M/S.pvp Ventures Limited,A Limited Company,Rep. By Its Head – Finance & Accounts,Mr.s.kannan v. The Assistant Commissioner Of Income Tax Companycircle 5(2)

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 11.06.2015CORAM:The Honourable Mr. Justice S.VAIDYANATHANWrit Petition No.1626 and 2057 of 2015And M.P.Nos.1 & 1 of 2015Reserved on 31.03.2015 M/s.PVP Ventures Limited,A Limited Company,Rep. by its Head – Finance & Accounts,Mr.S.Kannan ..Petitioner in both Writ Petitions -Vs- 1. The Assistant Commissioner of Income Tax CompanyCircle 5(2),121, Mahatma Gandhi Road,Nungambakkam, Chennai-600 034. .. 1[st] Respondent in W.P.No.1626 of 2015 2. The Deputy Commissioner of Income Tax,Corporate Circle 5(2),121, Mahatma Gandhi Road,Nungambakkam, Chennai-600 034. ..2[nd] Respondent inW.P.No.1626/15..Ist Respondent inW.P.No.2057/15 Prayer in W.P.No.1626 of 2015: Writ Petition is filed under Article226 of the Constitution of India, praying for the issuance of a writof Certiorari, to call for the records on the file of the 2[nd]respondent and quash the impugned proceedings in PANNo.AAAC3101/P/Corp.Cir-5(2)/2014-15, dated 12.1.2015 along withnotice issued by the first respondent under Section 148 of the Act,dated 10.12.2013. Prayer in W.P.No.2057 of 2015: Writ Petition is filed under Article226 of the Constitution of India, praying for the issuance of a writof Certiorarified Mandamus, to call for the records on the file ofthe respondent, quash the impugned order dated 20.1.2015 andconsequently direct the respondent to afford an opportunity of beingheard. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner : Mrs.Nalini Chidambaram, in both WPs. SC for Mr.R.Sivaraman For Respondents : Mr.Pramod Kumar Chopdain both W.Ps. Mr.Rajkumar Jabhak COMMON ORDER Prayer in W.P.No.2057 of 2015: Writ Petition is filed under Article226 of the Constitution of India, praying for the issuance of a writof Certiorarified Mandamus, to call for the records on the file ofthe respondent, quash the impugned order dated 20.1.2015 andconsequently direct the respondent to afford an opportunity of beingheard. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner : Mrs.Nalini Chidambaram, in both WPs. SC for Mr.R.Sivaraman For Respondents : Mr.Pramod Kumar Chopdain both W.Ps. Mr.Rajkumar Jabhak COMMON ORDER The petitioner company is a public limited company engaged in thebusiness of infrastructure and development. It is assessed to IncomeTax on the file of the respondents under PAN No. . For theassessment year 2008-09, the petitioner company had filed itsoriginal return of income on 30.9.2008, declaring a loss ofRs.14,07,72,863/- and filed revised return on 26.3.2009, declaring aloss of Rs.17,45,251/-. According to the petitioner, since it was aloss of return, the petitioner did not claim the unabsorbed loss anddepreciation of the earlier years. The said return was duly processedunder Section 143(1) of the Income Tax Act. 1961 (in short, the Act)and it was selected for scrutiny and a notice under Section 143(2)was issued, calling for the details. Pursuant to the same, thepetitioner filed all the details called for by the respondents fromtime to time. During the scrutiny of the assessment, havingconsidered the materials placed before them, the respondents hadcompleted the assessment under Section 143(3) of the Act on31.12.2010, determining the total income at Rs.415,20,26,520/-.Thereafter, it appears that the petitioner filed a rectificationapplication under Section 154 of the Act pointing out certainadditions, viz., FBT, non-allowing of brought forward losses,depreciation of earlier years, etc., which according to thepetitioner, were the mistakes apparent from the records andaccordingly, pleaded to the respondents to rectify the same. Thesecond respondent vide order, under Section 154 of the Act, dated6.9.2011 was pleased to rectify his order and revised the totalincome of the petitioner company at Rs.365,77,16,292/-, therebyallowing the unabsorbed loss and depreciation. It is stated that thepetitioner had also filed an appeal against the assessment orderpassed under Section 143(3) of the Act, dated 31.12.2010 before theCITA (A)-V in ITA No.605/13-14(A)-V. While so, after a period of fouryears, the respondent, by notice dated 10.2.2013 issued under Section148 of the Act, sought to re-open the concluded assessment underSection 143(3), which according to the petitioner, without anytangible materials and without giving a finding that there is afailure on the part of the petitioner company to disclose fully andtruly all the materials at the time of completion of the originalassessment. It is seen that vide letter dated 19.12.2013, thepetitioner company, requested the respondents to provide the reasonsfor re-opening of the assessment 2008-09 after a period of four years. 