Order:(Per v. Ramasubramanian, J

IN THE HIGH COURT OF JUDICATURE AT HYDERBADFOR THE STATE OF TELANGANA AND THE STATE OFANDHRA PRADERSHW.P.No.2148 of 2015 Between:Kohinoor Hatcheries Pvt Ltd., represented by itsManaging Director D. Raghava Rao…..PetitionerAnd:The Deputy Commissioner of Income Taxand another…… RespondentsJUDGMENT PRONOUNCED ON : 16.08.2016HON’BLE SRI JUSTICE : V.RAMASUBRAMANIANANDHON’BLE SMT. JUSTICE : ANIS1. Whether Reporters of local Newspapers may be allowed to see the Judgments? : No2. Whether the copies of judgment may be marked to Law Reporters/ Journals? : Yes3. Whether their Ladyship/Lordship wish to see the fair copy of the judgment? : Yes * HON’BLE SRI JUSTICE V.RAMASUBRAMANIAN ANDHON’BLE SMT JUSTICE ANIS + W.P.No.2148 of 2015 % 16-08-2016 Kohinoor Hatcheries Pvt Ltd., represented by itsManaging Director D. Raghava Rao …. Petitioner AND The Deputy Commissioner of Income Tax and another …. Respondents ! Counsel for petitioners : Y. Ratnakar ^ Counsel for respondents Senior : B. Narasimha Sarma, Standing Counsel for IncomeTax < Gist: > Head Note: ? Cases referred: 1) (2014) 1 SCC 6032) 247 ITR 8183) 2010 320 ITR 5614) 41 ITR 1915) 79 ITR 609 (SC) HON’BLE SRI JUSTICE V.RAMASUBRAMANIANANDHON’BLE SMT JUSTICE ANIS W.P.No.2148 of 2015 ORDER:(per V. Ramasubramanian, J.) The petitioner has come up with the above writ petitionchallenging a notice dated 26-03-2014 issued under Section 148 ofthe Income Tax Act, 1961, for reopening the assessment for theyear 2008-2009. 2. Heard Sri Y. Ratnakar, learned counsel for the petitionerand Sri Narasimha Sarma, learned senior standing counsel for therespondents. 3. The petitioner/assessee filed a return of income for theAssessment Year 2008-09 on 30-09-2008, admitting (i) a loss ofRs.1,98,26,817/- and (ii) a profit on sale of land to the tune ofRs.14,35,77,640/-. The assessment was completed under Section143 (3) of the Act on 31-12-2010. The total loss was determined atRs.1,87,83,175/-. 4. Thereafter, a notice dated 26-03-2014 was issued underSection 148 of the Act by the Deputy Commissioner of IncomeTax, claiming that he had reason to believe that the petitioner’sincome chargeable to tax for the Assessment Year 2008-09, hadescaped assessment within the meaning of Section 147of the Actand that therefore, the petitioner should deliver the return in theprescribed form. 5. Since the said notice did not contain any reasons forreopening of assessment, the petitioner made a request on 25-04-2014. In response, the Assessing Officer issued a replydated 14-07-2014 indicating that the profit on sale of land amounting toRs.14,35,77,640/-, related to land sold to a Real Estate Companyfor the construction of a Special Economic Zone and thattherefore, the sale was not exempt as agricultural land in view ofthe decision of the Supreme Court in Sarifabibi, MohammedIbrahim v. Commissioner of Income Tax (204 ITR 631 (SC). 6. In response to the reasons communicated by theAssessing Officer, the petitioner sent detailed objections on 22-08-2014. But these objections were rejected by the AssessingOfficer, by an order dated 23-01-2015. By the same order, the petitioner was called upon to appear before the Assessing Officeron 30-01-2015. 7. After appearing before the Assessing Officer on 30-01-2015 the petitioner came up with the above writ petitionchallenging the very reopening of assessment under the noticedated 26-04-2014. This Court, while ordering notice beforeadmission in the writ petition on 05.02.2015, permitted theAssessing Officer to complete the reassessment, but not to giveeffect to the same, until further orders of this Court. 6. In response to the reasons communicated by theAssessing Officer, the petitioner sent detailed objections on 22-08-2014. But these objections were rejected by the AssessingOfficer, by an order dated 23-01-2015. By the same order, the petitioner was called upon to appear before the Assessing Officeron 30-01-2015. 7. After appearing before the Assessing Officer on 30-01-2015 the petitioner came up with the above writ petitionchallenging the very reopening of assessment under the noticedated 26-04-2014. This Court, while ordering notice beforeadmission in the writ petition on 05.02.2015, permitted theAssessing Officer to complete the reassessment, but not to giveeffect to the same, until further orders of this Court. 8. But It appears that by the time this court passed the saidorder, the assessing officer had already completed theassessment on 31-01-2015. 9. Therefore, despite the interim order passed by this court,the Assessing officer communicated the assessment order dated31-01-2015 and the petitioner appears to have filed a statutoryappeal on 09-03-2015, so that they do not miss the bus, in theevent of the writ petition being decided against them. 10. In the light of the above developments, a preliminaryobjection is taken by Sri Narasimha Sarma, learned seniorStanding Counsel for the department, on the basis of the decisionsof the Supreme Court in Commissioner of Income Tax andothers v. Chabbil Agrawal[[1]]and Ess Ess Kay EngineeringCompany Limited v. Commissioner of Income Tax[[2]]that thewrit petition deserves to be dismissed on the ground of availabilityof alternative remedy. But we do not think that the said contentioncan be upheld in the case on hand. The law is well settled that therefusal to entertain writ petitions on the ground of availability ofalternative remedies, is a self-imposed restriction. This self-imposed restriction, as pointed out even in Commissioner ofIncome Tax and others v. Chabbil Agrawal’scaseis not without exceptions. These exceptions, which are not exhaustive, but onlyillustrative, are: (1) where the remedy available is ineffective; (2)where the statutory authority did not act in accordance with theprovisions of the enactment; (3) where the statutory authorityacted in defiance of fundamental principles of judicial procedure;(4) where the statutory authority resorted to invoke the provisionsthat are not available; and (5) where the statutory authority actedin total violation of the principles of natural justice. 