M/S.sterilite Industries (India) Ltd v. Assistant Commissioner Of Income Tax Company Circle Vi(4) New Block, Vii Floor, Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 19.12.2011 CORAM: THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN W.P.Nos.24476 to 24478 of 2009and M.P.Nos.1, 1 and 1 of 2009 M/s.Sterilite Industries (India) Ltd.represented by its General Manager(Finance & Accounts)Mr.A.SatishNo.55, Pillayar Koil StreetNo.1, Sai Flats, Kanagam, Tharamani, Chennai-600 113. ..Petitioner in all thesewrit petitions versus 1. Assistant Commissioner of Income Tax Company Circle VI(4) New Block, VII Floor, room No.705 121, Mahatma Gandhi Salai Chennai-34. 2. Commissioner of Income Tax, Range-III New Block, IV Floor, Room No.410 121, Mahatma Gandhi Salai Chennai-34... ..Respondents in all thesewrit petitions ----- PRAYER: Writ petition filed under Article 226 of the Constitution ofIndia for the issue of a Writ of Prohibition prohibiting the firstrespondent from proceeding further in pursuance of the notice inNo.AABCS4955Q dated 19.03.2009, issued under Section 148 of theIncome Tax Act, for the assessment year 2002-2003, 2003-2004 and2004-2005. For petitioner : Dr.Debi Prasad PalSenior Advocate forM/s.R.JanakiramanArna MazumdarT.Vasudevan For respondents-1 and 2 :Mr.J.NarayanaswamySenior standing counsel forIncome Tax----- ORDER W.P.Nos.24476 to 24478 of 2009 relate to the assessment years2002-03, 2003-04 and 2004-05. The assessee herein has come beforethis Court, challenging the notice of reassessment dated 19.03.2009for the above-said assessment years issued by the first respondentunder Section 148 of the Income Tax Act, 1961. 2. The petitioner herein is a company and an assessee on the fileof the first respondent herein. The petitioner is engaged in themanufacture and sale of non-ferrous metals and telephone cables. Thepetitioner states that it obtained the licence for its industrialundertaking, at Chinchpada Unit (CCR Refinery) at Silvassa in theUnion Territory of Dadra and Nagar, Haveli from the Chief Inspectorof Factories of Silvassa on 07.06.1996 in Form No.4, as prescribedunder the Factories Act, 1948 to manufacture copper. As is evidentfrom the Director's report, forming part of the balance sheet andprofit and loss account for the assessment year 1999-2000, thepetitioner is stated to have commenced its commercial production ofcopper in the said Unit from 1[st] April 1998. Thus, for the firsttime, in the return filed for the assessment year 1999-2000, thepetitioner claimed 100% deduction under Section 80 IB of the IncomeTax Act, 1961 in respect of the profits arising from the saidmanufacturing unit's operations. Thus starting from the assessmentyear 1999-2000, the deduction under Section 80 IB of the Income TaxAct, 1961, available at 100% for the first five assessment years wasgranted on the assessment made for the assessment years 2001-02,2002-03 and 2003-04. 3. It is further seen from the averments in the affidavit filedbefore this Court that in respect of the Rakholi Unit, the assesseegot the licence under the Factories Act on 18[th] March 1998. As thecommercial production in respect of the Rakholi unit started only on22nd February 1999, the assessee claimed deduction under Section 80IB of the Income Tax Act in the return filed for the assessment year2000-01. Thus in respect of Chinchpada Unit, deduction under Section80 IB was claimed from the assessment year 1999-2000, it being thefirst year of commencement of commercial production and in respect ofRakholi Unit, the claim was made only from 2000-01. Accordingly, inrespect of the claim for the assessment year 2002-03, the petitioneris said to have enclosed Form 10CCB and attached the calculation ofbook profit under Minimum Alternate tax as per Section 115 JB andclaimed an aggregate deduction of Rs.325,72,69,199/- under ChapterVIA, out of which, the claim for deduction under Section 80 IB in respect of the eligible Units at Chinchpada Unit and Rakholi Unit,was to the tune of Rs.310,96,28,749/-. As regards the assessmentyear 2003-04, on the total aggregate claim on deduction under ChapterVIA of Rs.417,67,25,823/-, the deduction under Section 80 IB was tothe tune of Rs.404,42,59,243/-. For the assessment year 2004-05, onthe total aggregate claim on deduction under ChapterVIA of Rs.186,65,45,794/-, the deduction under Section 80 IB was tothe tune of Rs.16,05,90,254/-. As the claim for deduction underSection 80 IB for the assessment years 2002-03, 2003-04 and 2004-05are well covered under the five year period, the petitioner claimed100% deduction under Section 80 IB. In the assessment orders passedunder Section 143(3) of the Income Tax Act, in respect of assessmentyears 2002-03, 2003-04 and 2004-05 on 28.2.2005, 30.3.2006 and28.12.2006 respectively, after verification of the materials calledfor and produced by the petitioner, the Assessing Officer granted theclaim of the petitioner for 100% deduction. A perusal of the orderspassed for the respective assessment years shows that the deductionclaimed by the assessee for the said Units had been examined withreference to the certificate of the Chartered Accountant andmaterials produced pursuant to the notices issued by the Officer.Thus, for the assessment year 2002-03, the Chinchpada Unit was in thefourth year and the Rakholi Unit was in the third year for 100%relief; for the assessment year 2003-04, the Chinchpada Unit was inthe fifth year and the Rakholi Unit was in the fourth year and forthe assessment year 2004-05, the Rakholi Unit was in the fifth year. 4. While matters stood thus, in respect of the assessment madefor the assessment year 2003-04, on 20.7.2006, the Assessing Officerinitiated rectification proceedings under Section 154 of the IncomeTax Act, proposing to rectify certain errors as apparent on the faceof the records, which reads as follows:" Particulars of mistake proposed to be rectified:115JB: To disallow claim u/s 80 HHC.Provision for bad debts and diminution of value ofcurrent investment and income tax debited.143(3): (i) Share issue expenses and FRN issueexpenses written off to be disallowed beingcapital in nature. (ii) IT & WT debited in P & L A/c.