2. In the meanwhile, the CIT (A), vide order in ITA No.605/13-14dated 27.3.2014 deleted the addition of Rs.377,71,78,316/- being onaccount of foreign direct investment (FD) and thus partly allowed theappeal filed by the petitioner company. Thereafter, vide order underSection 143(3) read with Section 254 of the Income Tax Act, 1961dated 5.8.2014 gave effect to the order of the CIT(A)-V in ITANo.605/13-14 dated 27.3.2014 and revised the rectification orderunder Section 154 of the Act, dated 6.9.2011 and calculated the totaltaxable income at NIL and unabsorbed depreciation atRs.11,94,62,024/-. According to the petitioner, despite therectification order under Section 154 and also giving effect orderunder Section 254, the respondents continued his parallel proceedingsunder Section 147 of the Act for the impugned assessment year andissued reasons for re-opening vide letter dated 8.12.2014 after thepronouncement of his own giving effect order dated 5.8.2014. Thepetitioner objected for re-opening the assessment proceedings underSection 147 of the Act. However, according to the petitioner, withoutdeciding the jurisdictional issue, the respondent passed order, dated12.1.2015, holding that the proceedings under Section 147 have beenrightly initiated and rejected the objections raised by thepetitioner. 3. It appears that along with the above said rejection order,dated 12.1.2015, the respondent had issued a show cause notice dated12.1.2015, calling upon the petitioner to file their objections on orbefore 19.1.2015 to complete the re-assessment proceedings. Pursuantto the same, the petitioner filed its detailed reply on 19.1.2015objecting to the jurisdiction to reopen and also on merits of thecase. A representative of the petitioner company appeared in personon 19.1.2015 before the respondent and requested for grant of timetill 28.1.2015 to file additional submissions. Thereafter, accordingto the petitioner, since no re-assessment order was served on thepetitioner, a writ petition was moved before this Court, however,later it came to know that the re-assessment order was passed on21.1.2015 and dispatched to the petitioner by speed post. 4. According to the petitioner, the respondent, without givingany opportunity of being heard, passed the impugned order on20.1.2015 itself, whereas the notice of demand was issued on21.1.2015, wherein, it was stated that the re-assessment was passedon 20.1.2015. The respondent dispatched the impugned order dated10.1.2015 by speed post on 22.1.2015 at about 3.14 p.m. much afterthe petitioner company moved this Court. Therefore, the act of therespondent in completing the re-assessment is not in accordance withthe principles of natural justice. Hence, the petitioner has comeforward with the present writ petitions. 4. According to the petitioner, the respondent, without givingany opportunity of being heard, passed the impugned order on20.1.2015 itself, whereas the notice of demand was issued on21.1.2015, wherein, it was stated that the re-assessment was passedon 20.1.2015. The respondent dispatched the impugned order dated10.1.2015 by speed post on 22.1.2015 at about 3.14 p.m. much afterthe petitioner company moved this Court. Therefore, the act of therespondent in completing the re-assessment is not in accordance withthe principles of natural justice. Hence, the petitioner has comeforward with the present writ petitions. 5. Two separate counter affidavits have been filed on behalf ofthe respondent in these writ petitions, stating that after servingnotice under Section 148 of the Act, at the request of thepetitioner, the reasons for reopening the assessment, werecommunicated to the petitioner. Pursuant to the same, the petitionerfiled objections, which were considered and disposed of by a speakingorder. Thereafter a show cause notice was issued, calling forexplanation on the proposed additions. The petitioner has submittedthe reply to the said show cause notice and after considering thesame, the impugned order was passed. Therefore, before passing theimpugned order, the petitioner was provided an opportunity. Since,there was a reason to believe that income has escaped assessment, theincome chargeable to tax has escaped assessment within the meaning ofSection 147 of the Act, a notice under Section 148 of the Act wasissued and the reasons were recorded for reopening the assessment andthe petitioner has participated in the said reassessment proceedingsby filing objections and reply to the show cause notice. It is statedthat though the assessment order was passed on 20.1.2015, the date onthe demand notice was inadvertently mentioned as 21.1.2015 and thereis no bar under the Act that the demand notice is also to be dated asthat of the assessment order. It is only a typographical error whichwas set right by passing a corrigendum on 4.2.2015 and thereby deniedthat the order was ante dated as alleged by the petitioner. It isalso stated that the impugned notice has merged with the re-assessment order, dated 20.1.2015 impugned in W.P.No.2057 of 2015 andhence, the writ petition in W.P.No.1626 of 2015 challenging theimpugned show cause notice, dated 12.1.2015 is not maintainablesince, it has become infructuous virtually. As against the impugnedorders, the petitioner is having efficacious alternative remedy underthe Act and without exhausting the same, the petitioner has comeforward with the present writ petition and hence, it is notmaintainable. 6. It is also stated that the additions made under Section 68and 69A are deemed income of the petitioner and fall under Chapter VIof the Act and not under any of the head of income specified inChapter IV of the Act and therefore, the petitioner is not entitledto set off and carry forward of losses as under Section 72 of theAct. This has been clarified by insertion of a specific sectionnamely Section 115BBE. The above said aspect was not adjudicated inthe assessment order and therefore, the question of change of opinionas contended by the petitioner is not valid and is only self servicestatement. It is also pertinent to note that the CIT (A) has upheldthe addition under Section 69A made in the assessment under Section143(3). With these averments, the respondent sought for dismissal ofthe writ petitions. 