Wp/2814/2019 Of Ananta Landmark Pvt Ltd v. Deputy Commissioner Of Income Tax Central Circle 5(3) And 2 Ors

Digitallysigned byGAURIGAURI AMITGAEKWADAMITDate:GAEKWAD2021.09.2914:24:52+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2814 OF 2019 Ananta Landmark Pvt. Ltd.)101, Kalpataru Synergy, Opp. Grand Hyatt,)Santacruz, Mumbai – 400 055) ….Petitioner V/s.1. Deputy Commissioner of Income Tax)Central Circle 5 (3), having his office at Air)India Building, Nariman Point, Mumbai –)400 021)2. Pr. Commissioner of Income Tax,)Mumbai having his office at 19[th] Floor, Air)India building, Nariman Point, Mumbai –)400 021)3. Union of India through the Secretary,)Department of Revenue, Ministry of)Finance, North Block, New Delhi – 110 001) ….Respondents ---- Mr. P.D. Pardiwalla, Senior Advocate i/b. Ms. Vasanti B. Patel forpetitioner.Mr. Suresh Kumar for respondents. ---- CORAM : K.R. SHRIRAM, & R.I. CHAGLA, JJ DATED : 14[th] SEPTEMBER 2021 ORAL JUDGMENT : (PER K.R. SHRIRAM, J.) 1 Since pleadings are completed, we decided to dispose this petition at the admission stage itself. Rule. Rule made returnable forthwith. 2Petitioner had filed its annual returns for Assessment Year2012-2013. As required under Section 139 of the Income Tax Act, 1961(the Act), petitioner being a company filed its audited profit and lossaccount and balance sheet and the auditor’s report with the annualreturns. Thereafter, petitioner received a notice dated 5[th] August 2014under Section 143 (2) of the Act alongwith notice dated 5[th] August 2014under Section 142 (1) of the Act calling upon petitioner to furnish thedocuments mentioned as per the annexure to the notice. There are fouritems mentioned in the annexure but what we are concerned with isserial no.2 in the annexure, i.e., audited accounts, 3cd, balance sheet, P& I A/C etc. By its letter dated 14[th] August 2014, petitioner submitted allthe documents asked for and also clarified that tax audit report in Form3CD for the Assessment Year 2012-2013 was not applicable. 3Petitioner, thereafter received another notice dated10[th] October 2014 under Section 142 (1) of the Act calling uponpetitioner to provide certain details, one of which is “details of interestexpenses claimed under Section 57 of the Act”. These details wereprovided vide petitioner’s letter dated 3[rd] December 2014. Thereafter, there was a personal hearing granted and as per the further detailssought during the personal hearing, petitioner provided furtherdocuments and details by its letter dated 17[th] December 2014. 4 After considering the details supplied, an assessment orderdated 20[th] February 2015 came to be passed accepting petitioner’sexplanations and computation of income. Ofcourse in the assessmentorder certain credit for tax paid in the sum of Rs.42,160/- was notgranted and to that extent, a notice of demand under Section 156 of theAct was issued. That amount has been paid by petitioner. More than fouryears, after the assessment order dated 20[th] February 2015 came to bepassed, petitioner received a notice dated 26[th] March 2019 under Section148 of the Act stating “…….. I have reasons to believe that your incomechargeable to tax for the Assessment Year 2012-13 has escapedassessment within the meaning of Section 147 of the Income Tax Act,1961”. In response, petitioner, without prejudice to its rights andcontentions, sought for the reasons to believe. Respondent, by its letterdated 28[th] May 2019 provided petitioner the reasons recorded forreopening of the assessment. and reproduced hereinbelow : and reproduced hereinbelow : 6By a letter dated 14[th] June 2019, respondent gave a noticeunder Sub Section (1) of Section 142 of the Act calling upon petitioner tofurnish further details/information/documents. Petitioner responded byits letter dated 19[th] June 2019 filing its objections to reopening of theassessment. According to petitioner, there was no failure to truly andfully disclose material facts and in any case, it was a mere change ofopinion and there was no fresh tangible material for initiatingreassessment proceedings. Respondent no.1 passed an order dated30[th] September 2019 with reference to the objections raised by petitionerto the issuance of notice under Section 148 of the Act, which isimpugned in this petition. According to respondent no.1, (i) To confer jurisdiction under Section 147 (a), twoconditions were required to be satisfied, firstly the Assessing Officer musthave reasons to believe that income, profits or gains chargeable toincome tax had escaped assessment, and secondly he must also havereason to believe that such escapement has occurred by reason of eitheromission or failure on the part of the assessee to disclose fully or truly allmaterial facts necessary for his assessment of that year. Both theseconditions had to be satisfied before the Assessing Officer could assumejurisdiction for issue of notice under Section 148 read with Section 147 (a). But under the substituted Section 147 existence of only the firstcondition suffices. In other words, if the Assessing Officer has reason tobelieve that income has escaped assessment, that was enough to conferjurisdiction to reopen the assessment; (ii) Subsequent to the assessment proceedings, it was noticedthat the assessee had wrongly claimed the deduction under Section 57 ofthe Act. Accordingly, the Assessing Officer formed reasons to believe forreopening of the assessment. This issue went unnoticed by the AssessingOfficer during the course of original assessment proceedings forAssessment Year 2012-2013 and therefore, the jurisdictional requirementunder Section 147 of the Act is fulfilled and reopening