J.b.j. Perfumes Private Limited v. Principal Commissioner Of Incometax And Another

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No. 772 of 2022. Reserved on: 17.06.2024. Date of decision: 25.06.2024. J.B.J. Perfumes Private Limited …..Petitioner. Versus Principal Commissioner of IncomeTax and another …..Respondents. Coram The Hon’ble Mr. Justice Tarlok Singh Chauhan, Judge.The Hon’ble Mr. Justice Sushil Kukreja, Judge. Whether approved for reporting?[1 ]Yes For the Petitioner : Mr. Vishal Mohan, Senior Advocatewith Mr. Aditya Sood and Mr.Abhinav Bajwaria, Advocates. For the Respondents : Mr. Neeraj Sharma and Mr. IshaanKashyap, Advocates. Tarlok Singh Chauhan, Judge The instant writ petition has been filed seeking quashing of notice dated 30.03.2021 issued under Section 148 of the IncomeTax Act, 1961, (for short the “Act”) for the assessment year 2013-14and further for quashing the order vide which objections filed by thepetitioner for reopening the case have been rejected. 2.The petitioner is a private limited company registeredunder the Companies Act and is engaged in the business ofmanufacturing of perfumery compound and room fresheners etc. 3.The petitioner for the assessment year underconsideration filed return declaring its net taxable income ofRs.1,01,50,780/- after claiming deductions of Rs.43,50,332/- underSection 80IC of the Act vide return of income filed on 28.09.2013. 4.The case of the petitioner-company was selected forscrutiny and the same was assessed vide order dated 28.03.2016passed under Section 143(3) of the Act after making an addition ofRs.95,000/- to the taxable income of the petitioner-company atRs.1,02,45,775/-. The petitioner-company was thereafter issuednotice dated 30.03.2021 under Section 148 of the Act requiring it tofile return of income within a period of 30 days. 5.The petitioner-company after filing return of incomeapplied for the copy of reasons so recorded and accordingly thesame was supplied to the petitioner-company. This led to filing ofdetailed objections by the petitioner-company regarding reopening ofthe case on both legal and factual aspects vide its submissionsdated 06.02.2022 constraining the petitioner-company to file theinstant petition seeking therein the following substantive reliefs: “a)This Hon’ble Court may be pleased to issue a writ inthe nature of certiorari and the notice issued under Section148 of the Income Tax Act, 1961 dated 30.03.2021 for the assessment year 2013-14 vide which case of the petitionerhas been reopened be quashed. b)That this Hon’ble Court may further be pleased toissue a writ in the nature of certiorari and the order videwhich the objections had been rejected may kindly bequashed and held to be illegal.” 6. The respondents filed the reply wherein they have raised various preliminary objections contending that the petition ispre-mature, writ against notice under Section 148 of the Act is notmaintainable and that the petitioner-company has an alternative andefficacious remedy to file an appeal against the fresh assessmentorder which may be passed. 7. On merits, it is contended that during the audit vide LAR No.106-108 dated 11.07.2017, para 16, AQ No. 30 dated29.05.2017, it has been revealed that the petitioner-company hadpurchased Plant and Machinery i.e. spray mount valve by way ofimport from M/s Majesty Packaging International Ltd. amounting to $83,922.00 (Rs.46,03,121/-) vide invoice No. JBJ01-12-7880 dated10.10.2012 and custody duty of Rs.3,73,728/- was paid on thisimport of capital assets on 23.01.2013. The petitioner-company hadnot booked the imported machine in block of fixed assets.Therefore, as per the provisions of the Act, expenditure amounting toRs.59,76,849/- (Rs.46,03,121+Rs.13,73,728/-) incurred by thepetitioner-company during the assessment year 2013-14 was ofcapital in nature. 7. On merits, it is contended that during the audit vide LAR No.106-108 dated 11.07.2017, para 16, AQ No. 30 dated29.05.2017, it has been revealed that the petitioner-company hadpurchased Plant and Machinery i.e. spray mount valve by way ofimport from M/s Majesty Packaging International Ltd. amounting to $83,922.00 (Rs.46,03,121/-) vide invoice No. JBJ01-12-7880 dated10.10.2012 and custody duty of Rs.3,73,728/- was paid on thisimport of capital assets on 23.01.2013. The petitioner-company hadnot booked the imported machine in block of fixed assets.Therefore, as per the provisions of the Act, expenditure amounting toRs.59,76,849/- (Rs.46,03,121+Rs.13,73,728/-) incurred by thepetitioner-company during the assessment year 2013-14 was ofcapital in nature. 8.It has been further contended that vide AQ No. 53 dated30.05.2017, it was revealed that the petitioner-company had derivedincome from damaged goods claim amounting to Rs.2,01,884/-,discount received of Rs.13,50,871/- and rounded off amounting toRs.3,564/-. The above incomes had no nexus and were not derivedby the petitioner-company from manufacturing activities. Hence, theabove income of Rs.4,66,896/- (30% of 15,56,320/-) could not havebeen allowed while computing eligible profits for claim of deductionunder Section 80IC of the Act. Since, an income of Rs.64,43,745/-had been escaped during the year under consideration and theAssessing Officer ( for short “A.O.”) had reasons to believe and hadrightly assumed jurisdiction over the case by recording reasons forreopening the case under Section 147 of the Act beyond the periodof four years but within six years after taking appropriate approval asenvisaged under the Act. The notice was issued after fulfilling allstatutory requirements of the Act. 9.The petitioner-company filed rejoinder wherein it isaverred that the respondents have not placed anything on record toshow that it had concealed or did not disclose true and correctparticulars, as were required under Sections 147 and 148 of the Act.It is further averred that the rejection of the objections andreopening of the case by the respondents are amenable to the writjurisdiction of this Court. 