing was pointed out to indicate that there was any failure on the part of the petitioner to disclose fully and truly all material facts. The Bench concluded thus; “4. Having heard learned counsel for the parties, we notice that Assessing Officer had recorded three separate reasons for issuing the notice for reopening. First was that the petitioner had paid commission to various dealers on prepaid Sim-cards and recharge vouchers without deducting the tax at source. Second reason was that the petitioner had paid roaming charges to various telecom service providers without deducting tax at source. Third was that as per the amendment to section 115JB of the Act, vide Finance Act 2009 with retrospective effect on 1.4.2001, explanation(1) to the said section had been inserted. According to such statutory change, the book profit under section 115JB had to be reworked.” 5. To our mind, none of the reasons would permit the Assessing Officer to reopen the assessment beyond a period of four years. 6. In case of Calcutta Discount Co. ltd. v. Income-Tax Officer reported in 41 ITR 191, the Constitution Bench of Supreme Court held and observed that to confer 5. To our mind, none of the reasons would permit the Assessing Officer to reopen the assessment beyond a period of four years. 6. In case of Calcutta Discount Co. ltd. v. Income-Tax Officer reported in 41 ITR 191, the Constitution Bench of Supreme Court held and observed that to confer jurisdiction on assessee to issue notice of reopening of assessment beyond a period of four years, two conditions are required to be simultaneously satisfied. Such conditions are that the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have been under-assessed and the second is that he must also have reason to believe that such under-assessment has occurred by reason of either omission or failure on part of the assessee to make return of his income or omission or failure on part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the taxing officer could have jurisdiction to issue notice for the assessment or reassessment beyond a period of four years. It was further observed that such duty would not extend beyond true and full disclosure of material facts. Once such primary facts are before the Assessing Officer, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for the assessee to tell the assessing authority what inferences, whether of facts or of law, should be drawn. It is not necessary to list the long line of decisions along this line. We may however, refer a recent decision of Division Bench in case of GVK Gautami Power Ltd . v. Assistant Commissioner of Income-tax(OSD) and another reported in 336 ITR 451, wherein referring to large number of authorities on the question of reopening the assessment, Division Bench culled out various principles, relevant of which read as under : (xiv). The words failure to disclose fully and truly all material facts necessary for his assessment, in the first proviso to Section 147, postulate a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. (Calcutta Discount Co. Ltd.(1961)41 ITR 191(SC). xv.Every disclosure is not, and cannot be treated to be, a true and full disclosure. A disclosure may be false or true. It may be a full disclosure or it may not. A partial disclosure may very often be misleading. What is required is a full and true disclosure of all material facts necessary for making assessment for that year. (Sri Krishna Pvt. Ltd.(1996) 221 ITR 538(SC) (xvii). The expression material facts refers only to primary facts which the assessee is duty bound to disclose. There is no duty cast on the assessee to indicate or draw the attention of the Income Tax Officer to the inferences which can be drawn from the primary facts disclosed. (Calcutta Discount Co. Ltd.(1961) 41 ITR 191(SC) and Associated Stone Industries (Kotah) Ltd.(1997)224ITR 560(SC) (xviii). What facts are material, and necessary for assessment, will differ from case to case. (Calcutta Discount Co. Ltd.(1961) 41 ITR 191(SC) (xx). The assessee's obligation, to disclose all material facts necessary for his assessment fully and truly, is in the context of the two requirements - called conditions precedent - which must be satisfied before the Income Tax Officer gets jurisdiction to re-open the assessment under Section 147/148. This obligation can neither be ignored nor watered down. (Sri Krishna Pvt. Ltd.(1996) 221 ITR 538(SC). 7. In the present case, with respect to requirement of deducting tax at source on prepaid SIM-cards and recharge voucher, petitioners case is two fold. Firstly, it is contended that in fact tax was deducted at (xviii). What facts are material, and necessary for assessment, will differ from case to case. (Calcutta Discount Co. Ltd.(1961) 41 ITR 191(SC) (xx). The assessee's obligation, to disclose all material facts necessary for his assessment fully and truly, is in the context of the two requirements - called conditions precedent - which must be satisfied before the Income Tax Officer gets jurisdiction to re-open the assessment under Section 147/148. This obligation can neither be ignored nor watered down. (Sri Krishna Pvt. Ltd.(1996) 221 ITR 538(SC). 