under Section 147of the Act cannot be challenged; (iii) The Assessing Officer had not made any discussion inrespect of those points on which assessment is reopened, thus it can behardly stated that Assessing Officer had formed an opinion on suchpoints during original assessment proceedings. The Supreme Court andvarious High Courts have justified the reopening of the assessment whereno opinion on certain points was formed by the Assessing Officer duringoriginal assessment proceedings and later on the assessment wasreopened on those points. Thus, the window of reopening of assessmentGauri Gaekwad will remain open for Assessing Officer on those points where theAssessing Officer neither accepts nor rejects such claim; (iv) Without prejudice to what is stated above, it is also important to mention that something which is tangible need not besomething which is new. Even if the Assessing Officer fails to apply hismind while framing original assessment to the points on whichassessment is sought to be reopened, it can be said that the reasons forreopening of the assessment under Section 147 comes within thejurisdiction. If there is an escapement of income in consequence, thejurisdictional requirement of Section 147 would be fulfilled on theformation of a reason to believe that income has escaped assessment; (v) The contention of the assessee that true and fulldisclosure of material fact with respect to interest income was madeduring the course of original assessment proceedings is not correct as theassessee was fully aware that it is settled position of law that the interestexpenses incurred for the purpose of business cannot be set off againstthe interest income under the income from other sources. The disclosureof material facts with respect to the setting off the interest expensesunder Section 57 of the Act might be full but it cannot be considered astrue. This is failure on the part of the assessee; (v) The contention of the assessee that true and fulldisclosure of material fact with respect to interest income was madeduring the course of original assessment proceedings is not correct as theassessee was fully aware that it is settled position of law that the interestexpenses incurred for the purpose of business cannot be set off againstthe interest income under the income from other sources. The disclosureof material facts with respect to the setting off the interest expensesunder Section 57 of the Act might be full but it cannot be considered astrue. This is failure on the part of the assessee; (vi) Further, explanation 1 to Section 147 of the Actstipulates that mere production of books of accounts or other documentsfrom which the Assessing Officer could have, with due diligence, inferredmaterial facts, does not amount to full and true disclosure of materialfacts. 7In our view, the order impugned requires to be set aside andwe have to hold that the Assessing Officer had no jurisdiction to issue thenotice under Section 148 of the Act. For ease of reference, we reproduce Section 147 as it then was prior to amendment : 147. Income escaping assessment - If the Assessing Officerhas reason to believe that any income chargeable to tax hasescaped assessment for any assessment year, he may, subjectto the provisions of sections 148 to 153, assess or reassesssuch income and also any other income chargeable to taxwhich has escaped assessment and which comes to his noticesubsequently in the course of the proceedings under thissection, or recompute the loss or the depreciation allowanceor any other allowance, as the case may be, for theassessment year concerned (hereafter in this section and insections 148 to 153 referred to as the relevant assessmentyear) : 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 this sectionafter the expiry of four years from the end of relevantassessment year, unless any income chargeable to tax hasescaped assessment for such assessment year by reason of thefailure on the part of the assessee to make a return undersection 139 or in response to a notice issued undersub-section (1) of section 142 or section 148 or to disclosefully and truly all material facts necessary for his assessmentfor that assessment year. 8 It is settled law that where the assessment is sought to bereopened after the expiry of a period of four years from the end of therelevant year, the proviso to Section 147 stipulates a requirement thatthere must be a failure on the part of the assessee to disclose fully andtruly all material facts necessary. Since in the case at hand, theassessment is sought to be reopened after a period of four years, theproviso to Section 147 is applicable. It is also settled law that the Assessing Officer has no powerto review an assessment which has been concluded. If a period of fouryears has lapsed from the end of the relevant year, the Assessing Officerhas to mention what was the tangible material to come to the conclusionthat there is an escapement of income from assessment and that therehas been a failure to fully and truly disclose material fact. After a periodof four years even if the Assessing Officer has some tangible material tocome to the conclusion that there is an escapement of income fromassessment, he cannot exercise the power to reopen unless he discloseswhat was the material fact which was not truly and fully disclosed by theassessee. If we consider the reasons for reopening, except stating inparagraph 3 that a sum of Rs.7,66,66,663/- which was chargeable to taxhas escaped assessment by reason of failure on the part of the assessee toGauri Gaekwad disclose fully and truly all material facts necessary, there is nothing elsein the reasons. In