Wp/2815/2019 Of Kalpataru Limited v. Deputy Commissioner Of Income Tax Central Circle 5 (3) And 2 Ors

Digitallysigned byPURTI IN THE HIGH COURT OF JUDICATURE AT BOMBAYPURTIPRASADPRASADPARABORDINARY ORIGINAL CIVIL JURISDICTIONPARABDate:2021.10.0816:08:23+0530WRIT PETITION NO. 2815 OF 2019 Kalpataru Limited91, Kalpataru Synergy,Opp. Grant Hyatt, Santacruz,Mumbai – 400 055. V/s.1. Deputy Commissioner of IncomeTax 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 at19[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. ))))….Petitioner))))))))))))) ….Respondents ----- Mr. Percy Pardiwalla, Senior Advocate i/b Ms. Vasanti B. Patel for Petitioner.Mr. Suresh Kumar for Respondents. ----- CORAM : K.R. SHRIRAM &R.I. CHAGLA, JJ. DATED : 30[th] SEPTEMBER, 2021 ORAL JUDGMENT : (PER : K.R. SHRIRAM, J.) 1.Rule. Rule made returnable forthwith. With the consent of parties taken up for hearing at the admission stage only. 2.Petitioner is challenging the validity of notice dated27/03/2019 received under Section 148 of the Income Tax Act, 1961 (theAct) together with consequential notices and orders for reopening theassessment for the assessment year 2012-2013. According to petitioner, theimpugned notice is without jurisdiction and if the jurisdictional conditionsas required to be complied with before initiating reassessment proceedingsare not satisfied, the assessment cannot be reopened. 3.Petitioner is a real estate developer. It is petitioner’s case thatits books are regularly audited under Section 44 AB of the Act and is alsoassessed to income tax. During the previous year pertaining to theassessment year 2012-13, petitioner declared income from house property,business and profession, capital gains and income from other sources.Petitioner’s income from house property after deduction under Section 24 ofthe Act had resulted into loss of Rs.2,91,39,714/-. Petitioner was eligiblefor deduction of Rs.139,36,10,974/- under Section 80 IB of the Act. But asavailable taxable income after set off of losses under Section 71 of the Actwas only Rs.78,47,26,016/-, petitioner restricted the claim under Section80 IB of the Act to taxable business income of Rs.78,47,26,016/-. As per theprovisions of Section 71 of the Act, petitioner set off loss from the houseproperty against short term capital gain, income from other sources andbusiness income. The taxable business income, after set off of said losses, isof Rs.78,47,26,016/- on which petitioner has claimed deduction under section 80 IB (10) of the Act. Petitioner filed its return of income for theassessment year 2012-13 on 30[th] September, 2012 declaring total income atNIL under the normal provisions of the Act and declared book profit underSection 115 JB of the Act at Rs.86,38,03,184/-. 4.Petitioner’s case was selected for scrutiny assessment andRespondent No.1 issued a notice dated 4[th] August, 2014 under Section 143(2) of the Act and asked petitioner to file various details as mentionedtherein. Petitioner, by its reply dated 13[th] August, 2014 provided details.Respondent No.1 thereafter issued further notice dated 9[th] October, 2014under Section 142 (1) of the Act seeking further details. Those wereprovided by petitioner vide its letter dated 3[rd] February, 2015. By a letterdated 16[th] March, 2015 petitioner further explained the computation ofincome from house property and permissible deduction under Section 24 ofthe Act. Respondent No.1 after applying his mind passed the assessmentorder dated 17[th] March, 2015 under Section 143 (3) of the Act. Petitioner’sincome was assessed as NIL and book profit under Section 115 JB of the Actwas computed at Rs.86,63,42,457/-. 5.More than four years later Respondent No.1 issued a noticedated 27[th] March, 2019 under Section 148 of the Act stating that he hadreason to believe that petitioner’s income chargeable to tax for theassessment year 2012-2013 had escaped assessment within the meaning of Section 147 of the Act. Petitioner was directed to deliver within 30 days areturn in the prescribed form of petitioner’s income for assessment year2012-2013. 6.Petitioner, in reply, addressed a letter dated 29[th] March, 2019and requested Respondent No.1 to provide the recorded reasons. Petitioneralso filed its return of income which was identical to the return earlier filedon 30[th] September, 2012. Respondent No.1 addressed a letter dated 28[th] May, 2019forwarding the reasons for re-opening of assessment under Section 147 ofthe Act. In the reasons it is stated that : (a)Petitioner has computed income from houseproperty by claiming 1/5th of the construction interest onnotional basis and which has resulted into irregular allowanceof construction period notional interest of Rs.3,90,71,980/- ; (b)Petitioner has claimed deduction under Section 80IB of the Act in respect of income from other sources which isjudicially held not allowable ; (c)Petitioner has wrongly claimed deduction underSection 80 IB of the Act on total income instead of claiming onthe business income and has wrongly claimed deductionunder Section 80 IB of the Act on capital gain and incomefrom other sources and thus petitioner has failed to disclosetrue and full material facts before Respondent No.1. 