7. In the present case, with respect to requirement of deducting tax at source on prepaid SIM-cards and recharge voucher, petitioners case is two fold. Firstly, it is contended that in fact tax was deducted at source and duly deposited with the Government. In the objections raised opposing notice for reassessment, such contention was pointedly taken. The Assessing Officer however, while disposing of such objections did not dispute this averment of the petitioner. Further in the petition also on oath the petitioner has stated that on such payments, tax was deducted at source. This important averment has not been denied in the affidavit in reply filed by the respondent. Even before us during the course of oral submissions, counsel for the Revenue was unable to dispute this factual aspect.” 6.8 The Constitution Bench of Supreme Court in case of Calcutta Discount Company Limited v. Income-Tax Officer, Companies District I, Calcutta & Anr. [Supra] held that in case of reopening of assessment beyond a period of four years, what is essential is to fulfill two conditions, simultaneously, where the Income Tax Officer must have a reason to believe that the income, profits or gains chargeable to income-tax have been under assessed and such under assessment has occurred on account of omission or failure on the part of the assessee to make the return of his income, or to disclose fully and truly all material facts necessary for his assessment for that particular year. Once these conditions, held to be condition precedent are satisfied, jurisdiction is conferred upon the Assessing Officer for issuance of the notice under section 148 of the Act. The Court also held that every assessee has a duty to disclose all material facts necessary for the assessment and what are “material” and “primary” facts also have been explained, this wise : “material” and “primary” facts also have been explained, this wise : “8. Before we proceed to consider the materials on record to see whether the appellant has succeeded ,in showing that the Income-tax Officer could have no reason, on the materials before him, to believe that there had been any omission to disclose material facts, as mentioned in the section, it is necessary to examine the precise scope of disclosure which the section demands. The words used are "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year ". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his Possession, whether on disclosure by the assessee, or discovered byhim on the basis of the facts disclosed, or otherwise-the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has todraw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above., In view of the Explanation, it will not be open to the assessee to say, for example-"I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents". His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, amount to "omission to disclose fully and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them-including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed.” 6.9The Court has also observed that the duty of the assessee does not extend beyond disclosing true and full primary facts and once those primary facts are before the Assessing Officer, no further assistance is required to be rendered by way of any further disclosure on the part of the assessee. In other 6.9The Court has also observed that the duty of the assessee does not extend beyond disclosing true and full primary facts and once those primary facts are before the Assessing Officer, no further assistance is required to be rendered by way of any further disclosure on the part of the assessee. In other words, it is essential for the assessee to reveal the primary facts truly and fully but not the inferential facts as drawing the inferences would be the domain of Revenue. 6.10 The Apex Court, in case of Parshuram Pottery Works Company Limited v. Income Tax Officer, Circle-I Ward-A, Rajkot, reported in 106 ITR 1, was dealing with re-assessment notice issued after expiry of four years from the end of relevant assessment year. The issue pertain to the higher amount of depreciation allowed by failure of Income Tax Officer to take into account initial depreciation. The question was whether that amounts to failure on the part of the assessee to disclose fully and truly all material facts, the Court held thus :- “..The words "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year" postulate a duty on the assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee,or discovered by him on the basis of the facts disclosed, or otherwise the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable see Calcutta Discount Co. v. Income-tax Officer (2)] as further observed in that case: "Does the duty, however, extend beyond the full and truthful disclosure of all primary facts ? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences 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 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." Keeping in view the principles enunciated above, we may deal with the contention advanced on behalf of the appellant that the present is not a case in which action could be taken under section 147(a) of the Act of 1961. This contention has been controverted (1) 103 I.T.R. 437. (2) 41 I.T.R. 191. By the learned counsel for the respondent, who has canvassed for the correctness of the view taken by the High Court in the judgment under appeal. It would appear from what has been’ discussed above that one of the essential requisites for proceeding under clause(a) of section 147of the Act of 1961 is that the income chargeable to tax should escape assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before us to show that in the return filed by the assessee-appellant, the particulars given were not