an unreported judgment of this Court in First SourceSolutions Limited V/s. The Assistant Commissioner of Income Tax – 12(2) (1) and Anr.1 relied upon by Mr. Pardiwalla, the Court held that ageneral statement that the escapement of income is by reason of thefailure on the part of the assessee to disclose fully and truly all materialfacts necessary for his assessment is not enough. The Assessing Officershould indicate what was the material fact that was not truly and fullydisclosed to him. In the affidavit in reply, it is stated that thereassessment proceedings was based on audit objections. In anotherunreported judgment of this Court in Jainam Investments V/s. AssistantCommissioner of Income Tax, Central Circle – 8 (1) and Ors.2 relied uponby Mr. Pardiwalla, it is held that the reasons for reopening an assessmentshould be that of the Assessing Officer alone who is issuing the noticeand he cannot act merely on the dictates of any another person in issuingthe notice. In Indian and Eastern Newspaper Society V/s. Commissionerof Income Tax, New Delhi 3, also relied upon by Mr. Pardiwalla, the Courtheld that in every case, the Income Tax Officer must determine forhimself what is the effect and consequence of the law mentioned in the 1. Writ Petition No.2762 of 2019 dated 31.08.2021 2. Writ Petition No.2760 of 2019 dated 24.08.2021 3. 119 ITR 996 (SC) audit note and whether in consequence of the law which has come to hisnotice he can reasonably believe that income had escaped assessment.The basis of his belief must be the law of which he has now becomeaware. The opinion rendered by the audit party in regard to the lawcannot, for the purpose of such belief, add to or colour the significance ofsuch law. Therefore, the true evaluation of the law in its bearing on theassessment must be made directly and solely by the Income Tax Officer. 9Mr. Suresh Kumar relied upon a judgment of this Court inCrompton Greaves Ltd. V/s. Assistant Commissioner of Income Tax,Circle 6 (2) 4 to submit that even if the reason for reopening does notspecifically state that there was any failure on the part of petitioner todisclose fully and truly all material facts necessary for its assessment forthe relevant assessment year, it will not be fatal to the assumption ofjurisdiction under Sections 147 and 148 of the Act. We would certainlyagree with Mr. Suresh Kumar but as held in Crompton Greaves Ltd.(Supra), this is subject to the rider that there must be cogent and clearindication in the reasons supplied, that in fact there was failure on thepart of the assessee to disclose fully and truly all the material factsnecessary for its assessment. If the factum of failure to disclose can be 4. (2015) 55 taxmann.com 59 (Bombay) culled down from the reasons in support of the notice seeking to reopenassessment, that will certainly not be fatal to the assumption ofjurisdiction under Sections 147 and 148 of the Act. The Court held“However, if from the reasons, no case of failure to disclose is made out,then certainly the assumption of jurisdiction under Sections 147 and 148of the Act would be ultra vires, being in excess of the jurisdictionalrestraints imposed by the first proviso to Section 147 of the Act”. 4. (2015) 55 taxmann.com 59 (Bombay) culled down from the reasons in support of the notice seeking to reopenassessment, that will certainly not be fatal to the assumption ofjurisdiction under Sections 147 and 148 of the Act. The Court held“However, if from the reasons, no case of failure to disclose is made out,then certainly the assumption of jurisdiction under Sections 147 and 148of the Act would be ultra vires, being in excess of the jurisdictionalrestraints imposed by the first proviso to Section 147 of the Act”. 10Coming to the ground no.(i) for rejection that for issuingnotice to reopen assessment, the Assessing Officer must only be satisfiedthat he had reasons to believe that income, profits and gains chargeableto income tax has escaped assessment and the second condition that suchescapement has occurred by reason of either omission or failure on thepart of the assessee to disclose fully or truly all material facts necessaryfor his assessment is not required, Mr. Suresh Kumar in fairness agreedthat that view of the Assessing Officer was incorrect. Mr. Suresh Kumar,as an Officer of the Court, agreed that both these are preconditionswhich are required to be fulfilled when assessment is sought to bereopened after four years. A Division Bench of this Court in Sesa GoaLimited V/s. Joint Commissioner of Income Tax and Ors.5 relied upon by 5. (2007) 294 ITR 101 (Bom) Mr. Pardiwalla, has held : “The power to reopen an assessment is not unbridled orunrestricted. The power is subject to the proviso embodied inthe section itself. The proviso prescribes restrictions on thepower of reopening the assessment by limiting the timeperiod to four years from the end of the relevant assessmentyear, unless any income chargeable to tax has escapedassessment by reason of failure on the part of the assessee……… to disclose fully and truly all material facts necessaryfor the assessment of the income for that assessment year”.