7.This was followed by a notice dated 14[th] June, 2019 issuedunder Section 142 (1) of the Act by which Respondent No.1 sought furtherdetails. By its letter dated 20[th] June, 2019, petitioner furnished itsobjections to the proposed reassessment. Petitioner pointed out that (a) ithad provided for all details, reassessment proceedings were based onchange of opinion and hence jurisdictional conditions are not complied withand (b) reassessment is based on reappraisal of the same material facts andtherefore, there cannot be any failure to fully and truly disclose of thematerial facts. 8.Respondent No.1 passed an order dated 30[th] September, 2019rejecting petitioner’s objections. According to Respondent No.1 : (a)As per the amended provisions of Section 147 witheffect from 01/04/1989 irrespective of the fact that there isfull and true disclosure made by the assessee if there is reasonto believe that income has escaped assessment reopening isjustified ; (b)Further at the stage of issuance of notice the onlyquestion that arises is whether on the basis of material, primafacie there is reason to believe that income has escapedassessment. It was noticed that petitioner has wronglyclaimed construction period interest which led to doublededuction and further had wrongly claimed deduction under Section 80 IB of the Act against “capital gains and incomefrom other sources” ; (c)Respondent No.1 has not denied the fact that allmaterial facts/information were on record but according toRespondent No.1 they were not relevant if later on it isnoticed that claim made by the assessee is wrong ; (d)If in the original assessment proceedings some ofthe material facts were not perused in detail, petitioner cannottake advantage of it ; (e)The issue of tangible material and change ofopinion is not relevant at the stage of issuance of the notice ; (f)As per Explanation 1 to Section 147 of the Actfurnishing of basic documents did not amount to completedisclosure ; (g)The Assessing Officer not having discussed theissue raised under reassessment proceedings in the assessmentorder, it can be said that the reassessment proceedings werevalidly initiated ; (h)The reasons for formation of belief of escaping ofincome were formed in good faith and that was sufficient forinitiating reassessment proceedings. 9. Mr. Pardiwalla submitted that ; (a)Existence of a valid reason to believe is sine quanon to the exercise of jurisdiction under Section 147 of theAct. (e)The issue of tangible material and change ofopinion is not relevant at the stage of issuance of the notice ; (f)As per Explanation 1 to Section 147 of the Actfurnishing of basic documents did not amount to completedisclosure ; (g)The Assessing Officer not having discussed theissue raised under reassessment proceedings in the assessmentorder, it can be said that the reassessment proceedings werevalidly initiated ; (h)The reasons for formation of belief of escaping ofincome were formed in good faith and that was sufficient forinitiating reassessment proceedings. 9. Mr. Pardiwalla submitted that ; (a)Existence of a valid reason to believe is sine quanon to the exercise of jurisdiction under Section 147 of theAct. (b)There are many decisions where it is held that theexpression “reason to believe” postulates a bonafide belief thatincome has escaped assessment and there must exist objectivereasons for that belief and the recorded reasons did notconstitute reasons to believe that the income has escapedassessment. (c)Scrutiny assessments cannot be reopened beyondfour years unless there is tangible material and there is faulton the part of assessee to disclose fully and truly all materialfacts necessary for its assessment for that assessment year.Simply saying that there was a fault to disclose fully and trulyall material facts is not enough. The reasons to believe has tospecifically disclose what are these materials which were notfully and truly disclosed. (d)No fresh or tangible material on record has beendisclosed for initiating reassessment. (e)Reassessment cannot be reopened on a merechange of opinion etc. 10.Mr. Suresh Kumar submitted that mere production ofdocuments is not a ground to dispute the re-opening of the assessment. Itwould also not amount to disclosure in respect of the