correct. Form C under rule 19 of the Indian Income-tax Rules, 1922 at the relevant time gives the form of return which had to be filed by the companies. Part V of that form deals with depreciation. The said part requires a number of columns to be filled in by the. assessee. It has not been suggested that any of the information furnished of any of the particulars given in those columns by the appellant company were factually incorrect. Nor is it the case of the revenue that the appellant failed to. furnish the particulars required to be inserted in those columns. Indeed, the copy of the return has not been filed and consequently no argument on that score could be or has been addressed before us. Part V of the form no doubt requires the assessee to state the written down value in column No. (2). Such written down value had to be specified without taking into account the initial depreciation because such depreciation in terms of clause (vi) of section 10(2) of the Act of 1922 could not be deducted in determining the written down value for the purpose of that clause. The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an income-tax officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee. It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery, plant and building installed or erected after the 31st day of March 1945 and before the 1st day of April 1956 is normally claimed and allowed. It seems that the Income-tax Officer in working ’the figures of depreciation for certain items of capital assets lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax officer in not applying the law contained in clause (c) of the proviso to section 10(2)(vi) of the Act of 1922. As observed by Shah J. in Commissioner of Income-tax v. Bhanji Lavji, (1) section 34(1)(a) of the Act of 1922 (corresponding to section 147’(a) (1)79 I,T.R. 582. S.C. 101 of the Act of 1961) does not cast a duty upon the assessee to instruct the Income-tax Officer on questions of law.” Income-tax officer in not applying the law contained in clause (c) of the proviso to section 10(2)(vi) of the Act of 1922. As observed by Shah J. in Commissioner of Income-tax v. Bhanji Lavji, (1) section 34(1)(a) of the Act of 1922 (corresponding to section 147’(a) (1)79 I,T.R. 582. S.C. 101 of the Act of 1961) does not cast a duty upon the assessee to instruct the Income-tax Officer on questions of law.” The Court has further held therein that, “10. It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarize themselves with the relevant provisions and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that state issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as income-tax assessment orders are concerned, they cannot be reopened on the scope of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, ’this cannot be said in the present case. The appeal is consequently allowed; the judgment of the High Court is set aside and the impugned notices are quashed. The parties in the circumstances shall bear their own costs throughout.” 6.11 The Supreme Court in case of Indo-Aden Salt Mfg. & Trading Company Private Limited v. Commissioner of Income Tax, Bombay, reported in 159 ITR 624 was dealing with the reassessment proceedings beyond the period of four years where it was found that the Income Tax Officer could have in the original assessment proceedings found out the correct position of the depreciation, allowed on entirety of the assets on the basis they consist of masonry work, by further probing. However, the Court held that that would not exonerate assessee from the duty to disclose truly and fully all material facts. It also further held that whether there was such non disclosure of primary facts as had caused escapement of income from assessment was basically a question of fact. It held thus - “It is well settled that the obligation of the assessee is 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 authority. 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. That is immaterial. But if there is omission to disclose material facts, then, subject to other conditions, jurisdiction to reopen is attracted.” 6.12The Court noted that the assessee did not disclose either by its valuation report or by a statement before the Income Tax authority as to what portion of the assets consist of earth work and that of masonry work. This was held to be a material fact for the purpose of calculating depreciation. Excess depreciation had been allowed considering the entire work to be masonry work and the income tax thus was had to be under-assessed, the Apex Court held that the I.T.O had a reasonable belief and sufficient material to hold that there was no true and full disclosure. In the words of the Apex Court : 6.12The Court noted that the assessee did not disclose either by its valuation report or by a statement before the Income Tax authority as to what portion of the assets consist of earth work and that of masonry work. This was held to be a material fact for the purpose of calculating depreciation. Excess depreciation had been allowed considering the entire work to be masonry work and the income tax thus was had to be under-assessed, the Apex Court held that the I.T.O had a reasonable belief and sufficient material to hold that there was no true and full disclosure. In the words of the Apex Court : “... The assessee’s contention is that the I.T.O. could have found out the position by further probing. That, however, does not exonerate the assessee to make full disc