…….. Section 147 of the Act is the source of power of theAssessing Officer for reopening of the assessment. Section148 contains procedural restrictions for issuance of a noticefor exercise of the power of reopening of an assessmentconferred under Section 147. Section 149 prescribes the timelimit for issuance of a notice under Section 148. In ouropinion, the conditions laid down under Section 147 of theAct for the purposes of reopening the assessment must besatisfied before the notice can be issued. The conditions laiddown 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 existbefore a notice under Section 148 can be issued. ………… Inother words, if the basic jurisdictional facts required forreopening of an assessment under Section 147 of the Act donot exist it would not be competent for the Assessing Officerto issue a notice under Section 148. Even where thejurisdictional facts prescribed under Section 147 exist and allconditions laid down under Section 147 and the provisothereto are satisfied, the notice under Section 148 can beissued only after the Assessing Officer has recorded hisreasons for doing so under Sub-section (2) of Section 148and has further obtained the necessary sanction for issuanceof the notice as required under Section 151 of the Act. …..The restriction ……. of a period of four years, …... In the present case, the reasons which have been recorded bythe Assessing Officer for reopening of the assessment do notdisclose that the assessee had failed to disclose fully and trulyall material facts necessary for the purpose of assessment. Nodoubt in the last paragraph of the reasons, the firstrespondent has stated: I am satisfied that due to furnishing the falseparticulars of the income by way of incorrectcertificate which means failure on the part of theassessee to disclose fully and truly all material facts required for the assessment, income of Rs.6,10,10,272 had escaped assessment. In the present case, the reasons which have been recorded bythe Assessing Officer for reopening of the assessment do notdisclose that the assessee had failed to disclose fully and trulyall material facts necessary for the purpose of assessment. Nodoubt in the last paragraph of the reasons, the firstrespondent has stated: I am satisfied that due to furnishing the falseparticulars of the income by way of incorrectcertificate which means failure on the part of theassessee to disclose fully and truly all material facts required for the assessment, income of Rs.6,10,10,272 had escaped assessment. The said statement is clearly made only as an attempt to takethe case out of the restriction imposed by the proviso toSection 147 of the Act. (emphasis supplied) 11As regards ground no.(ii) that it is subsequent to theassessment proceedings it was noticed that the assessee had wronglyclaimed the deduction under Section 57 of the Act and that it wentunnoticed by the Assessing Officer during the course of originalassessment proceedings and hence, the jurisdictional requirement underSection 147 of the Act has been fulfilled, that is not the case made out inthe reasons to believe. As held in First Source Solutions Limited (Supra),the reasons for reopening an assessment has to be tested/examined onlyon the basis of the reasons recorded at the time of issuing a notice underSection 148 of the said Act seeking to reopen an assessment. Thesereasons cannot be improved upon and/or supplemented much lesssubstituted by affidavit and/or oral submissions. 12As regards ground no.(iii) that the Assessing Officer had notmade any discussion in respect of those points on which assessment isreopened and hence, he has not formed any opinion and thus, the window of reopening of assessment will remain open for AssessingOfficer on those points, these are also not the grounds in the reason forreopening. The entire case of respondent while issuing reason forreopening is ‘failure to disclose truly and fully material facts’. 13As regards ground nos.(iv) to (vi) that the disclosure ofmaterial facts with respect to the setting off of the interest expensesunder Section 57 of the Act might be full but it cannot be considered astrue and hence, it is failure on the part of the assessee, mere productionof books of accounts or other documents are not enough in view ofexplanation 1 to Section 147 etc., these can be dealt with together. TheApex Court in Calcutta Discount Co. Ltd. V/s. Income Tax Officer6, reliedupon by Mr. Pardiwalla, has held that there can be no doubt that the dutyof disclosing all the primary facts relevant to the decision of the questionbefore the assessing authority lies on the assessee. To meet a possiblecontention that when some account books or other evidence has beenproduced, there is no duty on the assessee to disclose further facts, whichon due diligence, the Income Tax Officer might have discovered, theLegislature has put in the Explanation to Section 34 (1). The duty,however, does not extend beyond the full and truthful disclosure of all 6. (1961) 41 ITR 191 (SC) 6. (1961) 41 ITR 191 (SC) primary facts. Once all the primary facts are before the assessingauthority, he requires no further assistance by way of disclosure. It is forhim to decide what inferences of facts can be reasonably drawn and whatlegal inferences have ultimately to be drawn. It is not for somebody else-far less the assessee to tell the assessing authority what inferences,whether of facts or law, should be drawn. Indeed, when it is rememberedthat people often differ as regards what inferences should be drawn fromgiven facts, it will be meaningless to demand that the assessee mustdisclose what inferences - whether of facts or law - he would draw fromthe primary facts. If from primary facts more inferences than one couldbe drawn, it would not be possible to say that the assessee should havedrawn any particular inference and communicated it to the assessingauthority. How could an assessee be charged with failure to communicatean inference, which he might or might not have drawn? It may bepointed out that the Explanation to the sub- section has nothing to dowith "inferences" and deals only with the question whether primarymaterial facts