10.On merits, it has been averred that the objections raisedby the petitioner-company have been rejected in a mechanical waywithout actually taking into consideration the objections so filed. It isfurther averred that the income derived from the damaged goodsclaim, discounts received and rounded off are not attributable tomanufacturing activities of the petitioner-company and as such theAssessing Officer had rightly allowed deductions under Section 80ICwhile passing the order under Section 143(3) of the Act. 11.As far as the import made outside India is concerned, itis averred that the petitioner-company had not imported anymachinery but the raw material required in the production of themanufacturing which has been duly made in the purchases by thepetitioner-company. The Assessing Officer in the first inning hadduly taken into consideration all the facts while framing theassessment. Thus, there was no occasion for reopening of thecase on the same facts which amounts to change of opinion and isnot permissible in the eyes of law. It is further averred that thecapital goods had not been purchased and only raw material hadbeen purchased which was required and utilized in packing ofperfumes and treating the same to be capital expenditure isabsolutely wrong and not sustainable in the eyes of law. It isreiterated that the damaged goods claim, discounts received androunding off are an integral part of manufacturing activities and as such qualifies for its deductions under Section 80IC and the samehas rightly been allowed to the petitioner-company by the AssessingOfficer. 12.We have heard the learned counsel for the parties andhave also gone through the records of the case. such qualifies for its deductions under Section 80IC and the samehas rightly been allowed to the petitioner-company by the AssessingOfficer. 12.We have heard the learned counsel for the parties andhave also gone through the records of the case. 13.Before adverting to the merits of the case, we find itappropriate to briefly traverse through Section 147 of the Act tounderstand the nature, scope and intent behind enacting of the saidprovision. For the sake of clarity, the relevant portion of Section 147of the Act, as it stood prior to the substitution by Act No.13 of 2021 isculled out as under: “147. Income escaping assessment.-- If the AssessingOfficer, has reason to believe that any income chargeable totax has escaped assessment for any assessment year, hemay, subject to the provisions of Sections 148 to 153,assess or reassess such income and also any other incomechargeable to tax which has escaped assessment andwhich comes to his notice subsequently in the course of theproceedings under this section, or recompute the loss or thedepreciation allowance or any other allowance, as the casemay be, for the assessment year concerned (hereafter inthis section and in Sections 148 to 153referred to as therelevant assessment year): Provided that where an assessment under sub-section (3)of Section 143or this section has been made for therelevant assessment year, no action shall be taken underthis section after the expiry of four years from the end of therelevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year byreason of the failure on the part of the assessee to make areturn under Section 139or in response to a notice issuedunder sub-section (1) of Section 142or Section 148or todisclose fully and truly all material facts necessary for hisassessment, for that assessment year: Provided further thatnothing contained in the first proviso shall apply in a casewhere any income in relation to any asset (includingfinancial interest in any entity) located outside India,chargeable to tax, has escaped assessment for anyassessment year: Provided also that the Assessing Officer may assess orreassess such income, other than the income involvingmatters which are the subject matters 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 3.--For the purpose of assessment orreassessment under this section, the Assessing Officer mayassess or reassess the income in respect of any issue,which has escaped assessment, and such issue comes tohis notice subsequently in the course of the proceedingsunder this section, notwithstanding that the reasons forsuch issue have not been included in the reasons recordedunder sub-section (2) of Section 148.” 