7. Mrs.Nalini Chidambaram, learned senior counsel appering forthe petitioner would contend that after four years of the assessmentyear 2008-09, the respondent issued notice dated 10.12.2013 underSection 148, seeking to reopen the assessment, without any tangiblematerials and without a finding that income chargeable to tax hasescaped assessment by reason of failure on the part of the petitionerto disclose fully and truly all material facts necessary for theassessment which is a precondition for reopening the assessment,which is untenable and that the notice merely stated that theAssessing Officer has ‘reason to believe’ that the income chargeableto tax for the assessment year 2008-09 has escaped assessment andsuch ground is available only if the notice is within four years ofthe assessment year. According to learned senior counsel,reassessment notice is without jurisdiction since it has not beenissued within the time limit of 4 years as prescribed under Section149 of the Act. She has further contended that reassessment noticewas issued based on an audit report without independent applicationof mind of the assessing officer and hence, it is not sustainable.She contended that parallel proceedings under Section 154 and 147 ofthe Act cannot be undertaken simultaneously and that the AssessingOfficer ought not to have refused to set of unabsorbed depreciationof the year years and carried forward loss against deemed incomeunder Sections 68 and 69A. She has further contended that theimpugned proceedings were initiated only based on the audit reportand the respondent has not applied his mind and only in circumstanceswhere the audit party expresses its opinion on a question of law, re-opening of assessment based on audit objection is permissible.Therefore, the impugned notice under Section 148 of the Act based onan audit objection, which is not a valid ground to reopen a concludedassessment under Section 147 of the Act. She pointed out that theAssessing Officer has refused to set of unabsorbed depreciation ofearlier years and carried forward losses against income computedunder Sections 68, 69 and 69A of the Act by relying upon Section115BBE, which was introduced by Finance Act, 2012 with effect from01.04.2013 which cannot operate prospectively and since the issueunder consideration in the present case is pertaining to assessmentyear 2008-09 and hence, Section 115BBE will not apply to the facts ofthe present case. In support of her contentions, the learned seniorcounsel relied upon the following decisions, viz., “Once the audit party raised objections, one of which wasnot accepted, then, the Assessing Officer was expected andin the given facts and circumstances to record reasons forhis belief. Those reasons have not been recorded, as isclear from the material placed before the Tribunal. Despitesufficient opportunity, the reasons for reopening theassessment having not been placed on record and as such, it was held that the appeals preferred by the Revenue do notraise any substantial question of law.” ii) “Allanasons Ltd. Versus DCIT and others” reported in (2014)369 ITR 648 (Bom) ”In terms of the proviso to section 147 of the Income taxAct, 1961, where any assessment is sought to be openedbeyond a period of four years from the end of relevantassessment year, two jurisdictional conditions have to becumulatively satisfied: a) there must be reason to believethat income chargeable to tax has escaped the assessmentand (b) such escapement of income should have arisen onaccount of failure on the part of the assessee to fully andtruly disclose all material facts necessary for theassessment. The exercise of jurisdiction has to be examinedon the basis of the reasons recorded at the time of issuingthe notice. It is not open to the Revenue to substitute ormake addition to the reasons recorded at the time ofissuing the notice.” ”In terms of the proviso to section 147 of the Income taxAct, 1961, where any assessment is sought to be openedbeyond a period of four years from the end of relevantassessment year, two jurisdictional conditions have to becumulatively satisfied: a) there must be reason to believethat income chargeable to tax has escaped the assessmentand (b) such escapement of income should have arisen onaccount of failure on the part of the assessee to fully andtruly disclose all material facts necessary for theassessment. The exercise of jurisdiction has to be examinedon the basis of the reasons recorded at the time of issuingthe notice. It is not open to the Revenue to substitute ormake addition to the reasons recorded at the time ofissuing the notice.” iii) “Vinod Dhudlal Shah versus ACIT” (2014) 362 ITR 345 (Guj) “Beyond the period of four years, if any notice ofreopening of assessment is issued in the absence of anyfailure on the part of the assessee to disclose fully andtruly all the material facts, it would have no validity. Inthe original assessment proceedings, if the AssessingOfficer, had examined the claim in detail after raisingqueries which were fully answered by the assessee, suchaction of reopening cannot be sustained in suchcircumstances.” iv) “Jagat Jayantilal Parikh versus DCIT” (2013) 355 ITR 400 v) Fenner (India) Ltd. Versus DCIT (2000)241 ITR 672 (Mad) ”Mere escape of income