DCIT, Coimbatore V. Bannari Amman Sugars Limited, Coimbatore

ITA 1740/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9063 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 29-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 31-07-2015
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Revised return; Reason to believe; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1 74 0 /MDS/2015 / ASSESSMENT YEAR :200 7 - 08 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I, 63A, RACE COURSE ROAD, COIMBATORE. VS. M/S. BANNARI AMMAN SUGARS LTD., 1212, TRICHY ROAD, COIMBAT ORE 641 018. [PAN: AA A C B8933G ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI PATHLAVATH PEERYA, CIT / RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / DATE OF HEA RING : 29 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 27 . 0 6 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , C OIMBATORE , DATED 26 . 05 .20 15 RELEVANT TO THE ASSESSMENT YEAR 200 7 - 08 . THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS WITH REGARD TO QUASHING OF REASSESSMENT ORDER BY THE LD. CIT(A) BY OBSERVING THAT THERE WAS NO TANGIBLE FRESH MATERIAL IN THE HANDS OF THE A SSESSING OFFICER TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AND REOPENING IS BAD IN LAW. I.T.A. NO . 1 740 /M/ 15 2 2. THE FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED IN THIS CASE UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] FOR THE ASSESSMENT YEAR 2007 - 08 ON 29.12.2008 DETERMINING TOTAL INCOME AT .75,66,33,610/ - AFTER TAKING INTO ACCOUNT THE REVISED RETURN FILED BY THE ASSESSEE. THE ASSESSING OFFICER WHILE COMPUTING THE TOTAL INCOME IN THIS ASSESSMENT YEAR HAD DISALLOWED CARRY FORW ARD LOSSES AND UNABSORBED DEPRECIATION OF M/S. MAHESWARA SUGARS LTD. WHICH WAS AMALGAMATED WITH M/S. BANNARI AMMAN SUGARS LIMITED, THE ASSESSEE, HEREIN, PURSUANT TROT HE ORDER ISSUED BY THE HIGH COURT OF JUDICATURE AT MADRAS WHICH WAS EFFECTIVE FROM 01.01. 2007. IN THIS BACKGROUND, THE ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 148 OF THE ACT ON 21.03.2013 BY RECORDING REASONS FOR REOPENING OF ASSESSMENT AS FOLLOWS: HENCE, IT NEEDS TO BE VERIFIED WHETHER AS LOSSES AMALGAMATING COMPANY HAS BEEN TAKEN IN TO ACCOUNT FOR THE PURPOSE OF VALUATION. IT NEEDS VERIFICATION WHETHER THE ASSESSEE COMPANY HAS ACTUALLY CARRIED OVER LOSSES IN ITS ACCOUNTS FOR ASSESSMENT YEAR 2006 - 07 SO THAT IT IS ELIGIBLE FOR SET - OFF. 3. ACCORDINGLY, THE ASSESSING OFFICER HAS OBSER VED THAT FOR THE ASSESSMENT YEAR 2007 - 08, THE ASSESSEE HAD CLAIMED SET OFF OF LOSS AMOUNTING TO .23, 08,24,830/ - BEING THE UNABSORBED LOSSES RELATING TO MAHESWARA SUGARS LTD. AGAINST ITS TOTAL INCOME AS PER THE PROVISIONS OF SECTION 72A OF THE ACT. THE CARRY FORWARD LOSS OF MAHESWARA SUGARS LTD. HAS NOT VERIFIED WHETHER, IT WAS ACTUALLY CARRIED ON IN ITS ACCOUNT FOR THE FINANCIAL YEAR 2006 - 07. ACCORDING TO THE ASSESSING OFFICER, IN THE I.T.A. NO . 1 740 /M/ 15 3 ASSESSMENT ORDER DATED 25.03.2008 IN THE CASE OF MAHESWARA SUGAR S LIMITED FOR THE ASSESSMENT YEAR 2006 - 07, IT WAS LIMITED TO THE STATEMENT THAT THE ASSESSEE WAS NOT IN OPERATION FOR FIVE YEARS BEFORE TAKING OVER BY BANNARI AMMAN GROUP ON 07.02. 