11. In the case on hand, the petitioner challenges the veryinitiation of proceedings for reopening of assessment, as beingwithout jurisdiction and also in complete defiance of the statutoryprescriptions. Therefore, this is not a case, which can be thrownout on the ground of availability of alternative remedy. 12. Coming to the merits of the case, the reopening ofassessment had happened in this case, admittedly after 4 years. This is also a case where an assessment under sub-section (3) ofSection 143 had already been made on 31-12-2010 for the relevantAssessment Year. Therefore, by virtue of the proviso to Section147, no action could have been taken, after the expiry of 4 yearsfrom the end of the relevant Assessment Year, unless any incomechargeable to tax has escaped assessment, by reason of any oneof the 3 contingencies viz., a) failure on the part of the assessee,to make a return under Section 139; b) failure on the part of theassessee to make a return response to a notice under Section 142(1) or under Section 148; and c) failure on the part of the assesseeto disclose fully and truly all material facts necessary for theassessment. 13. It is neither the case of the Assessing Officer nor that ofthe learned senior Standing Counsel that the present case wouldfall under the first or the second contingency. The respondents attempt to bring the case of the writ petitioner, under the thirdcategory, viz., failure to disclose fully and truly all material factsnecessary for the assessment. 13. It is neither the case of the Assessing Officer nor that ofthe learned senior Standing Counsel that the present case wouldfall under the first or the second contingency. The respondents attempt to bring the case of the writ petitioner, under the thirdcategory, viz., failure to disclose fully and truly all material factsnecessary for the assessment. 14. Before testing whether the petitioner was guilty of failureto disclose fully and truly all material facts necessary for theassessment, we must keep in mind the prescription contained inExplanation 1 to Section 147. By this Explanation, it is made clearthat the production before the Assessing Officer of all accountbooks or other evidence from which material evidence could, withdue diligence, have been discovered by the Assessing Officer, willnot necessarily amount to disclosure within the meaning of theproviso. 15. Therefore, the proviso as well as the Explanation 1 toSection 147 make it obligatory on the part of the assessee (1)to make a full disclosure; 2) to make a true disclosure and 3)to ensure that such true and full disclosure is of material factsnecessary for the assessment. A clear signal is sent to theassessee by Explanation 1 that the mere production of books ofaccounts or other evidence before the Assessing Officer will notbe treated as a disclosure. In other words, a distinction is soughtto be made between production of materials and disclosure ofmaterials. 16. Such a distinction between a mere production ofmaterials and a true and full disclosure of materials is sought to bemaintained on account of the fact that under the Act, an AssessingOfficer has now power of review. This is why the Supreme Courtclarified in Commissioner of Income Tax vs. Kelvinator IndiaLtd.,[[3]]that though the power to reopen assessment, after theDirect Tax Laws (Amendment) Act, 1987 was much wider, Section147 cannot be taken to confer arbitrary powers to reopen assessment on the basis of mere change of opinion. 17. The question of change of opinion would arise onlyif there had been a formation of opinion in the first instance. Itis not necessary that upon mere production of materialevidence, a formation of opinion or the possibility offormation of an opinion could inevitably happen. But, on thecontrary, upon disclosure of material facts, fully and truly, theAssessing Officer could, nay, expected to, form an opinion.Once an opinion is formed or the possibility of forming anopinion is stepped up, at the time of assessment, theassessing officer is not allowed thereafter, by law, to takerecourse to Section 147. 18. By making a distinction between a mere productionof necessary materials and a true and full disclosure ofmaterials necessary for assessment, the statute ensures twothings viz., a) that an officer, who had once formed anopinion, does not seek to change it later; and b) that anofficer, who, deliberately or by his negligence, omitted to forman opinion, despite being made aware of the material facts, donot take refuge latter under Section 147 to cover up hisnegligence. 19. A question may arise in the second category of casesas to whether the interests of the Revenue would not suffer insuch cases. But the answer is not too difficult to find out. It is onlyto safeguard the interests of the Revenue in cases of this naturethat an express power is conferred upon the Commissioners underSection 263 of the Act. 20. Therefore, what is important in cases of this naturewhere a challenge is made to the reopening of assessment, isto see (1) whether there was a true and full disclosure of all materials or (2) whether there was a mere production ofmaterials. 