(iii) Mistake in ded. u/s. 80 IB in Chinchpada andACSR Rakholi Units. 5. The assessee filed its objections to the same. A perusal ofthe records produced before this Court shows that except for theinitiation of the rectification proceedings and the assessee filingits objection, there was no further processing of the proceedings.It is a matter of interest to note that in the order passed on 13[th]October 2009, on the reply filed by the assessee, the firstrespondent pointed out that as the issues in question were not such https://hcservices.ecourts.gov.in/hcservices/ mistakes apparent from the records requiring rectification underSection 154, proceedings under Section 147 was initiated. (ii) IT & WT debited in P & L A/c.(iii) Mistake in ded. u/s. 80 IB in Chinchpada andACSR Rakholi Units. 5. The assessee filed its objections to the same. A perusal ofthe records produced before this Court shows that except for theinitiation of the rectification proceedings and the assessee filingits objection, there was no further processing of the proceedings.It is a matter of interest to note that in the order passed on 13[th]October 2009, on the reply filed by the assessee, the firstrespondent pointed out that as the issues in question were not such https://hcservices.ecourts.gov.in/hcservices/ mistakes apparent from the records requiring rectification underSection 154, proceedings under Section 147 was initiated. 6. It is seen from the documents placed before this Court thatthe first respondent herein issued notice under Section 148 on19.03.2009 to reopen the assessment in respect of the assessmentyears 2002-03, 2003-04 and 2004-05. It was alleged by the AssessingOfficer that he had reasons to believe that the income chargeable tothe above assessment years had escaped assessment within the meaningof Section 147 of the Act and that he proposed to reassess the incomefor the said years and required the petitioner to file a return ofincome within 30 days from the date of receipt of the notice. Theassessee filed its reply objecting to the noting and stated that thereturns originally filed under Section 139 of the Income Tax Actmight be treated as a return filed pursuant to the notice issuedunder Section 148 of the Income Tax Act. On the reasons sought for bythe assessee, the first respondent herein intimated the same videletter dated 11.5.2009. The reasons given in the notice issued underSection 147 of the Income Tax Act in respect of the assessment year2003-04 and under Section 154 proceedings originally initiated, areone and the same. The reasons for reopening of assessment underSection 148 in respect of the assessment year 2003-04 were given asfollows:i. Assessee has claimed 100% deduction in respect of Rakholi Unit ofRs.13.22 crores and Chinchpada unit of Rs.404.42 crores and wasalso allowed whereas the assessee is eligible for 30% deductiononly since as per 10CCB filed for AYs 2003-04 in respect ofRakholi Unit, date of commencement of operation is 18.03.1998(Previous Year 1997-98 and initial year 1998-99 and hence currentbeing 6th year). Similarly, in respect of Chinchpada unit, dateof commencement of operation was 07.06.1996 (PY 1996-97 & initialyear being 1997-98 and hence current being 7th year). Hence, theassessee is eligible for 30% deduction only. Excess deductionallowed to be brought to tax. ii. In the P & L account for Chinchpada Unit, assessee has creditedinterest income of Rs.7,01,50,976/- and miscellaneous income ofRs.26,43,366/-. Assessee has netted a sum of Rs.9,34,01,802/-being interest received. Since these incomes do not form part ofincome from manufacturing unit, these are not eligible fordeduction u/s.80IB. iii. In the P&L account of Rakholi unit assessee has creditedinterest income of Rs.6,067/- and miscellaneous income ofRs.67,87,792/-. Since these incomes do not form part of incomefrom manufacturing unit, these are not eligible for deductionu/s.80IB.iv. Provision for Bad debts of Rs.67,17,311/-, provision fordiminishing value of investments of Rs.1,17,362/- and income taxof Rs.11,59,66,487/- debited to Profit and Loss account and addedto the total income under normal computation was omitted to be iii. In the P&L account of Rakholi unit assessee has creditedinterest income of Rs.6,067/- and miscellaneous income ofRs.67,87,792/-. Since these incomes do not form part of incomefrom manufacturing unit, these are not eligible for deductionu/s.80IB.iv. Provision for Bad debts of Rs.67,17,311/-, provision fordiminishing value of investments of Rs.1,17,362/- and income taxof Rs.11,59,66,487/- debited to Profit and Loss account and addedto the total income under normal computation was omitted to be added to the net profit u/s.115JB as unascertained liability.v. Wrong claim of 80HHC under section 115JB as no deduction isallowable under section 80HHCas per section 80IA(9).vi. Under normal