Niko Resources Ltd., Baroda V. The ACIT., Circle-6, Baroda

ITA 93/AHD/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50962 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-09-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 05-01-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA CITA
• Assessee Lawyers: VISPI T PATEL; RAJESH ATHAVALE ARS
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Period of limitation; Tangible material; Difference of opinion; Accommodation entries; Assessment record; Time period of passing order; Revised return; Reason to believe; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 142(1); 147; 139

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM A. MOHAN ALANKAMONY, A. M. NIKO RESOURCES LTD., 4 TH FLOOR, LAND MARK, RACE COURSE, CIRCLE, BARODA. VS. ASSTT. CIT, CIRCLE- 6, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI VISPI T. PATEL & RAJESH ATHAVALE, ARS RESPONDENT BY:- SHRI S. K. GUPTA, CIT(A), DR & SHRI VINOD TANWANI, SR.DR DATE OF HEARING : 22/9/2011 DATE OF PRONOUNCEMENT : 25-11-2011 O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-VI, BARODA DATED 30.11.2006 RAISING FOLLOWIN G GROUNDS :- (1) THE LD. CIT(A)-VI, BARODA [HEREINAFTER REFERRED TO AS THE CIT(A)] ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN UPHOLDING THE ASSESSMENT ORDER DATED FEBRUA RY, 17, 2006 ISSUED BY THE LD. ASSTT. CIT, CIRCLE-6, BARODA [HEREINAFTER REFERRED TO AS THE AO]. (2) THAT THE LD. CIT(A) HAS ERRED ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, IN CONFIRMING THE ACTION OF TH E AO IN ITA NO.93/AHD/2007 ASST. YEAR :1998-99 ITA NO.93/AHD/2007 ASST. YEAR 1998-99 2 REOPENING OF ASSESSMENT OF THE APPELLANT UNDER SECT ION 147 OF THE ACT. THE LD. CIT(A) HAS ERRED IN OBSERVING THAT THE APPE LLANT HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS IN RELATION TO DEDUCTION CLAIMED U/S 42. THE APPELLANT PRAYS THAT THE RE-ASSESSMENT U/S 147 BE TREATED AS INVALID. (3) THAT THE LD. CIT(A) HAS ERRED ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.1,95,26,259/- CLAIMED UNDER SECTION 42 OF THE INCOME-TAX ACT, 1961 (THE ACT) IN RESPECT OF GSPC NIKO JOINT VENTURE FIELDS AND IN TREATING THE APPELLANT NOT ELIGIBLE T O CLAIM ANY DEDUCTION U/S 42 OF THE ACT, ON THE BASIS THAT THE PRODUCTION SHARING CONTRACTS (PSC) DO NOT PROVIDE FOR THE DEDU CTIBILITY OF SUCH EXPENSES. THE APPELLANT PRAYS THAT IT BE HELD ELIGIBLE TO CLA IM DEDUCTION UNDER SECTION 42 OF THE ACT IN RESPECT OF THE EXPEN DITURE INCURRED BY THE APPELLANT IN CONNECTION WITH THE DR ILLING AND EXPLORATION ACTIVITIES CARRIED ON BY IT IN PURSUANC E OF THE PSCS RELATING TO GSPC-NIKO JOINT VENTURE FIELDS. 2. THE FIRST GROUND IS GENERAL IN NATURE HENCE NO A DJUDICATION IS REQUIRED. 3. THE SECOND GROUND RELATES TO REOPENING OF ASSESS MENT U/S 147 OF THE ACT. THE FACTS OF THE CASE ARE THAT M/S NIKO RE SOURCES LTD., A NON- RESIDENT COMPANY REGISTERED UNDER LAWS OF CANADA, D ERIVES INCOME FROM SALE OF NATURAL GAS AND CRUDE OIL. THE ASSESSEE COM PANY ENTERED INTO AN AGREEMENT ON 23.09.1994 WITH THE GOVERNMENT OF INDI A ON A JOINT VENTURE WITH GUJARAT STATE PETROLEUM CORPORATION LTD. (GSPC L), A COMPANY INCORPORATED UNDER THE LAWS OF INDIA, FOR EXPLORATI ON AND EXTRACTION OF OIL AND NATURAL GAS IN CERTAIN OIL AND GAS FIELDS IN GU JARAT NAMELY CAMBAY, ITA NO.93/AHD/2007 ASST. YEAR 1998-99 3 HAZIRA, BHANDUT, MATAR AND SABARMATI. THE DETAILS O F THESE FIELDS AND SHARE OF ASSESSEE COMPANY ARE TABULATED BELOW :- SL.NO. FIELD JOINT VENTURE PARTICIPATING INTEREST OF NIKO OPERATOR 1 HAZIRA GSPC-NIKO 33.33% NIKO 2 BHANDUT GSPC-NIKO 40.00% NIKO 3 CAMBAY GSPC-NIKO 33.33% NIKO 4 SABARMATI GSPC-NIKO 40.00% NIKO 5 MATAR GSPC-NIKO 40.00% NIKO THE ASSESSEES OVER-ALL SHARE IN THE OIL AND GAS FI ELD COMES TO 37.33%. THE REMAINING SHARE IS HELD BY GSPCL. THE ASSESSEE IS THE OPERATOR OF THESE FIELDS. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE-COMPA NY ALSO PARTICIPATED IN AN UNINCORPORATED JOINT VENTURE UNDER A PRODUCTI ON SHARING CONTRACT FOR BLOCK KG-OS-09/1. THE PARTICIPATING INTEREST OF THE JOINT VENTURE PARTNERS WAS AS FOLLOWS :- PARTIES SHARE NIKO RESOURCES LTD. 25% HINDUSTAN OIL EXPLORATION CO. LTD. (HOEC) 25% NAGARJUNA FERTILIZERS AND CHEMICALS LTD. 20% HARDY EXPLORATION AND PRODUCTION LTD. 30% FOR KG BLOCK, THE OPERATOR WAS HARDY EXPLORATION AN D PRODUCTION LTD. THE PROPORTIONATE COST OF KG BLOCK OF RS.6,41,89,72 4/- IS RELATED TO NIKO AND ASSESSEE HAS CLAIMED IT AS DEDUCTION U/S 42 OF THE ACT ON ACCOUNT OF INFRUCTUOUS & ABORTIVE EXPLORATION EXPENSES. THE WE LL IN QUESTION WAS PLUGGED AND ABANDONED AS IT WAS NOT SUCCESSFUL AND THE CONTRACT WAS CANCELLED BY GOVERNMENT OF INDIA ON 19.2.1998. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 4 THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.11.19 98 DECLARING A TOTAL LOSS OF RS.10,92,27,877/-. THIS RETURN WAS PROCESSE D U/S 143(1) ON 15.3.2000. SUBSEQUENTLY THE ASSESSEE SUBMITTED A RE VISED RETURN ON 16.3.2000 DECLARING A LOSS OF RS.4,09,24,063/-. THI S CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUE D ON 27.9.1999 WHICH WAS SERVED ON ASSESSEE ON 4.10.1999. THE ASSESSMENT U/S 143(3) OF THE ACT WAS FINALIZED ON 29.3.2001 WITH ASSESSED LOSS O F RS.4,08,35,802/-. THEREAFTER, THE CASE WAS REOPENED U/S 147 BY ISSUIN G NOTICE U.S 148 OF THE INCOME-TAX ACT, 1961 ON 24.3.2005 WHICH WAS SERVED TO THE ASSESSEE ON 28.3.2005. ASSESSMENT U/S 143(3) R.W.S. 147 WAS COM PLETED ON 17.2.2006 DETERMINING THE TOTAL REVISED LOSS AT (-) RS.2,27,9 6,315. 4. THE NOTICE WAS ISSUED AFTER OBTAINING NECESSARY SACTION FROM THE CIT-IV, BARODA. THE ASSESSEE WAS ALSO PROVIDED THE REASONS FOR REOPENING THE CASE. THE REASONS FOR REOPENING WERE AS UNDER:- IN THIS CASE, THE ASSESSMENT WAS MADE U/S 143(3) O F THE IT ACT ON 29.3.2001 DETERMINING TOTAL LOSS OF RS.4,08,35,802/ -. IN THE REVISED RETURN FILED BY THE ASSESSEE ON 16/3/2000, IT HAS CLAIMED DEDUCTION U/S 42 OF THE IT ACT OF RS.8,37,15,984/-. THE DEDUCTION CLAIMED U /S 42 INCLUDED CLAIM OF DEDUCTION IN RESPECT OF EXPENDITURE OF RS.1,95,2 6,260/- IN RESPECT OF BHANDUT, HAZIRA, CAMBAY AND BARODA AND SURAT. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT ASSESSMENT YEARS IT IS HELD THAT THE ASSESSEE IS NO T ENTITLED TO DEDUCTION U/S 42(1) OF THE IT ACT, AS IT WAS NOT SPECIFIED IN THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE CENTRAL GOVERNMENT. I N VIEW OF THE PROVISIONS OF SECTION 42(1) OF THE IT ACT, THE EXPE NDITURE INCURRED BY THE ASSESSEE IN RESPECT OF DRILLING AND EXPLORATION ACT IVITIES OR FOR SERVICES OR IN RESPECT OF PHYSICAL ASSET USED IN THAT CONNECTIO N IS ALLOWABLE ONLY IF SUCH ALLOWANCE IS SPECIFIED IN THE AGREEMENT ENTERE D INTO BY THE ASSESSEE WITH THE CENTRAL GOVERNMENT. THE ASSESSEE HAS NOT S UBMITTED COPY OF THE AGREEMENT WITH THE CENTRAL GOVERNMENT EITHER IN THE RETURN OF INCOME FILED OR DURING THE COURSE OF ASSESSMENT PROCEEDING S. THIS MAKES IT CLEAR THAT THE ASSESSEE HAS SOUGHT TO AVAIL OF THE DEDUCT ION WRONGFULLY BY NOT DISCLOSING FULL FACTS NECESSARY FOR THE ENTITLEMENT FOR THE DEDUCTION. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 5 THOUGH THE ASSESSEE HAS MADE PASSING REFERENCE OF T HE AGREEMENT IN THE NOTE ATTACHED TO THE FINANCIAL STATEMENT ALONG WITH RETURN WHAT WAS SPECIFIED IN THE AGREEMENT IS NOT MENTIONED. THE AS SESSEE HAS CLAIMED DEDUCTION U/S 42 WITHOUT DISCLOSING SOME OF THE EXP ENDITURE SPECIFIED IN THE AGREEMENT. THE INCOME HAS THEREFORE ESCAPED ASS ESSMENT FOR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ITS ASSESSMENT. 3. FROM THE PLAIN READING OF SECTION 42, IT CAN BE SEEN THAT THERE ARE TWO BASIC CONDITIONS WHICH SHOULD BE FULFILLED, FIR STLY THERE SHOULD BE AN AGREEMENT OF THE ASSESSEE WITH THE CENTRAL GOVERNME NT. THE SECOND CONDITION IS THAT ONLY THOSE ALLOWANCES ARE ALLOWAB LE WHICH ARE SPECIFIED IN THE AGREEMENT AND THESE ALLOWANCES SHOULD BE IN RELATION TO VARIOUS SPECIFIC NATURE AS MENTIONED IN SUB-CLAUSE (A), (B) & (C) OF SECTION 42(1). OUT OF THESE ALLOWANCES, ALLOWANCES WHICH ARE SPECI FIED IN THE AGREEMENT ONLY THOSE ALLOWANCES ARE TO BE ALLOWED UNDER SUB-C LAUSE (B) WHICH ARE IN RESPECT OF DRILLING OR EXPLORATION ACTIVITIES OR SERVICES. 4. AS NO SUCH ALLOWANCE HAS BEEN SPECIFIED IN THE A GREEMENT AND IN ABSENCE OF ANY ALLOWANCE BEING SPECIFIED IN THE AGR EEMENT, NO ADDITIONAL ALLOWANCE CAN BE ALLOWED TO BE DEDUCTED BY VIRTUE O F SECTION 42 OVER AND ABOVE THE NORMAL ALLOWANCE ALLOWABLE UNDER THE OTHE R SECTION OF THE ACT. THIS POINT FURTHER GETS FORTIFIED FROM THE FACT THA T NOT ONLY THESE ALLOWANCES SHOULD BE SPECIFIED IN THE AGREEMENT BUT EVEN THE COMPUTATION OF SUCH ALLOWANCE HAS TO BE MADE IN THE MANNER SPECIFIED IN THE AGREEMENT. IT IS UNDISPUTED FACT THAT NOWHERE I N THE AGREEMENT, COMPUTATION OF SUCH ALLOWANCE HAS BEEN SPECIFIED, N O SUCH ALLOWANCE U/S 42 CAN BE COMPUTED IN ABSENCE OF MANNER OF COMPUTAT ION BEING SPECIFIED IN THE AGREEMENT. 5. THEREFORE, THE ASSESSEES CLAIM FOR DEDUCTION U/ S 42 OF THE IT ACT IN RESPECT OF EXPENDITURE INCURRED AT BHANDUT, HAZIRA, CAMBAY, BARODA AND SURAT OF RS.1,95,26,260/- IS NOT ALLOWABLE. AS THE DEDUCTION U/S 42 OF THE IT ACT CLAIMED BY THE ASSESSEE AMOUNTING TO RS.1,95 ,26,260/- IS NOT ALLOWABLE IN VIEW OF THE REASON THAT THE SAME IS NO T SPECIFIED IN THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE GOV ERNMENT OF INDIA, THE DEDUCTION U/S 42 OF THE IT ACT HAS BEEN WRONGLY ALL OWED WHICH HAS RESULTED IN THE UNDER ASSESSMENT OF INCOME WITHIN T HE MEANING OF SECTION 147 OF THE IT ACT. THE ASSESSEE HAS NOT PRODUCED TH E COPY OF THE AGREEMENT WITH THE GOVERNMENT OF INDIA FOR THE EXPL ORATION OF OIL AT CAMBAY, BHANDUT AND HAZIRA FIELD. THOUGH, THE ASSES SEE HAS MENTIONED IN THE NOTE APPENDED WITH THE FINANCIAL STATEMENT A BOUT THE AGREEMENT, NO COPY OF THE SAME WAS FURNISHED ALONG WITH THE RETUR N OF INCOME. FURTHER ITA NO.93/AHD/2007 ASST. YEAR 1998-99 6 AS MENTIONED ABOVE, DEDUCTION UNDER SECTION 42(1) C AN BE ALLOWED ONLY IF THE SAME IS MENTIONED IN THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE CENTRAL GOVERNMENT. THE ASSESSEE HAS NOT DISCLO SED WHETHER SUCH ALLOWANCE UNDER SECTION 42(1) WAS MENTIONED IN THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE CENTRAL GOVERNMENT. T HE INCOME HAS ESCAPED ASSESSMENT FOR FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE PURP OSE OF ITS ASSESSMENT. 6. I HAVE THEREFORE REASON TO BELIEVE THAT THE DEDU CTION CLAIMED U/S 42(1) OF THE IT ACT IN RESPECT OF EXPENSES FOR VARI OUS GAS FIELD LIKE BHANDUT, HAZIRA, CAMBAY AND FOR BARODA AND SURAT HA S BEEN WRONGLY CLAIMED U/S 42(1) OF THE IT ACT WHICH HAS RESULTED IN THE UNDER ASSESSMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE IT ACT. THE DEDUCTION CLAIMED AND ALLOWED U/S 42 OF THE IT ACT OF RS.1,95,26,260/- REQUIRES TO BE WITHDRAWN. 5. THE ASSESSEE VIDE ITS LETTER DATED 7.6.2005 RAIS ED PRELIMINARY OBJECTIONS AGAINST THE REOPENING OF THE CASE. (A) THE COMPANY RECEIVED THE NOTICE DATED 24 MA RCH 2005 ISSUED UNDER SECTION 148 OF THE ACT THE SAID N OTICE PROPOSING TO INITIATE THE . RE-ASSESSMENT PROCEEDINGS WAS ISSU ED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. FOR ASSESSMENT YEAR 1998-99, THE COMPANY HAD FILED RETURN OF INCOM E WITHIN THE STIPULATED TIME AND DISCLOSED FULLY AND TRULY AIL M ATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. (B) FURTHER IT SUBMITTED THAT THE REASONS RECOR DED FOR REOPENING THE ASSESSMENT THAT THE COMPANY HAD WRONGLY CLAIMED THE DEDUCTION UNDER SECTION 42 OF THE ACT, ARE NOT CORRECT. THE ASSESSE E SUBMITS THAT AT THE TIME OF THE ASSESSMENT PROCEEDINGS THE COMPANY HAD PROVIDED TO THE THEN AO, ALL THE INFORMATION THAT WAS REQUESTED FOR IN CONNECTION WITH THE ALLOWABILITY OF DEDUCTION CLAIMED BY IT UNDER SECTI ON 42 OF THE ACT. (C) THE ASSESSEE FURTHER SUBMITTED THAT THE ERSTWHI LE AO HAD ASSESSED THE INCOME UNDER SECTION 143(3) OF THE ACT ONLY AFTER C OMPLETE APPLICATION OF MIND BY TAKING INTO ACCOUNT ALL REQUISITE INFORMATI ON. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 7 (D) FURTHER IT SUBMITTED THAT REASSESSMENT PROCEEDI NGS WERE PROPOSED TO BE INITIATED MERELY BECAUSE IN THE YEARS SUBSEQUENT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE DEDUCTION UNDER SECTION 42 OF THE ACT WAS DISALLOWED. IN THIS RESPECT, THE ASSESSEE STATED TH AT IT WAS A WELL SETTLED LAW THAT MERE FRESH APPLICATION OF MIND TO THE SAME SET OF FACTS OR MERE CHANGE IN OPINION DOES NOT CONFER JURISDICTION ON A N ASSESSING OFFICER TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT:. (E} WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTE D THAT THE COMPANY WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 42 OF THE ACT. THE COMPANY WAS ENGAGED IN THE BUSINESS OF EXPLORATION AND DEVELOPM ENT OF OIL AND GAS FIELDS. THE COMPANY HAD ENTERED INTO A PRODUCTION S HARING CONTRACT FOR 25 YEARS WITH THE GOVERNMENT OF INDIA FOR EXPLORATI ON AND DEVELOPMENT OF MINERAL OIL AT DESIGNATED FIELDS. DURING THE CUR RENT YEAR, THE COMPANY HAS CLAIMED A DEDUCTION OF RS. 1,95,26,260/- UNDER SECTION 42 OF THE ACT TOWARDS THE SAID EXPENDITURE. THE PRODUCTION SHARIN G CONTRACT BETWEEN THE COMPANY AND THE GOVERNMENT OF INDIA CLEARLY PRO VIDED FOR THE DEDUCIBILITY OF EXPENSES INCURRED FOR EXTRACTION AN D PRODUCTION OF MINERAL OIL. (F) IT IS THUS, SUBMITTED THAT THERE WAS NO INF IRMITY IN THE CLAIM OF THE COMPANY AND THE SAME WAS RIGHTLY ALLOWED BY THE THE N AO ALTER DUE VERIFICATION OF THE SUBMISSIONS MADE BY THE ASSESSE E. 6. THE CONTENTIONS OF THE ASSESSES, OBJECTING TO PROCEEDINGS, WERE EXAMINED AND IT WAS RECORDED BY THE ASSESSING OFFIC ER THAT ; (A) THE NOTICE IS ISSUED WITH IN TIME LIMIT AS PER SECTION I49(L)(B) AND SANCTION WAS OBTAINED AS PER SECTION 151(1) OF INCO ME TAX ACT, (B) IN THE INSTANT CASE, THE EARLIER ASSESSMENT WAS COMPLETED UNDER SECTION 143(3), NO DOUBT, THE PROVISO TO SECTION 147 IS ATT RACTED. HOWEVER, SUCH A CASE CAN BE RE-OPENED EVEN BEYOND FOUR YEARS PROVID ED ANY OF THE TWO CONDITIONS MENTIONED THERE IN ARE SATISFIED. THE PR ESENT CASE IS REOPENED AS THE ASSESSEE FAILED TO FULLY AND TRULY DISCLOSE AIL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. EXPLANATION 1 BELOW THE PROVISO TO SECTION 147 EXPL ICITLY STATES THAT PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILT NOT N ECESSARILY AMOUNT TO DISCLOSURE WITH IN THE MEANING OF PROVISO. IN THIS PARTICULAR CASE ALSO, ITA NO.93/AHD/2007 ASST. YEAR 1998-99 8 SAME EXPLANATION APPLIES. THE ASSESSEE DID NOT FURN ISH THE COPY OF AGREEMENT. ONLY ROUTINE DETAILS WERE FILED. THE MAI N CONDITION THAT THE DISCLOSURE SHOULD BE SELF-CLARIFICATORY AND THE ASS ESSING OFFICER SHOULD NOT PUT IN EXTRA EFFORTS TO DIG OUT THE CLINCHING MATER IAL HAS NOT BEEN FULFILLED BY THE ASSESSEE. IN FACT WHILE RECORDING REASONS FOR REOPENING THE A SSESSMENT THE ASSESSING OFFICER HAD RECORDED THAT HE HAD REASON TO BELIEVE THAT THE INCOME HAS ESCAPED WITHIN THE MEANING OF SECTION 147 OF THE IN COME TAX ACT ON GROUNDS MENTIONED SUPRA. THE STAND OF THE ASSESSING OFFICER IS VINDICATED BY DECISION IN THE CASE OF BAWA ABHAISTNGH 168 CTR 521. IN THE CASE OF PRAFUL CHUNILAL PATEL VS. M.J.MAKWANA, ASSISTANT COMMISSIONER OF INCOME TAX (1999) 236 ITR 832 (GUJ) , HON'BLE GUJAIAT HIGH COURT HAS HELD AS UNDER: - REASSESSRNENT - REASON TO BELIEVE - NON CONSIDERATI ON OF FACTS -IN CASES WHERE THE AO HAS NOT MADE ASSESSMENT OF AN ITEM OF INCOME WHILE PASSING THE ASSESSMENT ORDER IT CANNOT BE SAID THAT SUCH INCOME WAS SUBJECTED TO ASSESSMENT - MERELY BECAUSE DURING THE ASSESSMENT PROCEEDINGS THE RELEVANT MATERIAL WAS ON RECORD OR COULD HAVE BEEN DISCERNED BY AO FOR ASSESSING A PARTICULAR ITEM OF INCOME IT CANNOT BE INFERRED THAT AO MUST NECESSARILY HAVE DELIBERATED OVER IT OR FORMED ANY OPINION IN THEREOF - THUS, IF A PARTICULAR ITEM THO UGH REFLECTED ON RECORD WAS NOT SUBJECTED TO ASSESSMENT AO CAN IN ITIATE PROCEEDINGS - CASES OF NON-ASSESSMENT OF ART WARRANT FORMATION OF REQUISITE BELIEF - WORDS . ESCAPED ASSESSMENT ARE APT TO COVER THE CASE OF DISCOVERY OF A IN ASSESSMENT CAUSED BY EITHER AN E RRONEOUS OF TRANSACT/ON OR DUE TO ITS NON-CONSIDERATION -WORDS 'REASON TO BEL IEVE' CANNOT MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. (C) FOR A CLAIM UNDER SECTION 42, TWO BASIC CONDITI ONS NEED TO BE FULFILLED- FIRSTLY, THERE SHOULD HE AN AGREEMENT OF THE ASSESSEE WITH THE CENTRAL GOVERNMENT. SECONDLY, ONLY THOSE ALLOWANCES ARE ALLOWABLE WHICH ARE SPECIFIED IN THE AGREEMENT AND THESE ALLO WANCES SHOULD BE IN RELATION TO VARIOUS SPECIFIC NATURE AS MENTIONED IN SUB CLAUSE (A), (B) AND (C.) OF SECTION 42(1). OUT OF THESE ALLOWANCES, ALL OWANCES WHICH ARE SPECIFIED IN THE AGREEMENT ONLY ARE TO BE ALLOWED U NDER SUB CLAUSE (B) WHICH ARE IN RESPECT OF DRILLING OR EXPLORATION AC TIVITIES OR SERVICES. IT IS ALREADY STATED IN REASONS THAT ASSESSEE DID NOT SUBMIT THE COPY OF AGREEMENT WITH THE GOVT. OF INDIA DURING FILING OF RETURN OR DURING ASSESSMENT PROCEEDINGS. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 9 (D) THE ORDER U/S 143(3) DOES NOT DEBAR TH E DEPARTMENT TO TAKE ACTION UNDER SECTION 147 OF THE ACT. THE SECTION ST IPULATES THAT IF AO HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THIS CASE ALL THE PRECONDITIONS AS L AID DOWN IN INCOME-TAX ACT HAVE BEEN DULY FOLLOWED. (E) THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THE RELEVANT ASSESSMEN T YEAR. THIS IS NOT A CASE OF THE MERE FRESH APPLICATION OF MIND TO THE S AME SET OF FACTS OR MERE CHANGE OF OPINION WHICH IS ARGUED BY ASSESSEE IN LI GHT OF SUPREME COURT DECISIONS, BUT AS ALREADY STATED IN REASONS IN THIS CASE, ASSESSEE FAILED TO SUBMIT ALL MATERIAL FACT NECESSARY FOR ASSESSMENT. (F) IT IS SUBMITTED BY THE ASSESSEE THAT COMPANY IS ELIGIBLE FOR DEDUCTION U/S 42 OF THE INCOME-TAX ACT. AS DISCUSSE D IN FOLLOWING PARAS CLAIM WAS WRONGLY MADE ON THE PRODUCTION SHARING CO NTRACTS WITH GOVT. OF INDIA DID NOT PROVIDE FOR ANY CLAIM U/S 42. THE FACT THAT THE CONTRACTS DID NOT CONTAIN SUCH CLAUSE, WAS NOT DISCLOSES BY A SSESSEE IN ASSESSMENT. IT WAS DISCOVERED POST ASSESSMENT. (2.4) IN VIEW OF THE FACTS MENTIONED AND DISCUSSED ABOVE, IT IS ABUNDANTLY CLEAR THAT NOTICE U/S 148 OF THE ACT ISSUED BY THIS OFFICE ON 24.3.2005 IS VALIDLY ISSUED AND OBJECTIONS OF THE ASSESSEE ARE M ISPLACED. 7. IN APPEAL IT WAS SUBMITTED BY THE ASSESSEE THAT ACCORDING TO THE PROVISO TO SECTION 147, IF AN ASSESSMENT UNDER SECT ION 143(3) OF THE ACT HAD ALREADY BEEN MADE FOR ANY ASSESSMENT YEAR, THE REASSESSMENT PROCEEDINGS COULD NOT BE INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THAT ASSESSMENT YEAR UNLESS THE FOLLOWING CONDITIONS ARE MET: THERE IS A FAILURE ON PART OF ASSESSEE TO FILE A RETURN OF INCOME UNDER SECTION 139; OR THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 10 FOR ASSESSMENT YEAR 1998-99, IT WAS SUBMITTED THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME WITHIN THE STIPULATED TI ME (THE ORIGINAL RETURN SUBMITTED ON 30 NOVEMBER 1998 AND THE REVISED RETUR N WAS FILED ON 16 MARCH 2000) AND HAD DISCLOSED FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. IT WAS SUBMITTED THAT THE ASSESSEE HAD PROVIDED ALL THE DETAILS WHICH WERE REQUIRED TO BE PROVIDED UNDER THE PROVISIONS OF THE ACT AND UNDER THE VARIOUS REQUIREMENTS IN THE RETURN FORM. RELIANCE IN THIS REGARD WAS PLACED ON THE RULING OF THE HON'BLE SUPREME COURT I N THE CASE OF V.D.M. RM. M.RM. MUTHIAH CHETTIAR VS COMMISSIONER OF INCOM E TAX, MADRAS - 74 ITR 183 (SC) WHEREIN IT HAS BEEN HELD THAT IN THE FORM OF RETURN PRESCRIBED UNDER RULE 19 OF THE INDIAN INCOME TAX R ULES, FRAMED UNDER SECTION 59 OF THE INDIAN INCOME TAX ACT 1922, THERE WAS NO CLAUSE WHICH REQUIRED DISCLOSURE OF THE INCOME OF ANY PERSON OTH ER THAN THE INCOME OF THE ASSESSES, WHICH WAS LIABLE TO BE INCLUDED IN HI S TOTAL INCOME. NOR WAS THE ASSESSEE REQUIRED, UNDER SECTION 22(5) OF T HE ACT, IN MAKING A RETURN, TO DISCLOSE THAT ANY INCOME WAS RECEIVED BY HIS WIFE OR MINOR CHILD ADMITTED TO THE BENEFITS OF THE PARTNERSHIP I N A FIRM OF WHICH HE WAS A PARTNER ITA NO.93/AHD/2007 ASST. YEAR 1998-99 11 FURTHER ASSESSEE SUBMITTED THAT NEITHER THE RETURN FORM NOR THE PROVISIONS OF THE ACT REQUIRED DISCLOSURE ABOUT THE AGREEMENTS ENTERED INTO BY THE ASSESSEE. THEREFORE, IF THERE WAS NO REQUIREMENT TO FURNISH THE DETAILS OF THE AGREEMENT, THERE COULD NOT BE QUESTION OF FAILU RE OR OMISSION ON THE PART OF THE ASSESSEE. IN ANY CASE, THE MANNER IN WH ICH THE ASSESSEE HAD COMPUTED ITS INCOME IN THE YEAR IN QUESTION WAS CLE ARLY STATED IN THE STATEMENT OF COMPUTATION OF INCOME ENCLOSED WITH TH E RETURN OF INCOME. FURTHER, ALONG WITH THE STATEMENT OF COMPUTATION OF INCOME, THE ASSESSEE HAD ALSO ENCLOSED A STATEMENT OF COMPUTATION OF THE CLAIM UNDER SECTION 42 OF THE ACT ACCORDINGLY, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS. IT WAS INDICATED BY ASSESSEE THAT THE AO ISSUED THE FOLLOWING LETTERS REQUESTING THE APPELLANT TO PROVIDE VARIOUS DETAILS , IN THE COURSE OF ASSESSMENT PROCEEDINGS: * REFERENCE NO: BRD/SCR/NIKO/00-01 DATED 2 MARCH 2001 * REFERENCE NO: BRD/SCR/NIKO/00-0L DATED 23 FEBRUARY 2001 PARTICULARLY, FOLLOWING DETAILS WERE CALLED FOR: * DETAILS OF EXPENSES ON BHANDUT WELL WITH BRIEF NO TE ON EXPENSES (POINT NO.5 OF THE LETTER DATED 2 MARCH 2001); * DETAILS OF EXPENSES ON HAZIRA GAS WELL WITH BRIEF NOTE ON EXPENSES AND OF GENERAL AND ADMINISTRATIVE COST (PO INT NO. 6 OF THE LETTER DATED 2 MARCH 2001); * DETAILED WORKING OF CLAIM FOR DEDUCTION OF DEPLET ION OF MINERAL OIL IN THE MINING ARE IN ACCORDANCE WITH SECTION 42(1)( C) OF THE ACT AS ITA NO.93/AHD/2007 ASST. YEAR 1998-99 12 MENTIONED IN THE NOTES FORMING PART OF THE REVISED RETURN (POINT NO.10(C) OF THE LETTER DATED 2 MARCH 2001); * DETAILS OF RS.8,37,15,984 CLAIMED AS EXPENSES ALL OWABLE UNDER SECTION 42 OF THE ACT WITH REASONS AS TO HOW THE SA ME ARE ELIGIBLE. FIXED ASSETS REGISTER SITE WISE AND MANAGEMENT REPO RT ON THIS VERIFICATION AS PER AUDIT REPORT (POINT NO. 10(D) O F THE LETTER DATED 2 MARCH 2001); * BRIEF NOTE ON PRODUCTION FACILITIES IN PROGRESS A ND DETAILS OF SUCH ADDITION DURING THE YEAR UNDER CONSIDERATION (POINT NO. 11 OF THE LETTER DATED 7 MARCH 2001) THE ASSESSEE ADDED THAT DETAILED REPLIES TO THE AFO RESAID QUERIES WERE PROVIDED FOR IN THE REGULAR ASSESSMENT PROCEEDINGS VIDE THE ASSESSEE'S WRITTEN SUBMISSIONS DATED 16, 26 AND 28 MARCH 2001 ALONG WITH RELEVANT SUPPORTING SCHEDULES. IT WAS ALSO EMPHASIZED THAT THE AO HAD SPECIFICALLY ASKED FOR THE DETAILS OF EXPENSES CLAIMED UNDER SECTION 42 OF THE ACT AND HAS ALSO REFERRED TO THE ELIGIBILITY OF SUCH EXPENSES FOR DEDUCTION UNDE R SECTION 42 OF THE ACT. THIS MAKES IT ABUNDANTLY CLEAR THAT THE AO HAD SOUG HT TO EXAMINE THE NATURE OF EXPENSES ELIGIBLE FOR DEDUCTION UNDER SEC TION 42 OF THE ART AND ALSO THE ELIGIBILITY OF SUCH EXPENSES. THAT BEING SO IT COULD NOT BE SAID THAT THE ASSESSEE HAD NOT APPLIED HIS MIND TO THE F ACTS OF THE CASE. IT WAS CONTENDED THAT THE AO HAD IN FACT, SPECIFICA LLY MENTIONED IN HIS ASSESSMENT ORDER THAT THE ASSESSEE HAD ENTERED INTO A PRODUCTION SHARING ITA NO.93/AHD/2007 ASST. YEAR 1998-99 13 CONTRACT FOR 25 YEARS WITH THE GOVERNME NT OF INDIA ON MAINTENANCE OF THE OIL AND GAS FIELDS AT GUJARAT ATTENTION WAS ALSO INVITED TO DECISION OF FULL BENC H OF THE DELHI HIGH HELD IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD (DELHI)[FB] 256 ITR 1 (DEL) WHEREIN IT IS HELD THAT WHEN A REGULAR ORDER OF ASSESSMENT IN TERMS OF SUB-SECTION (3) OF SECTION 143 OF THE ACT A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APP LICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EV IDENCE ACT, 1872, JUDICIAL AND OFFICIAL ACTS HAVE BEEN RE GULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDL Y WITHOUT APPLICATION OF THE MIND WOULD ITSELF CONFER JURISDICTION ON THE AO TO REOPEN PROCEEDINGS WITHOUT ANY THING FURTHER, THE SAME WOU LD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI JUDICIAL F UNCTION TO TAKE BENEFIT OF ITS OWN WRONG. HENCE IT IS CLEAR THAT SECTION 14 7 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE AO TO INITIA TE REASSESSMENT PROCEEDINGS UPON A MERE CHANGE OF OPINION. FURTHER THE ASSESSEE RELIED ON FOLLOWING DECISIONS TO SUPPORT ITS CONTENTIONS:- CIT VS. FORAMER FRANCE 264 ITR 566 (SC) A.V. THOMAS EXPORTS LTD. VS. DY. CIT, CO.CIRCLE IV (1) (TRIB)CHENNAI) ITA NO.93/AHD/2007 ASST. YEAR 1998-99 14 VARE;O WEAVES (P) LTD. 240 ITR 77 (GUJ) CALCUTTA DISCOUNT CO. LTD. VS. ITO 41 ITR 191 (SC) CIT VS. BURLOP DEALERS LTD. 79 ITR 609 (SC) THE LD. CIT(A) AFTER TAKING INTO CONSIDERATION ALL THE CONTENTIONS OF ASSESSEE AND THE DECISIONS RELIED ON BY THE ASSESSE E DISMISSED THIS GROUND BY OBSERVING AS UNDER:- 4.3 I HAVE GONE THROUGH THE CONTENTIONS OF THE APP ELLANT AS WELL AS THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REASS ESSMENT AND ALSO THE ASSESSMENT RECORDS. IN THE RETURN OF INCOME FOR ASS T. YEAR 1998-99 FILED ON 30.11.1998 THE FOLLOWING COMPUTATION OF TOTAL IN COME WAS FILED :- 1.INCOME FROM BUSINESS LOSS AS PER PROFIT & LOSS A/C (REVISED) (6,51,188) ADD: SHARE OF PROFIT AS PER JOINT VENTURE A/C INCLUDED IN PROFIT & LOSS A/C OF THE COMPANY 52,852,839 TOTAL RS. 53,504,027 ADD: CLAIM AS PER ATTACHED STATEMENT U/S 42 BEING SHARE IN RATIO OF PARTICIPATION SHARE AS PER JOINT OPERATING AGREEMENTS 23,643,226 ADD: CLAIM AS PER ATTACHED STATEMENT U/S 42 BEING AMOUNT OF KRISHNA GODAWARI BLOCK AS UNDER K.G. BLOCK OFF SHORE WELL CAPITAL COST AS PER STATEMENT OF DEP. 54,161,249 LESS: DEPRECIATION ON KG BLOCK DEBITED TO PROFIT & LOSS A/C OF NIKO RESOURCES LTD. UNDER SECTION E OF INDIRECT COST 32,080,625 32,080,624 TOTAL LOSS RS. 1,09,227,877 SCHEDULE-D OF SCHEDULE TO RETURN FORMING PART OF TH E PROFIT AND LOSS ACCOUNT GIVES THE FOLLOWING DETAILS : ITA NO.93/AHD/2007 ASST. YEAR 1998-99 15 BHANDUT PRODUCTION COST EXP. AT BHANDUT OIL WELL 3566201 PROCESSING & LAB CHARGES 210645 SHARE OF GEN & ADMN COST 132553 GENERAL DEPRECIATION OF OFFICE 3859 DEPRECIATION BHANDUT 4938274 8851432 HAZIRA PRODUCTION COST EXP. AT HAZIRA GAS WELL 3110772 SHARE OF GEN & ADMN COST 6287621 PRIOR PERIOD ITEM 38105 DEPRECIATION SURAT 38432 DEPRECIATION HAZIRA 6011843 GENERAL DEPRECIATION OF OFFICE 183069 CAMBAY PRODUCTION COST EXP. AT CAMBAY OIL WELL 971909 SHARE OF GEN & ADMN COST 6058 GENERAL DEPRECIATION OF OFFICE 176 PRIOR PERIOD ITEM 15156 DEPRECIATION CAMBAY 132350 1125649 TOTAL 25646923 4.3.2 FURTHER THE NOTES FORMING PART OF ACCOUNT PA RA H MENTIONS THAT - AS EXPLAINED TO US, COMPANY IS COVERED U/S 42 & 29 3A OF THE INDIAN INCOME-TAX ACT UNDER WHICH THERE IS NO LIABILITY AR ISING FOR THE INCOME- TAX ON THE INCOME OF THE CURRENT YEAR. 4.3.3 THE THEN AO DURING THE COURSE OF SCRUTINY ASS ESSMENT VIDE LETTER DATED 2.3.2001 HAS ASKED FOR DETAILS OF EXPENSES ON BHANDUT OIL WELL AND HAZIRA GAS WELL. THIS IS THE PART OF THE QUESTIONNA IRE. 4.3.4 IN THE ASSESSMENT ORDER FOR ASST. YEAR 1998-9 9 PASSED ON 29.3.2001 IN REGARD TO DEDUCTION U/S 42 FINDS MENTI ON AT PARA 6. 6. IN THE YEAR 1994-95 RELEVANT TO ASST. YEAR 1995 -96, THE COMPANY IN JOINT VENTURE WITH GSPCL HAS TAKEN PHYSICAL POSSESS ION OF FOUR OF THE FIVE FIELDS AWARDED ON 23.9.1994. OUT OF WHICH BHAN DUT FIELD HAS COMMENCED COMMERCIAL PRODUCTION FROM 16.11.1994, HA ZIRA FIELD FROM ITA NO.93/AHD/2007 ASST. YEAR 1998-99 16 6.7.1995 AND CAMBAY FIELD FROM 13.3.1997. DURING TH E YEAR UNDER CONSIDERATION, THE COMPANY NIKO RESOURCES LTD. HAD PARTICIPATED IN THE UNINCORPORATED JOINT VENTURE WITH HOEC, NAGARAJUNA FERTILIZERS AND CHEMICALS LTD. AND HARDY EXPLORATION AND PRODUCTION LTD. FOR EXPLORING K.G. BLOCK-OS-90/1. THE ENTIRE COST OF K.G. BLOCK O F RS.6,41,61,249/- WAS WRITTEN OFF DUE TO THE EXPENDITURE BEING INFRUCTUOU S NATURE. THE BLOCK WAS ALSO SURRENDERED TO GOVERNMENT. THE WELL WAS NOT SU CCESSFUL AND WAS PLUGGED AND ABANDONED BY THE OPERATOR AND CONTRACT WAS CANCELLED BY THE GOVERNMENT OF INDIA ON 19.2.1998. THE ASSESSEE COMPANY HAS FILED THE DETAILS AND CORRESPONDENCE WITH AUTHORITIES. AC CORDINGLY, THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S 42 OF TH E IT ACT AS INFRUCTUOUS OR ABORTIVE EXPLORATION EXPENSES. 4.3.5 THE ORIGINAL RETURN WAS REVISED ON 16.3.2000 WHEREIN CLAIM OF DEDUCTION U/S 42 OF RS.83,715,984/- WAS MADE OF EXP ENDITURE FOR BHANDUT, HAZIRA, CAMBAY, BARODA AND SURAT. THE ASSE SSMENT WAS COMPLETED ON 29.3.2001 MAKING DISALLOWANCE IN RESPE CT OF PRIOR PERIOD EXPENSES AND GUEST HOUSE EXPENSES. 4.3.6 IT IS ALSO SEEN FROM ORIGINAL AND REVISED RET URN THAT IN RESPECT OF CLAIM U/S 42 NO DETAILS WERE SUBMITTED AS TO HOW TH E FIGURE OF EXPENDITURE U/S 42 OF RS.83,715,984/- WAS ARRIVED AT. THE COMPU TATION IN THE REVISED RETURN. AMOUNT (RS.) AMOUNT (RS.) A) INCOME/LOSS PROFIT PROFITS AND GAINS OF BUSINESS OR PROFESSION PROFIT AFTER TAX FOR THE YEAR AS PER THE P & L ACCOUNT (651188) ADD: DISALLOWANCES AND ITEMS CONSIDERED SEPARATELY PROVISION FOR TAXATION DEPRECIATION FOR THE YEAR AS PER BOOKS 43389848 PROVISION FOR GRATUITY PRIOR PERIOD EXPENDITURE 53261 LOSS ON SALE OF ASSET 43443109 TOTAL 42791921 LESS:ALLOWANCES AND ITEMS CONSIDERED SEPARATELY ITA NO.93/AHD/2007 ASST. YEAR 1998-99 17 EXPENDITURE DEDUCTIBLE U/S 42 OF THE INCOME-TAX ACT, 1961 (REFER ANNEXURE) 83715984 TOTAL LESS (REVISED) (40924063) 4.37 IT IS SEEN THAT THE AUDITOR M/S A.C. SHAH & CO ., CA VIDE LETTER DATED 27.11.1998 HAS INDICATED : II) AS PER THE OPINION OF THE INSTITUTE OF CHARTER ED ACCOUNTANTS OF INDIA AND THAT OF THE COMPANY LAW BOARD, A COMPANY CANNOT REOPEN AND REVISED THE ACCOUNTS, ONCE ADOPTED BY THE SHAREHOLD ERS AT THE ANNUAL GENERAL MEETING. CONTRARY TO THESE OPINIONS, THE BO ARD OF THE DIRECTORS OF THE COMPANY HAS REOPENED AND REVISED THE AFORESA ID ACCOUNTS. III) WE HAVE CONSIDERED OUR EARLIER AUDIT REPORT DA TED 11 TH JULY, 1998 GIVEN ON THE ORIGINAL ACCOUNTS AND HENCE EXAMINED T HE CHANGES MADE THEREIN, WHICH ARE AS UNDER :- A) THE CHANGES MADE IN THE COST OF KRISHNA GODAVARI WE LL, RESULTING INTO LOWERING IN THE VALUE OF FIXED ASSET S BY RS.1,92,94,468/- THAN SHOWN IN THE PREVIOUS AUDIT R EPORT. B) THE RATE OF DEPRECIATION ON KRISHNA GODAVARI WELL I S CHANGED CONSEQUENTLY THE LOSS IS INCREASED BY RS.1,95,62,26 7/- C) THE GENERAL AND ADMINISTRATION EXPENSES HAVE INCREA SED TO THE TUNE OF RS.1,92,94,468/- D) IN OUR EARLIER REPORT THE REMARK PERTAINING TO THES E CHANGES WAS AS UNDER : EXPENDITURE INCURRED FOR THE DRILLING OF THE KG BL OCK WELL AMOUNTING TO RS.834.56 LACS AND ADMINISTRATIVE EXPENSES OF RS .11.42 LACS IS INCLUDED ON THE BASIS OF CERTIFICATION GIVEN BY THE HEAD OFFICE. 