escaped assessment.As per Explanation 1 to Section 147 of the Act even in case where petitionerhad produced the document showing the income which was not assessedearlier is also a ground for re-opening of the assessed return. Therefore,petitioner cannot state that it had already produced the documentsalongwith returns and hence the Assessing Officer cannot reopen theassessment which had attained finality. Mr. Suresh Kumar submits that evenif any mistake went unnoticed by the Assessing Officer during the course oforiginal assessment proceedings, the assessee cannot take this ground toobject the re-opening. Mr. Suresh Kumar’s submissions were basicallyreiteration of the views stated in the order disposing the objections raised bypetitioner and the averments in the affidavit in reply of one Mr.Ankit Vermaaffirmed on 19[th] November, 2019. 11.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 that theremust be a failure on the part of the assessee to disclose fully and truly allmaterial facts necessary. Since in the case at hand, the assessment is soughtto be reopened after a period of four years, the proviso to Section 147 isapplicable. It is also settled law that the Assessing Officer has no power toreview an assessment which has been concluded. If a period of four yearshas lapsed from the end of the relevant year, the Assessing Officer has tomention what was the tangible material to come to the conclusion that thereis an escapement of income from assessment and that there has been afailure to fully and truly disclose material fact. After a period of four yearseven if the Assessing Officer has some tangible material to come to theconclusion that there is an escapement of income from assessment, hecannot exercise the power to reopen unless he discloses what was thematerial fact which was not truly and fully disclosed by the assessee. It is also settled law that the Assessing Officer has no power toreview an assessment which has been concluded. If a period of four yearshas lapsed from the end of the relevant year, the Assessing Officer has tomention what was the tangible material to come to the conclusion that thereis an escapement of income from assessment and that there has been afailure to fully and truly disclose material fact. After a period of four yearseven if the Assessing Officer has some tangible material to come to theconclusion that there is an escapement of income from assessment, hecannot exercise the power to reopen unless he discloses what was thematerial fact which was not truly and fully disclosed by the assessee. 12.If one considers the reasons, the Assessing Officer only statesthat from the record it is noticed that petitioner has computed income fromhouse property by claiming 1/5th of the construction interest on notionalbasis and which has resulted into irregular allowance of construction periodnotional interest of Rs.3,90,71,980/-. Secondly, it is stated that it is noticedthat petitioner has claimed deduction under Section 80 IB of the Act inrespect of income from other sources which is as judicially held notallowable. Thirdly, it is stated that it is noticed that petitioner has wronglyclaimed deduction under Section 80 IB of the Act on total income instead ofclaiming on the business income and has wrongly claimed deduction underSection 80 IB of the Act on capital gain and income from other sources andthus petitioner has failed to disclose true and full material facts before Respondent No.1. There is nothing else in the reasons. A general statementthat the escapement of income is by reason of the failure on the part of theassessee to disclose fully and truly all material facts necessary for hisassessment is not enough. The Assessing Officer should indicate what wasthe material fact that was not truly and fully disclosed to him. 13. In this regard, it will be useful to reproduce paragraph nos.10,13 to 17 of the recent judgment of this court in Ananta Landmark Pvt. Ltd. Vs. Deputy Commissioner of Income Tax Central Circle 5 (3) and Ors.1 10.Coming 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 preconditions whichare required to be fulfilled when assessment is sought to be reopenedafter four years. A Division Bench of this Court in Sesa Goa Limited V/s.Joint Commissioner of Income Tax and Ors., [ (2007) 294 ITR 101(Bom)] relied upon by Mr.Pardiwalla, has held : “The power to reopen an assessment is not unbridled orunrestricted. The power is subject to the proviso embodiedin the section itself. The proviso prescribes restrictions onthe power of reopening the assessment by limiting thetime period to four years from the end of the relevantassessment year, unless any income chargeable to tax hasescaped assessment by reason of failure on