computation:a)Share issue expenses written off of Rs.40,74,600/- and FRNissue expenses written off of Rs.54,61,569/- debited toProfit and Loss account as per column 17(a) of Form 3CD to bedisallowed being capital in nature.b) Wealth of Rs.10,89,940/- debited in Profit and Loss accountas per clause 17(f) of From 3CD to be disallowed.c)Mistake in deduction u/s.80IB in Chinchpada and ACSR Rakhaliunit i.e., by wrongly allowing deduction u/s.80IB in relationto the interest and miscellaneous income allowed as eligiblefor deduction u/s.80IB. " 7. As far as the assessment year 2002-03 is concerned, thereasons given for the notice issued under Section 148 of the IncomeTax Act stated that, taking the date of commencement of operation as07.06.1996, the deduction in respect of Chinchpada Unit was wronglygranted at 100%. The claim being in the sixth year, the petitionerassessee was entitled to 30% deduction only. 8. The notice issued also referred to the other income creditedin the Profit and Loss Account, viz., for Chinchpada Unit; that theassessee had credited interest income of Rs.3,26,64,158/-, which wasnot derived from manufacturing activity. Since these incomes did notform part of the income from the manufacturing unit, these wereviewed as not eligible for deduction under Section 80IB of the Act. 9. Thus for the assessment year 2004-05, under notice dated19.3.2009, the deduction given in respect of Rakholi Unit at 100%was sought to be withdrawn as in the case of Chinchpada Unit. Thenotice also referred to the other income being included in thededuction granted under Section 80 IB. Thus, except for the allegedwrong claim under Section 80 HHC and Section 115 JB raised in thereassessment proceedings in respect of assessment year 2003-04, thenotice in respect of all the three assessment years under Section148 of the Act are more or less on identical grounds, particularlywith reference to the grant of relief under Section 80 IB in respectof the Chinchpada Unit as well as Rakholi Unit. 10. Immediately on receipt of the reasons for reopening, thepetitioner filed its objections on 24.07.2009. While questioning thejurisdiction of the respondent as hit by the limitation of four yearsas provided for under Section 148(1), the petitioner contended thatin the absence of any material to show that there was failure on thepart of the assessee petitioner to disclose truly and fully, materialfacts in making the claim for deduction, the initiation of theproceedings under Section 148 to reopen the assessments for the https://hcservices.ecourts.gov.in/hcservices/ 10. Immediately on receipt of the reasons for reopening, thepetitioner filed its objections on 24.07.2009. While questioning thejurisdiction of the respondent as hit by the limitation of four yearsas provided for under Section 148(1), the petitioner contended thatin the absence of any material to show that there was failure on thepart of the assessee petitioner to disclose truly and fully, materialfacts in making the claim for deduction, the initiation of theproceedings under Section 148 to reopen the assessments for the https://hcservices.ecourts.gov.in/hcservices/ assessment years 2002-03, 2003-04 and 2004-05 after the expiry offour years, is bad in law. The petitioner contended that the noticedid not disclose any material based on which the satisfaction forassumption of jurisdiction was arrived at, to reopen the assessments.Thus in the absence of any materials disclosed, on which the Officeris stated to have formed a prima facie view that by reason of anyomission or failure on the part of the assessee to disclose fully andtruly all material facts, the income of the assessee had escapedassessment, there could be no valid assumption of jurisdiction forthe assessment years under consideration. Thus the notice issuedafter the expiry of four years, hit by the limitation providedtherefor under Section 147, there could be no assumption ofjurisdiction. Thus, the notices issued are under challenge on theground of want of jurisdiction, both from the angle of limitation aswell as from the absence of materials, disclosing the causalconnection on the alleged escapement of tax. 11. As far as the proposal to withdraw 100% deduction in respectof Chinchpada Unit and Rakholi Unit is concerned, the petitionerpointed out that as per Section 80 IB, the five years' period forclaiming 100% deduction has to be considered from the date ofcommencement of production. Given the fact that Chinchpada Unit andRakholi Unit had their licence granted only on 7[th] June 1996 and 18[th]March 1998 respectively, the benefit for five assessment years has tobe worked out from the date of commencing of commercial production -1st April, 1998 being the date of commercial production for theChinchpada Unit and for the Rakholi Unit, from 22nd February 1999.Thus taking note of the materials produced, when the originalassessment rightly considered the claim and thus was found fullysatisfied, the question of withdrawal of the benefit did not arise. 