not disclosed could still be said to be constructivelydisclosed on the ground that with due diligence the Income-tax Officercould have discovered them from the facts actually disclosed. TheExplanation has not the effect of enlarging the section, by casting a dutyGauri Gaekwad on the assessee to disclose "inferences" to draw the proper inferencesbeing the duty imposed on the Income Tax Officer. Therefore, it can beconcluded that while the duty of the assessee is to disclose fully and trulyall primary relevant facts, it does not extend beyond this. The relevant portion of Calcutta Discount Co. Ltd. (Supra) reads as under : Before we proceed to consider the materials on record to seewhether the appellant has succeeded ,in showing that theIncome-tax Officer could have no reason, on the materialsbefore him, to believe that there had been any omission todisclose material facts, as mentioned in the section, it isnecessary to examine the precise scope of disclosure whichthe section demands. The words used are " omission orfailure to disclose fully and truly all material facts necessaryfor his assessment for that year ". It postulates a duty onevery assessee to disclose fully and truly all material factsnecessary for his assessment. What facts are material, andnecessary for assessment will differ from case to case. Inevery assessment proceeding, the assessing authority will, forthe purpose of computing or determining the proper tax duefrom an assessee, require to know all the facts which helphim in coming to the correct conclusion. From the primaryfacts in his Possession, whether on disclosure by the assessee,or discovered by him on the basis of the facts disclosed, orotherwise-the assessing authority has to draw inferences asregards certain other facts; and ultimately, from the primaryfacts and the further facts inferred from them, the authorityhas to draw the proper legal inferences, and ascertain on acorrect interpretation of the taxing enactment, the proper taxleviable. Thus, when a question arises whether certainincome received by an assessee is capital receipt, or revenuereceipt, the assessing authority has to find out what primaryfacts have been proved, what other facts can be inferred fromthem, and taking all these together, to decide what the legalinference should be. There can be no doubt that the duty of disclosing all theprimary facts relevant to the decision of the question beforethe assessing authority lies on the assessee. To meet a There can be no doubt that the duty of disclosing all theprimary facts relevant to the decision of the question beforethe assessing authority lies on the assessee. To meet a possible contention that when some account books or otherevidence has been produced, there is no duty on the assesseeto disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Legislature has put inthe Explanation, which has been set out above., In view ofthe Explanation, it will not be open to the assessee to say, forexample-" I have produced the account books and thedocuments: You, the assessing officer examine them, and findout the facts necessary for your purpose: My duty is donewith disclosing these account-books and the documents". Hisomission to bring to the assessing authority's attention theseparticular items in the account books, or the particularportions of the documents, which are relevant, amount to "omission to disclose fully and truly all material factsnecessary for his assessment." Nor will he be able to contendsuccessfully that by disclosing certain evidence, he should bedeemed to have disclosed other evidence, which might havebeen discovered by the assessing authority if he had pursuedinvestigation on the basis of what has been disclosed. TheExplanation to the section, gives a quietus to all suchcontentions; and the position remains that so far as primaryfacts are concerned, it is the assessee's duty to disclose all ofthem-including particular entries in account books, particularportions of documents and documents, and other evidence,which could have been discovered by the assessing authority,from the documents and other evidence disclosed. Does the duty however extend beyond the full and truthfuldisclosure of all primary facts ? In our opinion, the answer tothis question must be in the negative. Once all the primaryfacts are before the assessing authority, he requires no furtherassistance by way of disclosure. It is for him to decide whatinferences of facts can be reasonably drawn and what legalinferences have ultimately to be drawn. It is not forsomebody else-far less the assessee--to tell the assessingauthority what inferences-whether of facts or law should bedrawn. Indeed, when it is remembered that people oftendiffer as regards what inferences should be drawn from givenfacts, it will be meaningless to demand that the assessee mustdisclose what inferences-whether of facts or law-he woulddraw from the primary facts. If from primary facts more inferences than one could bedrawn, it would not be possible to say that the assesseeshould have drawn any particular inference andcommunicated it to the assessing authority. How could anassessee be charged with failure to communicate aninference, which he might or might not have drawn? It may be pointed out that the Explanation to the sub- sectionhas nothing to do with " inferences " and deals only with thequestion whether primary material facts not disclosed couldstill be said to be constructively disclosed on the ground thatwith due diligence the Income-tax Officer could havediscovered them from the facts actually disclosed. TheExplanation has not the effect of enlarging the section, bycasting a duty