4.3.8 IT IS ALSO NOTICED THAT IN THE ANNEXURE 2 THE RE IS NO REFERENCE TO SECTION 42 OR THE DEDUCTION, ALTHOUGH IN THE REVISE D RETURN IT IS MENTIONED THAT EXPENDITURE UNDER SECTION 42 ARE DETAILED AT A NNEXURE-2. FURTHER IN CLAUSE 4 TO FORM 3CD THE FOLLOWING NARRATION APPEAR S : 04. AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF, OR ON (I) CAPITAL EXPENDITURE DEBITED TO : NO EXCE PT EXPENSES COVERED THE PROFIT AND LOSS ACCOUNT UNDE R 42 OF IT ACT. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 18 IN OTHER WORDS FROM ASSESSMENT RECORDS AND ALSO FRO M THE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NO DET AILS WERE FURNISHED PROVIDING AS TO WHY THE CLAIM U/S 42 IS ADMISSIBLE. FROM THE ASSESSMENT ORDER ALSO IT IS SEEN THAT THE CLAIM U/S 42 HAS NOT AT ALL BEEN DISCUSSED AND ORDER WAS PASSED BY THE AO MAKING ROUTINE DISAL LOWANCES. 4.3.9 THE ORIGINAL RETURN IN THIS CASE WAS FILED ON 30.11.1998 AND NOTICE U/S 148 WAS ISSUED ON 24.3.2005 I.E. BEYOND 4 YEARS FROM THE RELEVANT ASSESSMENT YEAR. HENCE THE PROVISO TO SECTION 147 W AS ATTRACTED AND ACTION U/S 147 CANNOT BE SAID TO BE VALID UNLESS IT IS FOUND THAT THE ESCAPEMENT OF INCOME WAS BY REASON OF FAILURE ON TH E PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT. IN THE REASONS RECORDED BY THE AO THE ASSESSMENT IS RE OPENED ON THE GROUND THAT COMPLETE DETAILS WERE NOT FURNISHED AS REGARDS EXPENDITURE INCURRED BY ASSESSEE IN RESPECT OF DRILLING AND EXPLORATION ACTIVITIES OR FOR SERVICES OR IN RESPECT OF PHYSICAL ASPECTS USED IN THAT CONN ECTION. DEDUCTION U/S 42 IS ALLOWABLE ONLY IF SUCH ALLOWANCES ARE SPECIFI ED IN THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE CENTRAL GOVER NMENT. IT HAS BEEN INDICATED BY AO IN HIS REASONS FOR REOPENING THAT A ND THAT NO SUCH COPY OF AGREEMENT WAS FILED ALONG WITH THE RETURN. A DED UCTION U/S 42 IS ALLOWABLE IF THE FOLLOWING TWO CONDITIONS ARE FULFI LLED: 1. THERE SHOULD BE AN AGREEMENT OF THE ASSESSEE WITH T HE CENTRAL GOVERNMENT. 2. ONLY THOSE ALLOWANCES WHICH ARE SPECIFIED IN RELATI ON TO VARIOUS SPECIFIC NATURE AS MENTIONED IN SUB-CLAUSE, A, B & C OF SECTION 42(1) ARE ALLOWABLE. SINCE NO SUCH ALLOWANCES ARE BEEN SPECIFIED IN THE AGREEMENT, THE ASSESSEES CLAIM OF DEDUCTION IN RESPECT OF EXPENDI TURE OF RS.195262621 IS NOT ALLOWABLE AND WAS WRONGLY ALLOWED WHICH RESU LTED IN UNDER- ASSESSMENT OF INCOME. 4.3.10 FROM PERUSAL OF ASSESSMENT RECORDS AND DETA ILS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO THE P ROVISIONS OF SECTION 42, I FIND THAT FULL AND TRUE DISCLOSURE OF ALL MAT ERIAL FACT WERE NOT MADE BY THE ASSESSEE. WHILE DISMISSING THE GROUND RAISED BY THE ASSESSEE THE LD. CIT(A) RELIED ON THE FOLLOWING DECISIONS :- ITA NO.93/AHD/2007 ASST. YEAR 1998-99 19 PRAFUL CHUNILAL PATEL VS. M.J. MAKWANA, ACIT (1999) 236 ITR 832 (GUJ) RENU SAGAR POWER COMPANY VS. ITO 117 ITR 719 (ALL) ITO VS. MAHADEO LAL TULSIYAN 111 ITR 25 (CAL) CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 202 (DEL) CIT VS. FORAMER FRANCE (2003) 264 ITR 566 (SC) CALCUTTA DISCOUNT CO. LTD. VS. ITO 41 ITR 191 (SC) A.V. THOMAS EXPORTS LTD. VS. DCIT VARELI WEAVERS (P) LTD. 240 ITR 77 GUJ) AGAINST THIS ORDER OF LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. BEFORE US THE LD. COUNSEL OF THE ASSESSEE ARGUED AT LENGTH AND FILED SYNOPSIS OF HIS ARGUMENTS AS UNDER :- REASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE INCOME-TAX ACT IS INVALID: 1. REASONS FOR REOPENING THE ASSESSMENT WERE COMMUN ICATED TO THE APPELLANT BEYOND A PERIOD OF 6 YEARS FROM THE END O F THE ASSESSMENT YEAR AS PER SECTION 149(1)(B) OF THE ACT . 1.1 IN THE PRESENT CASE, THE NOTICE FOR REOPENING T HE ASSESSMENT U/S 148 WAS ISSUED ON 24.03.2005 WHILE IT WAS SERVED ON THE APPELLANT ON 29.03.2005 (REFER PAGE 43 OF THE PAPER BOOK). THE R EOPENING OF ASSESSMENT WAS GETTING TIME BARRED ON 31.03.2005 (I .E. 6 YEARS FROM THE END OF THE ASSESSMENT YEAR 1998-99). AS TH E NOTICE WAS RECEIVED ONLY ON 29.03.2005 THE APPELLANT REQUESTED THE AO TO PROVIDE REASONS FOR REOPENING ON 31.03.2005 (REFER PAGE 387 OF THE PAPER BOOK). 1.2 THE AO COMMUNICATED THE REASONS FOR REOPENING T HE ASSESSMENT (HIS LETTER DATED 14.03.2005) ONLY ON 06.05.2005 (R EFER PAGES 390- 392 OF THE PAPER BOOK) I.E. FIVE WEEKS AFTER THE EX PIRY OF PERIOD OF LIMITATION OF ISSUING NOTICE (31.03.2005). MERE SIG NING OF NOTICE CANNOT BE EQUATED WITH ISSUANCE OF NOTICE, DATE OF RECEIPT SHOULD BE CONSIDERED AS ISSUANCE OF NOTICE KANUBHAI M. PAT EL (HUF) VS. HIREN BHATT (GUJ) (2010) TIOL 531-HC-AHM-IT). ITA NO.93/AHD/2007 ASST. YEAR 1998-99 20 1.3 AS PER SECTION 148(2), THE REASONS ARE REQUIRED TO BE COMMUNICATED TO THE APPELLANT ALONG WITH THE NOTICE ISSUED U/S 148. IN THIS CONNECTION, RELIANCE CAN BE PLACED ON THE DECISION IN THE CASE OF MITHLESH KUMAR TRIPATHI VS. CIT 280 ITR 16 (ALL) WHICH IT HAS BEEN OBSERVED AS UNDER :- IN OUR CONSIDERED OPINION, IF REASONS ARE SUPPLIED ALONG WITH THE NOTICE UNDER SECTION 148(2) OF THE ACT, IT SHALL OBVIATE U NNECESSARY HARASSMENT TO THE ASSESSEE AS WELL TO THE REVENUE BY AVOIDING UNNECES SARY LITIGATION WHICH WILL SAVE COURTS ALSO FROM BEING INVOLVED IN UNPRODUCTIV E LITIGATIONS. ABOVE ALL IT SHALL BE IN CONSONANCE WITH THE PRINCIPLES OF NATUR AL JUSTICE, AS DISCUSSED ABOVE. 1.4 WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT IF THE REASONS ARE COMMUNICATED TO THE ASSESSEE BEYOND THE PERIOD OF LIMITATION I.E. 6 YEARS, THE REASSESSMENT PROCEEDING IS BAD IN LAW. IN THIS CONNECTION RELIANCE IS PLACED ON THE DECISION OF HA RYANA ACRYLIC MANUFACTURING CO. VS. CIT (308 ITR 38)(DEL), WHEREI N IT HAS BEEN HELD THAT - THIS MEANS THAT A NOTICE UNDER SECTION 148 IN THE PRESENT CASE, COULD NOT, IN ANY EVENT, HAVE BEEN ISSUED AFTER SIX YEARS FROM THE END OF THE ASSESSMENT YEAR T998 AFTER 31.03 2005. IN WHICHEVER WAY WE LOOK AT IT, A NOTICE UNDER SECTION 148 WITHOUT COMMUNICATION OF THE REASONS THEREFOR IS MEANINGLESS INASMUCH AS THE ASSESSING O FFICER IS HOUND TO FURNISH THE REASONS WITHIN A REASONABLE TIME. IN A CASE. WHERE THE NOTICE HAS BEEN ISSUED WITHIN THE SAID PERIOD OF SI X YEARS, BUT THE REASONS HAVE NOT BEEN FURNISHED WITHIN THAT PERIOD, IN OUR VIEW, ANY PROCEEDINGS PURSUANT THERETO WOULD BE HIT BY THE BA R OF LIMITATION INASMUCH AS THE ISSUANCE OF THE NOTICE AND THE COMM UNICATION AND FURNISHING OF REASONS GO HAND-IN-HAND. THE EXPRESSI ON 'WITHIN A REASONABLE PERIOD OF TIME' AS USED BY THE SUPREME C OURT IN GKN DRIVESHAFTS (SUPRA) CANNOT BE STRETCHED TO SUCH AN EXTENT THAT IT EXTENDS EVEN BEYOND THE SIX YEARS STIPULATED IN SEC TION 149. FOR THIS REASON ALSO, EVEN ASSUMING THAT WE OVERLOOK ALL THAT HAS HAPPENED BETWEEN 11.05.2004, WHEN THE PETITIONER SOUGHT THE REASONS, AND 05.11 .2007, WHEN THE SAID FORM ANNEXED TO THE COUNTER-AF FIDAVIT WAS FILED IN THIS COURT, THE VALIDITY OF THE NOTICES UNDER SECTI ON 148 ISSUED ON 29. 03. 2004 AND ANY PROCEEDINGS PURSUANT THERETO CANNO T BE UPHELD. 1.5 THE DECISION OF HARYANA ACRYLIC MANUFACTURING C O. (SUPRA) HAS BEEN FOLLOWED IN THE CASE OF SHRI BALWANT WADHWA V. ITO (I.T.A. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 21 NO. 4806/DEL/10) (DEL) WHCREIN THE FACTS OF ABOVE C ASE ARE IDENTICAL TO THAT OF THE APPELLANT. IN THAT CASE, T HE REASSESSMENT NOTICE WAS SERVED ON THE ASSESSES ON 28.03.2008. TH REE DAYS PRIOR TO THE EXPIRY OF PERIOD OF LIMITATION OF 6 YEARS AN D THE REASONS WERE SUPPLIED ONLY ON 15.05,2008 I.E FIVE WEEKS AFTER EX PIRY OF PERIOD OF LIMITATION OF NOTICE. THE DELHI TRIBUNAL QUASHED TH E REOPENING PROCEEDINGS AND HELD THAT IF THE ASSESSING OFFICER FAILS TO ISSUE REASONS ALONG WITH NOTICE LIEN SUCH NOTICE IS INVAL ID IN LAW. IN THAT CASE, THE TRIBUNAL HAS HELD AS UNDER : A PLAIN READING OF THE ABOVE EXPOSITION OF LAW AT THE END OF HON'BLE JURISDICTIONAL HIGH COURT MAKE IT CLEAR THAT ISSUAN CE OF THE NOTICE AND THE COMMUNICATION AND FURNISHING OF REASONS WOULD G O HAND IN HAND. THE REASONS ARE TO BE SUPPLIED TO THE ASSESSEE BEFO RE THE EXPIRY OF PERIOD OF 6 YEARS. IF IT HAS NOT DONE THEN VALIDITY U/S. 148 COULD NOT BE UPHELD. IT IS NOT IN THE INCOME TAX PROCEEDING ALON E. IN ANY PROCEEDING SAY, CIVIL OR CRIMINAL, IF A SUMMON IS ISSUED TO TH E DEFENDANT/RESPONDENT, IS NOT ACCOMPANIED WITH THE C OPY PLAINT OR COMPLAINT THEN IT IS TO BE CONSTRUED THAT NO VALID SERVICE OF NOTICE HAS BEEN EFFECTED UPON THE DEFENDANT OR THE RESPONDENTS WHICHEVER MAY BE THE CASE. THE NOTICE COULD HE SERVED AT ANY POINT O F TIME BEFORE THE EXPIRY OF 6 YEARS, IF AO HAS REASONS TO BELIEVE THA T INCOME HAS ESCAPED ASSESSMENT BUT, SUCH REASONS ARE ALSO TO BE COMMUNI CATED TO THE ASSESSEE BEFORE THE EXPIRY OF THE LIMITATION OTHERW ISE VALIDITY OF SUCH NOTICE COULD NOT BE SUSTAINABLE. BEING A SUBORDINAT E AUTHORITY TO THE HON'BLE HIGH COURT., WE ARE BOUND TO FOLLOW THE AUT HORITATIVE EXPOSITION OF LAW AT THE END OF HON'BLE HIGH COURT. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW GROUND NO. 2 OF THE ASSE SSEE WHEREIN HE HAS PLEADED THAT NOTICE U/S. 148 HAS NOT BEEN SERVE D WITHIN THE PERIOD OF LIMITATION UPON THE ASSESSEE. THE ASSESSMENT IS NOT SUSTAINABLE. IT IS QUASHED. 1.6 THE DECISION OF HARYANA ACRYLIC MANUFACTURING C O. (SUPRA) HAS ALSO BEEN FOLLOWED IN THE CASE OF GOMTI TEXTILES (P ) LTD. VS. ITO (ITA NO.1528/DEL/2011(DEL). IN THIS CASE, THE FACTS INVOLVED ARE ALSO SIMILAR TO THE FACTS OF THE APPELLANT; THE REO PENING NOTICE WAS ISSUED ON 28.03.2007, THREE DAYS PRIOR TO EXPIRY OF PERIOD OF LIMITATION. AND THE REASONS WERE COMMUNICATED ON 26 .04.2007. AS THE REASONS WERE NOT COMMUNICATED ALONG WITH THE RE OPENING NOTICE, THE DELHI TRIBUNAL FOLLOWING THE DELHI HIGH COURT DECISION IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. (S UPRA) QUASHED THE REOPENING NOTICE. IN THIS CASE, IT HAS BEEN HEL D THAT : THE PLAIN READING OF THE EXPOSITION OF LAW BY THE JURISDICTIONAL HIGH COURT MADE IT CLEAR THAT THE ISSUANCE OF NOTICE AND COMMUNICATION AND FURNISHING OF REASONS WOULD GO HAND IN HAND. THE RE ASONS FOR THE REOPENING OF THE ASSESSMENT ARE TO BE SUPPLIED TO T HE ASSESSEE BEFORE ITA NO.93/AHD/2007 ASST. YEAR 1998-99 22 EXPIRY OF SIX YEARS IN TERMS OF THE PROVISIONS OF S ECTION 149(1)(B) OF THE ACT. SINCE THAT HAS NOT BEEN DONE, THE VALIDITY OF THE DEPARTMENT ACTION U/S 148 CANNOT BE UPHELD. IF THE AO HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BUT SUCH REASONS ARE NOT COM MUNICATED TO THE ASSESSEE BEFORE THE EXPIRY OF PERIOD OF LIMITATION, THE VALIDITY OF SUCH NOTICE COULD NOT BE SUSTAINED. 1.7 THERE ARE NO OTHER DECISIONS OF THE HIGH COURTS ON THE SAID SUBJECT AND THEREFORE, THE DECISION OF ALLAHABAD HIGH COURT AND DELHI HIGH COURT AS STATED ABOVE SHOULD BE CONSIDERED AS JUDICIAL PRECEDENTS AND THEREFORE, THE SAME SHOULD BE FOLLOW ED. RELIANCE IN THIS REGARD CAN BE PLACED ON THE FOLLOWING : CIT VS. MANGALAL MOHANLAL PANCHAL (HUF) 2 10 ITR 580 (GUJ) CIT VS. SMT. GODAVARI SARAF 113 ITR 589 ( BOM) 2. ASSESSMENT CANNOT BE REOPENED IF THERE IS A CHAN GE OF OPINION. 2.1 THE APPELLANTS CLAIM UNDER SECTION 42 HAD BEEN ACCEPTED IN SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASST. YEAR 1997-98, ASST. YEAR 1999-00, ASST. YEAR 2000-01 AND 2001-02 (REFER PAGES 250- 299 OF THE PAPER BOOK). 2.2 DURING THE ASSESSMENT PROCEEDINGS FOR ASST. YEA R 2001-02 THE APPELLANT FILED A COPY OF THE PSC IN ANNEXURE-D TO SUBMISSION MADE VIDE LETTER NO.NRL/2003-04/FINANCE/16. THE AO PASSED SCRUTINY ASSESSMENT ORDER UNDER SECTION 143(3) ACCE PTING APPELLANTS CLAIM OF SECTION 42 ON 3.03.2004 FOR AS ST. YEAR 2001- 02. THE APPELLANTS CLAIM UNDER SECTION 42 WAS NOT DENIED ON THE GROUND THAT SECTION 42 WAS NOT SPECIFIED IN THE PSC , HOWEVER THE PARTIAL DEDUCTION WAS GRANTED DUE TO SOME OTHER GRO UNDS. 2.3 IT WAS THE FIRST TIME, WHEN THE CIT(A) ENHANCED THE ASSESSMENT FOR ASST. YEAR 2001-02 BY WAY OF DISALLOWANCE OF THE AP PELLANTS CLAIM UNDER SECTION 42 AS THE EXPENSES CLAIMED UNDER SECT ION 42 WERE NOT SPECIFIED IN THE PSC. THIS WAS THE FIRST TIME I N THE ASSESSMENT HISTORY OF THE APPELLANT THAT CLAIM FOR SECTION 42 DEDUCTION WAS DENIED.(REFER PAGES 300- 386 OF THE PAPER BOOK). 2.4 FOLLOWING THE SAID ORDER OF CIT(A) THE NOTICE U NDER SECTION 148 WAS ISSUED FOR AYS 1998-99, 1999-00 AND 2000-01. 2.5 THE REASSESSMENT NOTICE FOR ASST. YEAR 1998-99 WAS ISSUED FOUR YEARS AFTER THE END OF ASSESSMENT YEAR. THERE WAS N O NEW MATERIAL ITA NO.93/AHD/2007 ASST. YEAR 1998-99 23 WHICH HAD COME TO THE POSSESSION OF THE AO EXCEPT T HE CIT(A)S ORDER. 2.6 THE AO HAD ALLOWED SECTION 42 DEDUCTION AFTER D UE APPLICATION OF HIS MIND. THEREFORE, THE REOPENING BASED ON THE SUB SEQUENT DECISION OF THE CIT(A) AMOUNTS TO CHANGE OF OPINION . IN THIS REGARD, RELIANCE IS PLACED ON THE FOLLOWING - CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC) HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETA TION TO THE WORDS REASON TO BELIEVE FAILING WHICH WE ARE AFRAID, SECTION 14 7 WOULD GIVE ARBITRARY POWERS TO THE AO TO RE-OPEN ASSESSMENTS ON THE BASI S OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON TO RE-OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REV IEW AND POWER TO RE- ASSESSEE. THE AO HAS NO POWER TO REVIEW, HE HAS THE POWER TO RE-ASSESSEE. BUT RE-ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CER TAIN PRE-CONDITION AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED AS CONTEN DED ON BEHALF OF THE DEPARTMENT, THEN IN THE GARB OF RE-OPENING THE ASSE SSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPI NION AS ON IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE AFTER 1 ST APRIL, 1989, AO HAS POWER TO RE-OPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO C OME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REAS ONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. CIT VS. KELVINATOR OF INDIA LTD.256 ITR 1 (DEL) AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TER MS OF SUB-SECTION (1) OF SEC.143 OR SUB-S (3) OF S.143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SAID SUB-S.(3) OF SEC.143 A PRESUMPTIO N CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT I N TERMS OF CL.(E) OF S.114 OF THE INDIAN EVIDENCE ACT THE JUDICIAL AND OFFICIAL A CTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BE EN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JUR ISDICTION UPON THE AO TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER THE SAME WOULD AMOUNT TO GIVING PREMIUM TO AN AUTHORITY EXERCISING QUASI JUD ICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. IN THE EVENT IT IS HELD THAT BY REASON OF S.147 IF ITO EXERCISES ITS JURISDICTION FOR INITIATING A PROCEEDING FOR REASSESSMENT ONLY U PON MERE CHANGE OF OPINION, THE SAME MAY BE HELD TO BE UNCONSTITUTIONA L. WE ARE, THEREFORE, OF THE OPINION THAT S.147 OF THE ACT DOES NOT POSTULATE CO NFERMENT OF POWER UPON THE AO TO INITIATE REASSESSMENT PROCEEDING UPON HIS MER E CHANGE OF OPINION. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 24 IN THIS DECISION OF DELHI HIGH COURT, THE COURT HAD OVERRULED THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNIL AL PATEL VS. M.J. MAKWANA 236 ITR 832. AUSTIN ENGINEERING CO. VS. JCIT 310 ITR 70 (GUJ) THE ONLY QUESTION THAT WOULD THEN SURVIVE WOULD B E WHETHER THERE WAS ANY FAILURE ON THE PART OF THE PETITIONER ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THOUGH IN THE REASONS RECORDED, THE RESPONDENT HAS STATED SO, APPARENTLY, THE SAID STATEMENT DOES NOT MERIT ACCEPT FOR THE SIMPLE REASON THAT IF ALL MATERIAL F ACTS HAD NOT BEEN FULLY AND TRULY DISCLOSED BY THE ASSESSEE, THERE WAS NO OCCAS ION FOR THE AO TO FRAME THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY ALLOW ING THE CLAIM OF THE ASSESSEE. IN FACT, THE LAW, AS IT THEN STOOD WAS UN DERSTOOD IDENTICALLY BOTH BY THE ASSESSEE AND THE AO. MERELY BECAUSE SUBSEQUENTL Y THE APEX COURT PRONOUNCED THE LAW TO BE OTHERWISE, ON THE DATE OF THE FILING OF THE RETURN OF THE INCOME WHEN THE ASSESSEE MADE A CLAIM FOR DEDUC TION THE CLAIM COULD NOT BE TERMED TO BE EITHER LACKING IN MATERIAL PARTICUL ARS OR COULD NOT BE TERMED TO BE UNTRUE. IN OTHER WORDS, ALL THE MATERIAL FACT S WERE FULLY DISCLOSED AND NO FALSE FACTS WERE STATED IN SUPPORT OF THE CLAIM MAD E. THE REASONS RECORDED THEMSELVES SHOW THAT THE AO HAS CHANGED HIS OPINION ONLY ON THE BASIS OF SUBSEQUENT JUDGMENT RENDERED BY THE APEX COURT. THU S, THIS IS A CASE OF CHANGE OF OPINION BY THE AO AND NOT A CASE OF ANY F AILURE ON THE PART OF THE ASSESSEE. GARDEN SILK MILLS VS. DCIT 222 ITR 68 (GUJ) THE AO CANNOT TAKE ANY ACTION UNDER THIS SECTION M ERELY BECAUSE HE HAPPENS TO CHANGE HIS OPINION OR TO HOLD AN OPINION DIFFERE NT FROM THAT OF HIS PREDECESSOR ON THE SAME SET OF FACTS. BIRLA VXL VS. ACIT 217 ITR 1 (GUJ) ANOTHER REQUIREMENT WHICH IS NECESSARY FOR ASSUMI NG JURISDICTION IS THAT THE AO SHALL RECORD HIS REASONS FOR ISSUING NOTICE. THI S REQUIREMENT NECESSARILY POSTULATES THAT BEFORE THE AO IS SATISFIED TO ACT U NDER THE AFORESAID PROVISIONS, HE MUST PUT IN WRITING AS TO WHY IN HIS OPINION OR WHY HE HOLDS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT.WHY FOR HOLDING SUC H BELIEF MUST REFLECT FROM THE RECORD OF REASONS MADE BY THE AO. IN A CAS E WHERE AO HOLDS OPINION THAT BECAUSE OF EXCESSIVE LOSS OR DEPRECIATION ALLO WANCE THE INCOME HAS ESCAPED ASSESSMENT, REASONS RECORDED BY THE AO MUST DISCLOSE THAT BY WHAT PROCESS OF REASONING HE HOLDS SUCH BELIEF THAT THER E HAS BEEN EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE HAS BEEN COMPUTED IN ORIGINA L ASSESSMENT. MERELY SAYING THAT EXCESSIVE LOSS OR DEPRECIATION ALLOWANC E HAS BEEN COMPUTED WITHOUT DISCLOSING REASONS WHICH LED THE ASSESSING AUTHORITY TO HOLD SUCH BELIEF, IN OUR OPINION, DOES NOT CONFER JURISDICTIO N ON THE AO TO TAKE ACTION UNDER SS.147 AND 148 OF THE ACT. WE ARE ALSO OF THE OPINION THAT HOWSOEVER WIDE THE SCOPE OF TAKING ACTION UNDER S.148 OF THE ACT BE, IT DOES NOT CONFER ITA NO.93/AHD/2007 ASST. YEAR 1998-99 25 JURISDICTION ON CHANGE OF OPINION ON INTERPRETATION OF A PARTICULAR PROVISION EARLIER ADOPTED BY THE ASSESSING AUTHORITY. CIT VS. BAER SHOES (INDIA) (P) LTD. 331 ITR 435 (MA D) THE JUDGMENT RENDERED BY THE HONBLE SUPREME COURT IS AN EXPRESSION OF OPINION ON THE INTERPRETATION OF STATUTE. THE POWER UNDER SECTION 147 WILL HAVE TO BE INVOKED BY THE AO IN ACCORDANCE WITH THE SAID PROVISION. IN OTHER WORDS, MERELY BECAUSE A JUDGMENT HAS BEEN RENDERED, THE SA ME CANNOT BE A GROUND FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT. TH E HONBLE GUJARAT HIGH COURT IN AUSTIN ENGINEERING CO. LTD. VS. JCIT 312 I TR 70 HAS TAKEN THE VIEW THAT IN A CASE WHERE THE MATERIAL FACTS WERE FULLY DISCLOSED AND THE ASSESSMENT WAS COMPLETED ALLOWING DEDUCTION UNDER SECTION 80HH C ON EXPORT INCENTIVE, SUCH AN ASSESSMENT CANNOT BE REOPENED BASED UPON A SUBSEQUENT DECISION OF THE SUPREME COURT, SINCE IT MERELY WOULD AMOUNT TO A CHANGE OF OPINION. WE ARE IN RESPECTFUL AGREEMENT WITH THE JUDGMENT OF TH E GUJARAT HIGH COURT ON THE PROPOSITION OF LAW LAID DOWN THEREIN. JINDAL PHOTO FILS 234 ITR 170 (DEL) IT IS CLEAR FROM THE REASONS PLACED BY THE AO ON RECORD AS ALSO FROM THE STATEMENTS MADE IN THE COUNTER-AFFIDAVIT THAT ALL T HAT THE ITO HAS SAID IS THAT HE WAS NOT RIGHT IN ALLOWING DEDUCTION UNDER S.80-I BECAUSE HE HAD ALLOWED THE DEDUCTION WRONGLY AND, THEREFORE, HE WAS OF THE OPINION THAT THE INCOME HAD ESCAPED ASSESSMENT. THOUGH HE HAS USED THE PHRA SE REASON TO BELIEVE IN HIS ORDER, ADMITTEDLY BETWEEN THE DATE OF THE OR DERS OF ASSESSMENT SOUGHT TO BE REOPENED AND THE DATE OF FORMING OF OPINION BY T HE ITO NOTHING NEW HAS HAPPENED. THERE IS NO CHANGE OF LAW. NO NEW MATERIA L HAS COME ON RECORD. NO INFORMATION HAS BEEN RECEIVED. IT IS MERELY A FR ESH APPLICATION OF MIND BY THE SAME AO TO THE SAME SET OF FACTS. WHILE PASSING THE ORIGINAL ORDERS OF ASSESSMENT THE ORDER DT.28 TH FEBRUARY, 1994 PASSED BY THE CIT(A) WAS BEFORE THE AO. THAT ORDER STANDS TILL TODAY. WHAT THE AO H AS SAID ABOUT THE ORDER OF THE CIT(A) WHILE RECORDING REASONS UNDER S.147 HE C OULD HAVE SAID EVEN IN THE ORIGINAL ORDERS OF ASSESSMENT. THUS IT IS A CASE OF MERE CHANGE OF OPINION WHICH DOES NOT PROVIDE JURISDICTION TO THE AO TO IN ITIATE PROCEEDINGS UNDER S.147 OF THE ACT. 2.7 RELIANCE CAN ALSO BE PLACED ON THE FOLLOWING : CIT VS. FORAMER FRANCE 264 ITR 566 (SSC) RITU INVESTMENT VS. DCIT 2010 TIOL-82-HC-DEL-IT(DE L) INDUCTO ISPAT ALLOYS LTD. VS. ACIT 2009 TIOL-264-H C-AHM- IT(GUJ) ACIT VS. BHAGYAWANTI S. MARADIA 6 SOT 367 (AHD) ANNAPURNA INDUSTRIES VS ITO 2 SOT 54 (AHD) H.K.BUILDCON VS ITO 2010 TIOL-254-HC-AHD-IT (GUJ) ICICI PRUDENTIAL LIFE INSURANCE VS. ACIT 325 ITR 4 71 (BOM) ITA NO.93/AHD/2007 ASST. YEAR 1998-99 26 IPCA LABORATORIES LTD. DCIT 251 ITR 416 (BOM) 2.8 THE DECISION IN THE CASE OF RENUKA SAGAR POWER COMPANY VS. ITO 117 ITR 719 (ALL), WHICH WAS RELIED UPON BY THE CIT (A) AS WELL AS THE DEPARTMENTS REPRESENTATIVE, HAS BEEN DISTINGUI SHED BY THE SUBSEQUENT DECISION OF KERALA HIGH COURT IN THE CAS E OF PALA MARKETING CO-OPERATIVE SOCIETY LTD. VS. STATE OF KE RALA 236 ITR 604. FURTHER, THE DECISION IN THE CASE OF ITO VS. M.L. TYLSYAN 111 ITR 25 (CAL) RELIED UPON BY THE CIT(A) AS WELL AS THE D EPARTMENTS REPRESENTATIVE IS DISTINGUISHABLE BASED ON THE FACT S AS THE CASE WAS PERTAINING TO BOGUS HUNDI LOANS. 3. REASSESSMENT CANNOT BE REOPENED AFTER A PERIOD O F 4 YEARS FROM THE END OF THE ASSESSMENT YEAR IN THE CASE OF ASSES SMENT BEING DONE UNDER SECTION 143(3) IF THE ASSESSEE DISCLOSES FULL Y OR TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 3.1 THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) FOR ASST. YEAR 1998-99. THE NOTICE UNDER SECTION 148 WA S ISSUED FOR ESCAPED ASSESSMENT ON 24.03.2005. AS THE NOTICE HAD BEEN ISSUED UNDER SECTION 148 AFTER EXPIRY OF FOUR YEARS FROM T HE END OF THE ASSESSMENT YEAR I.E 31.03.2003, THE APPELLANTS CAS E FALL UNDER 1 ST PROVISO TO SECTION 147 OF THE ACT. 3.2 IN TERMS OF 1 ST PROVISO TO SECTION 147 ASSESSMENT CAN BE REOPENED UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS IF (I) ASSESSEE FAILED TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE T O A NOTICE ISSUED UNDER SECTION 142(1) OR SECTION 148 OR; (II) HE FAILED TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR THE ASSESSMENT. 3.3 THE APPELLANTS CASE FALLS UNDER PART (II) ABOV E. 3.4 IN THE APPELLANTS CASE, THE PRIMARY INFORMATIO N ON DEDUCTION CLAIMED UNDER SECTION 42 WERE SUBMITTED ALONG WITH THE RETURN OF INCOME AS WELL AS TAX AUDIT REPORT AND ALSO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS (REFER PAGES 1-39 O F THE PAPER BOOK) PARTICULARLY: ITA NO.93/AHD/2007 ASST. YEAR 1998-99 27 IN THE RETURN OF INCOME, A BREAK UP OF DEDUCTION C LAIMED UNDER SECTION 42 OF THE ACT FOR ALL THE PRODUCTION SHARIN G CONTRACTS (PSCS) WAS GIVEN. THE ABOVE BREAK UP WAS ALSO TIED UP WITH THE FIXED ASSETS SCHEDULE GIVEN ALONG WITH THE BALANCE SHEET. THIS AMOUNT WAS ALSO DISCLOSED IN TAX AUDIT REPORT (PARA 4 OF FORM 3 CD/PARA 4.3.8/PAGE 19 OF CIT(A) ORDER FOR AS ST. YEAR 1998-99). NOTES FORMING THE BALANCE SHEET FOR THE YEAR ENDED 31 MARCH 1998 ALSO PROVIDE THE DETAILS OF THE PSC/JOINT VENTURE A GREEMENTS ALONG WITH THE RATIO PARTICIPATING INTEREST. 3.5 THIS SHOWS THAT THE APPELLANT HAD MADE FULL DIS CLOSURE OF PRIMARY FACTS REQUIRED FOR SECTION 42 CLAIM IN HIS SUBMISSI ONS TO AO DURING THE SCRUTINY ASSESSMENT PROCEEDINGS. IT WAS THE DUT Y OF THE AO TO CALL UPON ALL THE FURTHER MATERIAL REQUIRED BY HIM TO COMPLETE THE ASSESSMENT PROCEEDINGS. THEREFORE, THE QUESTION OF NON-DISCLOSURE OF ALL PRIMARY FACTS IN RESPECT OF DEDUCTION CLAIME D UNDER SECTION 42 DOES NOT ARISE. RELIANCE IN THIS REGARD IS PLACE D ON THE FOLLOWING: CALCUTTA DISCOUNT CO. VS. ITO 41 ITR 191 (SC): ONCE ALL THE PRIMARY FACTS ARE BEFORE THE ASSESSI NG AUTHORITY, HE REQUIRES NO FURTHER ASSISTANCE BY WAY OF DISCLOSURE. IT IS FAOR HIM TO DECIDE WHAT INFERENCES OF FACTS CAN BE REASONABLY DRAWN AND WHA T LEGAL INFERENCES HAVE ULTIMATELY TO BE DRAWN. IT IS NOT FOR SOMEBODY ELSE -FOR LESS THE ASSESSEE TO TELL THE ASSESSING AUTHORITY WHAT INFERENCES, WHETHER OF FACTS OR LAW, SHOULD BE DRAWN. INDEED, WHEN IT IS REMEMBERED THAT PEOPLE OF TEN DIFFER AS REGARDS WHAT INFERENCES SHOULD BE DRAWN FROM GIVEN FACTS, IT WIL L BE MEANINGLESS TO DEMAND THAT THE ASSESSEE MUST DISCLOSE WHAT INFERENCES WH ETHER OF FACTS OR LAW HE WOULD DRAW FROM THE PRIMARY FACTS. IF FROM PRIMARY FACTS MORE INFERENCES THAN ONE COULD BE DRAWN, IT WOULD NOT BE POSSIBLE TO SAY THAT THE ASSESSEE SHOULD HAVE DRAWN ANY PARTICULAR INFERENCE AND COMMUNICATE D IT TO THE ASSESSING AUTHORITY. GEMINI LEATHER SHOES VS. ITO 100 ITR 1 (SC) THE AMOUNT INVESTED BY THE ASSESSEE IN PURCHASE O F DRAFTS, WHICH CAME TO NOTICE OF THE ITO INDEPENDENTLY, COULD BE TREATED A S PART OF THE TOTAL INCOME OF THE ASSESSEE AFTER DUE ENQUIRY. THE ASSESSEE DID NO T DISCLOSE THE TRANSACTION EVIDENCED BY THESE DRAFTS. AFTER THIS DISCOVERY THE ITO HAD IN HIS POSSESSION ALL THE PRIMARY FACTS AND IT WAS FOR HIM TO MAKE NE CESSARY ENQUIRIES AND DRAW ITA NO.93/AHD/2007 ASST. YEAR 1998-99 28 PROPER INFERENCE AS TO WHETHER THE AMOUNTS INVESTED IN THE PURCHASE OF THE DRAFTS COULD BE TREATED AS PART OF THE TOTAL INCOME OF THE ASSESSEE DURING THE RELEVANT YEAR. THIS THE ITO DID NOT DO. IT WAS PLAI NLY A CASE OF OVERSIGHT, AND IT CANNOT BE SAID THAT THE INCOME CHARGEABLE TO TAX FOR THE RELEVANT ASSESSMENT YEAR HAD ESCAPED ASSESSMENT BY REASON OF THE OMISSI ON OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS. THE ITO HAD ALL THE MATERIAL FACTS BEFORE HIM WHEN HE MADE THE ORIG INAL ASSESSMENT. HE CANNOT NOW TAKE RECOURSE TO S.147(A) TO REMEDY THE ERROR RESULTING FROM HIS OWN OVERSIGHT. ITO VS. NAWAB MIR BARKAT ALI KHAN 97 ITR 239 (SC) WHEREIN THE SUPREME COURT HELD THAT NON-PRODUCTION OF DEEDS IN THE CASE OF RE- ASSESSMENT PROCEEDINGS DID NOT AMOUNT TO NON-DISCLO SURE OF PARTICULARS, HENCE IT DID NOT WARRANT INITIATION OF PROCEEDINGS UNDER SECTION 147. GAEKWAD INVESTMENT CORPORATION (P) LTD. VS. ACIT 12 9 TTJ 379 (AHD) WHEREIN WAS HELD THAT DISCLOSURE THROUGH NOTES TO A CCOUNTS IN FINANCIAL STATEMENTS WAS DISCLOSURE OF PRIMARY FACTS AND AO W AS NOT AUTHORIZED TO REOPEN THE PROCEEDINGS TO REVIEW HIS OWN ASSESSMENT ORDER. IN VIEW OF ABOVE SUBMISSIONS THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE RE-ASSESSMENT PROCEEDINGS U/S 147 IS NOT A T ALL JUSTIFIED AND THE SAME BE QUASHED. 6. ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDER S OF LOWER AUTHORITIES AND RELIED ON THE FOLLOWING WRITTEN SUB MISSIONS :- 2.1 THIS IS REGARDING THE CIT(A) CONFIRMING THE AO 'S ACTION OF REOPENING THE ASSESSMENT U/S 147 AND HOLDING THAT T HE APPELLANT HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS IN RELATION TO DEDUCTION CLAIMED U/S 42. THE APPELLANT HAS ARGUED THAT THE N OTICE U/S 148 READ WITH SEC 147 BE TREATED AS INVALID. 2.2 IN THIS GROUND THE APPELLANT HAS ARGUED THAT RE -ASSESSMENT U/S.147 SHOULD BE TREATED AS INVALID FOR THE FOLLOWING TWO REASONS - (I) THE NOTICE IS INVALID BECAUSE THE REASONS HAVE BEEN GIVEN BEYOND THE TIME BARRING LIMIT AND IN THIS REGARD TH E APPELLANT HAS RELIED ON (TIE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO 308 ITR 38. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 29 (II) THERE WAS NO FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULL AND TRUE AIL MATERIAL FACTS IN RELATION TO THE DEDU CTION CLAIMED U/S 42 AND HENCE THE NOTICE IS TIME BARRED AS IT IS BEY OND FOUR YEARS. 2.3,1 WITH RESPECT TO THE FIRST REASON, IT IS STATE D THAT THE APPELLANT HAS SUBMITTED A LIST OF EVENTS ACCORDING TO WHICH THE A SSESSMENT UNDER CONSIDERATION BEING A.Y.1998-99, THE ORIGINAL INCOM E-TAX RETURN WAS FIFED ON 30 11 98 WHICH WAS PROCESSED ON 15.3.2000 BUT A REVISED RETURN WAS FILED ON 16.3.2000. ASSESSMENT U/S. 143(3) WAS COMPLETED ON 29.3.2001. NOTICE U/S 148 WAS ISSUED ON 24.3.2005 A ND SERVED ON THE APPELLANT ON 28.3.2005. FROM THIS IT IS CLEAR THAT THE APPELLANT HAS ADMITTED THAT THE NOTICE HAS BEEN SERVED BEFORE THE END OF SIX YEARS FROM 31.3.99 I.E. FROM THE END OF THE ASSESSMENT YEAR UN DER CONSIDERATION. THE APPELLANT HAS FURTHER STATED THAT THE REQUEST FOR D ISCLOSURE OF REASONS FOR REOPENING THE ASSESSMENT WAS MADE ON 31.3.2005 AND THE REASONS WERE PROVIDED ON 6 TH MAY, 2005 I.E. WITHIN FIVE WEEKS FROM THE DATE ON WHICH THE REQUEST WAS MADE WHICH IS A VERY REASONABLE PER IOD. THE APPELLANT HAS STATED THAT THE REOPENING IS TIME BARRED BECAUS E THE HON'BLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYIIC MANUFACTU RING CO.(SUPRA) HAS STATED THAT THE REASONS SHOULD BE GIVEN WITHIN THE REASONABLE TIME BEFORE THE END OF SIX YEARS PERIOD. 2.3.2 THE CONTENTION OF THE APPELLANT WITH RESPECT TO THE DELHI HIGH COURT IS TAKEN UP FIRST. IN THIS REGARD, THE CONTENTION O F THE APPELLANT IS TOTALLY WRONG THE OBSERVATION MADE BY THE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO.(SUPRA) IS ON PECU LIAR FACTS OF THAT CASE AND IT CANNOT BE REGARDED AS EXPLAINING THE LA W- 2.3.3 FROM THE PROVISIONS OF SECTION I49(1)(B) IT I S CLEAR THAT A NOTICE CAN BE ISSUED BEFORE THE END OF SIX YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. NOWHERE IN THE PROVISIONS OF SECTION 147 OR 1 48 OR 149 IT HAS BEEN MENTIONED THAT THE REASONS HAVE ALSO TO BE GIVEN BE FORE THE END OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN THIS REGARD THE ATTENTION OF THE HON'BLE TRIBUNAL IS BROUGHT TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA ) LTD, - 259 ITR 19 WHEREIN THE HON'BLE SUPREME COURT POINTED OUT THE F OLLOWING PROCEDURE AND WHICH HAS ALSO BEEN QUOTED IN THE DECISION OF D EFHI HIGH COURT IN THE CASE OF HARYANA ACRYIIC MANUFACTURING CO (SUPRA ). THE HON'BLE SUPREME COURT HAS STATED AS UNDER: ' . . HOWEVER, WE CLARIFY THAT WHEN A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE ITA NO.93/AHD/2007 ASST. YEAR 1998-99 30 NOTICEE IS TO FILE RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, TH E NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE A ND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CASE, AS THE REASONS HAVE BEE N DISCLOSED IN THESE PROCEEDINGS, THE ASSESSING OFFICER HAS TO DIS POSE OF THE OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH THE ASSESSMENT IN RESPECT OF THE ABOVE SAID FI VE ASSESSMENT YEARS.' (P. 964) 2.3.4 THE HON'BLE DELHI HIGH COURT IN THE CASE OF H ARYANA ACRYLIC MANUFACTURING CO. (SUPRA) ITSELF HAS RELIED ON THE ABOVE DECISION OF THE SUPREME COURT FROM WHICH IT IS CLEAR THAT WHEN THE NOTICE U/S.148 IS ISSUED, NEED TO BE KEPT IN MIND : I) THE FIRST POINT IS THAT THE ASSESSEE HAS TO FIFE THE RETURN AND THE SECOND IS THAT, WHERE THE ASSESSEE SEEKS REASONS FOR THE I SSUANCE OF THE NOTICE, THE A.O IS BOUND TO SUPPLY THEM WITHIN THE REASONAB LE TIME. THEREAFTER THE ASSESSEE MAY FILE OBJECTIONS AND IF SO, THE AO IS BOUND TO DISPOSE OFF THE SAME BY A SPEAKING ORDER. FROM THIS OBSERVATION OF THE HON'BLE DELHI COURT IN THE DECISION OF HARYANA ACRYLIC MANUFACTUR ING CO (SUPRA), IT IS CLEAR THAT THE REASONS CAN BE PROVIDED WITHIN REASO NABLE TIME FROM THE ISSUE OF NOTICE U/S. 148. FURTHER AS PER THE PROVIS IONS OF SECTION 149(1)(B) NOTICE CAN BE ISSUED BEFORE THE END OF 6 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. II) IN VIEW OF THE ABOVE, AS PER SECTION 149, AS ST ATED ABOVE, THE NOTICE CAN BE ISSUED AND SERVED IN THE PRESENT CASE UPTO 3 1.3.2005. THE NOTICE HAS BEEN ISSUED ON 24.3.2005 AND SERVED ON 28.3.200 5 ABOUT WHICH THERE IS NO DISPUTE AND THE REASONS WERE SUPPLIED ON 06/0 5/2005 I.E. WITHIN 5 WEEKS OF APPLICATION AS STATED ABOVE IN PARA 2.3.1 AND HENCE WITHIN REASONABLE TIME. 2.3.5 THE APPELLANT HAS RELIED ON THE OBSERVATION O F THE HONBLE DELHI HIGH COURT IN PARA 24 OF THE ORDER WHEREIN THE HON' BLE DELHI HIGH COURT HAS OBSERVED AS UNDER: THIRDLY, IT COULD BE ARGUED THAT THE REASONS SUPPL IED TO THE PETITIONER IN SEPTEMBER. 