M/S. Pvp Ventures Limited,Rep. By Its Head -Finance & Accounts Mr.s.kannan, Krm Centre, 9Th Floor v. The Deputy Commissioner Of Income Tax, Corporate Circle 5(2)

IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved on: 12.10.2015 & Pronounced on: 27.10.2015 CORAM M/s. PVP Ventures Limited,rep. by its Head -Finance & Accounts Mr.S.Kannan, KRM Centre, 9th Floor, No.2, Harrington Road, Chetpet, Chennai - 600 031. ..Appellant/Petitioner in both Appeals Vs. 2. The Deputy Commissioner of Income Tax, Corporate Circle 5(2), 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. ..2nd Respondent in WA.1171/2015 & Writ Appeals under Clause 15 of Letters Patent against thecommon order dated 11.06.2015 passed by a learned Judge,dismissing the writ petitions filed by the appellant inW.P.Nos.1626 and 2057 of 2015. WP.No.1626/2015: This Writ petition is filed under Article 226of the Constitution of India, praying for the issuance of a writof Certiorari to call for the records on the file of the 2ndrespondent and quash the impugned proceedings in PANNo.AAACS310P/Corp.Cir-5(2)/2014-15 dated 12.01.2015 of theRespondent along with notice issued by the 1st Respondentu/s.148 of the Act dated 10.12.2013 WP.NO.2057/2015: This Writ petition is filed under Article 226of the Constitution of India, praying for the issuance of a writof Certiorarified mandamus, to call for the records on the fileof the respondent and quash the impugned order dt 20.1.2015 andconsequently direct the respondent to afford opportunity ofbeing heard. These writ appeals arise out of the dismissal of two writpetitions filed by the appellant, questioning a show causenotice dated 12.1.2015 and an order of assessment dated20.1.2015 passed after reopening of assessment. 2. We have heard Mr.R.Sivaraman, learned counsel for theappellant and Mr.Pramodkumar Chopda, learned Standing Counselappearing for the respondent. 3. The appellant/assessee filed a Return of Income on30.9.2008 declaring a loss of Rs.14,07,72,863/-. Later theyfiled a Revised Return of Income on 26.3.2009 declaring a lossof Rs.17,47,251/-. The case was selected for scrutiny and anotice under Section 143(2) and 142(1) was issued. 4. Six specific issues were taken up in the course ofscrutiny proceedings. One of them related to income frompurported sale of land. The assessee had declared an income ofRs.14,31,19,916/- as Short Term Capital Gain on sale of land.Since Fixed Assets Schedule of the company for the relevantprevious year did not show any land having been disposed of andsince the depreciation statement of the assessee prepared forincome tax purposes also showed a particular value at thebeginning and at the end of the relevant year, the AssessingOfficer concluded in para 5 of the Order of Assessment dated31.12.2010 that the assessee had income from undisclosed sourcesassessable under Section 69A. Consequently, the AssessingOfficer treated the entire receipt of sale consideration ofRs.31,07,20,000/- derived by the assessee from undisclosedsources assessable under Section 69A. 5. Subsequently, the Assessing Officer passed arectification order on 6.9.2011 under Section 154 of the Act.This order was for the purpose of adjustment of losses under the head Unabsorbed Depreciation and Business Loss of Earlier Years. 6. More than two years after the order passed under Section154 and more then three years after the Original Order ofAssessment, the Assessing Officer issued a notice under Section148, proposing to reassess the income for the Assessment Year2008-09, on the ground that he had reason to believe that theincome chargeable to tax had escaped assessment within themeaning of Section 147. 7. The appellant made a request on 19.12.2013 demandingreasons for the reopening of assessment. The reasons forreopening the assessment were communicated by a letter dated8.12.2014. The letter reads as follows: head Unabsorbed Depreciation and Business Loss of Earlier Years. 6. More than two years after the order passed under Section154 and more then three years after the Original Order ofAssessment, the Assessing Officer issued a notice under Section148, proposing to reassess the income for the Assessment Year2008-09, on the ground that he had reason to believe that theincome chargeable to tax had escaped assessment within themeaning of Section 147. 