14.A perusal of the aforesaid provisions reveals that itempowers the Assessing Officer to assess or reassess any incomewhich had escaped assessment. However, the said authority iscircumscribed with a predominant condition that the AssessingOfficer must be in possession of reasons to believe that anyincome chargeable to tax has escaped assessment for therelevant assessment year. Further, the first proviso to Section 147of the Act stipulates that where the assessment has been doneunder Section 143(3) or Section 147 of the Act, no action shall betaken after the expiry of four years unless there exists inter alia, afailure of the assessee to fully and truly disclose all the necessaryfacts necessary for assessment of the concerned assessment year. 14.A perusal of the aforesaid provisions reveals that itempowers the Assessing Officer to assess or reassess any incomewhich had escaped assessment. However, the said authority iscircumscribed with a predominant condition that the AssessingOfficer must be in possession of reasons to believe that anyincome chargeable to tax has escaped assessment for therelevant assessment year. Further, the first proviso to Section 147of the Act stipulates that where the assessment has been doneunder Section 143(3) or Section 147 of the Act, no action shall betaken after the expiry of four years unless there exists inter alia, afailure of the assessee to fully and truly disclose all the necessaryfacts necessary for assessment of the concerned assessment year. 15.In order to ascertain, the meaning of full disclosure inthe context of Section 147 of the Act, it is noteworthy to refer toExplanation 1 to the said provision which indicates that theproduction of books and accounts before the Assessing Officerwould not necessarily amount to disclosure within the meaning ofthe first proviso. 16.The meaning of the phrase “true and full disclosure”has been succinctly encapsulated by the Hon ble Supreme Court in‟its decision in M/s Mangalam Publications, Kottayam vs.Commissioner of Income Tax, Kottayam, AIR 2024 SC 813 wherein the Hon’ble Supreme Court took a view that mereproduction of books of accounts or other material evidence cannotbe said to be a true and full disclosure. It shall be apt to reproducethe relevant paragraph of the said decision which reads as under: "31. At this stage, we deem it necessary to expound on themeaning of disclosure. As per the P. Ramanatha Aiyar,Advanced Law Lexicon, Volume 2, Edition 6, “to disclose‟is to expose to view or knowledge, anything which beforewas secret, hidden or concealed. The word “disclosure”means to disclose, reveal, unravel or bring to notice, videCIT Vs. Bimal Kumar Damani, (2003) 261 ITR 87 (Cal).The word “true qualifies a fact or averment as correct,‟exact, actual, genuine or honest. The word “full means‟complete. True disclosure of concealed income must relateto the assessee concerned. Full disclosure, in the contextof financial documents, means that all material orsignificant information should be disclosed. Therefore, themeaning of “full and true disclosure is the voluntary filing‟of a return of income that the assessee earnestly believesto be true. Production of books of accounts or othermaterial evidence that could ordinarily be discovered by theassessing officer does not amount to a true and fulldisclosure." 17.The law postulates a duty on every assessee todisclose fully and truly all material facts for its assessment. Thedisclosure must be full and true. Material facts for initiating actionunder Section 147 of the Act would essentially mean those facts, iftaken into account, would have an adverse effect on the assessee by the higher assessment of income than the one actually made.They ought to be proximate and not have any remote bearing on theassessment. Omission to disclose could be deliberate or eveninadvertent. However, this is not at all relevant provided there isomission or failure on the part of the assessee. The latter confersjurisdiction to reopen the assessment. 18.The decision of the Hon’ble Constitution Bench in Calcutta Discount Co. Ltd. vs. Income Tax Officer, CompaniesDistrict I, Calcutta and another (1961) Vol. 41 ITR 191 explicitlyburdens the assessee with a responsibility to disclose fully and trulyall the material facts. 19. Having examined the scope and extent of true and fulldisclosure as per Section 147 of the Act, we may now proceed toexamine the factual facts essential in the instant petition. Having examined the scope and extent of true and full 20.The reasons for issuing notice under Section 147 of theAct are contained in paras 2 and 2.1 thereof which read as under: 18.The decision of the Hon’ble Constitution Bench in Calcutta Discount Co. Ltd. vs. Income Tax Officer, CompaniesDistrict I, Calcutta and another (1961) Vol. 41 ITR 191 explicitlyburdens the assessee with a responsibility to disclose fully and trulyall the material facts. 19. Having examined the scope and extent of true and fulldisclosure as per Section 147 of the Act, we may now proceed toexamine the factual facts essential in the instant petition. Having examined the scope and extent of true and full 20.The reasons for issuing notice under Section 147 of theAct are contained in paras 2 and 2.1 thereof which read as under: “2. Subsequently, it was noted that in the assessment recordrevealed that assessee firm derives income from damagedgoods claim amounting to Rs.201884/-, discount ofRs.1350871/- and rounded off amounting to Rs.3564/- forthe period ending 31[st] March 2013. The income on accountof claim on damaged goods, discount receipt and sundryround off were not derived by the assessee frommanufacturing activities. The above income had no direct nexus with the manufacturing activity. Hence, the deductionu/s 80IC on above income of Rs.466896/- (30% of1556320/-) needed to be disallowed for computation ofeligible profits for 80IC deduction. 