2004 HE DISREGARDE D SO ALSO THE OBJECTIONS FILED BY IT AS ALSO THE IMPUGNED ORDER D ATED 2-3-2005 AND THE REASONS NOTED IN THE SAID FORM BE NOW TAKEN AS THE FOR THE ISSUANCE OF THE NOTICE UNDER SECTION 148 AND THE PE TITIONER MAY ITA NO.93/AHD/2007 ASST. YEAR 1998-99 31 NOW PREFER HIS OBJECTIONS, IF ANY, AND THEREUPON TH E ASSESSING OFFICER BE DIRECTED TO PASS A SPEAKING ORDER. IN OT HER WORDS AN ARGUMENT REQUIRES US TO SWEEP ALL THE PROCEEDINGS E MANATING FROM THE SUPPLY OF REASONS IN SEPTEMBER 2004 AND CULMINA TING IN THE PASSING OF THE ORDER DATED 2-3-2005 'UNDER THE CARP ET AS IT WERE. AND, STARTING THE PROCESS AS PER THE DIRECTIONS GIV EN IN GKN DRIVESHAFTS (INDIA) LTD 'S CASE ( SUPRA ) AFRESH CO NSIDERING THE REASONS NOTED IN THE SAID FORM TO BE THE ACTUAL OR THE ISSUANCE OF THE NOTICE UNDER SECTION 148. IF WE WERE TO ACCEPT THIS ARGUMENT, WE WOULD HAVE TO IGNORE THE DIRECTIONS GIVEN BY THE SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LTD.S CASE (SUPRA) THAT THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASON ABLE TIME THE NOTICE UNDER SECTION 148 WAS ISSUED ON 29-3-2004 T HE PETITIONER FILED THE RETURN AND SOUGHT REASONS BY ITS LETTER D ATED 11-5-2004. IF THE DALE OF FIFING OF THE COUNTER-AFFIDAVIT IN THIS WRIT PETITION IS TAKEN AS THE DATE OF COMMUNICATION OF THE REASONS W HICH FORMS PART OF THE SAID FORM, A COPY OF WHICH IS ANNEXVRE- A TO THE COUNTER- AFFIDAVIT, THEN THE DATE OF SUPPLY OF REASONS, BASE D ON THIS ARGUMENT, WOULD BE 5-11-2007. THIS IMMEDIATELY MAKE S IT CLEAR THAT THE ASSESSING OFFICER, WHO WAS BOUND TO FURNIS H HIS REASONS WITHIN A REASONABLE TIME DID NOT DO SO. THE PERIOD WHICH ELAPSED BETWEEN 11-5-2004, WHEN THE PETITIONER MADE THE REQ UEST FOR COMMUNICATING THE REASONS, AND 5-11-2007 THE DATE W HEN THE COUNTER-AFFIDAVIT WAS FILED, CAN CERTAINLY NOT BE R EGARDED AS A REASONABLE PERIOD OF TIME APART FROM THIS, WE MUST NOT FORGOT THE PROVISIONS OF SECTION J49 WHICH PRESCRIBES THE TIME -LIMIT FOR A NOTICE UNDER SECTION 148 SECTION 149(1)( B ) STIPUL ATES THE OUTER LIMIT OF SIX YEARS FROM THE END OF THE RELEVANT ASS ESSMENT YEAR WHERE THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPE D ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO RUPEES ONE LAK H OR MORE FOR THAT YEAR THIS MEANS THAT A NOTICE UNDER SECTION 14 8 IN THE PRESENT CASE, COULD NOT. IN ANY EVENT, HAVE BEEN ISSUED AFT ER SIX YEARS FROM THE END OF THE ASSESSMENT YEAR 1998-99, I.E. AFTER 31-3-2005. IN WHICHEVER WAY WE LOOK AT IT, A NOTICE UNDER SECTION 148 WITHOUT THE COMMUNICATION OF THE REASONS THEREFORE IS MEANINGLE SS INASMUCH AS THE ASSESSING OFFICER IS BOUND TO FURNISH THE RE ASONS WITHIN A REASONABLE TIME IN A CASE, WHERE THE NOTICE HAS BEE N ISSUED WITHIN (HE SAID PERIOD OF SIX YEARS, HUT THE REASONS HAVE NOT BEEN FURNISHED WITHIN THAT PERIOD, IN OUR VIEW, ANY PROC EEDINGS PURSUANT THERETO WOULD BE HIT BY THE BAR OF LIMITATION INASM UCH AS THE ISSUANCE OF THE NOTICE AND THE COMMUNICATION AND FU RNISHING OF REASONS GO HAND-IN-HAND. THE EXPRESSION 'WITHIN A REASONABLE PERIOD OF TIME' AS USED BY THE SUPREME COURT IN GKN DRIVESHAFTS ITA NO.93/AHD/2007 ASST. YEAR 1998-99 32 (INDIA) LTD.'S CASE (SUPRA) CANNOT BE STRETCHED TO SUCH AN EXTENT THAT IT EXTENDS EVEN BEYOND THE SIX YEARS STIPULATE D IN SECTION 149. FOR THIS REASON ALSO ,EVEN ASSUMING THAT WE OVERLOO K ALL THAT HAS HAPPENED BETWEEN 11-5-2004, WHEN THE PETITIONER SOUGHT THE REASONS AND 5-11-2007, WHEN THE SAID FORM ANNEXED TO THE COUNTER-AFFIDAVIT WAS FILED IN THIS COURT, THE VALI DITY OF THE NOTICES U/S 148 ISSUED ON 29-3-2004 AND ANY PROCEEDINGS PU RSUANT THERETO CANNOT BE UPHELD.' 2.3.6 FROM THE ABOVE, IT IS SEEN THAT THE OBSERVATI ON OF THE HON'BLE DELHI HIGH COURT RELIED UPON BY THE APPELLANT ARE THAT: IN A CASE THE NOTICE HAS BEEN ISSUED WITHIN THE SA ID PERIOD OF SIX YEARS, BUT THE REASONS HAVE NOT BEEN FURNISHED WITH IN THAT PERIOD, ANY PROCEEDINGS PURSUANT THERETO WOULD BE HIT BY TH E BAR OF LIMITATION IN AS MUCH AS THE ISSUANCE OF THE NOTICE AND THE COMMUNICATION FURNISHING OF REASONS GO HAND IN HAND . THE EXPRESSION 'WITHIN A REASONABLE PERIOD OF TIME' AS USED BY THE SUPREME COURT IN GKN DRIVESNAFTS (INDIA) LTD. CASE (SUPRA) CANNOT BE STRETCHED TO SUCH AN EXTENT THAT IT EXTEN DS EVEN BEYOND THE SIX YEARS STIPULATED IN SECTION 149. FOR THIS REASON A/SO, EVEN ASSUMING THAT THE COURT OVERLOOKS ALL THAT HAS HAPP ENED BETWEEN 11.5.04 WHEN THE PETITIONER SOUGHT THE REASONS, AND 5.11.07, WHEN THE SAID FORM ANNEXED TO THE COUNTER AFFIDAVIT, WAS FIFED IN THIS COURT THE VALIDITY OF NOTICE U/S 148 ISSUED ON 29 3 2004 AND ANY PROCEEDINGS PURSUANT THERETO CANNOT BE UPHELD' 2.3.7 THE ABOVE OBSERVATIONS WERE MADE BY THE HON'B LE DELHI HIGH COURT IN THE CONTEXT OF THE FACT THAT THE REASONS S UPPLIED BY THE DEPARTMENT ON 6.5.2005 WERE DIFFERENT FROM THE REAS ONS WHICH WERE RECORDED ON WHICH APPROVAL OF THE CIT WAS OBTAINED. AS PER THE HON'BLE DELHI HIGH COURT THE COMMUNICATED TO THE ASSESSEE , HAD NO MENTION OF FAILURE OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND HENCE THE REASONS COULD NOT HAVE GIVEN TO THE AO PO WER TO ISSUE NOTICE BEYOND FOUR YEARS BUT BEFORE THE END OF SIX YEARS. WHEN THE DEPARTMENT POINTED OUT THAT THE ACTUAL REASONS CONTAINED, THE REMARK OF THE AO THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS AND WHEN THE DEPARTMENT REQUESTED THE HIGH CO URT TO SUBSTITUTE THESE REASONS FOR THE OLD REASONS THEN THE HONBLE DELHI HIGH COURT MADE THE ABOVE REMARKS SINCE BY THAT TIME THE COURT WAS IN T HE MONTH OF NOVEMBER, 2007 MUCH BEYOND THE SIX YEARS FROM THE E ND OF RELEVANT YEAR. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 33 2.3.8 IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE HO N'BLE DELHI HIGH COURT HAS NOT PASSED ANY SUCH DECISION THAT THE NOTICE WI LL HAVE TO BE ACCOMPANIED WITH REASONS OR THAT THE REASONS WILL H AVE ALSO TO BE GIVEN BEFORE THE END OF SIX YEARS LIMIT MENTIONED IN SECT ION 149(1)(B). IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THERE IS NO SUC H CONCLUSION DRAWN BY ANY OF THE MAJOR INCOME-TAX REPORTS LIKE ITR, CTR O R TAXMAN. THE COPY OF THEIR HEAD NOTES, FACTS AND DECISIONS IN RESPECT OF CTR, ITR AS WELL AS TAXMAN ARE ENCLOSED HEREWITH. 2.3.9 IF THE INTERPRETATION DRAWN BY THE APPELLANT IS ACCEPTED THEN THE DECISION OF HON'BLE SUPREME COURT RELIED UPON BY DE LHI HIGH COURT GETS NEGATED AND BECOMES INVALID BECAUSE THE HON'BLE SUP REME COURT IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LTD. (SUPRA) HAS V ERY CLEARLY STATED THAT REASONS HAVE TO BE GIVEN AFTER THE ISSUE OF NOTICE U/S.148 AND WHEN THE ASSESSEE APPLIES FOR THE SAME. THE PROVISIONS OF SE CTION 149(1)(B) IS VERY CLEAR THAT NOTICE CAN BE ISSUED BEFORE THE END OF S IX YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. THEREFORE, THE INTERPRETA TION MADE BY THE ASSESSEE DESERVES TO BE IGNORED AS THERE IS NO SUCH DECISION MADE BY THE DELHI HIGH COURT. FURTHER, IT IS NOT OUT OF PLACE T O MENTION THAT THIS DECISION WAS DELIVERED IN NOVEMBER, 2008 IN A WRIT PETITION FILED BY THE APPELLANT. FROM THAT DATE AND TILL TODAY NO COURT H AS INTERPRETED THIS DECISION IN THE MANNER BEING SOUGHT BY THE APPELLAN T. THE HORBLE COURT MADE THOSE OBSERVATIONS WHEN THE DEPARTMENT WANTED NEW REASONS TO BE SUBSTITUTED IN NOVEMBER, 2007. 2.4.1 THE OBSERVATIONS OF THE HONBLE DELHI HIGH CO URT IF FOLLOWED BLINDLY IN OTHER CASES WHICH ON FACTS ARE DIVORCED FROM THE PECULIAR FACTS BEFORE THE HONBLE COURT WOULD MAKE THE WHOLE ASSES SMENT MACHINERY UNDER THE INCOME-TAX UNWORKABLE. THIS IS AMPLY DEMO NSTRATED BY ITS APPLICATION TO THE FACTS AT HAND ITSELF. AS PER THE SEQUENCE GIVEN IN THE DECISION OF GKN DRIVESHAFTS (SUPRA) IN RESPONSE TO NOTICE U/S 148 THE ASSESSEE SHOULD FIRST FILE A RETURN AND THEREAFTER IF_HE SO DESIRES MAKE A REQUEST FOR FUMBLING OF REASONS TO THE A.O. REASONS CANNOT BE GIVEN ALONQ WITH THE NOTICE BECAUSE THE I. T. ACT AND THE HON'BLE SUPREME COURT IN G. K. N._DRIVESHAFTS (SUPRA) REALIZED THAT THE ASSESSEE MUST COME CLEAN BY FILING THE RETURN OF TRUE INCOME IN R ESPONSE TO THE NOTICE U/S 148 AND THEREAFTER ON DEMAND.THE REASONS ARE TO BE GIVEN. ON RECEIPT OF SUCH A REQUEST AO SHOULD FURNISH THE REASONS WIT HIN A REASONABLE TIME 2.4.2 IT IS SUGGESTED BY THE APPELLANT THAT THE OBS ERVATIONS OF THE HON'BLE DELHI HIGH COURT TANTAMOUNT TO LAYING OUT THE POSIT ION THAT IN ALL CASES WHERE THE REASONS ARE NOT FURNISHED WITHIN THE TIME LIMIT PRESCRIBED U/S.149 THE ASSESSMENT WOULD BE BARRED BY LIMITATIO N. AS MENTIONED ITA NO.93/AHD/2007 ASST. YEAR 1998-99 34 ABOVE IN THE CASE AT HAND FOR AY 1998-99, THE NOTIC E U/S 148 WAS ISSUED ON 24.03.2005 AND WAS SERVED ON 28 03.2005. THE REQ UEST FOR FURNISHING OF THE REASONS WAS MADE ON 31-03-2005 THUS AS PER THIS IF THE OBSERVATIONS OF THE HON'BJE DELHI HJGH COURT ARE BL INDLY APPLIED, .REVENUE DID NOT HAVE A SINGLE DAY'S TIME TO FURNIS H THE REASONS AS THE TIME LIMIT OF 6 YEARS FROM THE END OF THE RELEVANT A.Y, FOR 1998-99 WAS 31.03.2005, THE DATE ON WHICH THE REQUEST FOR REASO NS WAS MADE. MORE SO IF THE APPELLANT HAD MADE THE REQUEST FOR REASONS A FTER 31.03.2005 IN FACT AS PER THE INTERPRETATION SUGGESTED BY THE APPELLAN T REVENUE WAS TRAPPED. AS THE REQUEST ITSELF WOULD HAVE BEEN MADE AFTER THE TIME LIMIT U/S 149 EVEN IF REASONS WERE TO BE FURNISHED AS PER THE APPELLANT THE CASE WOULD ANY WAY BE TIME BARRED JUST BECAUSE THE ASSES SEE REQUESTED FOR THE REASONS AFTER THE END OF SIX YEARS FROM THE END OF ASST. YEAR. THUS WHETHER A CASE COULD BE PROPERLY ASSESSED OR WOULD BE BARRED WOULD BE A FREE CHOICE AVAILABLE TO THE ASSESSEE AND SUCH A THING IS PATENTLY ABSURD. 2.4.3 THE SITUATION WOULD BE EVEN MORE ABSURD IF FO R A CASE FOR ASST. YEAR 1998-99 THE NOTICE U/S 148 WERE TO BE ISSUED A ND SERVED ON 31.03.2005. IN SUCH A CASE IF THE ASSESSEE WAS GRAN TED ANY TIME, LEAVE ALONE REASONABLE TIME, TO FILE THE RETURN IN RESPON SE THEN AS PER THE CONSTRUCTION SUGGESTED BY THE APPELLANT, THE RESULT ANT PROCEEDINGS ANY WAY WOULD BE TIME BARRED AS IN SUCH A CASE THE REQU EST OF THE ASSESSEE FOR FURNISHING OF REASONS CAN IN NO WAY BE ENTERTAI NED WITHIN THE TIME LIMIT PRESCRIBED U/S 149. 2.4.4 WFTH RESPECT TO THE SECOND REASON THAT THE PR OCEEDINGS U/S.148 IS INVALID, IT IS STATED THAT THE ASSESSES HAD NOT DIS CLOSED TRULY AND FULLY ALL MATERIAL FACTS. THIS IS CLEAR FROM THE FACT THAT IN PARA 4.3.6 ON PAGE 18 OF THE CIT APPEAL ORDER, THE CIT APPEAL HAS STATED THA T 'IT IS ALSO SEEN FROM ORIGINAL REVISED RETURN THAT IN RESPECT OF CLAIM U/ S.42 NO DETAILS WERE SUBMITTED AS TO HOW THE FIGURE OF EXPENDITURE U/S.4 2 OF RS.83,715,984/- WAS ARRIVED AT IN THE REVISED RETURN. THE CIT APPEA L HAS FURTHER STATED THAT IN PARA 3.4.7 THAT THE AUDITORS HAVE ALSO MADE A REMARK : 'AS PER THE OPINION OF THE INSTITUTE OF CHARTERED A CCOUNTANTS OF INDIA AND THAT OF THE COMPANY LAW BOARD, A COMPANY CANNOT REOPEN AND REVISED THE ACCOUNTS, ONCE ADOPTED BY THE SHAREHOLD ERS AT THE ANNUAL GENERAL MEETING CONTRARY TO THESE OPI NIONS, THE BOARD OF THE DIRECTORS OF THE COMPANY HAS REOPENED AND REVISED THE BALANCE-SHEET ACCOUNTS.' ITA NO.93/AHD/2007 ASST. YEAR 1998-99 35 2.4.5 THE CIT APPEAL FURTHER STATED IN PARA 4.3.8 O N PAGE 18 THAT IT IS NOTICED THAT IN ANNEXURE-2 THERE IS NO REFERENCE TO SECTION 42 OR THE DEDUCTION ALTHOUGH IN THE REVISED RETURN IT IS MENT IONED THAT EXPENDITURE U/S 42 ARE DETAILED AT ANNEXURE. FURTHER IN CLAUSE NO.4 OF FORM 3CD IT HAS ONLY BEEN MENTIONED THAT THERE ARE NO CAPITAL E XPENDITURE DEBITED TO THE P & L ACCOUNT EXCEPT EXPENSES COVERED U/S.42. I N OTHER WORDS FROM THE ASSESSMENT RECORDS AND ALSO FROM THE DETAILS FI LED DURING THE COURSE OF APPELLATE PROCEEDINGS IT IS CLEAR THAT NO DETAIL S WERE FURNISHED PROVIDING AS TO WHY THE CLAIM U/S 42 IS ADMISSIBLE . THE AO AND CIT APPEAL THEREFORE HELD THAT THE ASSESSEE HAS NOT DIS CLOSED TRULY AND FULLY ALL THE MATERIAL FACTS. 2.4.6 IN THIS REGARD, IT IS STATED THAT AS PER GENE RAL CIRCULAR NO 1 OF 2003 (COPY ENCLOSED) OF DEPARTMENT OF COMPANY AFFAI RS DATED 13 TH JANUARY, 2003 IT HAS BEEN MADE VERY CLEAR THAT THE COMPANY CAN REOPEN AND REVISE ITS ACCOUNTS OVEN AFTER ITS ADOPTION IN THE ANNUAL GENERAL MEETING BUT ONLY IN ORDER TO COMPLY WITH TECHNICAL REQUIREMENTS OF TAXATION LAWS AND FURTHER IF IT ADOPTS THE REVISED ANNUAL ACCOUNTS IN THE SUBSEQUENT ANNUAL GENERAL MEETING AND FILE WITH THE REGISTRAR OF COMPANIES. THEREFORE REVISION OF ACCOUNTS IS WITH A VERY STRICT RIDER. FROM THIS CIRCULAR IT IS ALSO VERY CLEAR THAT FOR T HE PURPOSE OF MAKING A CLAIM OF DEDUCTION THE ASSESSEE CANNOT REOPEN THE ACCOUNTS. FURTHER AS CLEARLY STATED BY THE A.C. SHAH & CO. CA QUOTED BY THE CIT APPEAL IN PARA 4.3.7, THE C.A. HAS ALSO CLEARLY STATED THAT N EITHER THE INSTITUTE OF CHARTERED ACCOUNTANTS NOR THE COMPANY LAW BOARD ALL OWS A COMPANY TO REVISE ITS ACCOUNTS ONCE IT HAS BEEN ADMITTED BY THE SHAREHOLDERS AT THE ANNUAL GENERAL MEETING EXCEPT PERMITTING ANY TECHNI CAL REQUIREMENT OF LAW. THEREFORE, THE ASSESSEE HAS RIOT DISCLOSED ANY SUCH CLAIM. 2.4.7 THEREFORE, THE ASSESSEE COULD NOT HAVE REVISE D ITS ACCOUNTS AND EVEN AFTER REVISING ITS ACCOUNTS AS STATED BY THE A O AND QUOTED BY C.A AND ALSO AS STATED BY THE CIT(A) IN PARA 4.1.3 TO P ARA 4.3.16 THE ASSESSEE HAD NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACT S AND THEREFORE, THE REOPENING WAS VALID. THIS GROUND OF APPEAL THEREFOR E, NEEDS TO BE DISMISSED. 2.4.8 IN THIS REGARD RELIANCE IS ALSO PLACED ON THE DECISION OF CIT(A) CONTAINED IN PARA 4.3 OF THE APPELLATE ORDER WHEREI N IT HAS BEEN CLEARLY DISCUSSED BY THE CIT(A) THAT THE CLAIM WAS MADE FOR THE FIRST TIME U/S 42 IN THE REVISED RETURN (PARA 4.3.5 OF THE APPELLATE ORDER). THE CIT(A) HAS FURTHER STATED IN PARA 4.3.6 PAGE 18 OF THE APPELL ATE ORDER THAT NO SUCH DETAILS WERE SUBMITTED AS TO HOW THIS EXPENDITURE W AS ARRIVED AT. IN VIEW OF THESE REASONS AS STATED BY THE CIT(A) IN PARA 4. 