is insufficient to justify theinitiation of action after the expiry of four years fromthe end of the assessment year. Such escapement must be byreason of the failure on the part of the assessee either tofile a return referred to in the proviso or to truly andfully disclose the material facts necessary for theassessment.”Unless, the condition in the proviso issatisfied, the Assessing Officer does not acquirejurisdiction to initiate any proceeding under Section 147of the Act after the expiry of four years from the end ofthe assessment year. Thus, in cases where the initiation ofthe proceedings is beyond the period of four years from theend of the assessment year, the Assessing Officer mustnecessarily record not only his reasonable belief thatincome has escaped assessment but also the default orfailure committed by the assessee. Failure to do so wouldvitiate the notice and the entire proceedings. If the Assessing Officer chooses to entertain the belief that theassessment has been made in the background of theassessee's failure to disclose truly and fully all materialfacts, it is necessary for him to record that fact, and inthe absence of a record to that effect, it cannot be heldthat a notice issued without recording such a fact iscapable of being regarded as a valid notice.” vi) CIT versus A.V.Thomas Exports Ltd.” (286 ITR 603 (Mad) vii) CIT versus Elgi Ultra Industries Ltd.”(296 ITR 573 (Mad) viii) Elforge Ltd versus DCIT (83 CCH 066) 8. On the other hand, the learned standing counsel appearing forthe respondent/revenue would contend that though while issuing theimpugned notice, no reasons were mentioned to reopen the assessment,however, later on request of the petitioner, reasons were intimatedin conformity the provision of Section 147 of the Act and afterconsidering the objections raised by the petitioner, the impugnedproceedings were issued. 9. A notice under Section 148 of the Act, dated 10.12.2013 hasbeen issued to the petitioner proposing to re-assess the income forthe assessment year 2008-09 by the respondent, since the respondenthas reason to believe that the income in respect of the saidassessment year has escaped assessment within the meaning of Section147 of the Act. It is relevant to extract Sections 147 to 149 of theAct, which read as under: 9. A notice under Section 148 of the Act, dated 10.12.2013 hasbeen issued to the petitioner proposing to re-assess the income forthe assessment year 2008-09 by the respondent, since the respondenthas reason to believe that the income in respect of the saidassessment year has escaped assessment within the meaning of Section147 of the Act. It is relevant to extract Sections 147 to 149 of theAct, which read as under: "147. If the Assessing Officer has reason to believe thatany income chargeable to tax has escaped assessment forany assessment year, he may, subject to the provisions ofSections 148 to 153, assess or reassess such income andalso any other income chargeable to tax which has escapedassessment and which comes to his notice subsequently inthe course of the proceedings under this section, or re-compute the loss of or the depreciation allowance or anyother allowance, as the case may be, for the assessmentyear concerned (hereafter in this section and in Sections148 to 153 referred to as the relevant assessment year) :Provided that where an assessment under Sub-section (3) ofSection 143 or this section has been made for the relevantassessment year, no action shall be taken under thissection after the expiry of four years from the end of therelevant assessment year, unless any income chargeable totax has escaped assessment for such assessment year byreason of the failure on the part of the assesses to makea return under Section 139 or in response to a noticeissued under Sub-section (1) of Section 142 or Section 148or to disclose fully and truly all material facts necessary for his assessment for that assessment year." “Explanation 1.--Production before the Assessing Officerof account books or other evidence from which materialevidence could, with due diligence, have been discoveredby the Assessing Officer will not necessarily amount todisclosure within the meaning of the foregoing proviso.Explanation 2.--For the purposes of this section, thefollowing shall also be deemed to be cases where incomechargeable to tax has escaped assessment, namely: (a) where no return of income has been furnished by theassessee although his total income or the total income ofany other person in respect of which he is assessableunder this Act during the previous year exceeded themaximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by theassessee but no assessment has been made and it is noticedby the Assessing Officer that the assessee has understatedthe income or has claimed excessive loss, deduction,allowance or relief in the return; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or(iii) such income has been made the subject of excessiverelief under this Act; or (iv) excessive loss or depreciation allowance or any otherallowance under this Act has been computed. “148. Issue of notice where income has escapedassessment.