2.1. As per copy of account of Import of Spray mount &heads aerosol valve forming part of the audited accounts ason 31.03.2013 revealed that assessee company hadimported spray mount valve from M/s Majesty PackagingInternational Ltd. Amounting to Rs.4603121/- on 25.01.2013and custom duty of Rs.1373728/- was paid on this importof capital asset. Scrutiny of chart of depreciation chartrevealed that assessee company had not booked theimported machine in block of fixed assets whereas inaccounting note No.4 forming part of audited balance sheetrevealed that assessee company had imported machineryequipment during the year. Thus assessee company hadnot included such capital asset Schedule of fixed assetsrather the same had taken in purchase imported andtreated it as revenue expenditure. As per provisions ofIncome-Tax Act, expenditure amounting to Rs.5976849/-incurred was of capital in nature. Hence, the same neededto be disallowed.” 21.The reasons have been recorded in paragraphs 3.1 and 4 of the order which read as under: “3.1. A perusal analysis of the information in para-2 abovereveals that there was failure/omission on the part of theassessee to disclose fully and truly all necessary factsessential for its assessment, as a result of which theprovisions of Section-147 of the Income Tax Act, 1961 shallapply in this case. 4. In view of the above, I have reason to believe that dueto failure/omission on the part of the assessee to disclosefully and truly all necessary facts essential for hisassessment, income to the extent of Rs.64,43,745/-[Rs.4,66,896+Rs.59,76,849] has escaped assessmentunder Section 147 of the Income Tax Act, 1961 for the A.Y.2013-14.” 22. As regards observations in para 3.1 of the order, the petitioner-company after placing reliance on various judgments ofthe Hon’ble Supreme Court submitted as under: 4. In view of the above, I have reason to believe that dueto failure/omission on the part of the assessee to disclosefully and truly all necessary facts essential for hisassessment, income to the extent of Rs.64,43,745/-[Rs.4,66,896+Rs.59,76,849] has escaped assessmentunder Section 147 of the Income Tax Act, 1961 for the A.Y.2013-14.” 22. As regards observations in para 3.1 of the order, the petitioner-company after placing reliance on various judgments ofthe Hon’ble Supreme Court submitted as under: “3.4. Your Honour, it is submitted that the assessee wasissued notice dated 30/03/2021 under Section 148 of the Actsaying that there are reasons to believe that income of theassessee is chargeable to tax for A.Y. 2013-2014 hasescaped assessment within the meaning of Section 147 ofthe Act. Since the notice has been issued after the expiry of4 years from the relevant assessment year and assesseehas already been assessed under Section 143(3) of the Act,the proviso to Section 147 as it was then existing on theStatute Book, would apply. As per the proviso, the onus ison the department to show that there was failure on the partof the assessee to fully and truly disclose all material factsrequired for assessment. Your Honour, the duty ofdisclosing all the primary facts relevant to the decision of thequestion before the assessing authority lies on theassessee. To meet a possible contention that when booksof account or other evidence in the form of bills & vouchers,have been produced, there is no duty on the assessee todisclose further facts, which on due diligence, the AO mighthave discovered, the Legislature has put in Explanation toSection 147. The duty, however, does not extend beyond the full and truthful disclosure of all primary facts. Once allthe primary facts are before the assessing authority, herequires no further assistance by way of disclosure. It is forhim to decide what inferences of facts can be reasonablydrawn and what legal inferences have ultimately to bedrawn. It is not for somebody else-far less the assessee totell the assessing authority what inferences, whether of factsor law, should be drawn. Indeed, when it is rememberedthat people often differ as what inferences should be drawnfrom given facts, it will be meaningless to demand that theassessee must disclose what inferences-whether of facts orlaw-he would draw from the primary facts. If from primaryfacts more inferences than one could be drawn, it would notbe possible to say that the assessee should have drawn anyparticular inference and communicated it to the assessingauthority. How could an assessee be charged with failure tocommunicate an inference, which he might or might notdrawn? It may be pointed out that the Explanation to thesub-section has nothing to do with “inferences” and dealsonly with the question whether primary material facts notdisclosed could still be said to be constructively disclosed onthe ground that with due diligence the Income-Tax Officercould have discovered them from the facts actuallydisclosed. The Explanation cannot enlarge the scope of thesection by casting a duty on the assessee to disclose“inferences”, to draw the proper inferences being the dutyimposed on the Income Tax Officer. Therefore, it can beconcluded that while the duty of the assessee is to disclosefully and truly all primary relevant facts, it does not extendbeyond this.” The objections so filed by the petitioner-company were The objections so filed by the petitioner-company were “6. Even if it is presumed, without admitting that all theinformation/details were placed before the Assessing Officerduring the original assessment proceedings, the AssessingOfficer is not precluded from reopening the case on thebasis of material already on record provided the formationof such opinion is consequent on “information” in the shapeof some light thrown on aspect of facts or law which theAO was not earlier conscious of . In this regard reliance isplaced on the decision in the case of A.L.A. Firm vs.Commissioner of Income-Tax (1991) 55 Taxman 497 (SC).Hence, on this account also assessee’s contention thatthere was no failure to disclose fully and truly all materialfacts at the time of assessment is not acceptable. 