3.8 THAT NEITHER FROM ITA NO.93/AHD/2007 ASST. YEAR 1998-99 36 THE ASSESSMENT RECORDS NOR THE DETAILS FILED DURING THE ASSESSMENT PROCEEDINGS IT IS CLEAR THAT REASONS AS TO WHY THE CLAIM OF DEDUCTION U/S 42 IS ADMISSIBLE WAS NOT GIVEN. IN VIEW OF THESE RE ASONS, THE CIT(A) HAS CORRECTLY RELIED ON THE FOLLOWING DECISIONS TO SAY THAT IT IS NOT A CASE OF CHANGE OF OPINION: I) PRAFUL CHUNILAL PATEL VS. M.J. MAKWANA, ACIT -23 6 ITR 832 (GUJ) WHEREIN THE HONBLE GUJARAT HIGH COURT STATED AS UNDER : ..SINCE THE ASSESSING OFFICER AT THE FIRST ASSESS MENT IN THE YEAR 1991-32 NEVER REALLY FORMED AN OPINION ON THE QUESTION WHET HER THERE WAS A TRANSFER ON 19-9-1990 OF THE LAND IN QUESTION TO THE FIRM AN D THAT THE AMOUNTS CREDITED TO THE ACCOUNTS OF THE PARTNERS WHO HAD CONTRIBUTED THE LANDS TO THE FIRM, WERE MEANT TO BE THE PRICE OF THE LAND WHICH WAS TO BE A CTUALLY PAID FROM THE COLLECTIONS RECEIVED BY THE FIRM FROM MEMBERSHIP FE ES AS SOON AS RECEIVED, THERE WAS NO QUESTION OF ANY CHANGE OF OPINION WHEN ON THE RELEVANT FACTS BEING FOUND THE ASSESSING OFFICER WHITE PROTECTIVEL Y ASSESSING THE ASSESSEE FOR THE YEAR 1993-94, NOTED THAT THIS WAS A CASE FOR IS SUANCE OF A NOTICE UNDER SECTION 148, WHICH CAME TO BE ISSUED THEREAFTER. WH EN THE AMOUNT OF TAXABLE INCOME AND OF THE TAX PAYABLE THEREON WERE NOT ASCE RTAINED AT ALL BY THE ASSESSING OFFICER IN RESPECT OF THE TRANSFER MADE B Y THE ASSESSEE IN FAVOUR OF THE FIRM ON 19-9-1990, THERE OBVIOUSLY WAS NO OPINI ON FORMED IN THAT REGARD AND, CONSEQUENTLY, THERE WOULD NOT ARISE ANY QUEST ION OF A MERE CHANGE OF OPINION. IN CASES WHERE THE ASSESSING OFFICER HAD OVERLOOKED SOMETHING AT THE FIRST ASSESSMENT, THERE CAN BE NO QUESTION OF ANY CHANGE OF OPINION WHEN THE INCOME WHICH WAS CHARGEABLE TO TAX IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDER THE LAW BUT WAS NOT, DUE TO AN ERROR COM MITTED AT THE FIRST ASSESSMENT' II) THE RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF RENU SAGAR POWER COMPANY VS.I TO 117 ITR 719 (ALL) WHEREIN IT WAS OBSERVED THAT 'QUESTION OF CHANGE OF OPINION WOULD ARISE ONLY WHEN THE SAME HAS ALREADY BEEN EXPRESSED ON THE MAT ERIALS OF RECORD. IF THE MATERIALS WERE NOT BEFORE THE ASSESSING OFFICER THE QUESTION OF CHANGE OF OPINION DOES NOT ARISE. SIMILAR VIEW HAS BEEN EXPR ESSED BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF ITO VS. M.L TULS YAN - 111 ITR 25 (CAL.) WHEREIN IT IS BEEN STATED THAT 'THE FORMATION OF OP INION IS A POSITIVE ON THE PART OF ASSESSING OFFICER AND THE OPINION IS SAID T O BE FORMED WHERE THERE IS APPLICATION OF MIND WITH REFERENCE TO MATERIAL ON R ECORD AND THE PROVISIONS OF THE STATUTE AND IN CASE IN EARLIER PROCEEDINGS NO S UCH OPINION IS FORMED IT CANNOT BE CONTENTED THAT THE REASSESSMENT PROCEEDIN GS WERE INITIATED ON MERE CHANGE OF OPINION. MERE ASSESSMENT IN ROUTINE MANNE R DID NOT LEAD TO INFERENCE THAT THE OPINION WAN FORMED IN RESPECT OF ISSUES INVOLVED IN THE ASSESSMENT.' THE LD. DR PLACING RELIANCE ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF MAYAWATI 222 CTR 117 AND THE DECISI ON OF HONBLE ITAT ITA NO.93/AHD/2007 ASST. YEAR 1998-99 37 DELHI BENCH IN THE CASE OF E-FUNDS CORPORATION VS. ASSTT. DIRECTOR OF INCOME-TAX, CIRCLE 1(2), INTERNATIONAL TAXATION, NE W DELHI (2010) 42 SOT 165 (DELHI) SUBMITTED THAT RELIANCE PLACED BY T HE ASSESSEE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. VS. CIT 308 ITR 38 (DEL) AS WELL AS THE DECISION OF THE ITAT IN THE CASE OF GOMTI TEXTILES (P) LTD. VS. ITO (ITA NO.1528/DEL/2011 (DEL) WAS NOT CORRECT AS THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACT URING CO. VS. CIT (SUPRA) WAS PURELY ON FACTS OF THAT CASE WHERE WRON G REASONS WERE COMMUNICATED TO THE ASSESSEE WHEREAS ACTUAL REASONS WERE COMMUNICATED ONLY DURING THE COURSE OF WRIT PETITIO N BEFORE THE HONBLE HIGH COURT. CONCLUDING HIS ARGUMENT, THE LD. DR SUB MITTED THAT IN VIEW OF THE ABOVE, THE GROUND TAKEN BY THE ASSESSEE MAY KINDLY BE DISMISSED. 10. HEARD BOTH THE PARTIES. PERUSED THE RECORD AND CAREFULLY GONE THROUGH THE WRITTEN SUBMISSIONS, ARGUMENTS ADVANCED BY BOTH THE PARTIES BEFORE US AND THE CASE LAWS RELIED UPON BY BOTH THE PARTIES. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.11.1998 DECLARING TOTAL LOSS OF RS.10,92,27,8 77/-. THIS RETURN WAS PROCESSED U/S 143(1) ON 15.3.2000. SUBSEQUENTLY THE ASSESSEE FILED A REVISED RETURN DECLARING LOSS OF RS.4,09,24,063/-. THE ASSESSMENT U/S 143(3) OF THE ACT WAS FINALIZED ON 29.3.2001 WITH A N ASSESSED LOSS OF RS.4,08,35,802/-. THEREAFTER THE CASE WAS REOPENED U/S 147 BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON 24.3.2005 WH ICH WAS SERVED ON THE ASSESSEE ON 28.3.2005. THE ASSESSEE REQUESTED THE A O TO PROVIDE THE ITA NO.93/AHD/2007 ASST. YEAR 1998-99 38 REASONS FOR REOPENING THE ASSESSMENT ON 31.3.2005. THE AO COMMUNICATED THE REASONS FOR REOPENING OF ASSESSMEN T ON 6.5.2005. PRELIMINARY OBJECTIONS RAISED BY THE ASSESSEE AGAIN ST THE REOPENING WERE ALSO MET BY THE AO BEFORE ASSESSMENT U/S 143(3) R.W .S. 147 WAS COMPLETED ON 17.2.2006 DETERMINING TOTAL REVISED LO SS OF RS.2,27,96,315/-. AGGRIEVED BY THIS ORDER OF AO THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AND REO PENING OF THE ASSESSMENT WAS CHALLENGED ON THE GROUND THAT ACCORDING TO THE PROVISO TO SECTION 147 IF AN ASSESSMENT U/S 143(3) OF THE ACT HAS ALREADY BEEN MADE FOR ANY ASSESSMENT YEAR THE REASSESSMENT PROCEEDINGS CANNOT BE INITIATED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THAT ASST. YEAR, UNLESS THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO FILE A RETURN OF INC OME U/S 139 OR THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE FILED ITS RETURN OF INCOME WITHIN THE STAT UTORY TIME LIMIT AND HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR ITS ASSESSMENT, THEREFORE, REOPENING OF THE ASSESSMENT CARRIED OUT BY THE AO WAS BAD IN LAW. HOWEVER, LD. CIT(A) DISMISSED, THE APPEAL OF A SSESSEE BY HOLDING THAT FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS WAS NOT DONE BY THE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS , THEREFORE, HE HELD THE RE-ASSESSMENT PROCEEDINGS TO BE VALID. FURTHER AGGRIEVED, NOW THE ASSESSEE IS IN APPEAL BEFORE US. 11. BEFORE US, THE ASSESSEES ARGUMENTS AGAINST RE- ASSESSMENT U/S 147 ARE TWO FOLDS- (I) THE NOTICE ISSUED U/S 148 WAS INVALID BECAUSE T HE REASONS FOR REOPENING HAVE BEEN GIVEN BEYOND THE TIME BARRING LIMIT AND I N THIS REGARD THE ITA NO.93/AHD/2007 ASST. YEAR 1998-99 39 ASSESSEE HAS RELIED ON THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF HARYANA ACRILYC MANUFACTURING CO. (SUPRA)A ND (II) THERE WAS NO FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULL AND TRUE ALL MATERIAL FACTS IN RELATION TO THE DEDUCTIO N CLAIMED UNDER SECTION 42, HENCE THE NOTICE WAS INVALID AS IT WAS TIME BAR RED AS IT IS BEYOND FOUR YEARS. 12. COMING TO THE FIRST ARGUMENT OF THE ASSESSEE WE FIND THAT THE NOTICE FOR REOPENING THE ASSESSMENT U/S 147 WAS ISSUED ON 24.3.2005 AND IT WAS SERVED ON THE ASSESSEE ON 28.3.2005 ACCORDING TO TH E REVENUE AND ON 29.3.2005 ACCORDING TO THE ASSESSEE. THE REOPENING OF ASSESSMENT WAS GETTING TIME BARRED ON 31.3.2005 I.E. 6 YEARS FROM THE END OF THE ASSESSMENT YEAR 1998-99. THE ASSESSEE REQUESTED THE AO TO PROVIDE REASONS ON 31.3.2005 FOR REOPENING THE ASSESSMENT. THE AO COMMUNICATED THE REASONS ON 6.5.2005. THE ASSESSEE S CASE IS THAT AS PER SECTION 148(2) REASONS ARE REQUIRED TO BE ISSUED TO THE ASSESSEE ALONG WITH THE NOTICE ISSUED U/S 148. FOR MAKING THIS SUBMISSI ON RELIANCE WAS PLACED ON THE CASE OF MITHLESH KUMAR TRIPATHI VS. CIT 280 ITR 16 (ALL). IT WAS ALSO SUBMITTED THAT IF THE REASONS ARE NOT COMMUNIC ATED TO THE ASSESSEE DURING THIS PERIOD THE RE-ASSESSMENT PROCEEDINGS WE RE BAD IN LAW. FOR MAKING THIS SUBMISSION THE ASSESSEE RELIED ON THE D ECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRILYC MAN UFACTURING CO. (SUPRA). ITA NO.93/AHD/2007 ASST. YEAR 1998-99 40 13. AT THIS STAGE IT WILL BE PERTINENT TO REFER TO THE RELEVANT SECTIONS WITH REGARD TO THE REOPENING OF ASSESSMENT I.E. SECTION 147, SEC.148 & SEC.149 WHICH ARE AS UNDER :- SEC.147. IF ASSESSING OFFICER HAS REASON TO BELIEVE THAT AN Y INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 15 3, ASSESSEE OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SU BSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RE COMPUTED THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THI S SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASS ESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION143 OR THIS SECTION HAS BEEN MADE FOR THE RE LEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION A FTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN UNDER SECTION139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT Y EAR: [ PROVIDED FURTHER THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVI NG MATTERS WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REV ISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT]. 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 FORE GOING PROVISO. EXPLANATION 2 - FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT, NAMELY :- ITA NO.93/AHD/2007 ASST. YEAR 1998-99 41 (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INC OME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM A MOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED B Y THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, AL LOWANCE OR RELIEF IN THE RETURN; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERSTATED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTH ER ALLOWANCES UNDER THIS ACT HAS BEEN COMPUTED. EXPLANATION 3 FOR THE PURPOSE OF ASSESSMENT OR RE ASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR R EASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PRO CEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 148. ] [ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMEN T. SEC. 148. [(1)] BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION UNDER SECTION 147, THE ASSESSING OFFI CER SHALL, AS MAY BE SPECIFIED IN THE NOTICE, A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER T HIS ACT DURING THE PREVIOUS YEAR CORRESPONDING TO THE RELEVANT ASSESSM ENT YEAR, IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANN ER AND SETTING FORTH SUCH OTHER PARTICULARS MAY BE PRESCRIBED; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF S UCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION139:] [PROVIDED THAT IN A CASE ITA NO.93/AHD/2007 ASST. YEAR 1998-99 42 (A) WHERE A RETURN HAS BEEN FURNISHED DURING THE PE RIOD COMMENCING ON THE LST DAY OF OCTOBER, 1991 AND ENDI NG ON THE 30 TH DAY OF SEPTEMBER, 2005 IN RESPONSE TO A NOTICE SERVED UNDER THIS SECTION, AND (B) SUBSEQUENTLY A NOTICE HAS BEEN SERVED UNDER SUB -SECTION (2) OF SECTION 143 AFTER THE EXPIRY OF TWELVE MONTHS SP ECIFIED IN THE PROVISO TO SUB-SECTION (2) OF SECTION 143, AS I T STOOD IMMEDIATELY BEFORE THE AMENDMENT OF SAID SUB-SECTIO N BY THE FINANCE ACT, 2002 (20 OF 2002) BUT BEFORE THE EXPIR Y OF THE TIME LIMIT FOR MAKING THE ASSESSMENT, RE-ASSESSMENT OR RECOMPUTATION AS SPECIFIED IN SUB-SECTION (2) OF SE CTION 153, EVERY SUCH NOTICE REFERRED TO IN THIS CLAUSE SHALL BE DEEMED TO BE A VALID NOTICE: [PROVIDED FURTHER THAT IN A CASE (A) WHERE A RETURN HAS BEEN FURNISHED DURING THE PE RIOD COMMENCING ON THE LST DAY OF OCTOBER, 1991 AND ENDI NG ON THE 30 TH DAY OF SEPTEMBER, 2005, IN RESPONSE TO A NOTICE SERVED UNDER THIS SECTION, AND (B) SUBSEQUENTLY A NOTICE HAS BEEN SERVED UNDER CLAUSE (II) OF SUB- SECTION (2) OF SECTION 143 AFTER THE EXPIRY OF TWEL VE MONTHS SPECIFIED IN THE PROVISO TO CLAUSE (II) OF SUB-SECT ION (2) OF SECTION 143, BUT BEFORE THE EXPIRY OF THE TIME LIMI T FOR MAKING THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION AS SP ECIFIED IN SUB-SECTION (2) OF SECTION 153, EVERY SUCH NOTICE R EFERRED TO IN THIS CLAUSE SHALL BE DEEMED TO BE A VALID NOTICE.] EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT NOTHING CONTAINED IN THE FIRST PROVISO OR THE SECON D PROVISO SHALL APPLY TO ANY RETURN WHICH HAS BEEN FURNISHED ON OR AFTER TH E 1ST DAY OF OCTOBER, 2005 IN RESPONSE TO A NOTICE SERVED UNDER THIS SECT ION.] [(2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING AN Y NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR DOING SO.] TIME LIMIT FOR NOTICE. SEC. 149. [(1) NO NOTICE UNDER SECTION 148 SHALL BE ISSUED F OR THE RELEVANT ASSESSMENT YEAR, - ITA NO.93/AHD/2007 ASST. YEAR 1998-99 43 [(A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FALLS UNDER CLAUSE (B); (B) IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAV E ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNDER THE I NCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOU NTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE F OR THAT YEAR. ] EXPLANATION IN DETERMINING INCOME CHARGEABLE TO T AX WHICH HAS ESCAPED ASSESSMENT FOR THE PURPOSES OF THIS SUB-SEC TION, THE PROVISIONS OF EXPLANATION 2 OF SECTION 147 SHALL APPLY AS THEY FO R THE PURPOSES OF THAT SECTION.] (2) THE PROVISIONS OF SUB-SECTION (1) AS TO THE ISS UE OF NOTICE SHALL SUBJECT TO THE PROVISIONS OF SECTION 151. (3) IF THE PERSON ON WHOM A NOTICE UNDER SECTION 14 8 IS TO BE SERVED IS A PERSON TREATED AS AGENT OF A NON-RESIDENT UNDER S ECTION 163 AND THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION TO BE MAD E IN PURSUANCE OF THE NOTICE IS TO BE MADE ON HIM AS THE AGENT OF SUC H NON-RESIDENT, THE NOTICE SHALL NOT BE ISSUED AFTER EXPIRY OF A PERIOD OF TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT IS CLEAR FROM THE ABOVE THAT NOWHERE IN THE PROV ISIONS OF SECTIONS 147, 148 & 149 IT HAS BEEN MENTIONED THAT REASONS HAVE A LSO TO BE GIVEN BEFORE THE END OF 6 YEARS FROM THE END OF RELEVANT ASST. YEAR. AS A MATTER OF FACT HONBLE SUPREME COURT IN THE CASE OF GKN D RIVESHAFTS (INDIA) LTD. (SUPRA) HAS LAID DOWN THE FOLLOWING PROCEDURE TO BE FOLLOWED IN SUCH CASES:- ' . . HOWEVER, WE CLARIFY THAT WHEN A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING NOTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REASONS, TH E NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE A ND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE INSTANT CASE, AS THE REASONS HAVE BEE N DISCLOSED IN THESE PROCEEDINGS, THE ASSESSING OFFICER HAS TO DIS POSE OF THE ITA NO.93/AHD/2007 ASST. YEAR 1998-99 44 OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDING WITH THE ASSESSMENT IN RESPECT OF THE ABOVE SAID FI VE ASSESSMENT YEARS.' (P. 964) IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE AO IS NO T BOUND TO GIVE REASONS FOR REOPENING THE ASSESSMENT ALONG WITH NOTICE UNDE R SECTION 148 AND IT IS ONLY WHEN ASSESSEE DESIRES TO SEEK THE REASONS FOR ISSUING NOTICE U/S 148 THE AO IS BOUND TO FURNISH REASONS WITHIN A REASONA BLE TIME. IN THIS CASE THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE SO UGHT THE REASONS ON 31.3.2005 I.E. THE LAST DATE ON WHICH THE REOPENING OF THE ASSESSMENT WAS GETTING TIME BARRED. THIS IS ALSO NOT IN DISPUTE TH AT THIS LETTER DATED 31.3.2005 SEEKING REASONS FOR REOPENING WAS FILED B Y THE ASSESSEE IN TAPAL. THE REASONS WERE SUPPLIED TO THE ASSESSEE ON 6.5.2005 I.E. WITHIN 5 WEEKS OF APPLICATION WHICH ACCORDING TO US IS A REA SONABLE TIME. RELIANCE ON THE DECISION IN THE CASE OF HARYANA ACRILYC MANU FACTURING CO. (SUPRA) BY THE ASSESSEE IS MISPLACED AS IT WAS PURELY ON FA CTS OF THAT CASE WHERE WRONG REASONS WERE COMMUNICATED TO THE ASSESSEE WHE REAS ACTUAL REASONS WERE COMMUNICATED ONLY DURING THE COURSE OF WRIT PE TITION BEFORE THE HONBLE HIGH COURT. THIS VIEW OF OURS GETS SUPPORT FROM THE DECISION OF THE HONBLE DELHI HIGH COURT ITSELF IN THE CASE OF MAYABATI VS. CIT 222 CTR 117 AND THE DECISION OF ITAT IN THE CASE OF E-F UNDS CORPORATION (2010) 42 SOT 165. IN THE CASE OF MAYAVATI VS. CIT THE HONBLE DELHI ITA NO.93/AHD/2007 ASST. YEAR 1998-99 45 HIGH COURT THE JUDGMENT IN THE CASE OF HARYANA ACRI LYC MANUFACTURING CO. (SUPRA) WAS EXPLAINED AS UNDER :- MR. SALVE LEARNED SENIOR COUNSEL APPEARING FOR THE PETITIONER, HAS SOUGHT STRONG SUPPORT FROM THE DECISION OF A DIVISION BENC H OF THIS COURT OF WHICH MY ESTEEMED BROTHER, RAJIV SHAKDHER, I. WAS A MEMBER, IN HARYANA ACRYLIC MFG. CO. VS. CIT DECIDED ON 3 RD NOV.2008 [REPORTED AT (2008) 220 CTR (DELHI) 450-ED.]