12. The petitioner pointed out that the relief under Section 80IB of 100% was granted by the Officer after fully satisfying himselfas to the date of commencement of commercial production. Thus thepetitioner pointed out that the view of the first respondent that therelief had to be granted from the date of the licence i.e., from18.03.1998 in respect of the Rakholi Unit and from 07.06.1996 in thecase of Chinchpada Unit, is contrary to the provisions of Section 80IB of the Act. The petitioner further pointed out that the entirereassessment proceedings, in fact, rested on the view taken by theAssessing Officer that deduction should be made only from the datewhen the experimental production was started and not when thecommercial production had started. Thus, except for the auditobjection, there are no materials which led him to form a belief thatthe income had escaped assessment, to warrant assumption ofjurisdiction under Section 147 of the Act. The assessee alsoreferred to Form 10CCB which was required to be filed for claimingdeduction under Section 80IB of the Act – a requirement introducedfor the first time by Income Tax (23[rd] Amendment) Rules, 2002, with effect from 6.9.2002, which gave the details of commercial productionof copper in Chinchpada Unit and Rakholi Unit. effect from 6.9.2002, which gave the details of commercial productionof copper in Chinchpada Unit and Rakholi Unit. 13. As regards the other income which were not stated to havebeen derived from the manufacturing activity, particularly relatingto the first two assessment years, the petitioner made its objectionthat there was no omission or failure on the part of the assesseefrom disclosing fully and truly, all material facts. The petitionerpointed out that the interest income earned related to the belatedpayment from its purchaser as well as sundry items and the claim issupported by the decision of the High Court. As regards the shareissue expenses, the same was reflected as capital expenditure debitedto the Profit and Loss Account in the Tax Audit Report under Section44AB of the Act. As regards the income tax and wealth tax debited inthe Profit and Loss Account, there was never a claim made fordeduction. 14. As regards the computation under Section 115 JB of the Actwith reference to the claim under Section 80 HHC, the petitionercontended that the provision under Section 115 JB has an overridingeffect over the other provision. The amount of profit eligible fordeduction under Section 80HHC could not form part of the book profitas per the Section. For the purpose of Explanation (iii) to Section115JB, it is not the actual deduction under Section 80HHC that isrelevant, but what is relevant is the eligible profit for deductionunder Section 80HHC of the Act. As regards the provision for baddebts, it was contended that the same was towards ascertainedidentified liability and a provision was made in the books ofaccounts. The amount, though added in the regular computation of thetotal income, was not added while computing book profit under Section115 JB of the Act. So too the diminution in the value of currentinvestment. The assessee contended that the above claims wereconsidered by the Assessing Officer after making verification withthe records of the petitioner. As such, the question of allegingfailure on the part of the assessee from disclosing true and fullfacts, did not arise. Therefore, the question of granting relief ofmore than what had been laid down, did not arise. 15. In the reply filed for the assessment year 2003-04, thepetitioner specifically pointed out to Section 154 proceedings thaton the admitted fact that the proceedings were on account of thealleged mistake on the face of the record, the proceedings takenunder Section 147, read with Section 148, alleging that there wasfailure on the part of the assessee to disclose any material factstruly and fully, fails. Thus there could be no simultaneousassumption of jurisdiction under Sections 148 and 154 on the selfsame issues. The petitioner further pointed out that on anapplication made under the Right to Information Act, 2005, thepetitioner was supplied with all the details as regards the view of the audit party on the relief granted to the petitioner under Section80 IB of the Act. In the circumstances, the petitioner contends thatthe reopening of assessment based on audit objection suffers fromlegal infirmity and hence, the proceedings are liable to be quashed. the audit party on the relief granted to the petitioner under Section80 IB of the Act. In the circumstances, the petitioner contends thatthe reopening of assessment based on audit objection suffers fromlegal infirmity and hence, the proceedings are liable to be quashed. 16. Learned senior counsel appearing for the petitioner madedetailed submissions on Section 147 of the Act, in particular, withreference to the assessments made based on the materials produced andverified by the Assessing Officer. Making particular reference tothe proceedings under Section 154 as regards the assessment year2003-04, he submitted that when once the Officer had assumedjurisdiction under Section 154 of the Act to rectify the errorsapparent on the face of the record, the question of further issuanceof notice under Section 147 of the Act, alleging that the petitionerhad not made a true and full disclosure of facts, did not arise.Placing reliance on the decision reported in [1994] 206 ITR 1 (Bom)(Commissioner of Income Tax Vs. Premier Automobiles Ltd.), hesubmitted that Section 154 and Section 147 operated on differentfields. Even though the first respondent had communicated that therewere some inherent difficulties in sustaining the proceedings underSection 154, the fact remains that as of today, there are no orderspassed on the objections made. Hence, the assessee is entitled toassume the proceedings as still pending. Pointing out to the date ofcommercial production in respect of the two units and the materialsproduced at the time of assessment and examined by the Income TaxOfficer, learned