7. The appellant made a request on 19.12.2013 demandingreasons for the reopening of assessment. The reasons forreopening the assessment were communicated by a letter dated8.12.2014. The letter reads as follows: "The scrutiny assessment was completed u/s143(3) determining the total income at Rs.415.20crores after making an addition of Rs.415.37crores which included Rs.408.78 crores made u/s68 & 69A. The assessment was revised whichinteralia included to allow the assessee's claimfor set off of unabsorbed depreciationaggregating to Rs.45.18 crores relating to A.Y.2004-05 and unabsorbed business loss of Rs.4.15crores relating to A.Y.2005-06. The aboveaddition u/s 68 & 69A is deemed income of theassessee and does not come under any heads ofincome specified in Chapter IV of the Income-taxAct, 1961 and hence brought forward business lossand depreciation cannot be set off against thisas per Section 72." 8. Immediately the appellant submitted their objections on12.12.2014, followed by another letter dated 15.12.2014. Butoverruling the objections, an order was passed on 12.1.2015.Simultaneously, a show cause notice was also issued on12.1.2015, seeking to make additions. 9. The appellant submitted their detailed objections on19.1.2015. On the very next day namely 20.1.2015, the AssessingOfficer passed an order of assessment and directed the issue ofdemand notice. A demand notice dated 21.1.2015 was accordinglyissued. 10. Aggrieved by the show cause notice dated 12.1.2015 aswell as the order of assessment dated 20.1.2015, on the groundthat the reopening of assessment itself was illegal, theappellant filed two writ petitions in W.P.Nos. 1626 and 2057 of2015. The writ petitions were dismissed by the learned Judge by https://hcservices.ecourts.gov.in/hcservices/ a common order dated 11.06.2015, on the ground that since theoriginal Returns filed by the appellant got merged with therectification order dated 6.9.2011, the period of 4 years has tobe calculated not from the end of the relevant assessment year,but from the date, on which, the rectification application wasfiled. Therefore, the learned Judge held that the reopening ofassessment was within the period of 4 years prescribed underSection 147. In the light of such a conclusion, the learnedJudge held that the appellant should canvass the correctness ofthe order of assessment only before the First AppellateAuthority in regular appeal. Aggrieved by the said common orderof the learned Judge, the appellant is before us. https://hcservices.ecourts.gov.in/hcservices/ a common order dated 11.06.2015, on the ground that since theoriginal Returns filed by the appellant got merged with therectification order dated 6.9.2011, the period of 4 years has tobe calculated not from the end of the relevant assessment year,but from the date, on which, the rectification application wasfiled. Therefore, the learned Judge held that the reopening ofassessment was within the period of 4 years prescribed underSection 147. In the light of such a conclusion, the learnedJudge held that the appellant should canvass the correctness ofthe order of assessment only before the First AppellateAuthority in regular appeal. Aggrieved by the said common orderof the learned Judge, the appellant is before us. 11. At the outset, even Mr.T.Promodkumar Chopda, learnedStanding Counsel for the department, does not support theconclusion reached by the learned Judge that the reopening ofassessment should be taken to be within the period of 4 years,in view of the fact that a petition for rectification underSection 154 was filed on 25.1.2011. This is due to the fact thatthe Proviso to Section 147 makes it very clear that where anassessment under Section 143(3) has been made for the relevantassessment year, no action shall be taken under this sectionafter the expiry of 4 years from the end of the relevantassessment year. The only exception to this Rule of Limitationis that if any income chargeable to tax has escaped assessmentby reason of the failure on the part of the assessee to make areturn under Section 139 or in response to a notice issued underSection 142(1) or Section 148 or to disclose fully and truly allmaterial facts necessary for his assessment, the limitation of 4years may not apply. 12. The Proviso to Section 147 does not use the expression"assessment" or "reassessment". Therefore, the starting pointfor the period of limitation is not the date of assessment orrevised assessment and/or reassessment. The Proviso uses theexpression "from the end of the relevant assessment year".Hence, the finding recorded by the learned Judge in para 16 ofhis common order dated 11.06.2015 is not correct. This is whythe learned Standing Counsel for the Department endeavoured tocontend before us that this is a case of failure on the part ofthe assessee to disclose fully and truly all material facts. Inother words, the attempt of the learned Standing Counsel for theDepartment was to convince us that though the reopening ofassessment was sought to be made beyond the period of limitationstipulated in the proviso to Section 147, the case is one offailure to disclose and it is a case of escapement of assessmentwithin the purview of Explanation 2 to Section 147. 