--(1)Beforemakingtheassessment,reassessment or recomputation under Section 147, theAssessing Officer shall serve on the assessee a noticerequiring him to furnish within such period, as may bespecified in the notice, a return of his income or theincome of any other person in respect of which he isassessable under this Act during the previous yearcorresponding to the relevant assessment year, in theprescribed form and verified in the prescribed manner andsetting forth such other particulars as may beprescribed ; and the provisions of this Act shall, so faras may be, apply accordingly as if such return were areturn required to be furnished under Section 139. (2) The Assessing Officer shall, before issuing any noticeunder this section, record his reasons for doing so. “149. Time limit for notice.--(1) No notice underSection 148 shall be issued for the relevant assessmentyear,- (2) The Assessing Officer shall, before issuing any noticeunder this section, record his reasons for doing so. “149. Time limit for notice.--(1) No notice underSection 148 shall be issued for the relevant assessmentyear,- (a) if four years have elapsed from the end of therelevant assessment year, unless the case falls underClause (b); (b) if four years, but not more than six years, haveelapsed from the end of the relevant assessment yearunless the income chargeable to tax which has escapedassessment amounts to or is likely to amount to one lakhrupees or more for that year. Explanation.--In determining income chargeable to taxwhich has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 to Section 147shall apply as they apply for the purposes of thatsection. (2) The provisions of Sub-section (1) as to the issue ofnotice shall be subject to the provisions of Section 151. (3) If the person on whom a notice under Section 148 is tobe served is a person treated as the agent of a non-resident under Section 163 and the assessment,reassessment or recomputation to be made in pursuance ofthe notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiryof a period of two years from the end of the relevantassessment year.” 10. It is no doubt true that an assessment order once made isordinarily final. Section 154 of the Act confers a power ofrectification of mistakes apparent from the record. Section 147 ofthe Act empowers the Assessing Officer to assess or reassess theincome in the circumstances mentioned therein. The power to reopen anassessment under Section 147 is in the nature of an exception to thegeneral principle that an assessment order once made would be final.The power to reopen an assessment is not unbridled or unrestrictedand it is subject to the proviso embodied in the section itself. Theproviso prescribes restrictions on the power of reopening theassessment by limiting the time period to four years from the end ofthe relevant assessment year, unless any income chargeable to tax hasescaped assessment by reason of failure on the part of the assessee(i) to submit a return under Section 139, or (ii) to respond to thenotices issued under Section 142(1), or (iii) to respond to thenotices issued under Section 148, or (iv) to disclose fully and trulyall material facts necessary for the assessment of the income forthat assessment year. Explanation 1 to Section 147 lays down thatmere production of the books of account or other evidence from whichthe Assessing Officer could, with due diligence, have discoveredcertain facts would not amount to disclosure within the meaning ofthe provision. Explanation 2 to Section 147 enumerates cases where itwould presume that income chargeable to tax has escaped assessment.If the assessment is to be reopened after the expiry of four years from the end of the relevant assessment year, under the proviso toSection 147 of the Act, following conditions must exist, viz., (i) The Assessing Officer must have a reason to believe that anyincome chargeable to tax has escaped assessment for the anyassessment year. The expression "reason to believe" does not mean apurely subjective satisfaction on the part of the Assessing Officer.The reason must be held in good faith. It cannot be merely apretence. It is open to the court to examine whether the reasons forthe formation of the belief has a rational connection with or arelevant bearing on the formation of the belief and are notextraneous or irrelevant for the purpose of the section. To thisextent, action of an Assessing Officer in starting the proceedingsunder Section 147 in respect of income escaping assessment is open tochallenge in a court of law. (i) The Assessing Officer must have a reason to believe that anyincome chargeable to tax has escaped assessment for the anyassessment year. The expression "reason to believe" does not mean apurely subjective satisfaction on the part of the Assessing Officer.The reason must be held in good faith. It cannot be merely apretence. It is open to the court to examine whether the reasons forthe formation of the belief has a rational connection with or arelevant bearing on the formation of the belief and are notextraneous or irrelevant for the purpose of the section. To thisextent, action of an Assessing Officer in starting the proceedingsunder Section 147 in respect of income escaping assessment is open tochallenge in a court of law. (ii) The Assessing Officer must have a reason to believe thatsuch income had escaped assessment by reason of failure on the partof the assessee (a) to make a return under Section 139 ; or (b) torespond to the notice issued under Section 142(1) or 148 of the Act,or (c) to disclose fully and truly all the material facts necessaryfor his assessment of income for that year. 11. Therefore, it is clear that both the aforementionedconditions imposed must co-exist to confer jurisdiction on theAssessing Officer to reopen the assessment under Section 147. Sub-section (2) of Section 148 of the Act makes it imperative for theAssessing Officer to record his reasons before initiatingproceedings. Where a notice under Section 147 of the Act is to beissued after the expiry of four years from the end of the relevantassessment year, the Commissioner or the Joint Commissioner, as thecase may be, should be satisfied on the reasons recorded by theAssessing Officer that it is a fit case for issue of such notice. 