Gujarat State Fertilisers & Chemicals Ltd., V. THE DY.CIT., CIRCLE-1,

ITA 4237/AHD/2003

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0038 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-08-2010
• Assessment Year: 1990-1991
• Appeal Filed On: 01-12-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Assessee Lawyers: J P SHAH
• Keywords: Reopening of assessment; Capital asset; Depreciation; Difference of opinion; Reason to believe; Change of opinion; Capital expenditure
• Section: 143(3); 234B; 147; 148; 54; 12; 139

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM GUJARAT STATE FERTILIZERS & CHEMICALS LTD., P.O.FERTILIZERNAGAR, 391750, DIST. BARODA. VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-1, [FORMERLY ACIT (OSD), BARODA CIRCLE-1] BARODA (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI J. P. SHAH, AR REVENUEBY:- SHRI ALOK JOHRI, CIT,DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 3.9.2003. THE ASSESSEE HAS RAISED FOL LOWING GROUNDS :- (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN UPHOLDING THE ACTION ON THE PART OF THE ASSESSING O FFICER BY INVOKING THE PROVISIONS OF SECTION 147 OF THE I.T. ACT, 1961. IT IS RESPECTFULLY SUBMITTED THAT THE PROVISIONS OF SECTI ON 147 ARE NOT AT ALL APPLICABLE. YOUR APPELLANT HAS FURNISHED ALL TH E INFORMATION AND DETAILS ALONG-WITH THE RETURN OF INCOME AND ALSO DU RING (HE COURSE OF ORIGINAL APPELLANT PROCEEDINGS AND THERE IS NO N EW INFORMATION FOR WHICH ASSESSMENT HAS BEEN RE-OPENED. UNDER THE CIRCUMSTANCES, YOUR APPELLANT SUBMITS THAT THE ORDE R PASSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME- TAX (APPEALS) IS BAD IN LAW. IT IS SUBMITTED THAT I T BE SO HELD NOW. (2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER UPTO ITA NO.4237/AHD/2003 ASST. YEAR :1990-91 2 1% OF THE TOTAL EXPENDITURE ON REPAIRS AND MAINTENA NCE CONSIDERING THE SAME AS CAPITAL EXPENDITURE. YOUR APPELLANT SUB MITS THAT MERELY BECAUSE THE EXPENDITURE ON REPLACEMENT OF CERTAIN I TEMS WAS SUBSTANTIAL, THE SAME CANNOT BE CONSIDERED AS CAPIT AL EXPENDITURE. YOUR APPELLANT SUBMITS THAT IN (HE FACTS AND CIRCUM STANCES OF THE ITS CASE, THE ENTIRE EXPENDITURE ON REPAIRS AND MAI NTENANCE IS OF REVENUE NATURE AND THEREFORE IT IS FULLY ALLOWABLE. IT IS SUBMITTED THAT IT BE SO HELD NOW, (3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN NOT ENTERTAINING THE ADDITIONAL GROUNDS OF APPEAL FILED BY YOUR APPELLANT IN RESPECT OF CLAIM OF DEDUCTION FOR THE SUBSIDY RECEIVED RS. 14.01 CRORES CREDITED TO PROFIT AND LOSS A/C. BUT EVENTUALLY WAS REPAYABLE AND REPAID TO GOVERNMENT I N ASST, YEAR 2001-02 DUE TO INDUCTION IN SUBSIDY ON ACCOUNT OF R EVISION IN RETENTION PRICE. YOUR APPELLANT SUBMITS THAT IN THE FACTS AND CIRCUMSTANCES, THE LEARNED C I T (APPCALS) OUGHT TO HAVE ENTERTAINED THE ADDITIONAL GROUND OF APPEAL AND ALL OWED THE CLAIM FOR DEDUCTION OF THE AMOUNT OF SUBSIDY RECOVERED