13. Having cleared the question of limitation as above, letus now move on to the contentions of the appellant. 14. Assailing the order of the learned Judge, it iscontended by Mr.R. Sivaraman, learned counsel for theappellant/assessee that the mere reopening of assessment was ona change of opinion on the part of the Assessing Officer andhence, it is bad in law. 15. The next contention of the learned counsel for theappellant is that the reasons for reopening the assessmentindicated in the letter dated 8.12.2014 were different from thereasons indicated in the show cause notice dated 12.1.2015 andhence, the order resulting therefrom is illegal. 16. The third contention of the learned counsel for theappellant is that this is not a case, which will fall eitherunder the category of (i) failure to file return or (ii) failureto disclose fully and truly all material facts. Therefore, theperiod of limitation would operate in respect of the case onhand. 15. The next contention of the learned counsel for theappellant is that the reasons for reopening the assessmentindicated in the letter dated 8.12.2014 were different from thereasons indicated in the show cause notice dated 12.1.2015 andhence, the order resulting therefrom is illegal. 16. The third contention of the learned counsel for theappellant is that this is not a case, which will fall eitherunder the category of (i) failure to file return or (ii) failureto disclose fully and truly all material facts. Therefore, theperiod of limitation would operate in respect of the case onhand. 17. The last contention of the learned counsel for theappellant is that the Assessing Officer was in such a greathurry that he neither considered the detailed objectionssubmitted on 19.1.2015 nor considered a letter seeking time tofile further objections. Therefore, the learned counsel contendsthat there was a gross violation of principles natural justice. 18. On the first contention, we do not think that we needto spend more time. The Supreme Court made it clear inCommissioner of Income Tax v. Kelvinator of India Limited[(2010) 320 ITR 561 (SC)], that though the power to reopenassessment, after the Direct Tax Laws (Amendment) Act 1987, ismuch wider, one needs to give schematic interpretation to thewords "reason to believe", failing which, Section 147 would givearbitrary powers to the Assessing Officer to reopen assessmentson the basis of "mere change of opinion". The Court emphasisedthat the Assessing Officer has no power of review and that thereis a conceptual difference between the power of review and powerto reassess. One must treat, according to the Supreme Court,the concept of "change of opinion" as an inbuilt test to checkabuse of power by the Assessing Officer. 19. The reliance placed by Mr.T.Pramodkumar Chopda, learnedStanding Counsel for the Department on the decision of theSupreme Court in Reymonds Woollen Mills Limited v. Income TaxOfficer [(1999) 236 ITR 34 (SC), cannot be of any assistance tohim. The decision in Kelvinator was by a three Member Bench andit was made long after the decision in Reymonds Woollen Mills Limited. 20. It is contended by Mr.T.Promodkumar Chopda, learnedStanding Counsel for the Department that this is not a case ofchange of opinion. At the time when a scrutiny assessment wasmade, the Assessing Officer did not even form an opinion aboutthe addition made under Sections 68 and 69A. Therefore, thereopening of assessment, according to the learned StandingCounsel, cannot be said to tantamount to change of opinion. 21. We do not agree. The scrutiny assessment order dated31.12.2010, as we have pointed out earlier, dealt with sixspecific issues. One such issue was the income from purportedsale of land. In paragraph 5 of the order of scrutiny assessmentdated 31.12.2010, the Assessing Officer specifically dealt withincome from undisclosed sources assessable under Section 69A.Paragraph 5 of the scrutiny assessment order dated 31.12.2010reads as follows:- 21. We do not agree. The scrutiny assessment order dated31.12.2010, as we have pointed out earlier, dealt with sixspecific issues. One such issue was the income from purportedsale of land. In paragraph 5 of the order of scrutiny assessmentdated 31.12.2010, the Assessing Officer specifically dealt withincome from undisclosed sources assessable