. VARIOUS ISSUES HAD ARISEN IN THAT CASE, N ONE OF WHICH, IN OUR OPINION IS OF ANY RELEVANCE TO THE DETERMINATION OF THE QUE STION WHICH FALL FOR DETERMINATION BY US. IN HARYANA ACRYLIC (SUPRA) IT HAD, INTER ALIA, BEENOPINED THAT FOR SECTION 147 TO BECOME OPERATIONAL IT IS ES SENTIAL THAT IT SHOULD BE ALLEGED THAT ESCAPEMENT OF INCOME IS A CONSEQUENCE OF THE ASSESSEE HAVING FAILED TO FULLY AND TRULY DISCLOSE ALL MATERIAL FAC TS NECESSARY FOR THE COMPREHENSIVE COMPLETION OF THE ASSESSMENT. WHAT HA D TRANSPIRED IN THAT CASE WAS THAT WHILST THE INITIATION OF THE PROCEEDINGS B Y THE AO FOR APPROVAL OF THE CIT MENTIONED THE FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATING TO THE ALLEGED ACCOMMOD ATION ENTRIES, THE REASONS DISCLOSED TO THE ASSESSEE ON ITS REQUEST MERELY MENTIONED THOSE ACCOMMODATION ENTRIES AS BEING THE FOUNDATION FOR T HE BELIEF THAT INCOME TO THE EXTENT OF RS.5,00,000/- HAD ESCAPED ASSESSMENT. THE DISTINCTION BETWEEN THESE TWO SITUATIONS HAS BEEN PERSPICUOUSLY EMPHASI ZED AND ADUMBRATED. THE FINDING WAS THAT A REASON TO BELIEVE, WITHOUT THE E SSENTIAL CONCOMITANT OF IT BEING A RESULT OF THE FAILURE OF THE ASSESSEE TO FU LLY AND TRULY DISCLOSE ALL MATERIAL FACTS WOULD RENDER THE REASSESSMENT UNDER SECTION 147/148 UNSUSTAINABLE. IN ORDER TO OVERCOME THIS DIFFICULTY , IT HAS BEEN ARGUED ON BEHALF OF THE REVENUE THAT SINCE THE AO HAD DULY RE CORDED THE FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE AL L MATERIAL FACTS THIS NOTATION SHOULD BE ACTED UPON AND THE REASONS CONVEYED TO TH E ASSESSEE WHICH WERE PREDICATED ON THE CITS NOTING SHOULD BE IGNORED. T HE CONTENTION OF THE REVENUE WAS THAT THE ASSESSEE HAD BEEN MADE AWARE O F THE OPINION OF THE AO IN THE COUNTER AFFIDAVIT OF THE REVENUE FILED ON 5 TH NOV., 2007. IT WAS IN THAT CONTEXT THAT IT WAS OBSERVED IN HARYANA ACRYLIC (SU PRA) THAT SIX YEARS HAD ELAPSED BY THAT TIME GKN DRIVESHAFTS (INDIA) LTD. V S. ITO (2003) 179 CTR (SC) 11: (2003) 1 SCC 72 WAS APPLIED TO EMPHASISE T HE FACT THAT THE REASONS SHOULD HAVE BEEN FURNISHED WITHIN A REASONABLE TIME . IT WAS CLARIFIED THAT WHERE THE NOTICE HAS BEEN ISSUED WITHIN THE SAID P ERIOD OF SIX YEARS, BUT THE REASONS HAVE NOT BEEN FURNISHED WITHIN THAT PERIOD IN OUR VIEW, ANY PROCEEDINGS PURSUANT THERETO WOULD BE HIT BY THE BA R OF LIMITATION INASMUCH AS THE ISSUANCE OF THE NOTICE AND THE COMMUNICATION AND FURNISHING OF REASONS GO HAND IN HAND. THE EXPRESSION WITHIN A REASONABL E PERIOD OF TIME AS USED BY THE SUPREME COURT IN GKN DRIVESHAFTS (SUPRA) CAN NOT BE STRETCHED TO SUCH AN EXTENT THAT IT EXTENDS EVEN BEYOND THE SIX YEARS STIPULATED IN SECTION 149. THE FACTUAL MATRIX IN HARYANA ACRYLIC (SUPRA) IS IN APPLICABLE TO THE SEQUENCE OF EVENTS BEFORE US AND THEREFORE, RELIANCE BY MR. SALVE TO THIS DECISION IS INAPPOSITE. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 46 AND IN THE CASE OF E-FUNDS CORPORATION THE ITAT DEL HI (2010) 42 SOT 165 VIDE ITS ORDER DATED 30.09.2010 HAS EXPLAINED T HE JUDGMENT IN THE CASE OF HARYANA ACRYLIC 220 CTR 450 AS UNDER :- 7.13 FOR ASSESSMENT YEAR 2000-01, THE ASSESSEE HAS CONTENDED THAT THE REASONS FOR REOPENING WERE NOT RECORDED AND THEREFO RE THE SUBSEQUENT ASSESSMENT PROCEEDINGS BECOMES INVALID. THE CONTENT ION OF THE ASSESSEE THAT NO REASONS WERE RECORDED FOR ASSESSMENT YEAR 2000-0 1 IS FACTUALLY WRONG AS RELEVANT ASSESSMENT RECORDS HAVE BEEN PRODUCED BEFO RE THE BENCH WHICH REVEALS THAT REASONS ARE DULY RECORDED AND PLACED O N FILE. COPIES OF SUCH REASONS HAVE BEEN PROVIDED TO THE COUNSEL FOR THE A SSESSEE. 7.14 IN THIS REGARD, IT IS SUBMITTED THAT ISSUE HAS BEEN DISCUSSED BY CIT(A) ON PAGE 56 ONWARDS OF HIS ORDER. THE AO HAS REOPENE D DIFFERENT ASSESSMENT YEARS BY WRITING SIMILAR REASONS AS THE FACTS WERE EXACTLY THE SAME FOR ALL ASSESSMENT YEARS CONCERNED. THE ASSESSEE SAYS THAT REASONS FOR ALL ASSESSMENT YEARS EXCEPT ASSESSMENT YEAR 2000-01 WERE COMMUNICA TED AND OBJECTIONS THEREIN WERE FILED WHICH WERE DULY RESPONDED TO BY THE AO. HOWEVER, BECAUSE OF CHANGE IN JURISDICTION OF THESE CASES FROM ONE A O TO ANOTHER, THE SUCCESSOR AO WAS NOT IN KNOWLEDGE OF ANY REQUEST OF THE ASSES SEE ASKING FOR A COPY OF REASONS FOR ASSESSMENT YEAR 2000-01 AS SUCH REQUEST IF ANY WAS NEVER BROUGHT TO HIS KNOWLEDGE. THE REASONS FOR ASSESSMENT YEAR 2 000-01 ARE SIMILAR TO THOSE FOR OTHER ASSESSMENT YEARS, WHICH WERE UNDISP UTEDLY COMMUNICATED TO THE ASSESSEE. AT THE MOST, IT MAY BE CALLED PROCEDU RAL LAPSE, WHICH IS CURABLE AND WHICH IS NOT FATAL TO THE REASSESSMENT PROCEEDI NGS. HONBLE DELHI TRIBUNAL IN CASE OF ITO VS. SMT. GURINDER KAUR (200 6) 102 ITD 189 HAS HELD THAT - IN THE LIGHT OF JUDGMENT OF SUPREME COURT IN THE C ASE OF S. NARAYANAPPA VS. CIT 63 ITR 219 THERE IS NO REQUIREMENT IN THE ACT T HAT THE AO HAS TO COMMUNICATE THE REASONS FOR REOPENING THE ASSESSMEN T TO THE ASSESSEE. NON- COMMUNICATION OF REASONS EVEN ACCORDING TO JUDGMENT OF THE SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LTD. VS. ITO 259 ITR 19 IS NOT CONSIDERED TO BE FATAL TO THE VALIDITY OF THE REASSESSMENT PROCEEDIN GS 7.15 ASSESSEES RELIANCE ON THE CASE OF HARYANA ACR YLIC MANUFACTURING CO.S CASE (SUPRA) IS MIS PLACED AS THE FACTS IN TH AT CASE ARE ABSOLUTELY DIFFERENT. IN THAT CASE, WRONG REASONS WERE COMMUNI CATED TO THE ASSESSEE WHEREAS ACTUAL REASONS WERE COMMUNICATED ONLY DURIN G THE COURSE OF WRIT PETITION BEFORE THE HONBLE HIGH COURT. THE COURT O N BASIS OF THESE PECULIAR FACTS HAS HELD THAT SUCH A LONG DELAY CANNOT BE REG ARDED AS REASONABLE PERIOD. IN PRESENT CASE UNDER CONSIDERATION, THE SUCCESSOR AO WAS NOT AT ALL REQUESTED BY THE ASSESSEE TO SUPPLY REASONS AND NO SUCH REQUEST WAS MADE EVEN BEFORE CIT(A). IN RESPONSE TO LETTER DATED 22. 11.2008 MADE BY THE ASSESSEE BEFORE SUCCESSOR AO THE CONCERNED AO SUPPL IED COPY OF REASON OF ASSESSMENT YEARS AS REQUESTED ON 28.11.2008. THEREF ORE, IT CANNOT BE SAID THAT ITA NO.93/AHD/2007 ASST. YEAR 1998-99 47 AO HAS NOT COMPLIED WITH RATIO OF DECISION OF GKN D RIVESHAFTS (INDIA) LTD. VS. ITO (2003) 259 ITR 19 (SC). IN VIEW OF ABOVE, IT IS CLEAR THAT THE RELIANCE BY THE ASSESSEE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MFG. CO. (SUPRA) AS WELL AS THAT OF ITAT, DELHI BEN CH IN THE CASE OF GOMTI TEXTILES (P) LTD. VS. ITO ITA NO.1520/DEL/201 1 WHICH WAS PASSED BY THE TRIBUNAL FOLLOWING THE DECISION OF HA RYANA ACRYLIC MFG. CO. (SUPRA) WAS MISPLACED. IN VIEW OF THE ABOVE DEC ISION OF GKN DRIVESHAFTS (INDIA) LTD. (SUPRA), MAYAVATI VS. CIT AND E-FUNDS CORPORATION (SUPRA) THE ACTION OF THE AO IN GIVING REASONS WITHIN 5 WEEKS OF REQUEST OF SUPPLY OF REASONS BY THE ASSESS EE IS AS PER LAW. THERE IS NO REQUIREMENT OF LAW TO GIVE REASONS BEFORE THE END OF LIMITATION PERIOD OF ISSUING NOTICE U/S 148. ALL THAT THE LAW REQUIRES IS THAT THE AO SHOULD RECORD THE REASONS AND NOTICE SHOULD BE ISSU ED AND SERVED WITHIN SIX YEARS FROM THE END OF RELEVANT ASST. YEAR. IN T HE PRESENT CASE THE REASONS HAVE BEEN RECORDED WHICH IS CLEAR FROM THE ASSESSMENT RECORD BEING PRODUCED BEFORE US AND NOTICE U/S 148 WAS ISS UED ON 24.3.2005 AND THE SAME WAS SERVED ON ASSESSEE ON 28.3.2005. THE A SSESSEE ASKED FOR THE REASONS VIDE LETTER DATED 31.3.2005 GIVEN IN TAPAL ON 31.3.2005 AND THE REASONS WERE RECEIVED BY THE ASSESSEE ON 6.5.2005. THEREFORE, THE REQUIREMENT OF LAW AS LAID DOWN BY THE HONBLE APEX COURT DECISION IN THE CASE OF GKN DRIVE-SHAFTS (INDIA) LTD. (SUPRA) H AS BEEN FULFILLED BY ITA NO.93/AHD/2007 ASST. YEAR 1998-99 48 THE AO BY GIVING THE REASONS WITHIN A REASONABLE TI ME. THE NOTICE ISSUED BY THE AO U/S 148 IS THEREFORE, VALID. 14. NOW COMING TO THE SECOND ARGUMENT ADVANCED BY T HE ASSESSEE THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN FURNISHING FULL AND TRUE ALL MATERIAL FACTS IN RELATION TO THE DEDUCTION CLA IMED U/S 42 AND HENCE NOTICE WAS TIME BARRED AS IT IS BEYOND 4 YEARS. THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON 30-11-1998. NOTICE U/S. 14 8 WAS ISSUED BY A.O. ON 24-3-2005 I.E. BEYOND 4 YEARS FROM THE RELEVANT ASSESSMENT YEAR. AS PER THE PROVISO TO SECTION (4) NO ACTION UNDER SECT ION147 CAN BE INITIATED UNLESS IT IS FOUND THAT THE ASSESSMENT OF INCOME WA S BY REASON OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. PARAGRAPH-2 OF REASONS RE CORDED FOR REOPENING OF ASSESSMENT BY A.O. READS AS UNDER:- 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT ASSESSMENT YEARS IT IS HELD THAT THE ASS ESSEE IS NOT ENTITLED TO DEDUCTION U/S. 42(1) OF THE I.T. ACT, A S IT WAS NOT SPECIFIED IN THE AGREEMENT ENTERED INTO BY THE ASSE SSEE WITH THE CENTRAL GOVERNMENT .IN VIEW OF THE PROVISIONS OF SE CTION 42(1) OF THE I.T. ACT, THE EXPENDITURE INCURRED BY THE ASSES SEE IN RESPECT OF DRILLING AND EXPLORATION ACTIVITIES OR FOR SERVICES OR IN RESPECT OF PHYSICAL ASSET USED IN THAT CONNECTION IS ALLOWABLE ONLY IF SUCH ALLOWANCE IS SPECIFIED IN THE AGREEMENT ENTERED INT O BY THE ASSESSEE WITH THE CENTRAL GOVERNMENT. THE ASSESSEE HAS NOT SUBMITTED COPY OF THE AGREEMENT WITH THE CENTRAL GO VERNMENT EITHER IN THE RETURN OF INCOME FILED OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THIS MAKES IT CLEAR THAT TH E ASSESSEE HAS SOUGHT TO AVAIL OF THE DEDUCTION WRONGFULLY BY NOT DISCLOSING FULL FACTS NECESSARY FOR THE ENTITLEMENT FOR THE DEDUCTI ON. THOUGH THE ASSESSEE HAS MADE PASSING REFERENCE OF THE AGREEMEN T IN THE NOTE ATTACHED TO THE FINANCIAL STATEMENT ALONG WITH RETU RN WHAT WAS ITA NO.93/AHD/2007 ASST. YEAR 1998-99 49 SPECIFIED IN THE AGREEMENT IS NOT MENTIONED. THE AS SESSEE HAS CLAIMED DEDUCTION U/S. 42 WITHOUT DISCLOSING SOME O F THE EXPENDITURE SPECIFIED IN THE AGREEMENT. THE INCOME HAS THEREFORE ESCAPED ASSESSMENT FOR FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE PURPOSE OF ITS ASSESSMENT. THE LD. CIT (A) AFTER ANALYZING THE FACTS OF THE C ASE IN DETAIL ALSO HELD THAT THERE WAS NO FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS FOR CLAIMING DEDUCTION U/S.42 OF THE ACT. AT THIS STAGE IT WILL BE PERTINENT TO REFER TO RELEVANT PROVISIONS OF SECTION 42 OF THE A CT:- SECTION 42 [(1)] FOR THE PURPOSE OF COMPUTING THE PROFITS OR GAINS OF ANY BUSINESS CONSISTING OF THE PROSPECTING FOR OR E XTRACTION OR PRODUCTION OF MINERAL OILS IN RELATION TO WHICH THE CENTRAL GO VERNMENT HAS ENTERED INTO AN AGREEMENT WITH ANY PERSON FOR THE ASSOCIATI ON OR PARTICIPATION [OF THE CENTRAL GOVERNMENT OR ANY PERSON AUTHORIZED BY IT IN SUCH BUSINESS] (WHICH AGREEMENT HAS BEEN LAID ON THE TABLE OF EACH HOUSE OF PARLIAMENT), THERE SHALL BE MADE IN LIEU OF, OR IN ADDITION TO, THE ALLOWANCES ADMISSIBLE UNDER THIS ACT, SUCH ALLOWANC ES AS ARE SPECIFIED IN THE AGREEMENT IN RELATION (A) TO EXPENDITURE BY WAY OF INFRUCTUOUS OR ABORTIV E EXPLORATION EXPENSES IN RESPECT OF ANY AREA SURRENDERED PRIOR T O THE BEGINNING OF COMMERCIAL PRODUCTION BY THE ASSESSEE; (B) AFTER BEGINNING OF COMMERCIAL PRODUCTION, TO EX PENDITURE INCURRED BY THE ASSESSEE, WHETHER BEFORE OR AFTER S UCH COMMERCIAL PRODUCTION, IN RESPECT OF DRILLING OR EX PLORATION ACTIVITIES OR SERVICES OR IN RESPECT OF PHYSICAL AS SETS USED IN THAT CONNECTION, EXCEPT ASSETS ON WHICH ALLOWANCES FOR DEPRECIATION IS ADMISSIBLE UNDER SECTION 32: [PROVIDED THAT IN RELATION TO ANY AGREEMENT ENTERE D INTO AFTER THE 31 ST DAY OF MARCH, 1981, THIS CLAUSE SHALL HAVE EFFECT SUBJECT TO THE MODIFICATION THAT THE WORDS AND FIGU RES EXCEPT ASSETS ON WHICH ALLOWANCE FOR DEPRECIATION IS ADMISSIBLE UNDER SECTION 32 HAD BEEN OMITTED; AND] ITA NO.93/AHD/2007 ASST. YEAR 1998-99 50 (C) TO THE DEPLETION OF MINERAL OIL IN THE MINING A REA IN RESPECT OF THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YE AR IN WHICH COMMERCIAL PRODUCTION IS BEGUN AND FOR SUCH SUCCEEDING YEAR OR YEARS AS MAY BE SPECIFIED IN THE AGREEMENT; AND SUCH ALLOWANCES SHALL BE COMPUTED AND MADE IN T HE MANNER SPECIFIED IN THE AGREEMENT, THE OTHER PROVIS IONS OF THIS ACT BEING DEEMED FOR THIS PURPOSE TO HAVE BEEN MODIFIED TO THE EXTENT NECESSARY TO GIVE EFFECT TO THE TERMS OF THE AGREEMENT. 15. IT IS CLEAR FROM THE ABOVE THAT CLAIM OF DEDUCT ION UNDER SECTION 42 IS ALLOWABLE IF THE FOLLOWING THREE CONDITIONS ARE FULFILLED:- (I) THERE SHOULD BE AN AGREEMENT OF THE ASSESSEE WITH T HE CENTRAL GOVERNMENT. (II) ONLY THOSE ALLOWANCES WHICH ARE SPECIFIED IN RELATI ON TO VARIOUS SPECIFIC NATURE AS MENTIONED IN SUB-CLAUSES (A), (B ) & (C) OF SECTION 42 ARE ALLOWABLE. (III) SUCH ALLOWANCES SHALL BE COMPUTED AND MADE IN THE M ANNER SPECIFIED IN THE AGREEMENT. THERE IS NO DISPUTE ABOUT THE FACT THAT THE AGREEM ENT BETWEEN ASSESSEE AND CENTRAL GOVERNMENT WAS NEITHER FILED B Y THE ASSESSEE ALONGWITH THE RETURN OF INCOME NOR DURING THE ORIGI NAL ASSESSMENT PROCEEDINGS. THIS FACT WAS ADMITTED BY LD. COUNSEL OF THE ASSESSEE DURING THE COURSE OF HEARING BEFORE US, WHEN SPECIF IC QUERY WAS RAISED BY THE BENCH IN THIS RESPECT. IN VIEW OF THE ADMITTED FAILURE ON THE PART OF THE ASSESSEE TO FILE THE PRIMARY REQUIREMENT OF FILING OF AGREEMENT BETWEEN ASSESSEE AND CENTRAL GOVERNMENT TO CLAIM DEDUCTION U/S.42 OF THE ACT, IT ITA NO.93/AHD/2007 ASST. YEAR 1998-99 51 CANNOT BE SAID THAT THERE WAS FULL AND TRUE DISCLOS URE OF ALL MATERIAL FACTS IN RELATION TO DEDUCTION CLAIMED U/S. 42 OF THE ACT . WE FURTHER FIND THAT IN THE ORIGINAL ASSESSMENT ORDER CLAIM U/S.42 WAS NOT DISCUSSED AND THE ASSESSMENT WAS COMPLETED BY MAKING ROUTINE DISALLOW ANCES. THEREFORE, THE ACTION OF THE AO IN REOPENING THE ASSESSMENT OF THE ASSESSEE U/S. 147 OF THE ACT IS VALID IN OUR CONSIDERED OPINION. THIS VIEW OF OURS GET SUPPORT FROM THE DECISION OF THE HONBLE GUJARAT HI GH COURT IN THE CASE OF SHRI PRAFUL CHINUBHAI PATEL VS. SHRI M.J.MAKWANA , ACIT 236 ITR 832 WHEREIN HONBLE GUJARAT HIGH COURT HELD AS UNDER:- IN CASES WHERE THE ASSESSING OFFICER HAD OVERLOOK ED SOMETHING AT THE FIRST ASSESSMENT, THERE CAN, IN OUR OPINION BE NO QUESTION OF ANY CHANGE OF OPINION WHEN THE INCOME WHICH WAS CHARGEA BLE TO TAX IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDER THE L AW BUT WAS NOT, DUE TO AN ERROR COMMITTED AT THE FIRST ASSESSMENT. WE FURTHER FIND THAT IN VIEW OF THE ABOVE MENTIONE D PECULIAR FACTS OF THE CASE THE RATIO AS LAID DOWN IN THE CASE LAWS RELIED BY LD. COUNSEL OF THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF T HE PRESENT CASE. 16. IN VIEW OF THE ABOVE DISCUSSION, WE HAVE NO HES ITATION IN HOLDING THAT THE LD. CIT (A) HAS RIGHTLY UPHELD THE ACTION OF THE AO., IN REOPENING THE ASSESSMENT OF THE ASSESSEE U/S. 147 O F THE ACT. THEREFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 52 17. THE THIRD ISSUE RAISED BY THE ASSESSEE IS REGAR DING CONFIRMATION OF DISALLOWANCE OF DEDUCTION OF RS.1,95,26,259/- CLAIM ED UNDER SECTION 42 OF THE INCOME-TAX ACT, 1961. 