21. As pointed out by the Constitution Bench of theSupreme Court in Calcutta Discount Co. Ltd., v. Income TaxOfficer and another[[4]],the duty of the assessee stops with a trueand full disclosure and does not extend to assisting the AssessingOfficer with the inferences that could be drawn from out of whatwas disclosed. 20. Therefore, what is important in cases of this naturewhere a challenge is made to the reopening of assessment, isto see (1) whether there was a true and full disclosure of all materials or (2) whether there was a mere production ofmaterials. 21. As pointed out by the Constitution Bench of theSupreme Court in Calcutta Discount Co. Ltd., v. Income TaxOfficer and another[[4]],the duty of the assessee stops with a trueand full disclosure and does not extend to assisting the AssessingOfficer with the inferences that could be drawn from out of whatwas disclosed. 22. Explanation 1, as pointed out by the Supreme Court inCommissioner of Income Tax, Calcutta v. Burlop DealersLimited[[5]],does not impose an onerous obligation upon theassessee. It merely clarifies what could not be treated as true andfull disclosure. 23. Therefore, keeping the fundamental distinction betweenwhat is mere production of material facts and what tantamounts toa true and full disclosure, let us now come back to the facts of thepresent case. 24. It is the positive case of the petitioner that during thecourse of initial assessment proceedings, a detailed questionnairewas issued and the petitioner submitted their reply on 9-11-2010. There was a specific question covering the sale of agriculturallands and its taxability. The reply submitted by the petitioner tothese questions at Sl.Nos.4 and 5 of the letter dated 9.11.2010were as follows: “The details of total land holding of the company areenclosed. We have sold 28.13 acres of agricultural land duringthe financial year 2007-2008. Copies of the relevant saledeeds are enclosed along with working of computation of profiton sale of agricultural land. These lands sold are ‘agriculturallands’ within the meaning of ‘agricultural land’ as defined inIncome Tax Act. Hence, the gain on sale is exempt for tax.” 25. Thereafter, the order of assessment dated 31-12-2010was passed. Even in the order of assessment there was a clear indication to the following effect: “The information was called and questioned that why the profiton sale of land not offered to tax though disclosed in the returnand asked for to substantiate its claim that the said profit is nottaxable income. The assessee was also issued a letter callingfor information and produce books of accounts, bankstatements, vouchers/bills etc. The AR of the assessee, SriSyed Mansoor, CA, appeared from time to time and producedbooks of accounts with relevant vouchers/bills etc. and theinformation with regard to land details etc. After examining thebooks of accounts and other details at length, the case wasdiscussed with the AR of the assessee. However, uponverification of the balance sheet, the assessee is claimingdiffered tax liability of Rs.9,96,257 and also agriculturalexpenses of Rs.47,385 was debited to P & L account……” 26. The fact (1) that a questionnaire was issued during theinitial assessment proceedings; (2) that a reply was submitted on9.11.2010; (3) that the reply contained details about the sale of theland; (4) that the reply to the questionnaire was accompanied bythe relevant sale deeds; (5) that there was a positive claim in thereply that the lands sold were agricultural lands; and (6) that thesaid claim was actually examined by the Assessing Officer beforepassing the original order of assessment dated 31-12-2010 are allpatently clear from the records. 27. Therefore, the respondents cannot shy away from thefact that there was a full and true disclosure of all material factsnecessary for assessment. This case will not fall under thecategory of mere production of books of accounts and otherrecords. This case very clearly falls under the category of true andfull disclosure, upon which the first assessment order was passedon the opinion that the lands sold were agricultural lands.Therefore, to say after 4 years that the lands were sold to a Real Estate Company for the purpose of forming a Special EconomicZone, would undoubtedly tantamount to a change of opinion, whichis not permitted by law. 27. Therefore, the respondents cannot shy away from thefact that there was a full and true disclosure of all material factsnecessary for assessment. This case will not fall under thecategory of mere production of books of accounts and otherrecords. This case very clearly falls under the category of true andfull disclosure, upon which the first assessment order was passedon the opinion that the lands sold were agricultural lands.Therefore, to say after 4 years that the lands were sold to a Real Estate Company for the purpose of forming a Special EconomicZone, would undoubtedly tantamount to a change of opinion, whichis not permitted by law. 28. Therefore, the writ petition is allowed and the impugnedproceedings are set aside. There will be no order as to costs. 29. As a sequel thereto, miscellaneous petitions, if any,pending shall stand closed. ________________________ V. RAMASUBRAMANIAN, J Date: 16-08-2016 __________ ANIS, J Ksn LR to be marked [1](2014) 1 SCC 603 [2]247 ITR 818 [3]2010 320 ITR 561 [4]41 ITR 191 [5]79 ITR 609 (SC)