2006. IN THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED 2 9 .12.2009 IN THE CASE OF BANNARI AMMAN SUGARS LTD. FOR THE ASSESSMENT YEAR 2007 - 08 , THERE WAS NO MENTION OF TA KING OVER OF MAHESWARA SUGARS LTD. BY THE ASSESSEE COMPANY. THE ASSESSEE ONLY CARRIED FORWARD LOSS OF MAHESHWARA SUGARS LTD. BY THE ASSESSEE COMPANY. IT WAS ONLY CARRIED FORWARD LOSS OF MAHESWARA SUGARS LTD. AMOUNTING TO .23,08,24,830 / - HAS BEEN SET OFF A GAINST PROFIT S OF THE ASSESSEE. WHETHER THE SAID LOSS WAS TAKEN OVER IN THE ACCOUNTS OF THE ASSESSMENT YEAR 2006 - 07 FOR AMALGAMATION PURPOSE HAS NOT BEEN DISCUSSED. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) R.W.S. 147 ON 31.03.2014 IN THE CASE OF MA HESWARA SUGARS LTD. FOR THE ASSESSMENT YEAR 2006 - 07 THE DEPRECIATION PERTAINING TO THE ASSESSMENT YEARS 2002 - 03 TO 2004 - 05 AMOUNTING TO .6,98,05,670/ - OUT OF TOTAL BROUGHT FORWARD LOSSES AMOUNTING TO .23,73,98,026/ - THAT WAS BROUGHT FORWARD FOR SET OFF AGAINST THE ASSESSMENT YEAR 2006 - 07 WAS DISALLOWED FOR THE FOLLOWING REASONS: A. THE ASSESSEE THEMSELVES CONCEDED THAT THE COMPANY WAS NOT I N OPERATION FOR THE PREVIOUS THREE YEARS PRIOR TO AY 2005 - 06 AND THE MACHINERY, HENCE, WAS NOT PUT TO USE. BY THIS ITSELF, THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION FOR THESE YEARS. I.T.A. NO . 1 740 /M/ 15 4 B. THE ISSUE OF NOTICE UNDER SECTION 148 WAS VALID AS IT WAS ISSUED AFTE R OBTAINING NECESSARY APPROVAL OF THE CIT. ALSO, THE VIEW THAT REOPENING IS ONLY A REVIEW CANNOT BE TAKEN AS IN THIS REGARD, THE SUPREME COURT MADE A SIGNIFICANT OBSERVATION IN THE CASE OF CIT V. PVS BEEDIES PVT. LTD. (1999) REPORTED IN 237 ITR 13(SC) THA T WHEN APPARENTLY LEGAL MISTAKE IS FOUND TO HAVE BEEN COMMITTED BY THE ASSESSING OFFICER, REOPENING OF ASSESSMENT IS LEGALLY PERMISSIBLE . IN THE LIGHT OF THE ABOVE DECISION OF THE APEX COURT OF THE LAND, THE SLEW OF DECISIONS CITED BY THE ASSESSEE BECOME S IRRELEVANT. 4. ACCORDINGLY, WHILE FRAMING THE ASSESSMENT ORDER , THE BOOKS OF ACCOUNT OF M/S. MAHESWARA SUGARS LTD. AND THE ASSESSEE COMPANY AND THE ANNUAL REPORTS FOR THE RELEVANT YEARS WERE EXAMINED AND FOUND THAT THE CONDITIONS STIPULATED IN SECTION 72A AND RULE 9C OF THE I.T. RULES HAVE BEEN SATISFIED FULLY. ALSO, THE LOSSES OF MAHESWARA SUGARS LTD. FOR THE FINANCIAL YEAR 2005 - 06 WERE FULLY ABSORBED IN THE BOOKS OF THE ASSESSEE, M/S. BANNARIAMMAN SUGARS LTD. FOR THE SAME YEAR FOR THE PURPOSE OF AMALG AMATION. CONSIDERING THIS, AS AGAINST THE UNABSORBED LOSSES OF .23,08,24,830/ - THAT WERE ALLOWED TO BE CARRIED FORWARD AND SET OFF AGAINST THE ASSESSEE S PROFITS AS PER THE ORIGINAL ASSESSMENT ORDER, DEPRECIATION PERTAINING TO THE ASSESSMENT YEARS 2002 - 03 TO 2004 - 05 AMOUNTING TO .6,98,05,670/ - WOULD BE REDUCED AS DE TERMINED IN THE ASSESSMENT ORDER IN THE CASE OF MAHESWARA SUGAR MILLS LTD. FOR ASSESSMENT YEAR 2006 - 07 AND I.T.A. NO . 1 740 /M/ 15 5 ONLY LOSSES AMOUNTING TO .16,10,19,160/ - ARE ALLOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST THE ASSESSEE S CURRENT INCOME. 5. AGAINST THIS, TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) PLACED JUDGEMENT IN THE CASE OF USHA INTERNATIONAL LTD. 348 ITR 485 (DEL)(FB) AND THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LIMITED 320 ITR 561 AND OBSERVED THAT THERE IS NO TANGIBLE FRESH MATERIAL TO REOPEN THE CONCLUDE D ASSESSMENT AND ACCORDINGLY HE ANNULLED THE REASSESSMENT ORDER. 6. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECO RD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. PRIMARY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) SHOULD NOT HAVE QUASHED REASSESSMENT ORDER ITSELF AND HE SHOULD HAVE GIVEN FINDINGS ON MERITS. THE LD. DR RELIED ON THE ASSESSMENT ORDER AND ALSO JUDGEMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT V. PVS BEEDIES PVT. LTD. (SUPRA). ACCORDING TO HIM, WHILE GOING THROUGH THE REASSESSMENT ORDER OF MAHESWARA SUGARS LTD. FOR THE ASSESSMENT YEAR 2006 - 07, IT CAME TO KNOW THAT DEPRECIATION PERTA INING TO THE ASSESSMENT YEARS 2002 - 03 TO 2004 - 05 AMOUNTING TO . 6,98,05,670/ - , OUT OF TOTAL BROUGHT FORWARD LOSSES AMOUNTING TO .23,73,98,026/ - THAT WAS I.T.A. NO . 1 740 /M/ 15 6 BROUGHT FORWARD FOR SET OFF AGAINST ASSESSMENT YEAR 2006 - 07 WAS DISALLOWED AND ACCORDINGLY, REOPENING WAS VALID. 8. CONTRARY TO THIS, THE LD. AR HAS RELIED ON THE JUDGEMENT OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. INTEL TECHNOLOGY INDIA (P) LTD. 232 TAXMAN 279, WHEREIN, IT WAS HELD THAT THE ASSESSMENT PROCEEDINGS INITIATED AGAINST A NON - EXISTING COMPANY EVEN AFTER AMALGAMATION OF ASSESSEE - COMPANY WITH OTHER COMPANY SHALL BE INVALID. FURTHER, HE SUBMITTED THAT SINCE THE ASSESSING OFFICER MA D E USE OF THE MATERIAL IN THE FORM OF THE ASSESSMENT ORDER OF MAHESWARA SUGARS LIMITED FOR THE ASSES SMENT YEAR 2006 - 07 TO REOPEN THE ASSESSMENT AND IT CANNOT BE USED SINCE THAT ASSESSMENT ORDER IS BAD IN LAW. THE LD. AR HAS FURTHER RELIED ON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF SPIC INFOTAINMENT LTD. V. CIT 247 CTR 500. ACCORDING T O THE LD. AR, THE REOPENING OF ASSESSMENT IS BAD IN LAW SINCE IN THIS CASE, THERE IS NO FRESH TANGIBLE MATERIAL AND THE ASSESSING OFFICER CANNOT MAKE ROVING ENQUIRY AND HE RELIED ON THE ORDER OF THE LD. CIT(A). 9. IN OUR OPINION, THE ARGUMENT OF THE LD. AR IS MISPLACED. THE ASSESSING OFFICER IS ENTITLED TO USE EVEN MATERIAL COLLECTED BY WHATEVER MEANS INCLUDING IL LEGAL SEARCH FOR THE PURPOSE OF REOPENING OF ASSESSMENT AND WE DO NOT FIND ANY INFIRMITY IN RELYING ON THE ASSESSMENT ORDER OF MAHESWARA SUGARS LTD. FOR THE ASSESSMENT YEAR 2006 - 07 TO REOPEN THE IMPUGNED CASE . I.T.A. NO . 1 740 /M/ 15 7 FURTHER CONTENTION OF THE LD. AR IS THAT NOTICE FOR REASSESSMENT HAS BEEN ISSUED BEYOND FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR AND AGAINST THE ASSESSEE HAD BROUGHT ALL MATERIA L FACTS IN THE RETURN FILED, THE REOPENING ON THE BASIS OF SAME SET OF FACTS IS BAD IN LAW AND IT IS ONLY CHANGE OF OPINION. IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE THE ASSESSING OFFICER, HE WAS OF THE OPINION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE FORMED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSE SSMENT, ACTION U/S 148 CAN BE TAKEN. BUT OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PART ICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDENCE. IN THE GIVEN CASE, ORIGINAL ASSESSMENT WAS COMPLETED ON 2 9 . 12 .200 9 . THE REASON WAS RECORDED AS DISCUSSED ABOVE. THE ARGUMENT OF THE LD.AR IS THAT U/S 147 , IN CASE THE ASSESSMENT ORDER IS COMPLETED U/S 143(3), AS HAS BEEN DONE IN THIS CASE, NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR, INTER ALIA. I.T.A. NO . 1 740 /M/ 15 8 10. AS SEEN FROM THE REASONS RECORDED, GIVE A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. THE POINT OF TIME WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THIS PLEA OF THE LD.