under Section 69A.Paragraph 5 of the scrutiny assessment order dated 31.12.2010reads as follows:- "5. Income from purported Sale of land:The assessee has declared an income ofRs.14,31,19,916/- as Short Term Capital Gain(STCG) on sale of land. It was seen from theFixed Schedule of the assessee company for therelevant previous year that no Land has beenshown as disposed off (land value at thebeginning and at the end of the relevant yearquantifiedatRs.15,12,91,428/-).TheDepreciation Statement of the assessee preparedfor I.T. purposes also shows the same value atthe beginning and at the end of the relevantyear. Hence, it can be conclusively taken thatthe assessee has income from undisclosed sources(assessable u/s 69A) which it has tried toproject as income from STCG, obviously, for thepurpose of Set-off of STCG against business loss.Thereforetheentirereceiptofsaleconsideration of Rs.31,07,20,000/- derived by theassessee from undisclosed sources is assessedu/s.69A of the I.T. Act." 22. Therefore, it is wholly untenable for the Revenue tocontend that the Assessing Officer never formed an opinion atthe time of scrutiny assessment and that therefore, theformation of opinion for the first time cannot tantamount tochange of opinion. 23. Drawing our attention to the show cause notice dated12.1.2015, it is next pointed out by the learned StandingCounsel for the Department that there were actually four https://hcservices.ecourts.gov.in/hcservices/ different reasons for the reopening of assessment. Hence, it iscontended that even if the issue relating to income fromundisclosed sources assessable under Section 69A is taken tohave been already covered by the scrutiny assessment order, theother issues raised in the show cause notice would still remain. 24. But unfortunately for the Department, we cannot nowallow the Department to enlarge the scope of the enquiry underSection 147. As per the communication dated 8.12.2014, which wehave extracted in para 7 above, there was only one reason statedfor reopening of the assessment. The Department will have tostand or fall only on the reasons stated therein, for justifyingthe reopening of assessment. 25. However, drawing our attention to Explanation 3 underSection 147, it is contended by Mr.T.Pramodkumar Chopda, learnedStanding Counsel for the Department that the reassessment soughtto be made under Section 148, need not be confined to thereasons stated in the proceedings under Section 148(2). Insupport of this contention, the learned Standing Counsel placedreliance upon a decision of the Punjab and Haryana High Court inMajinder Singh Kang v. Commissioner of Income Tax [(2012) 25Taxmann.com 124]. 26. In order to test the above contention, we have to takenote of the provisions of Sub-Sections (1) and (2) of Section148 as well as Explanation-3 under Section 147. Sub-Section (1)of Section 148 obliges the Assessing Officer to serve a noticeon the assessee requiring him to furnish a return of his incomein respect of which he is assessable. Before issuing any suchnotice under Section 148(1), the Assessing Officer is madeobliged to record his reasons for doing so under Sub-Section (2)of Section 148. 26. In order to test the above contention, we have to takenote of the provisions of Sub-Sections (1) and (2) of Section148 as well as Explanation-3 under Section 147. Sub-Section (1)of Section 148 obliges the Assessing Officer to serve a noticeon the assessee requiring him to furnish a return of his incomein respect of which he is assessable. Before issuing any suchnotice under Section 148(1), the Assessing Officer is madeobliged to record his reasons for doing so under Sub-Section (2)of Section 148. 27. Keeping this in mind, let us see what Explanation 3 toSection 147 says, which reads as follows: "Explanation 3. - For the purpose ofassessment or reassessment under this section,the Assessing Officer may assess or reassess theincome in respect of any issue, which has escapedassessment, and such issue comes to his noticesubsequently in the course of the proceedingsunder this section, notwithstanding that thereasons for such issue have not been included inthe reasons recorded under sub-section (2) ofsection 148." 