12. The power of reassessment conferred under Section 147 of theAct can be exercised within a period of four years from the end ofthe relevant assessment year without restrictions imposed by theproviso to that section. However, after the expiry of four years fromthe end of the relevant assessment year, power of the AssessingOfficer is restricted by the limitations imposed under the proviso,as stated earlier. 13. Section 147 of the Act is the source of power of theAssessing Officer for reopening of the assessment. Section 148contains procedural restrictions for issuance of a notice forexercise of the power of reopening of an assessment conferred underSection 147. Section 149 prescribes the time limit for issuance of anotice under Section 148. Therefore, the conditions laid down underSection 147 of the Act for the purposes of reopening the assessmentmust be satisfied before the notice can be issued. The conditions 13. Section 147 of the Act is the source of power of theAssessing Officer for reopening of the assessment. Section 148contains procedural restrictions for issuance of a notice forexercise of the power of reopening of an assessment conferred underSection 147. Section 149 prescribes the time limit for issuance of anotice under Section 148. Therefore, the conditions laid down underSection 147 of the Act for the purposes of reopening the assessmentmust be satisfied before the notice can be issued. The conditions laid down in Section 147 are the jurisdictional facts necessary forthe purpose of exercise of the power under Section 147. Thejurisdictional facts prescribed under Section 147 must exist before anotice under Section 148 can be issued. The time limit prescribedunder Section 149 of the Act for issuance of a notice under Section148 is in addition to and not in derogation with the necessaryconditions required to be satisfied under Section 147 of the Act. Inother words, if the basic jurisdictional facts required for reopeningof an assessment under Section 147 of the Act do not exist it wouldnot be competent for the Assessing Officer to issue a notice underSection 148. Even where the jurisdictional facts prescribed underSection 147 exist and all conditions laid down under Section 147 andthe proviso thereto are satisfied, the notice under Section 148 canbe issued only after the Assessing Officer has recorded his reasonsfor doing so under Sub-section (2) of Section 148 and has furtherobtained the necessary sanction for issuance of the notice asrequired under Section 151 of the Act. Such notice is also requiredto be issued within the time limit prescribed under Section 149 ofthe Act. In fact, Section 149 of the Act, does not relax therestriction of four years prescribed in the proviso to Section 147 ofthe Act for issuance of a notice under the proviso to Section 147.The restriction of four years would be applicable unless the incomechargeable to tax has escaped assessment by reason of failure of theassessee to make a return under Section 139 or in response to anotice under Section 142 or 148 of the Act or the failure of theassessee to disclose fully and truly all material facts. If thereassessment is required to be made on account of the failure of theassessee to disclose fully and truly all material facts necessary forhis assessment, obviously, the restriction of four years put underthe proviso to Section 147 would not be applicable and notice can beissued after the expiry of a period of four years, but within thetime limit of 7 or 10 years, as the case may be, prescribed underSection 149 of the Act. The object of Section 149 in imposing therestriction of seven years or ten years where the income likely tohave escaped assessment is less than Rs.50,000 or Rs.1,00,000, as thecase may be, is not to permit reopening of the assessment where thetax liability would not be significant as compared with the effortsthat would be required for reopening of an assessment after a passageof seven or ten years, as the case may be. To repeat, the time-limitimposed under Section 149 of the Act for issuance of the notice isnot in derogation of and is not for enlarging the time restrictionimposed under the proviso to Section 147 of the Act but to put anadditional time restriction even where there is no restriction oftime for reopening of the assessment on account of failure of theassessee to disclose fully and truly all material facts. 