the part of theassessee ……… to disclose fully and truly all material factsnecessary for the assessment of the income for thatassessment year”. …….. Section 147 of the Act is thesource of power of the Assessing Officer for reopening ofthe assessment. Section 148 contains proceduralrestrictions for issuance of a notice for exercise of thepower of reopening of an assessment conferred underSection 147. Section 149 prescribes the time limit forissuance of a notice under Section 148. In our opinion, theconditions laid down under Section 147 of the Act for thepurposes of reopening the assessment must be satisfied 1 WP NO. 2814 of 2019 dated 14[th] September, 2021 (Unreported). before the notice can be issued. The conditions laid downin Section 147 are the jurisdictional facts necessary for thepurpose of exercise of the power under Section 147. Thejurisdictional facts prescribed under Section 147 must existbefore a notice under Section 148 can be issued. …………In other words, if the basic jurisdictional facts required forreopening of an assessment under Section 147 of the Actdo not exist it would not be competent for the AssessingOfficer to issue a notice under Section 148. Even wherethe jurisdictional facts prescribed under Section 147 existand all conditions laid down under Section 147 and theproviso thereto are satisfied, the notice under Section 148can be issued only after the Assessing Officer has recordedhis reasons for doing so under Sub-section (2) of Section148 and has further obtained the necessary sanction forissuance of the notice as required under Section 151 of theAct. ….. The restriction ……. of a period of four years,…... In the present case, the reasons which have been recordedby the Assessing Officer for reopening of the assessment donot disclose that the assessee had failed to disclose fullyand truly all material facts necessary for the purpose ofassessment. No doubt in the last paragraph of the reasons,the first respondent 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 factsrequired for the assessment, income of Rs.6,10,10,272 had escaped assessment. The said statement is clearly made only as an attempt totake the case out of the restriction imposed by the provisoto Section 147 of the Act. (emphasis supplied) 13.As 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 Officer, [(1961) 41 ITR 191 (SC) ] relied upon by Mr. Pardiwalla, has held thatthere can be no doubt that the duty of disclosing all the primary factsrelevant to the decision of the question before the assessing authority lieson the assessee. To meet a possible contention that when some accountbooks or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income TaxOfficer might have discovered, the Legislature has put in the Explanationto Section 34 (1). The duty, however, does not extend beyond the full andtruthful disclosure of all primary facts. Once all the primary facts arebefore the assessing authority, he requires no further assistance by way ofdisclosure. It is for him to decide what inferences of facts can bereasonably drawn and what legal inferences have ultimately to be drawn.It is not for somebody else-far less the assessee to tell the assessingauthority what inferences, whether of facts or law, should be drawn.Indeed, when it is remembered that people often differ as regards whatinferences should be drawn from given facts, it will be meaningless todemand that the assessee must disclose what inferences - whether of factsor law - he would draw from the primary facts. If from primary factsmore inferences than one could be drawn, it would not be possible to saythat the assessee should have drawn any particular inference andcommunicated it to the assessing authority. How could an assessee becharged with failure to communicate an inference, which he might ormight not have drawn? It may be pointed out that the Explanation to thesub- section has nothing to do with "inferences" and deals only with thequestion whether primary material facts not disclosed could still be saidto be constructively disclosed on the ground that with due diligence theIncome-tax Officer could have discovered them from the facts actuallydisclosed. The Explanation has not the effect of enlarging the section, bycasting a duty on the assessee to disclose "inferences" to draw the properinferences being the duty imposed on the Income Tax Officer. Therefore,it can be concluded that while the duty of the assessee is to disclose fullyand truly all 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 or failureto disclose fully and truly all material facts necessary for hisassessment for that year ". It postulates a duty on everyassessee to disclose fully and truly all material facts necessaryfor his assessment. What