senior counsel relied on the decision reported in[1961] 41 ITR 191 (Calcutta Discount Company Ltd. Vs. Income TaxOfficer, Companies District, I and another), followed in a series ofdecisions, the latest decision being [2010] 320 ITR 561 (SC)(Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd.), andpointed out to the consistent view of the Apex Court that in thename of reopening the assessment, there cannot be a review of anassessment made based on the materials. He pointed out that theassumption of jurisdiction under Section 147 presupposes theexistence of materials to form the view that by reason of the failureon the part of the assessee from disclosing the full and true facts,there had been an escapement of income, necessitating the reopeningof assessment. Thus on a mere point of law as to whether the reliefunder Section 80 IB has to be granted from the year of operation orthe year of commercial production, there could be no assumption ofjurisdiction under Section 147 of the Act. When the notice does notdisclose the reasons or the materials, the assumption of jurisdictionis bad and it is also hit by the four years' time limit given in thesubstantive part of Section 147 of the Act.Given the fact that thenotice discloses absolutely no materials to provide the link to theassumption of jurisdiction that there had been escapement of incomefrom assessment, the scope of Explanation (1) to Section 147 is nodifferent from what one would have to apply in understanding the scope of Section 147 sub section (1). Learned senior counselsubmitted that the reasons disclosed does not disclose any materialto come to a conclusion that there existed facts necessary to conferjurisdiction on the Officer to proceed under Section 147 of the Act.He further pointed out that even in the backdrop of the Explanationto Section 147(1), one cannot find any material having a bearing onthe question of under-assessment, warranting a re-assessment in thiscase. Making particular submission that the deduction under Section80 IB is with reference to the date of commercial production, learnedsenior counsel relied on the decisions reported in [2006] 286 ITR 674(Commissioner of Income Tax Vs. Elgi Finance Limited), [1974] 93ITR 548 (Bom) (Commissioner of Income Tax, Poona Vs HindustanAntibiotics Ltd.,[2010] 322 ITR 631 (Delhi) (Commissioner of IncomeTax Vs. Nestor Pharmaceuticals Limited) and [1977] 110 ITR 164(Additional Commissioner of Income Tax Vs. Southern StructuralsLimited), and submitted that on the erroneous view taken as to thescope of Section 80 IB of the Act, the proceedings taken to reopenthe assessment must fail. He pointed out that the claim of thepetitioner originally made and accepted by the respondents asstarting from 1998-99 in respect of Chinchpada Unit and from 2000-2001 in respect of the Rakholi Unit, must not suffer an abortive end,consequent on the erroneous view taken by the Assessing Officer onthe provision of law under Section 80IB to revise the assessmentunder Section 148 for the assessment years 2002-03, 2003-04 and 2004-05. 17. Learned senior counsel also referred to the decision reportedin [2006] 284 ITR 626 (Sunil Kumar Jain Vs. The Income Tax Officer)on the aspect of availability of alternative remedy that when thematerials required for assumption of jurisdiction is not there, thepetitioner is justified in invoking this Court's jurisdiction.Hence, no exception could be taken in this matter. 18. On notice, the first respondent has filed the counteraffidavit before this Court. Raising the issue on the availabilityof alternative remedy, the counter affidavit supported theproceedings taken under Section 147 of the Act, particularly withreference to Section 80 IB of the Act, that when the petitioner hadbeen granted excessive relief, the assessment is liable to bereopened under Section 147 of the Act. Learned Senior StandingCounsel appearing for the respondents placed heavy reliance onExplanation (1) to Section 147(1) of the Act and submitted that eventhough the assessee had placed fully and truly the facts before theOfficer, yet, when they had not received due consideration which isrequired of and the relief had been granted in excess of what iscontemplated under the provisions of the Act, the Officer wasentitled to assume jurisdiction under Section 147 of the Act. Makingparticular reference to limitation, he once again referred to Explanation (1) that production of other evidence, by itself, wouldnot amount to disclosure within the meaning of the proviso to Section147 of the Act. In the circumstances, when there are sufficientremedies available under the Act, the petitioner should haveexhausted the same, instead of approaching this Court. He furtherpointed out that the proceedings under Section 154 of the Act couldnot be pursued further, as is evident from the communication receivedby the petitioner, on account of certain inherent difficulties inproceeding further in processing the said application. Hence, itcould not be presumed that the first respondent could not proceedfurther with the issuance of notice under Section 154, or the samewould oust the jurisdiction under Section 147 of the Act. 19. In support of his contention, he relied on the decisionreported in [1999] 237 ITR 13 (Commissioner of Income Tax Vs. P.V.S.Beedies Pvt. Ltd.), referred to in the unreported decision of theDelhi High Court dated 26.9.2011 in W.P.No.6205 of 2010 (Dalmia Pvt.Ltd. Vs. commissioner of Income Tax, Delhi and another), which alsodealt with the scope of Explanation (1) to Section 147 of the Act inthe context of the various decisions of the Apex Court on the scopeof Section 147 of the Act. 20. Reiterating the stand taken in the counter affidavit,particularly with reference to Section 80 IB of the Act, learnedSenior Standing Counsel appearing for the Revenue pointed out thatthe claim is not sustainable in law. As regards the miscellaneousincome, particularly when there are no discussions as to whether theyare derived from the industrial undertaking, rightly proceedings weretaken by the first respondent by issuing notice under Section 147 ofthe Act. 21. Heard learned senior counsel appearing for the petitioner andthe learned Senior Standing Counsel appearing for the Revenue andperused the materials placed on record. 