18. AT THE TIME OF HEARING BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASST. YEAR 2001-02 IN ITA NO.789/AHD/2 005. 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE MATERIAL ON RECORD WE FIND THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASST. YEAR 2001-02 BY OBS ERVING AS UNDER :- 28. WE HAVE HEARD THE PARTIES AND CONSIDERED THE R IVAL SUBMISSIONS. TO CLAIM A DEDUCTION U/S 42 THE EXPENDITURE CLAIMED SH OULD IN CONNECTION WITH DRILLING AND EXPLORATION ACTIVITY AS ENVISAGED U/S 42(L)(B). THERE IS NO DOUBT THAT THE EXPENSES CLAIMED BY THE ASSESSEE ARE CAPITAL IN NATURE NOT ALLOWABLE IN NORMAL COURSE. THE CLAIM OF THE AS SESSEE IS FOR SPECIAL EXPENDITURE/ALLOWANCES U/S 42(1) AND WE HAVE TO EXA MINE IT UNDER THIS SECTION. SECTION 42(1) READS AS UNDER:- '42(1): FOR THE PURPOSE OF COMPUTING THE PROFITS AN D GAINS OF ANY BUSINESS CONSISTING OF THE PROSPECTING FOR OR EXTRA CTION OR PRODUCTION OF MINERAL OILS IN RELATION TO WHICH THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT WITH ANY P ERSON FOR THE ASSOCIATION OR PARTICIPATION OF THE CENTRAL GOVERNM ENT OR ANY PERSON AUTHORIZED BY IT IN SUCH BUSINESS (WHICH AGR EEMENT HAS BEEN LAID ON THE TABLE OF EACH HOUSE OF PARLIAMENT) , THERE SHALL BE MADE IN LIEU OF, OR IN ADDITION TO, THE ALLOWANC ES ADMISSIBLE UNDER THIS ACT, SUCH AS ARE SPECIFIED IN T HE AGREEMENT IN RELATION; A), B) AFTER THE BEGINNING OF COMMERCIAL PRODUCTION, TO EXPENDITURE INCURRED BY THE ASSESSES, WHETHER BEFORE OR AFTER C OMMERCIAL PRODUCTION, IN RESPECT OF DRILLING AND EXPLORATION ACTIVITIES OR SERVICES OR IN RESPECT OF PHYSICAL ASSETS USED IN T HAT CONNECTION, ITA NO.93/AHD/2007 ASST. YEAR 1998-99 53 C) ............. , AND SUCH ALLOWANCES SHALL BE COMPUTED AND MADE IN T HE MANNER SPECIFIED IN THE AGREEMENT, THE OTHER PROVISIONS OF THIS ACT BEING DEEMED FOR THIS PURPOSE TO HAVE BEEN MODIFIED TO TH E EXTENT NECESSARY TO GIVE EFFECT TO THE TERMS OF THE AGREEM ENT' 29. ON A CLOSE READING OF THIS SECTION, WE FIN D THAT THE DEDUCTION UNDER THIS SECTION IS ALLOWED FOR COMPUTING THE PROFITS A ND GAINS OF THE BUSINESS OF PROSPECTING FOR OR EXTRACTING OR PRODUCTION OF M INERAL OIL IN RELATION TO WHICH THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT. ONLY SUCH DEDUCTIONS ARE ALLOWED U/S 42( 1) AS ARE SPECIFIED IN THE AGREEMENT AND THAT ALSO WHEN THEY FALL IN AN Y OF THE SUB CLAUSE (A), (B) OR (C) OF SECTION 42(1). SUB CLAUSE (A) APPLIE S TO AN ACTIVITY PRIOR TO BEGINNING OF COMMERCIAL PRODUCTION AND. SUB CLAUSE (B) APPLIES TO THE SITUATION, AFTER THE BEGINNING OF COMMERCIAL PRODUC TION. SUB CLAUSE (C) APPLIES TO ALLOWANCE IN RELATION TO DEPRECIATION ON MINERAL OIL IN THE YEAR WHERE PRODUCTION HAS BEGUN AND IN SUCCEEDING YEAR. THE ASSESSEE HAS ALREADY STARTED COMMERCIAL PRODUCTION, ITS CASE THE REFORE FALLS IN SUB CLAUSE (B) OF SECTION 42(1), TO SUMMARIZE, THE FOLL OWING CONDITIONS SHOULD BE SATISFIED FOR CLAIMING DEDUCTION U/S 42(1 ) OF THE ACT. I) THERE SHOULD BE AN AGREEMENT OF THE ASSESSES WITH CENTRAL GOVERNMENT; II) THAT THE AGREEMENT SHOULD BE LAID ON THE TABLE OF EACH HOUSE OF THE PARLIAMENT; III) THAT THE ALLOWANCES SOUGHT TO BE A LLOWED ARE THOSE SPECIFIED IN THE AGREEMENT; IV) THAT SUCH SPECIFIED ALLOWANCES SHOULD BE THE EXPENDITURE INCURRED IN RESPECT OF DRILLING OR EXPLORATION ACTIVITIES OR SERVICES OR IN RESPECT OF PHYSICAL ASS ETS USED IN THAT CONNECTION; AND V) THAT SUCH ALLOWANCES IS TO BE CO MPUTED AND ALLOWED IN THE MANNER SPECIFIED IN THE AGREEMENT. 30. THE ASSESSEE HAS NO DOUBT ENTERED INTO AGREEMEN T (PSC) WITH THE CENTRAL GOVERNMENT IN RESPECT OF VARIOUS FIELDS, BU T EXCEPT ONE THE OTHER AGREEMENTS ARE NOT SHOWN TO HAVE BEEN LAID ON THE T ABLE OF THE BOTH THE HOUSES OF THE PARLIAMENT. THE AGREEMENT DOES NOT PR OVIDE THE MANNER OF COMPUTATION SUCH DEDUCTION. FURTHER THE ALLOWANCE S ARE NOT OF THE NATURE SPECIFIED IN THE AGREEMENT, NOR OF VARIOUS S PECIFIC NATURE MENTIONED IN SUB CLAUSE (A), OR (B) OR (C) OF SECT ION 42(1). AS WE ARE CONCERNED IN THIS CASE WITH SUB CLAUS E (B), THESE SPECIFIED ALLOWANCES SHOULD BE IN RELATION TO EXPENDITURE IN RESPECT OF DRILLING OR EXPLORATION ACTIVITIES OR SERVICES. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 54 31. THERE ARE FIVE CONTRACTS WHICH THE ASSESS EE AND M/S. GSPCL JOINTLY ENTERED WITH THE GOVERNMENT OF INDIA. THEY ARE PRODUCTION SHARING CONTRACTS (PSC) AND THESE ARE SI MILARLY WORDED WITH THE SAME CONTENTS AND LANGUAGE. IN ALL THESE AGREEM ENTS ARTICLE 15 DEALS WITH COMPUTATION OF PROFITS AND GAINS FOR THE PURPO SE OF INCOME-TAX. IT IS TITLED AS 'TAXES, ROYALTIES, RENTALS, CUSTOM DUTI ES ETC'. CLAUSE (3) IS : RELEVANT AND ON WHICH RELIANCE IS PLACED READS: - ' '15.3 THE PROFITS AND GAINS OF THE A COMPANY CON SISTING OF PETROLEUM OPERATIONS SHALL, FOR THE PURPOS E OF LEVY OF INCOME-TAX UNDER THE INCOME-TAX ACT, 1961 BE COMPUT ED ON THE BASIS OF THE VALUE, DETERMINED IN ACCORDANCE WITH A RTICLE18, OF ITS PARTICIPATING INTEREST SHARE OF CRUDE OIL PRODUCED AND SAVED AND SOLD, OR OTHERWISE DISPOSED OF, FROM THE CONTRA CT AREA AND FROM ANY REVENUE REALISED ON THE SAME OR DISPOSAL OF ASSOCIATED OR NON-ASSOCIATED NATURAL GAS REFERRED TO IN ART ICLE 20 AS WELL AS ANY OTHER GAINS OR RECEIPTS FROM PETROLEUM OPE RATIONS AS REDUCED BY THE ALLOWABLE DEDUCTIONS' 32. THIS ARTICLE PROVIDES AS TO HOW THE PROFITS AND GAINS OF A COMPANY CONSISTING OF PETROLEUM OPERATIONS SHALL, FOR THE P URPOSE OF LEVY OF INCOME-TAX UNDER THE INCOME-TAX ACT, 1961 BE COMPUT ED. IT IS ON THE BASIS OF THE VALUE, DETERMINED IN ACCORDANCE WITH A RTICLE 18, OF ITS PARTICIPATING INTEREST SHARE OF CRUDE OIL PRODUCED AND SAVED AND SOLD, OR OTHERWISE DISPOSED OF, FROM THE CONTRACT AREA AN D FROM ANY REVENUE REALISED ON THE SAME OR DISPOSAL OF ASSOCIATED OR N ON-ASSOCIATED NATURAL GAS REFERRED TO M ARTICLE 20 AS WELL AS ANY OTHER GAINS RECEIPTS FROM PETROLEUM OPERATIONS AS RED UCED BY THE ALLOWABLE DEDUCTIONS. THE ASSESSEE SUBMITS THAT THE PHRASE USED IN ABOVE ARTICLE IS ALLOWABLE DEDUCTIONS' IT IS TO BE REA D AS 'ALLOWABLE DEDUCTIONS UNDER THE ACT INCLUDING, SECTION 42 OF T HE ACT'. WE ARE AFRAID, IT CANNOT BE READ LIKE THAT BECAUSE THE PSC IS AN AGREEMENT BETWEEN THE GOVERNMENT OF INDIA AND ASSESSEE .AND GSPCL AND WAS LAID/TO BE LAID ON THE TABLE OF BOTH THE H OUSES OF PARLIAMENT. IT BEING A LEGAL DOCUMENT, NO WORD OR PHRASE CAN BE ADDED IT HAS TO READ AS IT IS. ACCORDINGLY THE C1T(A) IS RIGHT IN NOT ACCEPTING SUBMISSION OF THE ASSESSEE THAT 'AS REDUCED BY ALL OWABLE DEDUCTION ' SHOULD BE READ AS AS REDUCED BY ALLOWABLE DEDUCTIO N UNDER THE ACT INCLUDING 42 OF THE ACT. EVEN OTHERWISE SECTION 42 CONTAINS A SPECIFIC MENTION OF THE PHRASE 'SUCH ALLOWANCE S AS SPECIFIED IN THE AGREEMENT' AND THAT IN ABSENCE OF ANY ALLOWANC ES BEING SPECIFIED IN THE AGREEMENT, NO ADDITIONAL ALLOWANCE CAN BE DEDUCTED BY VIRTUE ITA NO.93/AHD/2007 ASST. YEAR 1998-99 55 OF SECTION 42, OVER AND ABOVE THE NORMAL ALLOWANCE ALLOWABLE UNDER OTHER SECTION OF THE ACT. IT IS NOT ONLY THAT THESE ALLOWANCES SHOULD BE SPECIFIED IN THE AGREEMENT, BUT EVEN THE COMPUTATIO N OF SUCH ALLOWANCES HAS TO BE MADE IN THE MANNER SPECIFIED IN THE A GREEMENT THE SAME IS QUITE CLEAR FROM THE PHRASE USED BELOW SU B CLAUSE (C) OF SECTION 42(1) I,E,, 'AND SUCH ALLOWANCES SHA LL BE COMPUTED AND MADE IN THE MANNER SPECIFIED IN THE AGREEMENT'. NOWHER E IN THE PSC AGREEMENTS, THE COMPUTATION AND MANNER OF SUCH A LLOWANCES, IS STATED OR SPECIFIED. ACCORDINGLY, NO SUCH DEDUCTION CAN BE ALLOWED U/S 42 IN ABSENCE OF MANNER OF COMPUTATION AND THE- MANNER SP ECIFIED IN THE AGREEMENT. 33. ARTICLE 18 PROVIDING FOR VALUATION OF PETROLEUM IN ACCORDANCE WITH THE APPROPRIATE BASIS FOR THAT TYPE OF SALE OR DISP OSAL SPECIFIED THEREIN. IT DOES NOT DEAL WITH ANY, DEDUCTIONS OF EXPENSES AND THEREFORE IT MAY NOT HAVE RELEVANCE TO DETERMINE THE ISSUE OF DEDUCTION ALLOWABLE OR OTHERWISE. AS PER CLAUSE 18.11 OF PSC THE PRICE OF NATURAL GAS SHALL BE IN TERMS OF ARTICLE 20. AGAIN THE ARTICLE 20 DEALS WITH MARKETING RIGHTS AND SALE PRICE OF NATURAL GAS AND IT HAS ALSO NOTHI NG TO DO WITH EXPENSES AS IN ARTICLE 18. ARTICLE 24 PROVIDES FOR RECORD OF ALL ITS ACTIVITIES, EXPENDITURES AND RECEIPTS, REPORTS, ACCOUNTS IN ACCORDANCE WITH THE ACCOUNTING PROCEDURE AND AUDIT BY A QUALIFIED , INDEPENDENT FIRM OF RECOGNIZED CHATTERED ACCOUNTANTS, REGISTERED IN IND IA. THESE MAY NOT BE EXTRACTED IN EXTENSOR. 34. ANNEXURE - C SECTION-1 PROVIDES GEN ERAL PROVISIONS WHICH 'PURPOSE', 'DEFINITIONS', 'INCONSISTENCY', ' DOCUMENTATION AND STATEMENTS TO BE SUBMITTED BY THE CONTRACTOR', LAN GUAGE AND UNITS OR ACCOUNT, CURRENCY EXCHANGE RATES', 'PAYME NTS', 'ARMS LENGTH TRANSACTIONS, AUDIT AND INSPECTION RIGHTS OF THE GOVERNMENT' AND REVISION OF THE ACCOUNTING PROCEDURES' 35. NONE OF THESE CLAUSES DO NOT SPECIFY FO R THE COMPUTATION OF INCOME AND THE MANNER IN WHICH THEY ARE TO BE ALLOW ED. WHAT SECTION THAT 'THERE SHALL BE MADE IN LIEU OF, OR IN ADDITION TO, THE ALLOWANCES ADMISSIBLE UNDER THIS ACT, SUCH ALLOWANC ES AS ARE SPECIFIED IN THE AGREEMENT IN RELATION' NOTHING IS SPECIFIED IN THE AGREEMENTS AND THEREFORE DEDUCTION UNDER SECTION 42 WOULD NOT BE GRANTED FOR ANY EXPENDITURE EXCEPT THAT IS ALLOWABLE UNDER THE ACT OTHERWISE. ITA NO.93/AHD/2007 ASST. YEAR 1998-99 56 36. AN EXPENDITURE ON STORAGE, TRANSPORTATION AND O THER FACILITIES IS MORE RELATABLE TO THE PRODUCTION AND/OR SALE RATHER THAN EXPLORATION AND DRILLING. EXPLORATION IS AN ACTIVITY CARRIED OUT TO FIND OUT THE POSSIBILITY OF OIL/GAS BY COLLECTING GEOLOGICAL DATA AND SEISMIC S URVEY ETC AND THEREAFTER THE DRILLING IS DONE AT A PLACE WHERE PR OBABILITY OF FINDING THE OIL/GAS IS COMPARATIVELY HIGH. AT THE TIME OF EXPLO RATORY DRILLING, THESE FACILITIES HAVE HARDLY ANY ROLE TO PLAY. SIMILARLY, THE LAND IN QUESTION WAS TAKEN BY THE ASSESSEE BASICALLY AS A PASSAGE TO THE OIL FIELD LAND AND ALSO TO HAVE ITS SUPPORTING STRUCTURE INCLUDING BUILDING . THIS IS QUITE SEPARATE FROM THE LAND ALLOTTED BY THE GOVERNMENT FOR THE PU RPOSE OF DRILLING THE OIL/GAS WELL. ACCORDINGLY, THIS LAND & BUILDING HAS NO EXPLORATORY DRILLING ACTIVITY, 37. THE CONTENTION THAT SECTION 42 IS AN INCENTIVE PROVISION AND THEREFORE, SHOULD BE INTERPRETED LIBERALLY IS TO BE VIEWED IN THE LIGHT OF THE DECISION OF THE SUPREME COURT IN THE CASE OF PANDIAN CHEMICA LS LTD. (SUPRA) WHEREIN IT IS HELD THAT THE RULE LIBERAL INTERPRET ATION COMES INTO PLAY ONLY IF THERE WERE ANY DOUBTS WITH REGARD TO TH E EXPRESS LANGUAGE USED IN THE PROVISION AND WHERE THE WORDS ARE UNEQUIVOCA L, THERE IS NO SCOPE FOR IMPORTING THE RULE OF LIBERAL OR OTHER INTERPRE TATION OF AN INCENTIVE PROVISION. THE SUPREME COURT IN PETRON ENGINEE RING CONSTRUCTION P. LTD (SUPRA) AGAIN HELD THAT LIBERAL CONCEPTION CANN OT BE DOING VIOLENCE TO THE PLAIN READING OF THE PROVISION OF THE ACT. I T REAFFIRMED THAT LIBERAL CONSTRUCTION CAN BE RESORTED TO ONLY WHEN IT IS POS SIBLE WITHOUT IMPAIRING THE LEGISLATIVE REQUIREMENT AND THE SPIRIT OF PROVI SION. THE LANGUAGE IN THE STATUTE HAS TO BE READ PLAINLY AND NORMALLY. TH E WORDS USED IN THE PROVISION MAY BE READ FROM THE CONTEXT IN WHICH THE Y HAVE BEEN USED. THE RULE OF INTERPRETATION HAS ONLY TO BE USED WHERE TH ERE IS ANY DOUBT WITH REGARD TO THE EXPRESS LANGUAGE USED IN THE PROVISIO N OR WHERE THE PLAIN LITERAL INTERPRETATION, OF STATUTORY PROVISION PROD UCES A MANIFESTLY UNJUST RESULT, ONE MIGHT MODIFY THE LANGUAGE SO AS TO ACHI EVE THE INTENTION OF LEGISLATURE. ONE SHOULD NOT LOOSE SIGHT OF THE DECI SION OF THE SUPREME COURT IN NAVOPAN INDIA LTD.(SUPRA) HOLDING THAT 'EX EMPTION BEING IN THE NATURE OF EXCEPTION, IT IS TO BE CONSTRUED STRICTLY AT THE STAGE OF DETERMINATION WHETHER THE ASSESSEE FALLS WITHIN ITS TERMS OR NOT AND IN CASE OF DOUBT THE BENEFIT MUST GO TO THE STATE. ONC E IT IS FOUND APPLICABLE, FULL EFFECT MAY BE GIVEN. 38. IN THIS CASE THERE IS NO ANY DOUBT IN THE LANGU AGE USED IN SECTION 42(1) OF THE I T ACT AS WELL AS PRODUCTION SHARING CONTRACT. THE LANGUAGE USED IS QUITE CLEAR AND PLAIN AND THEREFOR E THERE IS NO SCOPE OF DOUBLE INTERPRETATION. THE LANGUAGE OF THE STATUTOR Y PROVISION IS NOT ITA NO.93/AHD/2007 ASST. YEAR 1998-99 57 RESULTING OR CREATING ANY UNJUST RESULT. IN FACT TH E LANGUAGE USED IN THE PROVISIONS OF SECTION 42 IS PLAIN, SIMPLE AND IS Q UITE CLEAR ADMITS OF NO DOUBT IN AS MUCH AS THAT ONLY THOSE ALLOWANCES ARE TO BE ALLOWED WHICH .ARE SPECIFIED M THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH CENTRAL GOVERNMENT. 39. THE ASSESSEE HAD MADE THIS MISS R ECTIFIED IN SUBSEQUENT AGREEMENTS AND ITSELF HAS PROVIDED SPECIFICALLY THE ALLOWANCES TO BE DEDUCTED U/S 42 AND THE MANNER THEREOF AND DEPARTME NT HAS ALLOWED IT DOES EXONERATE THE ASSESSEE FROM COMPLY ING WITH THE REQUIREMENTS IN THESE AGREEMENTS APPEARING IN THI S YEAR. THE LETTERS BETWEEN TWO DEPARTMENTS OF THE GOVT. TO THIS EFFECT ALSO DO ASSESSEE AS THEY ONLY REQUESTED FOR CLARIFICATION AND M ORE. NO ACTION TAKEN THEREON FOR A LONG TIME MIGHT BE INDICA TION OR AN IMPRESSION OTHERWISE. IT ONLY PROVES THAT WHILE ENTERING CONTR ACTS WITH THE ASSESSEE AND GSPCL, THE CENTRAL GOVERNMEN T AT THAT TIME HAVE NOT HAVE THOUGHT FIT TO PROVIDE SPECIAL DEDUCTION U /S 42 OF I T ACT AND THEREFORE, NO BENEFIT THEREOF CAN BE IN THE CIRCU MSTANCES, A PLAIN READING OF THE STATUTE IS NOT PRODUCING ANY MANIFESTLY UNJUST RESULTS AND ACCORDINGLY, THERE IS NO MERIT IN READING D OWN OR MODIFYING THE LANGUAGE OF THE STATUTORY PROVISIONS. W E THEREFORE HOLD THAT THE CIT (A) IS RIGHT IN DENYING THE CLAIM OF THE ASSESS EE AND HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION U/S 42. 20. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE T RIBUNAL, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS DISMISSED. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25-11-11. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, MAHATA/- ITA NO.93/AHD/2007 ASST. YEAR 1998-99 58 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- VI, BARODA. 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 22/9/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 14/11/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S22-11-2011 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25-11-2011. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25-11-2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25 -11-11. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 25- 11-11 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..