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147, THE ASSESSING OFFICER CAN EITHER ASSESS OR RE - ASSESS BUT FOR TAKING ACTION THEREUNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . IT IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE RE ASSESSMENT PROCEEDINGS U/S 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153. BUT IN THE PRESENT CASE, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSESSMENT YEAR IN QUE STION. THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) ARE SATISFIED OR NOT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOM E HAS BEEN ASSESSED AT TOO LOW RATE; OR(III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV)EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THE ASSESSING OFFICER WOULD HAVE VALID COGNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSESSMENT OF TAX HENCE, THE I.T.A. NO . 1 740 /M/ 15 9 CONDITIONS LAID ABOVE STAND FULFILLED IN SO FAR AS RE - ASSESSMENT PROCEEDINGS ARE CONCERNED. IN SO FAR AS THE REASON S RECORDED, EXTRACTED IN THE ABOVE PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS FACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSESSMENT. THE POWER TO RE - ASSESS POST 1S T APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS REASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE BASIS OF MER E CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASON TO REOPEN THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICER TO REVIEW BUT HAS ONLY GIVEN POWER TO RE - ASSESS. THERE IS A CONCEPTUAL DIFFERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFIC ER HAS NO POWER AT ALL TO REVIEW THE ASSESSMENT. THE REASSESSMENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE - CONDITIONS BUT THE CONCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWISE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASSESSMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN - BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN THE ASSESSING OFFICER HAS A TANGIB LE MATERIAL TO BASE HIS CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT AND THE REASONS RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELIEF, HE HAS THE POWER U/S 147 OF THE ACT. I.T.A. NO . 1 740 /M/ 15 10 11. NOW THE MOST MATERIAL PART WHICH WAS ARGUED BY THE LD .AR IS REGARDING THE TIME LAG WHICH IS PROVIDED IN FIRST PROVISO TO SECTION 147 WHICH STATES THAT WHERE AN ASSESSMENT U/S SUB - SECTION(3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, WHICH IS 200 6 - 0 7 , IN THIS CASE, NO ACTION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THERE ARE TWO OTHER CONDITIONS WHICH ARE NOT RELEVANT FOR DECIDING THE LEGAL ISSUE UNDER APPEAL. WE HAVE TO SEE AS TO WHAT FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS SIGNIFY. THE EXPRESSION FAILURE TO DISCLOSE MATERIAL FACTS HAS BEEN EXPLAINED IN THE TAXMAN S DIRECT TAXES MANUAL VOLUME 3. IT IS TRUE THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOSURE. A DISCLOSURE CAN BE EVEN FALSE OR TRUE. IT MAY BE A FULL DISCLOSURE OR IT MAY NOT BE A FULL ONE. A PART DISCLOSURE MANY A TIMES MAY BE MISLEADING ONE. WHAT IS REQUIRED UNDER THE LAW IS A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT Y EAR. THIS LAW WAS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF SRI KRISHNA PVT. LTD ETC VS ITO & OTHERS, 221 ITR 538. THE WORDS OMISSION OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT I.T.A. NO . 