7. With regard to the contention that the reopening is basedon change of opinion, it needs to be verified whether theassessment made earlier has either expressly or bynecessary implication expressed an opinion on a matter onthe basis of which the assessment is sought to be reopened.In a case where the assessment order is non speakingcryptic or perfunctory in nature, it would be difficult toattribute to the AO any opinion on question that are raised inthe proposed reassessment proceedings. In such cases, thereopening has been held to be in order. In this regard,reliance is placed on the decision of the Hon’ble SupremeCourt in the case of Income Tax Officer, Ward No.16(2) vs.Techspan India (P.) Ltd. [2018] 92 Taxmann. Com 371(SC).Considering the facts and circumstances of the present caseas discussed above, the various decisions relied upon by theassessee are not applicable as the facts are distinguishable. 11. Further, on the issue of “the assessee has already beenassessed under Section 143(3) of the Act and notice hasbeen issued after the expiry of 4 years from the relevant assessment year, the proviso to Section 147 as it was thenexisting on the Statute Book, would apply”. It is to mentionthat the case was reopened as per the time limits as existedin the old regime only and there is no lapse on this issue asraised by the assessee.” 24.It was thereafter observed that an analysis of theaforesaid paras revealed that there was failure on the part of thepetitioner-company to disclose truly and fully all necessary factsessential for its assessment, as a result of which, the provisions ofSection 147 of the Act shall apply in this case. Therefore, due toomission/failure on the part of the petitioner-company to disclosefully and truly all necessary facts essential for its assessment,income to the extent of Rs.64,43,745/- (Rs.4,66,896+Rs.59,76,849/-) had escaped assessment under Section 147 ofthe Act for the assessment year 2013-14. 25.The petitioner-company filed objections wherein itsubmitted that the petitioner-company was engaged in themanufacturing and trading in perfumery products, perfumerycompounds and room refresheners etc. and during the period underreference, return of income for the period under reference based onthe audit report and financial statements extracted by the CharteredAccountant on audit of regularly maintained books of account hadbeen filed originally on 28.09.2013. It is further stated that theassessment in the case of the petitioner-company was framed under Section 143(3) for the year under consideration vide order dated28.03.2016 and during the assessment proceedings by theAssessing Officer, the requisite information/details as per thequestionnaire had been furnished which included the claim ofdeduction under Section 80IC and the deduction was allowed by theAssessing Officer (DCIT) after full verification of documentsfurnished by the petitioner-company during those proceedings andare distinctively so recorded in para-2 of the assessment order. Section 143(3) for the year under consideration vide order dated28.03.2016 and during the assessment proceedings by theAssessing Officer, the requisite information/details as per thequestionnaire had been furnished which included the claim ofdeduction under Section 80IC and the deduction was allowed by theAssessing Officer (DCIT) after full verification of documentsfurnished by the petitioner-company during those proceedings andare distinctively so recorded in para-2 of the assessment order. 26.It is further averred that the letter dated 28.07.2017 wasissued by the respondents to the petitioner-company wherein theobjections were raised by the Audit Party seeking further clarificationpost assessment and the petitioner-company was asked to submitclarification on certain issues raised by the Audit Party. Theseobjections were duly replied to the concerned Officer by furnishingdetailed written submissions with cogent and corroborativedocumentary evidence in the form of invoices at that point of time. Itis well settled that the objections so raised by the Audit Partysomehow are the root cause of the current reassessment as per thereasons so recorded and provided to the petitioner-company againvide letter dated 04.01.2022 which almost is akin to the letter dated28.07.2017 issued by the then Assessing Officer. 27.It is also averred that the so-called reasons have beenrecorded on the borrowed satisfaction of the Audit Party, that too in amechanical manner, without remotely appreciating the facts andcircumstances of the case. Lastly, it is averred that as per theprovisions of law the onus was on the respondent-department toshow that there was failure on the part of the petitioner-company tofully and truly disclose all facts required for assessment and this dutyhowever does not extend beyond the full and truthful disclosure ofall primary facts. Once, all the primary facts were before theassessing authority, it required no further assistance by way ofdisclosure. It was for the authority to decide what inferences of factscan be reasonably drawn and what legal inferences have ultimatelyto be drawn. 