28. A careful perusal of the Explanation extracted abovewould show that the Assessing Officer is given liberty to assess or reassess the income in respect of any issue that comes to hisnotice subsequently in the course of the proceedings underSection 147, even if the reasons for such issue have not beenincluded in the proceedings under Section 148(2). Two sets ofwords found in Explanation 3 are of importance. The word"subsequently" and the words "in the course of proceedings"clearly indicate that an issue other than the one mentioned inthe order under Section 148(2) should have come to his notice,after the recording of reasons. It should have come to hisnotice "in the course of proceedings". The words "in the courseof proceedings" are also of significance. As a matter of fact,in the decision of the Punjab and Haryana High Court in MajinderSingh Kang, the assessment was reopened on the ground that theassessee in question, who was the Chairman of a State ownedCorporation, was charge sheeted by the Department of Vigilanceand Anti-Corruption, after which, he filed a revised Return.Therefore, there was never a question as to the issue whetherthe reopening of assessment was proper or not. After thethreshold entry point was crossed, the Assessing Officer foundin the course of the proceedings that some other additions werealso liable to be made. Therefore, the said case is of noassistance to the Revenue. 29. Even the decision in Commissioner of Income Tax v.Mehak Finvest (P) Ltd. [(2014) 52 Taxmann.com 51] of the Punjaband Haryana High Court cannot go to the rescue of the Revenue.In that case, the Assessing Officer reopened the assessment,upon receipt of information that various finance companiesmanaged and controlled by Chartered Accountants were involved inproviding accommodation entries to the assessee company.Therefore, the validity of the reopening of assessment was notin doubt. After reopening, the Assessing Officer also found thatthere was an unexplained income in the form of share applicationmoney. Therefore, it was added. This was upheld by the Punjaband Haryana High Court. Hence, the said decision is of no availto the Revenue. 30. As we have indicated earlier, cases where the reopeningis found to be within the parameters of the prescriptioncontained in Sections 147 and 148, the additions madesubsequently in the course of the proceedings, have always beenupheld by Courts. But, where the reopening of assessment cannotstand on the strength of the reasons recorded under Section 148(2), the Revenue cannot seek to justify the reopening, byfinding some point or the other post-facto after the reopeningof assessment. 31. Sub-Sections (1) and (2) of Section 148 and Explanation3 under Section 147 contemplate two entry points or two gate https://hcservices.ecourts.gov.in/hcservices/ 30. As we have indicated earlier, cases where the reopeningis found to be within the parameters of the prescriptioncontained in Sections 147 and 148, the additions madesubsequently in the course of the proceedings, have always beenupheld by Courts. But, where the reopening of assessment cannotstand on the strength of the reasons recorded under Section 148(2), the Revenue cannot seek to justify the reopening, byfinding some point or the other post-facto after the reopeningof assessment. 31. Sub-Sections (1) and (2) of Section 148 and Explanation3 under Section 147 contemplate two entry points or two gate https://hcservices.ecourts.gov.in/hcservices/ ways. The first entry point or the outer gate is the formationof an opinion that there was some income, which escapedassessment and which is reflected in the reasons recorded underSection 148(2). The Assessing Officer will be permitted entrythrough this outer gate only if he satisfies three criterianamely (i) the existence of a reason to believe that an incomechargeable to tax has escaped assessment (ii) the recording ofreasons under Section 148(2) and (iii) the issuing of noticeunder Section 148(1). Once the Assessing Officer satisfies thesethree criteria, he is allowed entry through the outer gate orthe first check-post. The moment he has gained entry lawfullythrough the first check-post, the proceedings for reassessmentbegin. In the course of those proceedings, if issues other thanthose, which triggered the formation of his opinion underSection 147, come to his notice, he would be permitted, byvirtue of Explanation 3, to gain entry into all other check-posts located within the prohibited area. Therefore, Explanation3 comes into play only after the Assessing Officer gains entrythrough the first door. If the Assessing Officer is imagined tobe an air passenger, travelling by flight to anotherdestination, his reason to believe, his recording of reasons andthe issuance of notice can be compared to a valid ticket that heholds. Only if he holds such a valid ticket, he will bepermitted entry into the airport. After gaining entry into theairport, he may also be permitted to visit restaurants, duty-free shops etc., before boarding the flight. His access to thefacilities inside the airport is dependent upon his right ofentry into the airport. This is how Sub-Sections (1) and (2) ofSection 148 and Explanation 3 to Section 147 have to beunderstood. 