facts are material, and necessary forassessment will differ from case to case. In every assessmentproceeding, the assessing authority will, for the purpose ofcomputing or determining the proper tax due from anassessee, require to know all the facts which help him incoming to the correct conclusion. From the primary facts inhis Possession, whether on disclosure by the assessee, ordiscovered 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 certain incomereceived by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary factshave been proved, what other facts can be inferred fromthem, and taking all these together, to decide what the legalinference should be. the assessing authority has to find out what primary factshave 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 possiblecontention that when some account books or other evidencehas been produced, there is no duty on the assessee todisclose further facts, which on due diligence, the Income-taxOfficer might have discovered, the Legislature has put in theExplanation, which has been set out above., In view of theExplanation, 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 for somebodyelse-far less the assessee--to tell the assessing authority whatinferences-whether of facts or law should be drawn. Indeed,when it is remembered that people often differ as regardswhat inferences should be drawn from given facts, it will bemeaningless to demand that the assessee must disclose whatinferences-whether of facts or law-he would draw from theprimary facts. If from primary facts more inferences than one could bedrawn, it would not be possible to say that the assessee should 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 the dutyof 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 the dutyof 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 that theCourt ought not to investigate the existence of one of theseconditions, viz., that the Income-tax Officer has reason tobelieve that under assessment has resulted from non-disclosure of material facts, cannot therefore be accepted. (emphasis supplied) 14.In Commissioner of Income Tax V/s. Bhanji Lavji, [ (1971)79 ITR 582 (SC) ] relied upon by Mr. Pardiwalla, the Apex Court has heldas under : In Commissioner of Income Tax V/s. Bhanji Lavji, [ (1971) 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 is not (emphasis supplied) 14.In Commissioner of Income Tax V/s. Bhanji Lavji, [ (1971)79 ITR 582 (SC) ] relied upon by Mr. Pardiwalla, the Apex Court has heldas under : In Commissioner of Income Tax V/s. Bhanji Lavji, [ (1971) 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 is not for the assessee to satisfy the Income-tax Officer that therewas no concealment with regard to any question; it is for theIncome-tax Officer, if that issue is raised, to establish that theassessee had failed to disclose fully and truly certain factsmaterial 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 disclose theprice 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 "question ofreceipt of sale proceeds in British India was thus by-passed".The assessee's representative had expressly stated that theassessee had maintained a Bank account in British India inwhich "for recovering from merchants dues in respect of thegoods delivered at Porbandar" were credited. The assesseealso produced the Bank Pass Books. The finding that "thequestion of receipt of sale proceeds was by-passed" cannot beaccepted as correct. The statement that the cheques were"subsequently transferred to Porbandar" only means that theamounts realized by encashment of the cheques were sent toPorbandar, and not that the cheques were sent to Porbandar.We do not think that any more detailed disclosure wasnecessary to comply with the requirements that the assesseehad fully and truly disclosed all the material facts necessaryfor 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 and trulyall material facts necessary for the purpose of assessment,income has escaped assessment, he may assess or re-assessthe income. But when the primary facts necessary forassessment are fully and truly disclosed, he is not entitled onchange 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. 15. (emphasis supplied) Section 34 of the Indian Income Tax Act, 1922 correspondsto Section 147 of the Act then in force. 15. 