28.It is more than settled that after amendment with effectfrom 01.04.1989 in the Act, the Assessing Officer has reasons tobelieve that the income has escaped assessment, but this does notimply that the Assessing Officer can reopen an assessment on amere change of opinion. The concept of “change of opinion” mustbe treated as an in-built test to check the abuse of power and hencethe Assessing Officer even after the amendments made in therelevant provisions from 01.04.1989 has the power to reopen anassessment provided there is tangible material to come to theconclusion that there was escapement of income from assessment. The ambit and scope of Section 147 has been considered in detail by the Hon’ble Supreme Court in Mangalam Publications’ case (supra) and it shall be apt to reproduce the relevant observationsas contained in paras 32 to 36 thereof which read as under: The ambit and scope of Section 147 has been considered in detail by the Hon’ble Supreme Court in Mangalam Publications’ case (supra) and it shall be apt to reproduce the relevant observationsas contained in paras 32 to 36 thereof which read as under: “32. Let us now discuss some of the judgments cited at thebar. First and foremost is the decision of a constitutionbench of this Court in Calcutta Discount Company Limitedvs. Income Tax Officer, Companies District I, Calcutta andanother 1961, Vol.41 ITR 191. That was a case underSection 34of the Indian Income Tax Act, 1922 which is inpari-materia to Section 147 of the Act. The constitutionbench explained the purport of Section 34 of the IndianIncome Tax Act, 1922 and highlighted two conditions whichwould have to be satisfied before issuing a notice to reopenan assessment beyond four years but within eight years (aswas the then limitation). The first condition was that theincome tax officer must have reason to believe that income,profits or gains chargeable to income tax had been under-assessed. The second condition was that he must have alsoreason to believe that such under-assessment had occurredby reason of either (i) omission or failure on the part of theassessee to make a return of his income under Section 22,or (ii) omission or failure on the part of the assessee todisclose fully and truly all material facts necessary for hisassessment for that year. It was emphasized that both thesewere conditions precedent to be satisfied before the incometax officer could have jurisdiction to issue a notice for theassessment or re-assessment beyond the period of fouryears but within the period of eight years from the end of theyear in question. The words used in the expression“omission or failure to disclose fully and truly all material facts necessary for his assessment for that year” wouldpostulate a duty on every assessee to disclose fully andtruly all material facts necessary for his assessment thoughwhat facts are material and necessary for assessment woulddiffer from case to case. On the above basis, this Courtcame to the conclusion that while the duty of the assesseeis to disclose fully and truly all primary facts, it does notextend beyond this. This position has been reiterated insubsequent decisions by this Court including in Income TaxOfficer Vs. Lakhmani Mewal Das, 1976 (3) SCC 757; 1976(103) ITR 437. The expression “reason to believe” has alsobeen explained to mean reasons deducible from thematerials on record and which have a live link to theformation of the belief that income chargeable to tax hasescaped assessment. Such reasons must be based onmaterial and specific information obtained subsequently andnot on the basis of surmises, conjectures or gossip. Thereasons formed must be bona fide. 33. In M/s Phool Chand Bajrang Lal Vs. Income Tax Officer,(1993) 4 SCC 77, this Court examined the purport ofSection 147 of the Act and observed that the object ofSection 147 is to ensure that a party cannot get away bywillfully making a false or untrue statement at the time oforiginal assessment and when that falsity comes to notice,to turn around and say “you accepted my lie, now yourhands are tied and you can do nothing”. This Court opinedthat it would be a travesty of justice to allow an assesseesuch latitude. After adverting to various previous decisions,this Court held that an income tax officer acquiresjurisdiction to reopen an assessment under Section 147(a)read with Section 148 of the Act only if on the basis ofspecific, reliable and relevant information coming to hispossession subsequently, he has reasons, which he must record, to believe that due to omission or failure on the partof the assessee to make a true and full disclosure of allmaterial facts necessary for his assessment during theconcluded assessment proceedings, any part of his income,profit or gains chargeable to income tax has escapedassessment. In the above context, Supreme Court has held record, to believe that due to omission or failure on the partof the assessee to make a true and full disclosure of allmaterial facts necessary for his assessment during theconcluded assessment proceedings, any part of his income,profit or gains chargeable to income tax has escapedassessment. In the above context, Supreme Court has held as under: 25. …...He may start reassessment proceedingseither because some fresh facts come to lightwhich were not previously disclosed or someinformation with regard to the facts previouslydisclosed comes into his possession which