22. It is an admitted fact that the assessee herein has eligibleindustrial undertakings, one at Chinchpada Unit (CCR Refinery) atSilvassa in the Union Territory of Dadra and Nahar, Haveli and theother at Rakholi. The first respondent does not deny, as a matter offact, that the licensing Authority granted the licence for theChinchipada Unit to start the business operations on 7th June 1996and for the Rakholi Unit, on 18th March 1998. It is not disputed bythe respondents that the commencement of the operation, as by way ofcommercial production in respect of these Units, was from 1st April1998 and 22nd February 1999 respectively. It is not denied by theRevenue that the assessee made no claim for deduction under Section80 IB in respect of the Chinchpada Unit and the Rakholi Unit in theassessment years 1997-98 and 1998-99, relevant to the year in which the licence was granted. To a specific question put to the firstrespondent as to the first year of granting the relief of 100% underSection 80 IB, the first respondent does not deny, as a matter offact, that as per the provision under Section 80 IB, the relief of100% was granted from the year in which the commercial productionstarted. As already pointed out, in respect of Chinchpada Unit, thecommercial production started on 1[st] April 1998 and in respect ofRakholi Unit, the commercial production started on 22[nd] February 1999.Given the fact that the assessee is entitled to 100% deduction forthe first five years starting from the initial assessment year of thedate of commercial production, the petitioner had had the benefit of100% deduction granted for the first time from the assessment year1999-2000 and 2000-2001 in respect of Chinchpada Unit and RakholiUnit respectively. 23. The contention of the first respondent herein that there wasa wrong relief granted at 100% in respect of the assessment years2002-03 2003-04 and 2004-05, is not legally correct. 24. Learned Senior Standing Counsel appearing for the Revenuepointed out that the notice to reopen the assessment was given onlyto bring the relief granted to be in tune with the date ofcommencement of operation and hence, the relief granted was in excessof what was available to the assessee.25. Section 80IB(14)(c)(iii) defines "initial assessment year" asfollows:"(c) "initial assessment year" -..........(iii) in the case of an undertaking engaged in thebusiness of commercial production or refining of mineraloil referred to in sub-section (9), means the assessmentyear relevant to the previous year in which the undertakingcommences the commercial production or refining of mineraloil;" 24. Learned Senior Standing Counsel appearing for the Revenuepointed out that the notice to reopen the assessment was given onlyto bring the relief granted to be in tune with the date ofcommencement of operation and hence, the relief granted was in excessof what was available to the assessee.25. Section 80IB(14)(c)(iii) defines "initial assessment year" asfollows:"(c) "initial assessment year" -..........(iii) in the case of an undertaking engaged in thebusiness of commercial production or refining of mineraloil referred to in sub-section (9), means the assessmentyear relevant to the previous year in which the undertakingcommences the commercial production or refining of mineraloil;" 26. Going by the above definition that the criteria fordetermining the period of deduction and the percentage of deductionis based on the industrial undertaking beginning to manufacture orproduce things, I do not find any legal basis in the contention ofthe Revenue that the relief has to be worked out from the date of thelicence. It may be noted that getting a licence to set up anindustrial undertaking is astage anterior to the commencement ofproduction and hence, the date of licence and the date of commercialproduction cannot be a simultaneous happening. In the circumstances,I hold that the very basis for initiating the reassessmentproceedings suffers from legal infirmity arising from the wrongunderstanding of a clear provision under Section 80 IB of the Act. https://hcservices.ecourts.gov.in/hcservices/ On the admitted fact as regards the date of the licence and the dateof commercial production, the relief granted from the initialassessment year taken from the date of commercial manufacture mustenure for a period of five years thereafter. 