on the assessee to disclose " inferences "-todraw the proper inferences being the duty imposed on theIncome-fax Officer. We have therefore come to the Conclusion that while theduty of the assessee is to disclose fully and truly all primaryrelevant facts, it does not extend beyond this. It may be pointed out that the Explanation to the sub- sectionhas nothing to do with " inferences " and deals only with thequestion whether primary material facts not disclosed couldstill be said to be constructively disclosed on the ground thatwith due diligence the Income-tax Officer could havediscovered them from the facts actually disclosed. TheExplanation has not the effect of enlarging the section, bycasting a duty on the assessee to disclose " inferences "-todraw the proper inferences being the duty imposed on theIncome-fax Officer. We have therefore come to the Conclusion that while theduty of the assessee is to disclose fully and truly all primaryrelevant facts, it does not extend beyond this. The position, therefore, is that if there were in fact somereasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have amaterial bearing on the question of "under assessments thatwould be sufficient to give jurisdiction to the Income-taxOfficer to issue the notice under Section 34. Whether thesegrounds were adequate or not for arriving at the conclusionthat there was a non disclosure of material facts would not beopen for the court's investigation. In other words, all that isnecessary to give this special jurisdiction is that the Income-tax officer had when he assumed jurisdiction some primafacie grounds for thinking that there had been some non-disclosure of material facts. ................. -Both the conditions, (i) the Incometax Officer having reasonto believe that there has been under assessment and (ii) hishaving reason to believe that such under assessment hasresulted from nondisclosure of material facts, must co-existbefore the Income-tax Officer has jurisdiction to startproceedings after the expiry of 4 years. The argument thatthe Court ought not to investigate the existence of one ofthese conditions, viz., that the Income-tax Officer has reasonto believe that under assessment has resulted from non-disclosure of material facts, cannot therefore be accepted. (emphasis supplied) 14 7, relied In Commissioner of Income Tax V/s. Bhanji Lavji 7 upon by Mr. Pardiwalla, the Apex Court has held as under : -Both the conditions, (i) the Incometax Officer having reasonto believe that there has been under assessment and (ii) hishaving reason to believe that such under assessment hasresulted from nondisclosure of material facts, must co-existbefore the Income-tax Officer has jurisdiction to startproceedings after the expiry of 4 years. The argument thatthe Court ought not to investigate the existence of one ofthese conditions, viz., that the Income-tax Officer has reasonto believe that under assessment has resulted from non-disclosure of material facts, cannot therefore be accepted. (emphasis supplied) 14 7, relied In Commissioner of Income Tax V/s. Bhanji Lavji 7 upon by Mr. Pardiwalla, the Apex Court has held as under : In our judgment, the High Court was right in holding that theTribunal misconceived the nature of the proceedings and theduty imposed upon the assessee by Section 34(1) (a). It isnot for the assessee to satisfy the Income-tax Officer thatthere was no concealment with regard to any question; it isfor the Income-tax Officer, if that issue is raised, to establishthat the assessee had failed to disclose fully and truly certainfacts material to the assessment of income which had escapedassessment. Failure to disclose how the delivery of ghee wasgiven at Porbandar was wholly irrelevant, and failure tofurnish particulars in that behalf cannot assist the case of theDepartment. Observation relating to the failure to disclosethe price of ghee supplied is not strictly accurate, for, it wasdisclosed by the assessee's representative that the chequeswere delivered for payment of the dues for ghee supplied atPorbandar and that "they were subsequently transferred toPorbandar". It was again no duty of the assessee to disclose toor instruct the Income-tax Officer that there were "profitsembedded in the receipt" of the money at Bombay. Section34(1) (a) does not cast any duty upon the assessee to instructthe Income-tax Officer on questions of law. The assessee haddisclosed that ghee was delivered at Porbandar by him andthe price in respect of those supplied was received in Bombaywhich was subsequently transferred to Porbandar. We areunable to accept the view of the Tribunal that the "questionof receipt of sale proceeds in British India was thus by-passed". The assessee's representative had expressly statedthat the assessee had maintained a Bank account in BritishIndia in which "for recovering from merchants dues in respectof the goods delivered at Porbandar" were credited. Theassessee also produced the Bank Pass Books. The finding that"the question of receipt of sale proceeds was by-passed"cannot be accepted as correct. The statement that thecheques were "subsequently transferred to Porbandar" onlymeans that the amounts realized by encashment of thecheques were sent to Porbandar, and not that the chequeswere sent to Porbandar. We do not think that any moredetailed disclosure was necessary to comply with therequirements that the assessee had fully and truly disclosedall the material facts necessary for the purpose of assessment. The Income-tax Officer may, if he is satisfied, that on accountof failure on the part of the assessee to disclose fully andtruly all material facts necessary for the purpose ofassessment, income has escaped assessment, he may assess orre-assess the income. But when the primary facts necessaryfor assessment are fully and truly disclosed, he is not entitledon change of opinion to commence proceedings forreassessment. The Income-tax Officer was apprised of all theprimary facts necessary for assessment, and he proceeded to"drop the assessment proceedings". He may have raised awrong legal inference from the facts, disclosed but on thataccount he was not competent to commence re-assessmentproceedings under Section 34(1) (a) for the two assessmentyears. (emphasis supplied) Section 34 of the Indian Income Tax Act, 1922 correspondsto Section 147 of the Act then in force. (emphasis supplied) Section 34 of the Indian Income Tax Act, 1922 correspondsto Section 147 of the Act then in force. 