32. Therefore, any number of reasons indicated in the showcause notice, cannot justify the reopening of assessment. Thejustification for reopening of assessment has to be tested onlyon the strength of the order recording reasons for reopeningunder Section 148(2). Once the reasons are found to be notwithin the prohibited degree or found not to be a mere change ofopinion, or found not to be amenable to attack on any otherground under Section 147, then, proceedings for reassessmentwould commence. After commencement, all other issues includingthose not covered in the original notice will also be amenableto scrutiny by the Assessing Officer. Hence the contention basedupon Explanation 3 to 147 is rejected. 33. That takes us to the next question as to whether thiscase would fall under the category of failure on the part of theassessee to disclose fully and truly all material factsnecessary for his assessment. https://hcservices.ecourts.gov.in/hcservices/ 34. This question becomes one of importance in view of theadmitted position and in view of our finding that the reopeninghas obviously taken place after the expiry of four years fromthe end of the relevant assessment year. Under the proviso toSection 147, there must be a failure on the part of the assesseeto disclose fully and truly all material facts, to justifyreopening of assessment after the expiry of four years. 33. That takes us to the next question as to whether thiscase would fall under the category of failure on the part of theassessee to disclose fully and truly all material factsnecessary for his assessment. https://hcservices.ecourts.gov.in/hcservices/ 34. This question becomes one of importance in view of theadmitted position and in view of our finding that the reopeninghas obviously taken place after the expiry of four years fromthe end of the relevant assessment year. Under the proviso toSection 147, there must be a failure on the part of the assesseeto disclose fully and truly all material facts, to justifyreopening of assessment after the expiry of four years. 35. In the case on hand, paragraph 5 of the order ofscrutiny assessment dated 31.12.2010 and the order passed underSection 154 on 6.9.2011 show that all material facts on accountof which the Assessing Officer sought to reopen the assessment,were not only available on record but they had also been takeninto account by the Assessing Officer. There was nothing thatthe assessee has failed to disclose fully and truly. What wasshown by the assessee as income from undisclosed sourcesassessable under Section 69A was not only available, but wasvery clearly taken note of by the Assessing Officer both in theorder of scrutiny assessment dated 31.12.2010 and the orderunder Section 154 dated 6.9.2011. The record of reasons underSection 148(2), made on 8.12.2014 does not disclose what are thematerial facts that the appellant/assessee failed to disclosetruly and fully. The reasons for reopening, recorded on8.12.2014 are already available and taken note of in para 5 ofthe order of scrutiny assessment. Therefore, this is not a casewhere the appellant/assessee can be held to have failed todisclose truly and fully all material facts. 36. Mr.T.Promodkumar Chopda, learned Standing Counsel forthe department, in a brave attempt to save the reopening ofassessment, contended that if an assessee makes a claim in theForm in which he files his return and that claim is found to belegally untenable, the same would tantamount to a failure todisclose truly and fully all material facts. In other words hiscontention is that if an assessee has claimed an addition orallowance under a particular provision though he is not entitledto the same in law, he would be taken to be guilty of failure todisclose fully and truly according to the learned StandingCounsel, the assessee made a claim under Section 68 and 69Athough he was not entitled to the same and that this wouldamount to a failure to disclose. 37. Except patting the learned Standing Counsel for hisbravery, we do not think that we can go with him. True and fulldisclosure contemplated in the first proviso to Section 147 isthat "all material facts" and not of a legal provision. If anassessee has disclosed all material facts truly and fully, buthas made a claim which is wrong in law, the same cannot amount to failure to disclose, in terms of the first proviso to Section147. 