15.In Gemini Leather Stores V/s. Income Tax Officer, [ (1975)100 ITR 1 (SC) ] also relied upon by Mr. Pardiwalla, the assessee had noteven disclosed the transactions evidenced by the drafts which the IncomeTax Officer discovered. After discovery, the Income Tax Officer gave thepartners of the firm opportunity to explain the drafts. The firm hadutilised certain drafts for making purchases and those amounts were notrecorded in the disclosed account of the firm. Despite that, the Court heldthat the assessment cannot be reopened by reason of the omission orfailure on the part of the assessee to disclose fully and truly all materialfacts as the Income Tax Officer had material facts before him when hemade the original assessment. The Court held that he cannot takerecourse to reopen to remedy the error resulting from his own oversight.The relevant 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.” 16.Whether 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. Inthe 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 assets havebeen provided for, what are the short term borrowings and from whom have been provided for. Petitioner also gave details of interest expensesclaimed under Section 57 of the Act in response to further notice dated10[th] October 2014 under Section 142 (1) of the Act, attended personalhearings and explained and gave further details as called for in thepersonal hearing vide its letter dated 17[th] December 2014 and afterconsidering all that, the assessment order dated 20[th]February 2015 was passed accepting the return of income filed by theassessee. have been provided for. Petitioner also gave details of interest expensesclaimed under Section 57 of the Act in response to further notice dated10[th] October 2014 under Section 142 (1) of the Act, attended personalhearings and explained and gave further details as called for in thepersonal hearing vide its letter dated 17[th] December 2014 and afterconsidering all that, the assessment order dated 20[th]February 2015 was passed accepting the return of income filed by theassessee. 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/- anamount of Rs.7,66,66,663/- has to be allowed as deduction under Section57 of the Act or the entire interest expenses of Rs.75,79,35,292/- shouldhave 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 many legalinferences from the facts disclosed, on that account the Assessing Officer,who has decided to reopen assessment, is not competent to reopenassessment proceedings. Where on consideration of material on record,one view is conclusively taken by the Assessing Officer, it would not beopen to reopen the assessment based on the very same material with aview 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.[ (1974) 97 ITR 55 (Calcutta) ] relied upon byMr.Pardiwalla, there was nothing more to disclose and a person cannot besaid to have omitted or failed to disclose something when, of such thing,he had no knowledge. One cannot be expected to disclose a thing or saidto have failed to disclose it unless it is a matter which he knows or knowsof. In this case, except for a general statement in the reasons forreopening, the Assessing Officer has not disclosed what was the materialfact that petitioner had failed to disclose. 17. We are satisfied that petitioner had truly and fully disclosed allmaterial facts necessary for the purpose of assessment. Not only materialfacts were disclosed by petitioner truly and fully but they were carefullyscrutinized and figures of income as well as deduction were reworkedcarefully by the Assessing Officer. In the reasons for reopening, theAssessing Officer has infact relied upon the audited accounts to say thatthe claim of deduction under Section 57 of the Act was not correct, thefigures 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 orderrejecting the objections, the Assessing Officer admits that all details werefully disclosed. In our view, this is not a case where the assessment issought to be reopened on the reasonable belief that income had escapedassessment on account of failure of the assessee to disclose truly and fullyall material facts that were necessary for computation of income but thisis a case wherein the assessment is sought to be reopened on account of change of opinion of the Assessing Officer about the manner ofcomputation of the deduction under Section 57 of the Act. In a similarcase where the notice to reopen the assessment was founded entirely onthe assessment records and the entire basis for reopening the assessmentwas the disclosure which has been made by the assessee in the course ofthe assessment proceedings and where no material to which a referencewas to be found, a Division Bench of this Court in 3i Infotech Limited V/s.Assistant Commissioner of Income Tax, [ (2010) 192 Taxman 137(Bombay) ] 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 re-open 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 re-opening 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 beopen to the Assessing Officer to re-open 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 re-opening ofan assessment beyond a period of four years has beenfulfilled. 