15In Gemini Leather Stores V/s. Income Tax Officer 8, alsorelied upon by Mr. Pardiwalla, the assessee had not even disclosed thetransactions evidenced by the drafts which the Income Tax Officerdiscovered. After discovery, the Income Tax Officer gave the partners ofthe firm opportunity to explain the drafts. The firm had utilised certaindrafts for making purchases and those amounts were not recorded in thedisclosed account of the firm. Despite that, the Court held that theassessment cannot be reopened by reason of the omission or failure onthe part of the assessee to disclose fully and truly all material facts as the 8. (1975) 100 ITR 1 (SC) Income Tax Officer had material facts before him when he made theoriginal assessment. The Court held that he cannot take recourse toreopen to remedy the error resulting from his own oversight. Therelevant portions in this judgment of the Apex Court reads as under : “………. In the case before us the assessee did not disclosethe transactions evidenced by the drafts which the Income-Tax Officer discovered. After this discovery the Income-taxOfficer had in his possession all the primary facts, and it wasfor him to make necessary enquiries and draw properinferences as to whether the amounts invested in thepurchase of the drafts could be treated as part of the totalincome of the assessee during the relevant year. This theIncome-tax officer did not do. It was plainly a case ofoversight, and it cannot be said that the income chargeable totax for the relevant assessment year had escaped assessmentby reason of the omission or failure on the part of theassessee to disclose fully and truly all material facts. TheIncome tax officer had all the material facts before him whenhe made the original assessment. He cannot now takerecourse to Section 147 (a) to remedy the error resultingfrom his own oversight.” 16Whether it is a disclosure or not within the meaning ofSection 147 of the Act would depend on the facts and circumstances ofeach case and nature of document and circumstances in which it isproduced. The duty of the assessee is to fully and truly disclose allprimary facts necessary for the purpose of assessment. It is not part of hisduty to point out what legal inference should be drawn from the factsdisclosed. It is for the Income Tax Officer to draw a proper reference. In the case at hand, petitioner had filed its annual returns alongwithcomputation of taxable income alongwith MAT (minimum alternate tax)calculation as per provisions of Section 115JB, audited annual financialsincluding auditor’s report, balance sheet, profit and loss account andnotes to accounts, annual tax statement in Form 26AS under Section203AA of the Act in response to the notices received under Section 142(1) and 143 (2) of the Act. Petitioner also explained how the borrowingcosts that are attributable to the acquisition or construction of assetshave been provided for, what are the short term borrowings and fromwhom have been provided for. Petitioner also gave details of interestexpenses claimed under Section 57 of the Act in response to furthernotice dated 10[th] October 2014 under Section 142 (1) of the Act,attended personal hearings and explained and gave further details ascalled for in the personal hearing vide its letter dated 17[th] December2014 and after considering all that, the assessment order dated20[th] February 2015 was passed accepting the return of income filed bythe assessee. The Assessing Officer had in his possession all primary facts,and it was for him to make necessary enquiries and draw properinference as to whether from the interest paid of Rs.75,79,35,292/- an The Assessing Officer had in his possession all primary facts,and it was for him to make necessary enquiries and draw properinference as to whether from the interest paid of Rs.75,79,35,292/- an amount of Rs.7,66,66,663/- has to be allowed as deduction underSection 57 of the Act or the entire interest expenses of Rs.75,79,35,292/-should have been capitalized to the work in progress against claimingRs.7,66,66,663/- as deduction under Section 57 of the Act. The AssessingOfficer had had all materials facts before him when he made the originalassessment. When the primary facts necessary for assessment are fullyand truly disclosed, the Assessing Officer is not entitled on change ofopinion to commence proceedings for reassessment. Even if the AssessingOfficer, who passed the assessment order, may have raised too manylegal inferences from the facts disclosed, on that account the AssessingOfficer, who has decided to reopen assessment, is not competent toreopen assessment proceedings. Where on consideration of material onrecord, one view is conclusively taken by the Assessing Officer, it wouldnot be open to reopen the assessment based on the very same materialwith a view to take another view.As noted earlier, petitioner has filed the annual returns withthe required documents as provided for under Section 139 of the Act. Asheld by the Calcutta High Court in Income Tax Officer V/s. CalcuttaChromotype (P.) Ltd.9 relied upon by Mr. Pardiwalla, there was nothing 9. (1974) 97 ITR 55 (Calcutta) more to disclose and a person cannot be said to have omitted or failed todisclose something when, of such thing, he had no knowledge. Onecannot be expected to disclose a thing or said to have failed to disclose itunless it is a matter which he knows or knows of. In this case, except fora general statement in the reasons for reopening, the Assessing Officerhas not disclosed what was the material fact that petitioner had failed todisclose. 