14. In the present case, it is not in dispute that thepetitioner filed returns of income for the assessment year 2008-09,declaring loss of income at Rs.14,07,72,863/- and later on 26.3.2009,revised returns were filed declaring loss of 17,47,251. Thereafter, https://hcservices.ecourts.gov.in/hcservices/ 14. In the present case, it is not in dispute that thepetitioner filed returns of income for the assessment year 2008-09,declaring loss of income at Rs.14,07,72,863/- and later on 26.3.2009,revised returns were filed declaring loss of 17,47,251. Thereafter, https://hcservices.ecourts.gov.in/hcservices/ the assessment under Section 143(3) of the Act for the year 2008-09has been concluded on 31.12.2010 determining the total income atRs.415,20,26,520/- and the demand payable at Rs.187,31,76,820/-. Itis pertinent to note that in the original returns filed on 30.9.2008as well as in revised returns on 26.3.2009, the petitioner had notdisclosed the material regarding the unabsorbed depreciation andbusiness loss of earlier years, which according to the petitioner,since it was a loss return, the petitioner did not claim the same. Itis only on 25.1.2011, a petition was moved under Section 154 of theAct, seeking rectification on the ground that there were mistakesapparent from records relating to certain additions such as Fringebenefit tax(FBT), non-allowing of brought forward losses anddepreciation of earlier years. By proceedings, dated 6.9.2011,rectification order under Section 154 of the Act has been passed bythe respondent, raising demand of Rs.164,97,15,480/- as againstoriginal demand for Rs.187,31,76,820/-. Later, a notice under Section148 of the Act, dated 10.12.2013 has been issued by the respondentproposing to reopen the assessment. It is to be noted that byproceedings, dated 8.12.2014, the respondent has narrated andcommunicated the reasons for re-opening the assessment under Section147 of the Act for the assessment year 2008-09, which are extractedhereunder: “The scrutiny assessment was completed under Section143(3) determining the total income at Rs.415.20 croresafter making an addition of Rs.415.37 crores whichincluded Rs.408.78 crores made under Section 68 & 69 A.The assessment was revised which interalia included toallow the assessee’s claim for set off of unabsorbeddepreciation aggregating to Rs.45.18 crores relating toassessment year 2004-05 and unabsorbed business loss ofRs.4.15 crores relating to assessment year 2005-06. Theabove addition under Section 68 & 69 A is deemed income ofthe assessee and does not come under any heads of incomespecified in Chapter IV of the Income-tax Act, 1961 andhence brought forward business loss and depreciationcannot be set off against this as per Section 72.” 15. Therefore, a perusal of the above, it indicates that theAssessing Officer has a reason to believe that the income, viz.,unabsorbed depreciation and business loss and depreciation, which wasallowed to be set off by the respondent in revision proceedings,dated 6.9.2011, has escaped assessment within the meaning of Section147 of the Act and accordingly, the respondent has rightly initiatedthe proceedings. It is to be noted that pursuant to the above noticeand communication of reasons, the petitioner has raised objectionswhich were duly considered by the respondent and rejected byproceedings dated 12.1.2015. Thereafter, the respondent proceededwith the reopening of the assessment, wherein, it is not in disputethat the petitioner had participated in the said proceedings and by proceedings, dated 12.01.2015, the respondent has issued impugnedshow cause notice by way of a final opportunity, calling forexplanation as to why the additions made under Sections 68 and 69A ofthe Act, should not be taxed separately without giving benefit ofsetting off the deemed income under Section 69A with brought forwardbusiness loss and unabsorbed depreciation. proceedings, dated 12.01.2015, the respondent has issued impugnedshow cause notice by way of a final opportunity, calling forexplanation as to why the additions made under Sections 68 and 69A ofthe Act, should not be taxed separately without giving benefit ofsetting off the deemed income under Section 69A with brought forwardbusiness loss and unabsorbed depreciation. 16. The main contention of the petitioner is that there is nofailure on the part of the petitioner in not disclosing fully andtruly all materials facts necessary for the assessment year underconsideration and in the absence of the same, the assumption ofjurisdiction by the respondent under Section 147 of the Act, afterexpiry of four years from the end of the relevant assessment year, isillegal and invalid and thereby, the impugned proceeds cannot besustained. This contention raised on behalf of the petitioner, in myconsidered opinion, is fallacious and has no force at all. It iscurious enough to note that as observed above, in the originalreturns filed by the petitioner on 30.09.2008, the petitioner had notat all disclosed fully or truly all material facts regarding theincome, viz., unabsorbed depreciation and business loss anddepreciation, which the Assessing Officer has reason to believe thatthe same has escaped assessment within the meaning of Section 147 ofthe Act. Therefore, when admittedly, the material which is thesubject matter of the proceedings under Section 147 was not disclosedin the original returns filed by the petitioner on 30.09.2008, itcannot be construed that the reopening of the assessment is beyondfour years. In fact, the petitioner has, for the first time, hasdisclosed the subject material, viz., unabsorbed depreciation andbusiness loss of earlier years, only on 25.1.2011 in the form ofrectification petition under Section 154 of the Act, seekingrectification, wherein, a rectification order has been passed by therespondent on 6.9.2011. In such circumstances, since the originalreturns filed by the petitioner got merged with the