BY THE GOVERNMENT. YOUR APPELLANT SUBMITS THAT ADDITIONAL GROUND OF APPEAL BE ADMITTED AND DEDUCTION FOR THE SUBSIDY RE COVERED BY THE GOVERNMENT BE GRANTED NOW BECAUSE SUCH SUBSIDY RECE IPT WAS NOR THE REAL INCOME OF DIE ASSESSEE, (4) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN NOT CONSIDERING THE GROUND NO.3 FOR NOT WORKING OUT (LI E TUX PAYABLE PROPERLY. IT IS SUBMITTED THAT THE SAME BE CONSIDER ED NOW. (5) THE LEARNED COMMISSIONER OF INCOME-FAX (APPEALS ) HAS ERRED IN NOT CONSIDERING THE GROUND NO.4 FOR NOT PROPERLY WO RKING OUT THE INTEREST U/S234B. YOUR APPELLANT SUBMITS THAT INTER EST U/S 234B IS CHARGED AT HIGHER AMOUNT THAN THAT WOULD BE CHARGED . IT IS SUBMITTED THAT DIRECTION BE GIVEN TO CHARGE INTERES T U/S 234B PROPERLY. IT IS SUBMITTED THAT IT BE SO DONE NOW. 2. THUS THE MAIN ISSUE INVOLVED IN THE APPEAL IS TH AT REOPENING OF ASSESSMENT UNDER SECTION 147 WAS BAD IN LAW. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF FERTILIZERS AND CHEMIC ALS. THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 20 .3.1993 ON A TOTAL 3 INCOME OF RS.37,34,36,500/-. SUBSEQUENTLY NOTICE U/ S 148 WAS ISSUED ON 14.3.2000 TO REOPEN THE ASSESSMENT. THE REASONS REC ORDED BY THE AO WERE NOT PROVIDED BEFORE US EITHER BY THE ASSESSEE OR BY THE DEPARTMENT ON THE GROUND THAT MATERIAL IS OLD AND RECORDS ARE NOT TRACEABLE. 4. THE LD. AR, HOWEVER, SUBMITTED THAT AO HAS REOPE NED THE ASSESSMENT AFTER EXPIRY OF 4 YEARS ONLY TO DISALLOW CERTAIN ITEMS DEBITED UNDER THE HEAD REPAIRS AND MAINTENANCE ON BUILDIN G, PLANT & MACHINERY AND OTHERS. TOTAL AMOUNT DEBITED UNDER THIS HEAD WA S RS.2262.96 LACS. IN THE REASSESSMENT ORDER AO PROVIDED A TABLE OF VARIO US EXPENDITURE AMOUNTING TO RS.1,45,02,452/- INCURRED ON 52 ITEMS SUCH AS PROVIDING AND LAYING AR BRICK TO RCC FLOOR; REPLACEMENT OF GE NERATING TUBES AND MUD AND DRUM COMPLETE WITH RETURNING OF REFRESHING WORK; AIRMENTALING & REASSEMBLY OF UREA DECOMPOSER TOP DO M 2 NOS.; REPLACEMENT OF FUME SCRUBBER OF A TRAIN; REPLACEM ENT OF UG CHALKPOND WATERLINE PHASE-II; RESURFACING OF ASHALF ROADS IN FACTORY AND TOWNSHIP AREA; BRICK LINING IN OLD DIGESTER; CO NSTRUCTION OF SLAB IN THE INSTRUMENT WORKSHIP FOR STORAGE AREA; PROVIDING & F IXING MOSAIC TILES IN CONSTRUCTION SITE OFFICE; UNDERGROUND PIPING RELATE D TO SCHEME CONTROLLING EMISSION; REPLACEMENT OF STEAM SUPERHEATER AND PREH EATER; AUGMENTATION OF WELL B; REPLACEMENT OF CONTROL PANEL OF WATER TREATMENT; PROVIDING MARBLE FLOORING IN THE ENTRANCE IN ADM BLDG.; PROVI DING RAIN WATER DISPOSAL SYSTEM IN WAREHOUSE OF CAPROLACTAM PLANT; SUPPLY, ERECTION AND COMMISSIONING OF COOLING TOWER FANS WITH FRP ETC. E TC. THESE DETAILS CAN BE SEEN FROM THE REASSESSMENT ORDER. FOR THE SAKE O F BREVITY IT IS NOT CONSIDERED TO REPRODUCE THEM IN THIS ORDER. BUT THE DESCRIPTION AND REASONING FOR DISALLOWANCE DESERVES A MENTION SO AS TO COMPREHEND AS TO WHAT WENT INTO