27. Thus with Section 80 IB laying stress on the date ofcommercial production as the year from which the relief should beworked out, I agree with the learned senior counsel appearing for thepetitioner that the decisions reported in [1977] 110 ITR 164(Additional Commissioner of Income Tax Vs. Southern StructuralsLimited),[2006] 286 ITR 674 (Commissioner of Income Tax Vs. ElgiFinance Limited), [1974] 93 ITR 548 (Bom) (Commissioner of IncomeTax, Poona Vs Hindustan Antibiotics Ltd., and [2010] 322 ITR 631(Delhi) (Commissioner of Income Tax Vs. Nestor PharmaceuticalsLimited) support the case of the assessee and consequently, theproceedings taken now must fail. In fact, in the decision reportedin [1977] 110 ITR 164 (Additional Commissioner of Income Tax Vs.Southern Structurals Limited), while considering Section 84 as itstood then, which is a percusor to Section 80 J and on its deletionfrom the statute, the present provision in Section 80 IB, this Courtpointed out that even a production of a prototype is not a productionof an article as such and that would not be enough to show that theassessee had begun to manufacture or produce articles. This Courtpointed out that "The manufacture or production of articles must bein commercial sense." Thus, apart from the issue raised as to theabsence of materials available with the Assessing Officer to assumejurisdiction to reopen the assessment, I agree with the contentionof the petitioner that going by the purport of Section 80 IB, on theadmitted facts as to the date of commercial production, there couldbe no denial of the relief. 28. As already pointed out, in respect of the assessment year2003-04, the first respondent herein issued notice under Section 154on 20.7.2006, wherein, the Officer proposed to disallow the claimunder Section 80 HHC, provision for bad debts and diminution of valueof current investment and income tax debited in respect of Section115 JB assessment and on the regular assessment under Section 143(3)in respect of the alleged mistake in granting deduction under Section80 IB, for income tax and wealth tax debited in the profit and lossaccount and the share issue expenses and FRN issue expenses writtenoff to be disallowed, being capital in nature. 29. A reading of the notice under Section 154 of the Act and thereassessment notice dated 11[th] May 2009 shows that there is absolutelyno material difference on the issues sought to be considered underthese notices, except the fact that while in the proceedings underSection 154, the notice is based on the view that there was a mistakeapparent on the face of the record warranting a rectification, the proceedings under Section 147 alleged that by reason of the untrueand incorrect particulars given by the assessee, there had been anescapement of tax. Given the fact that the area of operation of boththese provisions are on totally different fields, the simultaneousassumption of jurisdiction under Sections 154 and 147 on the selfsame issue, plainly shows the contradiction in the reasoning of thesecond respondent and as without logic or reason. 30. As rightly pointed out by the learned senior counselappearing for the petitioner placing reliance on the decisionreported in [1994] 206 ITR 1 (Bom) (Commissioner of Income Tax Vs.Premier Automobiles Ltd.), when once the assessment order has beenthe subject matter of rectification under Section 154, the self sameissue cannot be the subject matter of reassessment by taking recourseto Section 147 of the Act. Thus, on the facts that are availabletoday, as far as the assessment year 2003-2004 is concerned, thereare two proceedings, one under Section 154 and another under Section147 of the Act. The jurisdiction given under both the Sections thusoperating on different fields, (as far as this assessment year isconcerned), and with the doubt in the mind of the Officer as towhich direction he has to go, I have no hesitation in holding thatthe notice lacks the very basis for assumption of jurisdiction underSection 147 of the Act. For the reasons that there cannot be twoparallel proceedings on the self same issue as one based on the viewthat there were materials available on record which warrantedexercise of jurisdiction under Section 154 and the other initiatedunder Section 147 that there was escapement of income from tax onaccount of the failure of the assessee from disclosing the full andcorrect particulars, I have no hesitation in quashing the notice onreassessment. 31. Learned senior standing counsel appearing for the Revenuepointed out that the issue as regards the interest income being amatter of excessive relief under Section 80 IB and the provision forbad debts and provision for diminution in value of currentinvestment, to be considered under Section 115 JB, had not receiveddue consideration at the time of assessment. Consequently, the samewarranted assumption of jurisdiction under Section 147. As alreadyseen, as far as the reassessment for the assessment year 2003-04 isconcerned, the said issue is also the subject matter of Section 154proceedings. For the reasons already given in the precedingparagraph, I do not find any justifiable ground to accept thecontention of the Revenue to uphold the reassessment proceedings. 