14.Therefore, though it is correct that explanation 1 to Section 147of the Act says mere production of books of accounts or other documentsare not enough, and the duty of disclosing all the primary facts relevant tothe decision of the question before the assessing authority lies on theassessee, this duty does not extend beyond the full and truthful disclosure ofall primary facts. Once all the primary facts are before the assessingauthority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and whatlegal inferences have ultimately to be drawn. It is not for somebody else-farless the assessee to tell the assessing authority what inferences, whether offacts or law, should be drawn. Indeed, when it is remembered that peopleoften differ as regards what inferences should be drawn from given facts, itwill be meaningless to demand that the assessee must disclose whatinferences - whether of facts or law - he would draw from the primary facts.If, from primary facts, more inferences than one could be drawn, it wouldnot be possible to say that the assessee should have drawn any particularinference and communicated it to the assessing authority. How could anassessee be charged with failure to communicate an inference, which hemight or might not have drawn? 15.As held in Ananta Landmark Pvt. Ltd. (supra), Explanation 1 toSection 147 of the Act has nothing to do with "inferences" and deals onlywith the question whether primary material facts not disclosed could still besaid to be constructively disclosed on the ground that with due diligence theIncome-tax Officer could have discovered them from the facts actuallydisclosed. The Explanation has not the effect of enlarging the section, bycasting a duty on the assessee to disclose "inferences", to draw the properinferences being the duty imposed on the Income Tax Officer. Therefore,the duty of the Assessee is to disclose fully and truly all primary relevantfacts and it does not extend beyond this. 16. 16.Whether it is a disclosure or not within the meaning of Section147 of the Act would depend on the facts and circumstances of each caseand nature of document and circumstances in which it is produced. Theduty of the assessee is to fully and truly disclose all primary facts necessaryfor the purpose of assessment. It is not part of his duty to point out whatlegal inference should be drawn from the facts disclosed. It is for the IncomeTax Officer to draw a proper reference. In the case at hand, petitioner hadfiled its annual returns alongwith computation of taxable income alongwithMAT (minimum alternate tax) calculation as per provisions of Section115JB, audited annual financials including auditor’s report, balance sheet,profit and loss account and notes to accounts, annual tax statement in Form26AS under Section 203AA of the Act in response to the notices receivedunder Section 142 (1) and 143 (2) of the Act. Petitioner has also explained how it had computed income fromhouse property after deducting interest for construction period ofRs.3,90,71,980/- and why 1/5th of construction period interest wasdeductable. Petitioner has also given its justification of eligible claim underSection 80 IB (10) of the Act for Rs.139,36,10,974/- and also submittedduly certified Audit Report and Architect certificate together with detailedprofitability workings under Section 80 IB (10) of the Act vide its letterdated 3[rd] February, 2015. 17.The Assessing Officer had in his possession all primary facts andit was for him to make necessary inquiries and draw proper inference as towhether the interest of Rs.3,90,71,980/- was allowable as a deduction.Based on the primary facts and after necessary inquiries the AssessingOfficer was also satisfied that petitioner had complied with all thejustification specified in Section 80 IB (10) of the Act and was duly entitled/eligible for deduction in respect of the profits from eligible house purchase.The Assessing Officer had had all materials facts before him when he madethe original assessment. When the primary facts necessary for assessmentare fully and truly disclosed, the Assessing Officer is not entitled on changeof opinion to commence proceedings for reassessment. Even if theAssessing Officer, who passed the assessment order, may have raised toomany legal inferences from the facts disclosed, on that account theAssessing Officer, who has decided to re-open assessment, is not competentto re-open assessment proceedings. Where on consideration of material onrecord, one view is conclusively taken by the Assessing Officer, it would notbe open to re-open the assessment based on the very same material with aview to take another view. Petitioner has filed the annual