THE MIND OF THE AO FOR REOPENING THE ASSESSMENT AND MAKING ADDITION THERE AS UNDER :- 4 3. DISALLOWANCE OUT OF REPAIRS AND MAINTENANCE: A PERUSAL OF SCHEDULE 15 (MATERIALS MANUFACTURING AND OPERATING EXPENSE) OF THE ANNUAL REPORT ENCLOSED WITH THE RET URN OF INCOME SHOWS THAT ASSESSEE COMPANY HAS DEBITED AN AMOUNT OF RS.2 262.96 LACS TO REPAIRS AND MAINTENANCE EXPENSE FOR BUILDING, PLANT & MACHINERY AND OTHERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AR OF THE ASSESSEE WERE ASKED TO FURNISH, DATEWISE BREAK UP O F REPAIRS AND MAINTENANCE EXPENSES EXCEEDING RS.5 LACS IN A SINGL E TRANSACTION INDICATING THE NATURE OF REPAIRS AND MAINTENANCE CA RRIED OUT DURING THE PREVIOUS YEAR. A LEDGER ACCOUNT OF REPAIRS AND MAIN TENANCE EXPENSES OF RS.5 LACS AND ABOVE HAS BEEN FURNISHED BY THE ASSES SEE, HOWEVER, IN MOST OF THE CASES, IN MANY CASES NARRATION IS NOT WRITTE N IN THE LEDGER ACCOUNT. THE ASSESSEES AR HAS EXPRESSED INABILITY TO FURNIS H THE EXACT DETAILS OF THE EXPENDITURE CARRIED OUT ON THE GROUND THAT THER E ARE HUGE NUMBERS OF VOUCHERS, RECEIPTS WHICH IS VERY DIFFICULT TO TRACE OUT AND SUBMIT. ON EXAMINATION OF LEDGER ACCOUNT OF REPAIRS AND MAINTE NANCE IT IS NOTICED THAT MANY EXPENDITURE WHICH HAS BEEN CLAIMED AS REP AIRS AND MAINTENANCE ARE ACTUALLY INCURRED EITHER FOR CONSTR UCTION OF AN ASSET SUCH AS BUILDING, COMPOUND WALL, TOILET ETC. OR THE SAME HAS BEEN INCURRED FOR EXTENSION, RENEWAL OR RESTORATION OF T HE EXISTING ASSETS. IT IS RELEVANT TO MENTION HERE THAT IN THE LEDGER ACCOUNT PRODUCED BY THE ASSESSEE PARTICULARS OF TRANSACTION ARE NOT CLEARLY WRITTEN, HENCE IT IS VERY DIFFICULT TO ASCERTAIN THE EXACT NATURE OF EXPENDIT URE CLAIMED BY THE ASSESSEE. HOWEVER, ON CAREFUL EXAMINATION OF THE DE TAILS SUBMITTED IN THIS REGARD IT IS NOTICED THAT THE FOLLOWING EXPENDITURE HAD BEEN MAINLY INCURRED FOR PURCHASES OF FIXED ASSETS OR RENEWAL A ND RESTORATION OF THE ASSET WHICH CAN GIVE ENDURING BENEFIT TO THE ASSESS EE. IT IS EVIDENT FROM THE ABOVE DETAILS THAT MANY EXPE NDITURE CLAIMED AS REPAIRS AND MAINTENANCE EXPENDITURE HAD ACTUALLY BE EN INCURRED FOR THE CONSTRUCTION OF A NEW ASSET SUCH AS COMPOUND WALL, TOILET, BATHROOMS ETC. OR THESE HAVE BEEN INCURRED FOR EXTENSION, RESTORAT ION AND RENEWAL OF THESE ASSETS. SIMILARLY MANY EXPENDITURE HAD BEEN I NCURRED FOR REPLACEMENT OF MAJOR PARTS OF THE PLANT AND MACHINE RY AND INSPECT OF THE PLANT AND MACHINERY WHICH WILL GIVE NEW LEASE OF LI FE TO THE EXISTING PLANT AND MACHINERY AND THUS THE ASSESSEE WILL DEFINITELY WILL GET ENDURING BENEFIT FOR THESE EXPENDITURE INCURRED. SOME OF THE EXPENDITURE HAS ALSO BEEN INCURRED FOR INSPECTION/DECOMMISSIONING OF VAR IOUS STORAGE TANK WHICH ARE CLEARLY CAPITAL ASSET AND HENCE EXPENDITU RE INCURRED FOR INSPECTION AND DECOMMISSIONING OF A PLANT AND MACHI NERY IS DEFINITELY A CAPITAL EXPENDITURE. IT IS IMPORTANT TO MENTION HER E THE EXPRESSION CURRENT