32. As regards the writ petitions relating to the assessmentyears 2002-2003 and 2004-2005, the issue on the grant of relief underSection 80 IB under the reassessment notices are no different fromwhat had been adopted for the assessment year 2002-2003. Learnedsenior counsel appearing for the petitioner made particular reference 32. As regards the writ petitions relating to the assessmentyears 2002-2003 and 2004-2005, the issue on the grant of relief underSection 80 IB under the reassessment notices are no different fromwhat had been adopted for the assessment year 2002-2003. Learnedsenior counsel appearing for the petitioner made particular reference https://hcservices.ecourts.gov.in/hcservices/ that there cannot be a reassessment proceedings on the mere change ofopinion, particularly on the scope of Section 80 IB of the Act. Heparticularly laid stress on the language of Section 147, that in thecontext of the decision of the Apex Court reported in [1961] 41 ITR191 (Calcutta Discount Company Ltd. Vs. Income Tax Officer, CompaniesDistrict, I and another),followed by[2007] 294 ITR 310(Commissioner of Income Tax Vs. Eicher Ltd.) and the decisionreported in [2010] 320 ITR 561 (SC) (Commissioner of Income Tax,Delhi Vs. Kelvinator of India Ltd.), even to fall back on Explanation(1) to Section 147, the Revenue must have materials to form a primafacie viewthat there had been non-disclosure of material facts.Thuswhen all the facts relating to the various claims were placed beforethe Assessing Officer in the questionnaire sent and the petitionerhad participated in the enquiry, there could be no assumption ofjurisdiction by the Assessing Officer under Section 147 of the Act. 33.The case of the Revenue is that even if the assessee hadplaced the materials before the Assessing Officer at the time oforiginal assessment, Explanation (1) to Section 147 gives thenecessary jurisdiction required for reopening the assessment, for,under the Explanation, the production of Books of Accounts and othermaterial will not necessarily amount to "disclosure" within themeaning of the Section if the Assessing Officer does not draw theright inferences, which he should have otherwise drawn. Quite apart,he also placed reliance on Section 147 Explanation 2(c) that whenexcess relief had been granted to the assessee under Section 80 IB,the same is liable to be revised. 34. As for the contention of the Revenue based on theExplanation, it is no doubt true that if one goes by Explanation (1)to Section 147 of the Act, the mere production of account books orother evidence at the time of original assessment would not be a gooddefence to an assessee to contend that the failure to draw thecorrect inference would not confer jurisdiction under Section 147 ofthe Act. 35.Contentions such as the one raised by the Revenue based onthe Explanation to Section 147 of the Act was considered by the ApexCourt in the decision reported in [1961] 41 ITR 191 (CalcuttaDiscount Company Ltd. Vs. Income Tax Officer, Companies District, Iand another). To a specific question as to how could an assessee becharged with failure to communicate an inference which he might ormight not have drawn, the Apex Court pointed out as follows:“ There can be no doubt that the duty of disclosingall the primary facts relevant to the decision of thequestion before the assessing authority lies on theassesses. To meet the possible contention that when someaccount books or other evidence has been produced, there is no duty on the assessee to disclose further facts,which on due diligence, the Income-tax Officer might havediscovered, the Legislature has put in the Explanation...”“ His omission to bring to the assessing authority'sattention those particular items in the account books, orthe particular portions of the documents, which arerelevant, amount to "omission to disclose fully and trulyand truly all material facts necessary for his assessment” is no duty on the assessee to disclose further facts,which on due diligence, the Income-tax Officer might havediscovered, the Legislature has put in the Explanation...”“ His omission to bring to the assessing authority'sattention those particular items in the account books, orthe particular portions of the documents, which arerelevant, amount to "omission to disclose fully and trulyand truly all material facts necessary for his assessment” " 13.It may be pointed out that the Explanation to thesub-section has nothing to do with "inferences"and deals only with the question whether primarymaterial facts not disclosed could still be saidto be constructively disclosed on the ground thatwith due diligence the Income-tax Officer couldhave discovered them from the facts actuallydisclosed. The Explanation has not the effect ofenlarging the section, by casting a duty on theassessee to disclose "inferences" - to draw theproper inferences being the duty imposed on theIncome-tax Officer. 14. We have therefore come to the conclusion thatwhile the duty of the assessee is to disclosefully and truly all primary relevant facts, itdoes not extend beyond this. 15. The position therefore is that if there werein fact some reasonable grounds for thinking thatthere had been any non-disclosure as regards anyprimary fact, which could have a material bearingon the question of "under-assessment" that wouldbe sufficient to give jurisdiction to the Income-tax Officer to issue the notices under section34.(Emphasis supplied)The Apex Court further held as follows:“ Once all the primary facts are before theassessing authority, he requires no furtherassistance by way of disclosure. It is for him todecide what inferences of facts can be reasonablydrawn and what legal inferences have ultimatelyto be drawn. It is not for somebody else - farless the assessee - to tell the assessingauthority what inferences, whether of facts orlaw, should be drawn. Indeed, when it isremembered that people often differ as regardswhat inferences should be drawn from given facts,it will be meaningless to demand that theassessee must disclose what inferences - whether of facts or law - he would draw from the primaryfacts.12. If from primary facts more inferences thanone could be drawn, it would not be poss