rectificationorder, dated 6.9.2011, the period of four years has to be calculatednot from the end of the relevant assessment year, but should be fromthe date on which, the petitioner has filed a rectification petitionunder Section 154 of the Act, i.e. on 25.1.2011 wherein, as alreadystated, for the first time, brought the subject material, viz.,unabsorbed depreciation and business loss of earlier years. Then, thereopening of the assessment is well within the period of four yearsand it cannot be construed that the respondent has proceeded toreassess the income for the assessment year 2008-09 beyond four yearssince the notice under Section 148 of the Act has been issued on10.12.2013. Therefore, once it is clear that the reassessment wasproposed within the period of four years, the present case does notfall under proviso of the Section 147 of the Act, which makes anembargo on the assessing officer to make reassessment beyond fouryears on the account of failure on the part of the assessee to fullyand truly disclose all material facts necessary for assessment.Hence, the issuance of the impugned proceedings, viz., show cause notice under Section 148 of the Act, dated 10.12.2013 and thereassessment order, dated 20.1.2015 by the respondent on the groundthat he has reason to believe that the income, which is chargeable totax for the assessment year 2008-09 has escaped assessment, in myopinion, are well within the jurisdiction of the respondent andlegally sustainable and I do not find any arbitrariness in suchreopening of the assessment. In such view of the matter, the relianceplaced on the decisions, cited supra, by the learned senior counsel,would not any way help the petitioner since they dealt with the issueof matter wherein, the reassessment has been resorted beyond theperiod of four years. 17. As regards the contention that the reassessment based onaudit report without independent application of mind by the AssessingOfficer is not sustainable, is concerned, I do not find any force inthe said contention since the respondent has given cogent reasons inhis speaking order, dated 12.1.2015 while rejecting the objectionsraised by the petitioner, for re-opening of the assessment andtherefore, it cannot be stated that the respondent has not appliedhis mind and solely resorted to based on the audit report. In fact,the audit party is entitled to point out a factual error or omissionin the assessment and it is settled law that re-opening of the caseon the basis of a factual error pointed out by the audit party ispermissible under law. It has been held so in the case of “CIT versusP.V.S.Beedis” reported in (237 ITR 13), wherein, the Hon’ble SupremeCourt has held as under: “The dispute as to whether reopening is permissible afteraudit party expresses on opinion on a question of law isnow being considered by a larger Bench of the SupremeCourt. There can be no dispute that the audit party isentitled to point out a factual error or omission in theassessment. Re-opening of the case on the basis of afactual error pointed out by the audit party ispermissible under law. ..” 18. In view of my above conclusion that the re-opening of theassessment resorted to by the respondent is valid in law, all theother grounds raised on behalf of the petitioner, such as, unabsorbeddepreciation of earlier years and carried forward losses can be setoff against income computed under Sections 68, 69 and 69A of the Act,applicability of Section 115BBE and parallel proceedings underSections 154 and 147 cannot be undertaken simultaneously, etc., in myopinion, are the subject matter of the appeal inasmuch as, as againstthe impugned proceedings, the petitioner is having an efficaciousremedy. In this regard, it is worthwhile to refer to the decision ofthe Hon’ble Supreme Court, reported in CIT v. Chhabil Dass Agarwal,(2014) 1 SCC 603, at page 611, wherein, it has been held as under: “15. Thus, while it can be said that this Court hasrecognised some exceptions to the rule of alternativeremedy i.e. where the statutory authority has not acted inaccordance with the provisions of the enactment inquestion, or in defiance of the fundamental principles ofjudicial procedure, or has resorted to invoke theprovisions which are repealed, or when an order has beenpassed in total violation of the principles of naturaljustice, the proposition laid down in Thansingh Nathmalcase22, Titaghur Paper Mills case3and other similarjudgments that the High Court will not entertain apetition under Article 226 of the Constitution if aneffective alternative remedy is available to the aggrievedperson or the statute under which the action complained ofhas been taken itself contains a mechanism for redressalof grievance still holds the field. Therefore, when astatutory forum is created by law for redressal ofgrievances, a writ petition should not be entertainedignoring the statutory dispensation. 16. In the instant case, the Act provides completemachinery for the assessment/reassessment of tax,imposition of penalty and for obtaining relief in respectof any improper orders passed by the Revenue Authorities,and the assessee could not be permitted to abandon thatmachinery and to invoke the jurisdiction of the High Courtunder Article 226 of the Constitution when he had adequateremedy open to him by an appeal to the Commissioner ofIncome Tax (Appeals). The remedy under the statute,however, must be effective and not a mere formality withno substant