tendsto expose the untruthfulness of those facts. Insuch situations, it is not a case of mere change ofopinion or the drawing of a different inferencefrom the same facts as were earlier available butacting on fresh information. Since, the belief isthat of the Income Tax Officer, the sufficiency ofreasons for forming the belief, is not for the Courtto judge but it is open to an assessee to establishthat there in fact existed no belief or that the beliefwas not at all a bona fide one or was based onvague, irrelevant and non-specific information. Tothat limited extent, the Court may look into theconclusion arrived at by the Income Tax Officerand examine whether there was any materialavailable on the record from which the requisitebelief could be formed by the Income Tax Officerand further whether that material had any rationalconnection or a live link for the formation of therequisite belief. It would be immaterial whether theIncome Tax Officer at the time of making theoriginal assessment could or, could not havefound by further enquiry or investigation, whetherthe transaction was genuine or not, if on the basisof subsequent information, the Income Tax Officerarrives at a conclusion, after satisfying the twinconditions prescribed in Section 147(a)of the Act,that the assessee had not made a full and truedisclosure of the material facts at the time oforiginal assessment and therefore incomechargeable to tax had escaped assessment.…… 34. This Court in the case of Srikrishna Private Limited Vs.ITO, Calcutta, (1996) 9 SCC 534 emphasized that what is required of an assessee in the course of assessmentproceedings is a full and true disclosure of all material factsnecessary for making assessment for that year. It wasemphasized that it is the obligation of the assessee todisclose the material facts or what are called primary facts. Itis not a mere disclosure but a disclosure which is full andtrue. Referring to the decision in Phool Chand Bajrang Lal(supra), it has been highlighted that a false disclosure is nota true disclosure and would not satisfy the requirement ofmaking a full and true disclosure. The obligation of theassessee to disclose the primary facts necessary for hisassessment fully and truly can neither be ignored norwatered down. All the requirements stipulated by Section147 must be given due and equal weight. 35. CIT, Delhi Vs. Kelvinator of India Limited, (2010) 2 SCC723, is a case where this Court examined the question as towhether the concept of “change of opinion” standsobliterated with effect from 01.04.1989 i.e. after substitutionof Section 147 of the Act by the Direct Tax Laws(Amendment) Act, 1987. This Court considered thechanges made in Section 147 and found that prior to theDirect Tax Laws (Amendment) Act, 1987, reopening couldbe done under two conditions i.e., (a) the Income Tax Officerhad reason to believe that by reason of omission or failureon the part of the assessee to make a return under Section139 for any assessment year or to disclose fully and truly allmaterial facts necessary for his assessment for that year,income chargeable to tax had escaped assessment for thatyear, or (b) notwithstanding that there was no such omissionor failure on the part of the assessee, the Income Tax Officerhad in consequence of information in his possession reasonto believe that income chargeable to tax had escapedassessment for any assessment year. Fulfilment of the above two conditions alone conferred jurisdiction on theassessing officer to make a re-assessment. But with effectfrom 01.04.1989, the above two conditions have been givena go-by in Section 147 and only one condition hasremained, viz, that where the assessing officer has reasonto believe that income has escaped assessment, that wouldbe enough to confer jurisdiction on the assessing officer toreopen the assessment. Therefore, post 01.04.1989, powerto reopen assessment is much wider. However, this Courtcautioned that one needs to give a schematic interpretationto the words “reason to believe”, otherwise Section 147would give arbitrary powers to the assessing officer toreopen assessments on the basis of “mere change ofopinion”, which cannot be per se reason to reopen. 35.1. This Court also referred to Circular No.549 dated31.10.1989 of the Central Board of Direct Taxes (CBDT) toallay the apprehension that omission of the expression“reason to believe” from Section 147 and its substitution bythe word “opinion” would give arbitrary powers to theassessing officer to reopen past assessments on merechange of opinion and pointed out that in 1989 Section 147was once again amended to reintroduce the expression “hasreason to believe” in place of the expression “for reasons tobe recorded by him in writing, is of the opinion”. This Courtthereafter explained as under: 6. We must also keep in mind the conceptualdifference between power to review and power toreassess. The assessing officer has no power toreview; he has the power to reassess. Butreassessment has to be based on fulfilment ofcertain precondition and if the concept of “changeof opinion” is removed, as contended on behalf ofthe Department, then, in the garb of reopening theassessment, review would take place. difference between power to review and power toreassess. The assessing officer has no power toreview; he has the power to reassess. Butreassessment has to be based on fulfilment ofcertain precondition and if the concept of “changeof opinion” is removed, as contended on behalf ofthe Department, then, in the garb of reopening theassessment, review would take place. 