REPAIRS IN SECTION 31 OF THE I.T. ACT, 19 61 MEANS EXPENDITURE NOT 5 INCURRED ON RENEWAL OR RESTORATION OF A BUILDING, P LANT AND MACHINERY ETC. IT IS ONLY FOR PRESERVING AND MAINTAINING AN A LREADY EXISTING ASSET AND DOES NOT BRING THE NEW ASSET INTO EXISTENCE OR DOES NOT GIVE TO THE ASSESSEE A NEW OR DIFFERENT ADVANTAGE. IN VIEW OF T HE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE TOTAL AMOUNT OF RS.1 ,52,95,191/- IS DISALLOWED OUT OF THE REPAIRS AND MAINTENANCE EXPEN SES SINCE THESE EXPENSES ARE CAPITAL IN NATURE AND INCURRED FOR THE PURPOSE OF EITHER BRINGING INTO EXISTENCE A NEW ASSET OR GIVING ENDUR ING BENEFIT TO THE ASSESSEE. AS A NATURAL COROLLARY ASSESSEE WILL BE E NTITLED TO CLAIM DEPRECIATION FOR THE ABOVE AMOUNTS ALLOWABLE AS PER SCHEDULE OF DEPRECIATION. BY DRAWING OUR ATTENTION TO ABOVE OBSERVATIONS OF T HE AO, THE LD. AR FOR THE ASSESSEE ARGUED THAT ON THE BASIS OF FINDING GI VEN BY THE AO IN SUBSEQUENT ASST. YEARS THAT CERTAIN ITEMS OF EXPEND ITURE ARE CAPITAL IN NATURE WHEREAS ASSESSEE HAS CLAIMED SUCH ITEMS IN T HIS YEAR AS REVENUE, THE AO THOUGHT IT PROPER TO REOPEN THE ASSESSMENT. SINCE ASSESSMENT WAS REOPENED AFTER FOUR YEARS OF THE ASSESSMENT, PROVIS O TO SECTION 147 WOULD BE APPLICABLE AND AO HAS TO SHOW THAT THERE WAS A F AILURE ON THE PART OF THE ASSESSEE IN DISCLOSING ANY MATERIAL FACT, TRULY AND FULLY WHICH ARE RELEVANT FOR COMPUTING INCOME OF THE ASSESSEE. SINC E NO FAILURE HAS BEEN CHARGED, THE AO COULD NOT REOPEN THE ASSESSMENT U/S 147/148(1) AFTER EXPIRY OF 4 YEARS. THE LD. AR ALSO DREW OUR ATTENTI ON TO THE FACTS THAT ISSUE REGARDING REPAIRS AND MAINTENANCE HAD BEEN CO NSIDERED BY THE AO IN THE ORIGINAL ASSESSMENT AS REFLECTED FROM PARA 4 OF THE ORIGINAL ASSESSMENT ORDER DATED 29.3.1993. 5. ON THE OTHER HAND, THE LD. CIT(A) UPHELD THE REO PENING BY OBSERVING AS UNDER :- 2.2 I HOLD THAT THE CLAUSE REGARDING FOUR YEARS DO ES NOT APPLY TO THE APPELLANT. THE SECTION W.E.F. 1.4.1989 TILL 1.6.200 1 ALLOWED REOPENING, IF NOT MORE THAN 10 YEARS HAD ELAPSED AND THE INCOME C HARGEABLE TO TAX WHICH HAD ESCAPED ASSESSMENT WAS MORE THAN RS.1 LAK H. IN THE PRESENT CASE, THE ESCAPEMENT OF INTEREST WAS ESTIMATED IN T HE NOTICE ITSELF IN 6 CRORES. HENCE THE APPLICABLE SECTIONS TILL THE DATE OF ISSUE OF NOTICE ALLOWED THE DEPARTMENT TO REOPEN THE CASE. HENCE TH E REOPENING AS FAR AS LIMITATION IS CONCERNED IS VALID. 2.3 AS REGARDS THE FACT THAT DURING ORIGINAL ASSESS MENT, THE CONCERNED DETAILS HAD BEEN SUPPLIED IS NOT SUFFICIENT TO HOLD THAT THE REOPENING WAS INVALID. SECTION 147 CLEARLY PROVIDES THAT WHERE TH E AO HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT, HE CAN REOPEN THE ASSESSMENT TO WITHDRAW EXCESSIVE RELIEF OR ANY OTHER ALLOWANCE OR UNDER ASSESSMENT UNDER THE ACT. HENCE MERE FILING OF DETAILS FROM WHICH THE AO COULD POSSIBLY HAVE DRAWN OUT THE RELEVANT FACTS IS NOT SUFFICIENT TO HOLD THE REOPENING AS IN VALID. [PRAFUL CHUNILAL PATEL VS. ACIT 236 ITR 832 (GUJ)].HENCE THE ISSUES RAISED ARE DECIDED ON MERITS. 