17 We are satisfied that petitioner had truly and fully disclosedall material facts necessary for the purpose of assessment. Not onlymaterial facts were disclosed by petitioner truly and fully but they werecarefully scrutinized and figures of income as well as deduction werereworked carefully by the Assessing Officer. In the reasons for reopening,the Assessing Officer has infact relied upon the audited accounts to saythat the claim of deduction under Section 57 of the Act was not correct,the figures mentioned in the reason for reopening of assessment are alsofound in the audited accounts of petitioner. In the reasons for reopening,there is not even a whisper as to what was not disclosed.In the order rejecting the objections, the Assessing Officeradmits that all details were fully disclosed. In our view, this is not a case where the assessment is sought to be reopened on the reasonable beliefthat income had escaped assessment on account of failure of the assesseeto disclose truly and fully all material facts that were necessary forcomputation of income but this is a case wherein the assessment issought to be reopened on account of change of opinion of the AssessingOfficer about the manner of computation of the deduction under Section57 of the Act. In a similar case where the notice to reopen the assessmentwas founded entirely on the assessment records and the entire basis forreopening the assessment was the disclosure which has been made by theassessee in the course of the assessment proceedings and where nomaterial to which a reference was to be found, a Division Bench of thisCourt in 3i Infotech Limited V/s. Assistant Commissioner of Income Tax[10]relied upon by Mr. Pardiwalla, in paragraph 12 held : 12. The record before the Court, to which a reference hasbeen made earlier, is clearly reflective of the position thatduring the course of the assessment proceedings the assesseehad made a full and true disclosure of all material facts inrelation to the assessment. As a matter of fact, it would benecessary to note that the notice to reopen the assessment onthe first issue is founded entirely on the assessment records.There is no new material to which a reference is to be foundand the entire basis for reopening the assessment is thedisclosure which has been made by the assessee in the courseof the assessment proceedings. In Cartini India Limited V/s.Additional Commissioner of Income Tax [(2009) 314 ITR 275(Bom.)], a Division Bench of this Court has observed thatwhere on consideration of material on record, one view isconclusively taken by the Assessing Officer, it would not be open to the Assessing Officer to reopen the assessment basedon the very same material with a view to take another view.The principal which has been enunciated in Cartini mustapply to the facts of a case such as the present. The assesseehad during the course of the assessment proceedings made acomplete disclosure of material facts. The Assessing Officerhad called for a disclosure on which a specific disclosure onthe issue in question was made. In such a case, it cannot bepostulated that the condition precedent to the reopening ofan assessment beyond a period of four years has beenfulfilled. 18 It will be proper in the circumstances to quote a paragraph from the judgment of the Apex Court in Parashuram Pottery Works Co. Ltd. V/s. Income Tax Officer 11 (cited by Mr. Pardiwalla), and it reads asunder : It has been said that the taxes are the price that we pay forcivilization. If so, it is essential that those who are entrustedwith the task of calculating and realising that price shouldfamiliarise themselves with the relevant provisions andbecome well versed with the law on the subject. Anyremissness on their part can only be at the cost of thenational exchequer and must necessarily result in loss ofrevenue. At the same time, we have to bear in mind that thepolicy of law is that there must be a point of finality in alllegal proceedings, that state issues should not be reactivatedbeyond a particular stage and that lapse of time must inducerepose in and set at rest judicial and quasi-judicialcontroversies as it must in other spheres of human activity. Sofar as income-tax assessment orders are concerned, theycannot be reopened on the scope of income escapingassessment under Section 147 of the Act of 1961 after theexpiry of four years from the end of the assessment yearunless there be omission or failure on the part of the assesseeto disclose fully and truly all material facts necessary for theassessment. As already mentioned, 'this cannot be said in thepresent case. The appeal is consequently allowed; thejudgment of the High Court is set aside and the impugnednotices are quashed. The parties in the circumstances shallbear their own costs throughout. 19As already mentioned, it cannot be said in the present casethat there was an omission or failure on the part of the assessee todis