1 740 /M/ 15 11 YEAR POSTULATES A FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. WHAT FACTS ARE MATERIAL AND NECESSARY FOR ASSESSMENT WILL DIFFER FROM CASE TO CASE. THE MATERIAL SHOULD NOT ONLY BE FULL BUT ALSO BE TRUE. IF SOME M ATERIAL FOUND IN THE EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER WHICH TH E ASSESSING OFFICER COULD HAVE UNCOVERED BUT DID NOT, THEN IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTICE OF THE ASSESSING AUTHORITY. THIS OMISSION OR FAILURE MAY BE EITHER DELIBERATE, OR EVEN INADVERTENT, THAT IS IMMATERIAL, BUT IN CASE THERE IS OMISSION TO DISCLOSE THE MATERIAL FACTS THEN SUBJECT TO THE OTHER CONDITIONS JURISDICTION TO REOPEN IS ATTRACTED. 12. IN THE PRESENT CASE, ON FRAMING THE ASSESSMENT ORDER OF MAHESWARI SUGARS LTD. FOR THE ASSESSMENT YEAR 2006 - 07 VIDE ORDER DATED 25.03.20 08, IT CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER THAT THE DEPRECIATION PERTAINING TO THE ASSESSMENT YEARS 2002 - 03 TO 2004 - 05 AMOUNTING TO .6,98,05,670/ - WAS ALREADY SET OFF OUT OF TOTAL BROUGHT FORWARD LOSS AMOUNTING TO .23,73,98,026/ - AND THE BALAN CE AMOUNT OF .16,10,19,160/ - COULD BE CARRIED FORWARD FOR SET OFF AGAINST THE ASSESSEE S CURRENT INCOME. AS PER EXPLANATION 2 OF SECTION147 IT IS VERY CLEAR THAT DUE TO EXCESSIVE CLAIM OF THE ASSESSEE, THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE ASSESSEE HAS NOT PRODUCED ANYTHING BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TO SHOW AS TO HOW THIS FACT WAS FULLY I.T.A. NO . 1 740 /M/ 15 12 AND TRULY DISCLOSED BEFORE THE ASSESSING AUTHORITY AND THAT THERE WAS NOT FAILURE ON THE PART OF ASSESSEE . HENCE, THE COMMISSIONE R OF INCOME TAX (APPEALS) WRONGLY CANCELLED THE ASSESSMENT ORDER. IT IS FULLY COVERED BY THE PROVISIONS OF EXPLANATION 1 TO SECTION 147 OF THE INCOME TAX ACT WHICH READS AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNTS BOOKS OR OTHER EVIDENC E FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO . IT IS POSSIBLE THAT WITH DUE DILIGENCE THE ASSESSING OFFICER WOU LD HAVE ASCERTAINED THIS FAT AT THE TIME OF ORIGINAL ASSES SMENT ALSO, BUT IN VIEW OF THE E XPLANATION (1) IT DOES NOT MEAN THAT THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S.147 IS HELD TO BE VALID. THE ASSESSEE HAS TRIED TO TAKE SHELTER UNDER THE EXCEPTION PROVIDED BY THE ABOVE STATED PROVISO WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 HAS BEEN COMPLETED, NO ACTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR CAN BE TAKEN. BUT AS STATED ABOVE, WH EN THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY THE FAC TS NECESSARY FOR THE ASSESSMENT , THIS PROVISO WILL NOT COME TO ITS RESCUE. CONSEQUENTLY, THOUGH, WE HOLD THAT THE ENTIRE REASSESSMENT PROCEEDING IN THIS CASE IS VALID , AND THEREFORE, THE ACTION OF TH E ASSESSING OFFICER IS UPHELD. SINCE WE HAVE UPHELD THE REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER, WE DIRECT THE LD. I.T.A. NO . 1 740 /M/ 15 13 CIT(A) TO DECIDE THE APPEAL ON MERITS AFTER ALLOWING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. 13 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 27 TH JUNE , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 27 . 0 6 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.