6. THE LD. AR POINTED OUT THAT LD. CIT(A) HAD NOT A PPRECIATED THE RELEVANT PROVISIONS OF THE ACT CONTAINED IN SECTION 147 THAT ASSESSMENT CAN BE REOPENED AFTER EXPIRY OF FOUR YEARS ONLY ON THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. 7. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDE R OF LD. CIT(A) AND SUBMITTED THAT MERELY BECAUSE ASSESSEE HAS PROV IDED SCHEDULE ALONG WITH RETURN OF INCOME SHOWING VARIOUS HEADS UNDER T HE HEAD REPAIRS AND MAINTENANCE IT WOULD NOT AMOUNT TO DISCLOSURE WITH IN THE MEANING OF PROVISO TO SECTION 147 AS STOOD AT THE RELEVANT TIM E. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, REOPENING OF THE ASSESSMENT CANNOT BE JUSTIFIED. FOR THE SAKE OF CONVENIENCE WE REPRODUCE SECTION 147 AS STOOD AT THE RELEVANT TIME. 147. INCOME ESCAPING ASSESSMENT.--IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER I NCOME CHARGEABLE TO 7 TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERN ED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS T HE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSE SSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. EXPLANATION 1.--PRODUCTION BEFORE THE ASSESSING OFF ICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COUL D WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING P ROVISO. 9. IT IS UNDISPUTED FACT THAT ASSESSMENT WAS REOPEN ED AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASST. YEAR. THE QUESTION IS WHAT IS THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL FACT NECESSARY FOR HIS ASSESSMENT ? SCHEDULE XV CONTAINING MATERI AL MANUFACTURING OPERATING EXPENSES IN THE ANNUAL REPORT ENCLOSED W ITH THE RETURN WAS BEFORE THE AO AT THE TIME OF REGULAR ASSESSMENT. HE HAD EXAMINED THE SAME AS APPARENT FROM THE ASSESSMENT ORDER WHEREIN THE AO CONSIDERED REPAIRS AND MAINTENANCE OF THE GUEST HOUSE. THE ASS ESSEE HAD CLAIMED AN EXPENDITURE OF RS.13,40,923/- AS DISALLOWABLE AND T HE AO WORKED OUT A SUM OF RS.18,94,147/- AS DISALLOWABLE AS UNDER :- 1. REPAIRS AND MAINTENANCE OF GUEST HOUSE RS.96,698 2. SALARY TO EMPLOYEES POSTED AT GUEST HOUSE RS.13,94, 490 3. DEPRECIATION ON GUEST HOUSE RS.4,02,959 RS.18,94,147 8 IN FACT WHAT HAS TO BE SHOWN BY THE AO AS TO WHAT M ATERIAL FACT ASSESSEE HAS NOT DISCLOSED TRULY AND FULLY AT THE TIME OF RE GULAR ASSESSMENT. EVEN IN THE ENTIRE CHART REPRODUCED BY THE AO IN THE REA SSESSMENT ORDER HE HAS ONLY TAKEN A VIEW THAT EXPENDITURE SO INCURRED UNDE R THE HEAD REPAIRS AND MAINTENANCE ARE CAPITAL IN NATURE. THE AO ONLY HAS TAKEN A VIEW THAT SOME OF THE EXPENDITURE DEBITED UNDER THIS HEA D GIVE ENDURING BENEFIT TO THE ASSESSEE. IT COULD BE, IT COULD NOT BE. BUT SO FAR AS THE REASSESSMENT IS CONCERNED THIS COULD NOT BE THE GRO UND FOR ACTION U/S 147/148(1). THE DUTY OF THE ASSESSEE IS TO DISCLOSE