38. In Fenner (India) Limited v. Deputy Commissioner ofIncome Tax [(2000) 241 ITR 672], R.Jayasimha Babu, J (as he thenwas) explained this position as follows:- 37. Except patting the learned Standing Counsel for hisbravery, we do not think that we can go with him. True and fulldisclosure contemplated in the first proviso to Section 147 isthat "all material facts" and not of a legal provision. If anassessee has disclosed all material facts truly and fully, buthas made a claim which is wrong in law, the same cannot amount to failure to disclose, in terms of the first proviso to Section147. 38. In Fenner (India) Limited v. Deputy Commissioner ofIncome Tax [(2000) 241 ITR 672], R.Jayasimha Babu, J (as he thenwas) explained this position as follows:- "21. The duty of an assessee is limited to fullyand truly disclose all the material facts. Theassessee is not required thereafter to prepare adraft assessment order. If the details placed bythe assessee before the AO was in conformity withthe requirements of all applicable laws and knownaccounting principles, and materials details hadbeen exhibited before the AO, it is for the AO toreach such conclusions as he considered waswarranted from such data and any failure on hispart to do so cannot be regarded as assessee'sfailure to furnish the material facts truly andfully. Any lack of comprehension on the part ofthe AO in understanding the details placed beforehim cannot be confer a justification forreopening the assessment, long after the periodof four years had expired. On the facts of thiscase, it is clear that the escapement of incomeif any on this account is not on account of anyfailure on the assessee's part to disclose thematerial facts fully and truly. The notice issuedby the AO in exercise of his power under s.147,therefore, cannot be sustained." 39. Similarly, in Assistant Commissioner of Income Tax v.ICICI Securities Primary Dealership Limited [(2012) 348 ITR299], the Supreme Court held that when all details with respectto the stocks and shares and the income derived therefrom aredisclosed in the Return, a dispute as to whether the lossincurred was a business loss or speculative loss, cannot comeunder the category of failure to disclose. 40. In Commissioner of Income Tax v. Elgi Finance Limited[(2006) 286 ITR 674], this Court found that when the assesseehad furnished details regarding the acquisition of variousmachineries and assets and the details regarding leasing out ofthose machineries together with the lease rent received as wellas computation of depreciation, an attempt to reopen theassessment was made on the ground that depreciation was claimedand allowed at an higher rate. This Court held that when allmaterial facts had been disclosed truly and fully, the questionas to the correct rate of depreciation to be allowed cannot be areason for reopening after four years. Incidentally this decision also arose under identical circumstances where therewas a scrutiny assessment followed by an order of rectificationunder Section 154. 41. The learned Standing Counsel for the department reliesupon a decision of the Bombay High Court in Sociedade DeFormento Industrial (P) Ltd., v. Assistant Commissioner ofIncome Tax [(2010) 235 CTR 322 (Bombay)], to drive home thecontention as to what would constitute true and full disclosure.But the said decision arose out of a case where the assessee didnot disclose the fact that there was a new unit started. Thecase arose out of a non-disclosure of a fact and not of law. decision also arose under identical circumstances where therewas a scrutiny assessment followed by an order of rectificationunder Section 154. 41. The learned Standing Counsel for the department reliesupon a decision of the Bombay High Court in Sociedade DeFormento Industrial (P) Ltd., v. Assistant Commissioner ofIncome Tax [(2010) 235 CTR 322 (Bombay)], to drive home thecontention as to what would constitute true and full disclosure.But the said decision arose out of a case where the assessee didnot disclose the fact that there was a new unit started. Thecase arose out of a non-disclosure of a fact and not of law. 42. In Indian Hume Pipe Co. Limited v. AssistantCommissioner of Income tax [(2011) 16 taxmann.com 190], theBombay High Court held that the full and true disclosurecontemplated by statute must be judged in the context ofExplanation 1 to Section 147. The Court also held that the mereproduction of account books or other evidence from whichmaterial evidence could have been discovered, if the AssessingOfficer had exercised due diligence, would not tantamount to atrue and full disclosure. The said decision was also followed bythe same High Court in Pranawa Leafin (P) Ltd., v. The DeputyCommissioner of Income Tax [(2013) 33 taxmann.com 454]. 