6. We must also keep in mind the conceptualdifference between power to review and power toreassess. The assessing officer has no power toreview; he has the power to reassess. Butreassessment has to be based on fulfilment ofcertain precondition and if the concept of “changeof opinion” is removed, as contended on behalf ofthe Department, then, in the garb of reopening theassessment, review would take place. difference between power to review and power toreassess. The assessing officer has no power toreview; he has the power to reassess. Butreassessment has to be based on fulfilment ofcertain precondition and if the concept of “changeof opinion” is removed, as contended on behalf ofthe Department, then, in the garb of reopening theassessment, review would take place. 7. One must treat the concept of “change ofopinion” as an in-built test to check abuse ofpower by the assessing officer. Hence, after1-4-1989, the assessing officer has power toreopen, provided there is “tangible material” tocome to the conclusion that there is escapementof income from assessment. Reasons must havea live link with the formation of the belief. Our viewgets support from the changes made to Section147 of the Act, as quoted hereinabove. Under theDirect Tax Laws (Amendment) Act, 1987,Parliament not only deleted the words “reason tobelieve” but also inserted the word “opinion” inSection 147of the Act. However, on receipt ofrepresentations from the companies againstomission of the words “reason to believe”,Parliament reintroduced the said expression anddeleted the word “opinion” on the ground that itwould vest arbitrary powers in the assessingofficer. 36. Elaborating further on the expression “change ofopinion”, this Court in ITO vs. TechSpan India PrivateLimited (AIR 2018 SC 2113) observed that to check whetherit is a case of change of opinion or not one would have tosee its meaning in literal as well as legal terms. Theexpression “change of opinion” would imply formulation ofopinion and then a change thereof. In terms of assessmentproceedings, it means formulation of belief by the assessingofficer resulting from what he thinks on a particular question.Therefore, before interfering with the proposed reopening ofthe assessment on the ground that the same is based onlyon a change of opinion, the court ought to verify whether theassessment earlier made has either expressly or bynecessary implication expressed an opinion on a matterwhich is the basis of the alleged escapement of income thatwas taxable. If the assessment order is non-speaking,cryptic or perfunctory in nature, it may be difficult to attributeto the assessing officer any opinion on the questions thatare raised in the proposed reassessment proceedings.” 29.It is not in dispute that the original assessment by theAssessing Officer in this case was framed vide assessment orderdated 28.03.2016 and during the course of these proceedings, entirebooks of accounts, bills and vouchers have been duly perused bythe then Assessing Officer. It is after perusal of the books ofaccounts, bills and vouchers that the Assessing Officer had formed aview that the parts imported from Majesty Packaging InternationalLtd. were used in the manufacturing of product. Therefore,reopening of the case, that too, on the ground that expenditure ofRs.59,76,849/- was incurred for acquisition of capital, is not liable tobe treated as revenue expenditure, is absolutely wrong asadmittedly what was imported was perfume pumps to be installedfor packing and sale of the product of the petitioner-company andthe same could not have been held to be capital expenditure at alland the same, therefore, has rightly been booked as revenueexpenditure. 30.As regards an amount of Rs.4,66,896/- towards earnedreceipt of damaged goods that was claimed by the petitioner-company, there was nothing on record to suggest that the sale ofdamaged stock had not been derived from an industrial activity and,therefore, not admissible for deduction under Section 80IC. 31.Here again, while framing initial assessment of thepetitioner-company, the Assessing Officer had made independent analysis of the books of accounts and other relevant material. As amatter of fact, a detailed notice had been issued to the petitioner-company on 28.03.2021 qua this very aspect of the matter to whichdetailed written submissions along with cogent and corroborativedocumentary evidence in the form of invoices etc. had been dulysupplied by the petitioner-company. 32.Record reveals that the objections were raised only bythe Audit Party and, therefore, reasons have been recorded onborrowed satisfaction of the Audit Party and not that of therespondent-department. A perusal of the reasons for reopening thecase would make it evidently clear that all the material have beenculled out from the assessment record submitted by the petitioner.Therefore, in absence of new facts coming to the knowledge of theAssessing Officer subsequent to the original assessmentproceedings, the reopening of the case cannot be done on the basisof the same material. (Refer: Income Tax Officer, Ward No.16(2)vs. M/s TechSpan India Private Limited and another, AIR 2018 SC2113). 33.Moreover, as noticed above, the assessment order inthe instant case is not the one which could be termed to be non-speaking, cryptic or perfunctory in nature and, therefore, it can easilybe inferred and attributed to t