PRIMARY FACTS AND NOT TO POINT OUT WHAT INFERENCE THE AO COULD DRAW FROM THEM. THE DUTY OF THE ASSESSEE DOES NOT EXTEND BEYOND MAKING A TRUE A ND FULL DISCLOSURE OF PRIMARY FACTS. ONCE HE HAS DONE HIS DUTY ENDS. IT I S FOR THE AO TO DRAW THE CORRECT INFERENCE FROM THOSE PRIMARY FACTS. IT IS NOT THE RESPONSIBILITY OF THE ASSESSEE TO ADVISE THE ITO AS TO WHAT INFERE NCE HE CAN DRAW FROM THE PRIMARY FACTS. EVEN WHERE THE AO DRAWS AN INFER ENCE WHICH APPEARS SUBSEQUENTLY TO BE ERRONEOUS THEN FOR CHANGE OF OPI NION ALONE, ACTION FOR REOPENING THE ASSESSMENT CANNOT BE JUSTIFIED. OUR V IEW IS SUPPORTED BY THE DECISION OF HON. ANDHRA PRADESH HIGH COURT IN G .B. BROS. AND KONDA RAJAGOPALA CHETTY BEEDI FACTORY (P.) LTD. VS. INCOME-TAX OFFICER 2004) 267 ITR774 (AP). FURTHER IT HAS BEEN HELD BY HON. BOMBAY HIGH COURT IN HINDUSTAN LEVER LTD. VS. R.B. WADKAR, ASSI STANT COMMISSIONER OF INCOME-TAX (NO.1) (2004) 268 ITR 332 (BOM) THAT NOTICE TO REOPEN THE ASSESSMENT SHOULD CLEARLY STATE AS TO WHICH MAT ERIAL IS NOT DISCLOSED TO THE AO. THE REASONS CANNOT BE SUPPORTED BY SUBSEQUE NT DISCOVERY OF FACTS IN THE REASSESSMENT. IN THE REASSESSMENT ORDE R THERE IS NO INDICATION OF ANY SATISFACTION TO THE EFFECT OR INFORMATION WI TH REGARD TO THE ACCOUNTING HEAD THAT ASSESSEE HAD NOT DISCLOSED ANY MATERIAL FACT. THEREFORE, WHERE NOTICE TO REOPEN IS ISSUED AFTER 4 YEARS WITHOUT POINTING OUT ANY FAILURE TO DISCLOSE ANY MATERIAL FACT NECES SARY FOR ASSESSMENT SUCH 9 NOTICE WILL NOT BE VALID AND IT IS SO HELD BY HON. DELHI HIGH COURT IN JSRS UDYOG LIMITED V.INCOME-TAX OFFICER[2009] 313 I TR 0321-[DEL]. HON. APEX COURT IN COMMISSIONER OF INCOME-TAX V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 0561(SC) ALSO HELD THIS VIEW TH AT REASSESSMENT CANNOT BE INITIATED AFTER EXPIRY OF FOUR YEARS ON T HE BASIS OF MERE CHANGE OF OPINION. 10 IN ANY CASE THE AO HAS TO SHOW IN THE REASONS RE CORDED THAT FOUR INGREDIENTS ARE SATISFIED BEFORE HE ASSUMES JURISDI CTION UNDER SECTION 147 AND PROVISO THERETO. THE FIRST IS THE IDENTIFICATIO N OF THE ASSESSEE IN WHOSE CASE CHARGE OF INCOME ESCAPING ASSESSMENT IS MADE, SECOND IS THE ASST. YEAR FOR WHICH INCOME HAS ESCAPED ASSESSMENT AND TH E THIRD IS NATURE AND AMOUNT OF ESCAPED INCOME; AND WHERE ASSESSMENT IS S OUGHT TO BE REOPENED AFTER FOUR YEARS, THE FOURTH INGREDIENT TH E AO HAS TO SHOW IN THE REASONS RECORDED IS THAT THERE WAS FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY MATERIAL FACTS NECESSARY F OR ASSESSMENT. AGAIN THIS CHARGE IS NOT TO BE A MERE BALD OPINION BUT HA S TO BE BASED ON SOME INFORMATION, SOME MATERIAL OR SOME EVIDENCE HAVING NEXUS WITH THE CHARGE OF ESCAPEMENT OF INCOME AND FAILURE OF THE A SSESSEE FROM MAKING A TRUE OR FULL DISCLOSURE. 