43. But the above decision would not be of any assistanceto the Revenue in this case. It is for the reason that in thecase on hand, the Assessing Officer indicated in para 5 of thescrutiny assessment order, not only the disclosure but also hisapplication of mind to the same. 44. The decision of the Delhi High Court in Dalmia (P) Ltd.Vs. C.I.T. [2011 (14) Taxmann.com 106], relied upon by thelearned Standing Counsel for the Department, would not alsoadvance the case of the Department. This is for the reason thatin that case, the re-assessment proceedings were initiated onthe basis of audit note and the Assessing Officer called forcomplete details and confirmations from sundry creditors. Theassessee was able to provide confirmation only for part of theamount. But, the assessee contended that in the originalproceedings, the Assessing Officer had taken a conscious anddeliberate decision to add one particular portion of the amount,for which, confirmation was called for. Therefore, the assesseerelied upon the decision in Kelvinator. But, the Delhi HighCourt held that in the questionnaire issued by the AssessingOfficer at the time of the original assessment proceedings, theassessee was asked to submit a list of sundry creditors withtheir names and addresses and that the said demand was onlypartially complied by the assessee. Therefore, the Court held that there was no formation of opinion in the first instance, soas to enable the assessee to contend that the reopening ofassessment was merely a change of opinion. In contrast to thesaid case before the Delhi High Court, the Assessing Officer, inthe case on hand, had all material facts on hand in the courseof scrutiny assessment and also applied his mind to the claim,as seen from paragraph 4 of the scrutiny assessment order.Therefore, the decision in Dalmia cannot be pressed intoservice. 45. The decision of the Gujarat High Court in FakkirMohamed Haji Hasan Vs. C.I.T. [2002 (120) Taxmann 11 (Guj.)],relied upon by the learned Standing Counsel for the Department,is not a case that arose out of reopening of assessment. Thesaid decision relates to the applicability of Sections 69, 69A,69B and 69C. 46. The Standing Counsel relies upon this decision tocontend that the Assessing Officer was right on the merits ofthe case. 47. But, we have not tested the merits of the case. We areon the primary question as to whether the reopening ofassessment is in accordance with the provisions of the statuteor not. (i) that there was true and full disclosure by the assesseeof all material facts; 45. The decision of the Gujarat High Court in FakkirMohamed Haji Hasan Vs. C.I.T. [2002 (120) Taxmann 11 (Guj.)],relied upon by the learned Standing Counsel for the Department,is not a case that arose out of reopening of assessment. Thesaid decision relates to the applicability of Sections 69, 69A,69B and 69C. 46. The Standing Counsel relies upon this decision tocontend that the Assessing Officer was right on the merits ofthe case. 47. But, we have not tested the merits of the case. We areon the primary question as to whether the reopening ofassessment is in accordance with the provisions of the statuteor not. (i) that there was true and full disclosure by the assesseeof all material facts; (ii) that in the scrutiny assessment order, the AssessingOfficer accepted the claim of the assessee under Section 69A; (iii) that however, after the expiry of four years, theAssessing Officer sought to reopen the proceedings contrary tothe proviso to Section 147; and (iv) that therefore, the reopening of assessment iscontrary to law. 49. Once it is found that the reopening of assessment iscontrary to law, the question of directing the appellant to thealternative remedy of appeal before the Commissioner of IncomeTax does not arise, especially when the case is obviously one ofchange of opinion. https://hcservices.ecourts.gov.in/hcservices/ 50. In the result, the writ appeals are allowed, the commonorder of the learned Judge is set aside and the writ petitionsare allowed. No costs. Sd/ASSISTANT REGISTRAR(CS-III)SUB-ASSISTANT REGISTRAR /TRUE COPY/ gr./RS To1. The Assistant Commissioner of Income Tax, Corporate Circle 5(2), 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034.2. The Deputy Commissioner of Income Tax, Corporate Circle 5(2),121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. +1 CC to MR.R.Sivaraman Advocate. SR.NO. 58964+1 CC to MR.T.Pramodkumar Chopda Advocate. SR.NO. 58186W.A.Nos. 1171 and 1172 of 2015 CO-SRJD 18/12/2015