11. THE RELIANCE OF LD. CIT(A) ON THE DECISION OF H ON. GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL VS. ACIT (SUPRA) WILL NOT SUPPORT THE CASE OF THE REVENUE BECAUSE IN THAT CAS E ASSESSMENT ORDER FOR WHICH ASSESSMENT WAS REOPENED U/S 147/148(1) WAS 19 91-92 AND NOTICE U/S 148(1) WAS GIVEN ON 29 TH MARCH, 1996 I.E. WITHIN FOUR YEARS OF RELEVANT ASST. YEAR AND, THEREFORE, PROVISO TO SECT ION 147 WOULD NOT BE APPLICABLE. THE LD. DR HAS ALSO REFERRED TO A DECIS ION OF HON. MADRAS HIGH COURT IN THE CASE OF PRECOT MILLS VS. CIT (200 5) 273 ITR 397 10 (MAD). IN THIS DECISION IT WAS HELD THAT INCOME ESC APING ASSESSMENT AS A RESULT OF FAILURE TO EXAMINE THE ACCOUNT BOOKS PROD UCED BY THE ASSESSEE WOULD BE SUFFICIENT JUSTIFICATION IN MAKING THE REA SSESSMENT. THE WRIT PETITION FILED BY THE ASSESSEE AGAINST ISSUANCE OF NOTICE U/S 148 WAS ACCORDINGLY DISMISSED. THE HON. HIGH COURT DID NOT GO INTO THE QUESTION AS TO THE NECESSITY OF A CHARGE OF FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT AS A CONDITION PRECEDENT FOR REOPENING THE ASSESSMENT AF TER FOUR YEARS FROM THE RELEVANT ASST. YEAR. ON THE OTHER HAND, THE JUR ISDICTIONAL HIGH COURT IN NIKHIL K. KOTAK VS. MAHESH KUMAR (2009) 319 ITR 445(GUJ) HAS HELD THAT IT IS A CONDITION PRECEDENT TO SHOW BY THE AO A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS NECESSARY F OR ASSESSMENT BEFORE HE ASSUMES JURISDICTION TO ISSUE NOTICE U/S 148(1) AFT ER FOUR YEARS FROM THE RELEVANT ASST. YEAR. HON. GUJARAT HIGH IN THAT CASE HELD AS UNDER :- SECTION 147 OF THE INCOME-TAX ACT, 1961, PERMITS RE OPENING OF A COMPLETED ASSESSMENT IN A CASE WHERE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT. HOWEVER, THE PROVISO UNDER THE SECTION CARVES OUT A N EXCEPTION AND SHIFTS THE BURDEN ON THE REVENUE IN A CASE WHERE A PERIOD OF F OUR YEARS HAS ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE P ROVISO STIPULATES THREE CONDITIONS. THE REVENUE IS REQUIRED TO SHOW FROM TH E RECORD AND THE FACTS OF THE CASE THAT ANY ONE OF THE THREE CONDITIONS STAND S SATISFIED BEFORE THE ASSESSING OFFICER CAN ASSUME JURISDICTION TO ISSUE NOTICE FOR REASSESSMENT. THE CONDITIONS ARE NON-FILING OF RETURN AND NOT RES PONDING TO STATUTORY NOTICE. THE THIRD CONDITION REQUIRES THE REVENUE TO ESTABLI SH THAT THERE WAS ANY OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT OF THE A SSESSMENT YEAR IN QUESTION. HELD- THAT IT WAS NOT THE CASE OF THE REVENUE THAT THERE WAS ANY OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT OF THE ASSESSMENT YEAR IN QUESTION. IN FACT THE STATEMENT SHOWING COMPUTATION OF TOTAL INCOME, SHOW ED THAT ALL THE RELEVANT DETAILS FOR COMPUTING LONG-TERM CAPITAL GAINS HAD B EEN SHOWN BY THE ASSESSEE. NOT ONLY THAT, DETAILS OF EXEMPTION CLAIM ED UNDER SECTION 54 OF THE ACT IN RESPECT OF INVESTMENT IN THE NEW HOUSE HAD A LSO BEEN SHOWN ON A SEPARATE SHEET. THEREFORE, IT WAS APPARENT THAT THE RE WAS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF THE PROVISO TO SECTION 147 OF THE ACT. HENCE, THE NOTICE DATED MARCH 22, 1999, ISSUED UNDER SECTION 148 OF THE ACT, WHICH WAS ADMITTEDLY ISSUED BEYOND A PERIOD OF 11 FOUR YEARS, I.E., MARCH 31, 1997, WAS BAD IN LAW AN D WITHOUT JURISDICTION. THE NOTICE WAS LIABLE TO BE QUASHED. SIMILAR VIEW WAS TAKEN BY HON. GUJARAT HIGH COURT I N GUJ. FLUORO CHEMICALS LTD. VS. DCIT (2009) 319 ITR 282 WHEREIN IT WAS HELD AS UNDER :- THE ASSESSEE CHALLENGED THE NOTICE ISSUED UNDER SEC TION 148 OF THE INCOME- TAX ACT, 1961 IN RESPECT OF ASSESSMENT YEAR 2001-02 BY THE ASSESSING OFFICER. AS PER THE REASONS RECORDED, THE ASSESSMEN T HAD BEEN REOPENED ON THE GROUND THAT THE ASSESSEE HAD SHOWN LONG-TERM CA PITAL GAINS OF RS. 1,09,47,296 UNDER THE HEAD 'CAPITAL GAINS'. HELD- ALLOWING THE PETITION, THAT NO FAILURE ON THE PART OF THE ASSESSEE WAS EVEN ALLEGED AND IT WAS ACCEPTED THAT AN INCORRECT ASSESSMENT HAD BEEN FRAMED DUE TO AN ERROR ON THE PART OF THE ASSESSING OFFICER. THE ASSESSEE HAD MADE A FULL DISCLOSURE OF MATERIAL FACTS IN THE RET URN OF INCOME FILED BY IT FOR THE RELEVANT ASSESSMENT YEAR, WHICH WAS ACCOMPANIED BY SEVERAL ENCLOSURES, INCLUDING A SUMMARY OF SHORT-TERM AND LONG-TERM CAP ITAL GAINS DISCLOSED METICULOUSLY, AND ITEM-WISE. IT WAS THE STATUTORY D UTY OF THE ASSESSING OFFICER TO RECORD REASONS FOR ISSUING THE NOTICE UNDER SECT ION 148 OF THE ACT AND REASONS RECORDED COULD NOT FURTHER BE SUPPLEMENTED OR EXPLAINED BY A SUBSEQUENT ORDER SO AS TO GIVE AN ENTIRELY DIFFEREN T COMPLEXION TO THE CASE. THE NOTICE WAS NOT VALID. WE RESPECTFULLY PREFER TO FOLLOW THE DECISIONS OF J URISDICTIONAL HIGH COURT OVER THE DECISION OF HON. MADRAS HIGH COURT I N PRE-COT MILLS CASE (SUPRA) RELIED ON BY THE LD. DR. 12. IN OUR CONSIDERED VIEW THE ROLE OF EXPLANATION- 1 TO SEC.147 AS RELIED BY THE LD. CIT(A) OR BY LD. DR WOULD COME IN TO OPERATION ONLY WHEN AO HAS POINTED OUT AS TO WHAT HAS NOT BEEN DIS CLOSED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT. ONCE A CHARGE OF FAILURE IS IMPUTED ON THE ASSESSEE THEN ASSESSEE HAS TO SHOW THAT SUCH FACTS WERE ALREADY DISCLOSED. ONCE AN EXPLANATION IS RENDERED BY THE A SSESSEE THAT CERTAIN FACTS AS ALLEGED BY THE AO ARE ALREADY DISCLOSED TH EN EXPLANATION1 WOULD COME TO THE RESCUE OF THE AO AND IN THAT EVENT MERE LY PRODUCTION OF BOOKS OF ACCOUNT AS RELEVANT EVIDENCE BEFORE THE AO WOULD NOT TANTAMOUNT TO DISCLOSURE WITHIN THE MEANING OF PROV ISO TO SECTION 147. 12 HERE THE AO HAS NOT DISCHARGED THE PRIMARY ONUS LYI NG ON HIM FOR REOPENING THE ASSESSMENT AS HE HAS NOT MADE ANY ALL EGATION ABOUT THE FAILURE OF THE ASSESSEE TO DISCLOSE ANY PARTICULAR MATERIAL NECESSARY FOR THE ASSESSMENT. THUS WE HOLD THAT REOPENING OF THE ASSE SSMENT WAS NOT JUSTIFIED WITHIN THE MEANING OF PROVISO TO SECTION 147. WE ALLOW THE APPEAL OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 20.8.2010. SD/- SD/- (MAHAVIR SINGH) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD, DATED : 20.8.2010. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD