M/S. ASHOK LEYLAND LTD.,CHENNAI V. DCIT, NCC-8(1), LTU-II, CHENNAI

ITA 601/CHNY/2025

AI Insights

The case involves M/s. Ashok Leyland Ltd., which appealed against the reassessment order for the Assessment Year 2010-11. The reassessment was initiated by the Assessing Officer (AO) after four years, questioning the additional depreciation claimed on electrical installations and data processing equipment, and the treatment of exchange fluctuation losses. The Tribunal examined whether the AO had the jurisdiction to reopen the assessment beyond the four-year period and found that the necessary conditions, particularly the failure to disclose material facts, were not met, leading to the quashing of the reassessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712980 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2010-2011
• Other Referred Cases: Foramer v. CIT [2001] 247 ITR 436 (All.), Fenner (India) Ltd. v. DCIT [2000] 241 ITR 672 (Madras HC), CIT v. Foramer France [2003] 264 ITR 566 (SC), Kelvinator of India Ltd. [320 ITR 561], New Delhi Television Ltd. [NDTV] v. Dy. CIT [2020] 424 ITR 607, Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332], Calcutta Discount Co. Ltd. v. ITO AIR 1961 SC 372, CIT v. Avadh Transformers (P.) Ltd. 51 Taxmann.com 369, Tao Publishing (P.) Ltd. v. Dy. CIT [2015] 370 ITR 135
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A.T.KRISHNAMOORTHY
• Assessee Lawyers: R. VIJAYARAGHAVAN
• Keywords: Difference of opinion; Change of opinion; Revised return; Retrospective amendment; Reassessment proceedings; Depreciation; Additional depreciation; Tax effect; Capital receipt; Period of limitation; Reopening of assessment; Source of fund; Audit objection; Competent authority; Reason to believe; Tangible material; Borrowed satisfaction; Bogus
• Section: 147; 148; 143(3); 142(1); 263; 32(1)(iia)

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी जगदीश, लेखा सद क े सम\u0015 BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.601/Chny/2025 िनधा\u000eरणवष\u000e/Assessment Year: 2010-11 M/s. Ashok Leyland Ltd., No.1, Sardar Patel Road, Guindy, Chennai-600 032. v. The DCIT, Non Corporate Circle-8(1), LTU-II, Chennai. [PAN: AAACA 4651 L] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.R. Vijayaraghavan, Advocate \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Mr.A.T. Krishnamoorthy, JCIT सुनवाईक\u001aतारीख/Date of Hearing : 25.06.2025 घोषणाक\u001aतारीख /Date of Pronouncement : 29.07.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated 31.12.2024 for the Assessment Year (hereinafter referred to as ‘AY‘) 2010-11 [erroneously stated in the Cause Title of the impugned order as AY 2009-10]. Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 2 :: 2. The brief facts of the case are that, the assessee company filed its return of income (RoI) on 30.09.2010 which was revised on 31.03.2012 declaring ‘Nil’ income. Later, the Income Tax Return (ITR) was picked up for scrutiny and notices u/s.143(2) of the Act was issued on 06.09.2011 and detailed questionnaire u/s.143(2) of the Act was issued on 15.07.2013. Pursuant to the notices issued, the AO acknowledged that the assessee was duly represented and produced the details called for and thereafter, the AO determined the income of the assessee at Rs.328,87,81,902/-, after inter alia disallowing additional depreciation to the extent of Rs.9,53,49,197/- which was claimed u/s 32(1)(iia) of the Act. Thereafter, the AO issued notice u/s.148 of the Act dated 31.03.2017 after expiry of four (4) years, reopening the assessment, for the reasons that additional depreciation could not be allowed to the assessee on account of electrical installations, data processing equipment & exchange fluctuation loss. Thereafter, the reassessment was completed u/s 147/143(3) of the Act after making further disallowance on account of additional depreciation of Rs.8,64,30,006/- [Rs.2,78,78,547/- plus Rs.5,85,51,519/-]. Inviting our attention to the appellate order impugned in this appeal, the Ld. AR pointed out that the Ld. CIT(A) had rejected the assessee’s challenge to the legal validity of reopening of assessment as well as the merits of the impugned addition(s). Aggrieved by the same, the assessee is now in appeal before this Tribunal. Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 3 :: 3. The Ld. AR first assailed the action of Ld. CIT(A) rejecting the challenge to the legal validity of reopening of assessment u/s 147/148 of the Act. He submitted that this legal issue, if found valid, goes to the root of the re-opening itself, and therefore pleaded that it may be adjudicated first. In our view as well, the legal issue raised by the assessee challenging the jurisdiction of the AO to reopen the assessment, if found valid, goes to the root of the matter, and therefore we deem it fit to first adjudicate the same. The relevant ground raised by the assessee in this appeal is noted to be as follows:- 3. Reassessment Proceedings has not been validly initiated: 3.1. The CIT(A) failed to consider the fact that, initiation of reassessment proceedings is beyond a period of four years from end of relevant AY 2010-11 and in the absence of failure on part of the Appellant to disclose material facts as per First Proviso to section 147, the order passed by AO is required to be quashed in light of the following judicial precedents • Foramer v. CIT [2001] 247 ITR 436 (All.) (affirmed by SC in CIT v. Foramer France [2003] 264 ITR 566 (SC); • Fenner (India) Ltd. v. DCIT [2000] 241 ITR 672 (Madras HC) 3.2. The CIT(A) ought to have appreciated that the appellant has not merely submitted the books of accounts before the AO, whereas a complete scrutiny has been done, wherein the issues / addition made in the reassessment order were already dealt in or examined, hence the Explanation 1 to Section 147 is not applicable in the present case. 4. Referring to the first proviso to Section 147 of the Act, the Ld. AR submitted that, where an assessee had filed a return of income and thereafter the assessment was completed either under section 143(3) or under section 147 of the Act, then in such case no notice under section 147 of the Act could have been issued beyond four years from expiry of Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 4 :: relevant assessment year, unless the AO demonstrates in the recorded reasons that income had escaped assessment as a consequence of assessee's failure to disclose truly and fully all facts necessary for his assessment. According to the Ld. AR, in the present case, all the relevant information and details concerning the exchange fluctuation loss which was capitalized to fixed assets and the additional depreciation claimed on plant & machinery including the electrical installations at the factory premises, were made available at the time of original assessment and therefore it was not a case that the assessee had failed to disclose truly and fully all material facts necessary for assessment for that year and in that view of the matter, the AO could not have validly reopened the assessment for AY 2010-11 after the expiry of four years. The Ld. AR further submitted that even the reasons as recorded by the AO did not contain any averment to the effect that income had escaped assessment as a consequence of assessee's failure to disclose truly and fully all facts necessary for his assessment. According to the Ld. AR therefore, the AO's action of re-opening the assessment completed u/s. 143(3) after four years, deserves to be struck down for not satisfying the condition precedent set out in the first proviso to Section 147 of the Act. 5. Per contra, the Ld. CIT, DR submitted that the AO was in possession of external material in the form of audit objection based on which he Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 5 :: formed his opinion that income chargeable to tax had escaped assessment. According to him, there is no requirement in law for the AO to explicitly demonstrate in his recorded reasons that there was any failure on the part of the assessee to disclose truly and fully all material facts in the course of assessment, but the same was inferable from the contents of the reasons. Relying on the explanation underneath the third proviso to section 147 of the Act, the Ld. DR submitted that mere production of books of accounts of the assessee company doesn’t satisfy that the assessee has disclosed fully and truly all the material facts necessary for that assessment year. According to the Ld. DR, it cannot be said that assessee has fully disclosed all material facts necessary for assessment. He therefore does not want us to interfere with the AO’s action of reopening of the assessment. 6. We have heard the rival submissions of both the parties. Before we advert to the facts in this case, let us first look into the well settled principles regarding reopening of assessment. To begin with, it should be kept in mind that the concept of assessment is governed by the time- barring Rule, and the assessee acquires a right as to the finality of proceedings. Queitus of the completed assessment is the Fundamental Rule and exception to this rule is re-opening of assessment by AO under section 147 or exercise of Revisional jurisdiction by CIT under section 263 Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 6 :: of the Act. Therefore, the Parliament in its wisdom has provided safeguards for exercise of the reopening of assessment jurisdiction to AO; and revisional jurisdiction of CIT by providing condition precedent which is sine qua non for assumption/usurpation of jurisdiction. In the case of reopening of assessment, section 147 provides that where the Assessing Officer has reason to believe escapement of income [is the jurisdictional fact & law] he shall record his reasons for doing so and assess or reassess the income which has escaped assessment; and for exercising revisional jurisdiction u/s. 263 the CIT has to find the assessment order of the AO to be erroneous as well as prejudicial to the revenue. Unless the condition precedent is satisfied, the AO or the CIT can’t exercise their reopening jurisdiction or revisional jurisdiction respectively. The legislative history is that in respect to the reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws (Amendment) Act 1987 w.e.f. 01.04.1989 had substituted “for reason to believe escapement of income” to “for reasons to be recorded by him in writing, is of the opinion’’ which gave unbridled subjective satisfaction to the AO was later substituted back to “reason to believe escapement of income’’, by the Direct Tax Laws (Amendment) Act, 1989. The Hon’ble Apex Court as well as the Hon’ble jurisdictional High Court as well as other Hon’ble High Courts have already held in plethora of cases the test of a prudent person instructed in law in Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 7 :: understanding jurisdictional fact & law (mixed question of fact and law) the reason to believe escapement of income (supra). 7. As noted, the AO, who is a quasi-judicial authority is empowered to reopen the assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax, which he has to record before issuing notice u/s 148 of the Act. In this regard, it must be borne in mind that reasons to believe postulates foundation based on information, and belief based on reason. After a foundation based on information, is made, there still must be some reason, which should warrant the holding of a belief that income chargeable to tax has escaped assessment. It has to be kept in mind that the Hon’ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. ITO (1981) 130 ITR 1 (SC) held that the expression “reason to believe” occurring in sec. 147 “is stronger” than the expression “if satisfied” and such requirement has to be met by the AO in the reasons recorded before usurping the jurisdiction u/s. 147 of the Act. At this stage, authorities must understand the fine distinction between “reason to suspect” & ‘reason to believe”. Adverse information against an assessee may trigger “reason to suspect,” then the AO is duty bound to make reasonable enquiry to collect material which would make him form a belief that there is an escapement of income. And on satisfaction of such an event, then proceed to reopen the assessment and Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 8 :: not before that event, because reason to believe is the jurisdiction requirement u/s 147 of the Act, and not the reason to suspect escapement of income. This subtle distinction should be borne in mind while adjudicating the legal issue raised by assessee. 8. And further, the reason to believe escapement of income should be that of AO, and not that of any other authority, because then it will be against one of the basic feature of the Constitution of India i.e., the Rule of Law, wherein the Parliament has empowered this reopening jurisdiction only to that of Assessing Officer and that is why if the reason to believe escapement of income is not that of AO, the assumption of jurisdiction to re-open, is vitiated; and resultantly bad in law, because assumption of jurisdiction to reopen will be on the basis of borrowed satisfaction. 9. And, if the AO intends to re-open the assessment [scrutinized u/s 143(3)] after four years from the relevant assessment year, then as per first proviso to section 147 of the Act, an additional safeguard or condition that escapement of income was due to fault of the assessee, in not fully and truly disclosing the material facts at the time of original assessment needs to be satisfied. In this context, it is gainful to refer to the Hon’ble Supreme Court decision endorsing the Full Bench decision of the Hon’ble Delhi High Court in CIT vs. Kelvinator of India Ltd. [320 ITR 561] wherein inter-alia, it was held that Assessing Officer has no power to Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 9 :: review; and emphasized that AO in absence of “tangible material” should not resort to reopening. The Hon’ble Supreme Court held that merely on “change of opinion” the AO should not re-open the assessment because he doesn’t enjoy the power to review his own order. 10. Thus, as noted before the AO assumes jurisdiction to re-open it is necessary that the conditions laid down in the said section 147 has to be satisfied viz., AO should record “reason to believe” that the income chargeable to tax for that assessment year has escaped assessment. And, if the AO intends to re-open an assessment [scrutinized u/s 143(3)] after four years from the relevant assessment year, then an additional condition needs to be satisfied viz escapement of income was due to fault of the assessee, in not fully and truly disclosing all the material facts necessary at the time of original assessment. If the conditions stipulated by statute are not satisfied at the first place, then it cannot be said that AO has validly assumed jurisdiction u/s.147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment. For that, it has to be seen as to whether the AO on the basis of whatever material before him, [which he had indicated in his “reasons recorded”] had reasons warrant holding a belief that income chargeable to tax has escaped assessment. At this stage, it is also important to bear in mind Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 10 :: that the reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed, while adjudicating the legal issue of AO’s usurpation of jurisdiction u/s. 147 of the Act. The Hon’ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332], has, inter alia, observed that \"………. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons.\"Their Lordships added that \"The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence….\". Therefore, the reasons are to be examined only as they were recorded by the AO before the issue of the notice. 11. Hence, in all cases where assessment is completed under section 143(3) or under section 147 of the Act and such concluded assessment is being sought to be reopened beyond four years, it is not only necessary for the AO to form reasonable belief that income had escaped assessment as envisaged in Section 147 of the Act but additionally he has to show Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 11 :: that such escapement occurred as a result or consequence of assessee's failure to disclose truly and fully all facts necessary for assessment. The AO after obtaining information and documents from the assessee cannot supplement his conclusion about assessee's failure to disclose truly and fully material facts, if the recorded reasons do not refer to such failure. In the circumstances, where the AO initiates the reassessment proceedings beyond four years from the end of the relevant assessment year, then the AO is duty bound to demonstrate in his reasons recorded prior to issue of notice, the failure on the assessee's part to truly and fully disclose all material facts in the course of original assessment. 12. This legal principle has been reiterated by the Hon'ble Supreme Court in the case of New Delhi Television Ltd. [NDTV] v. Dy. CIT [2020] 424 ITR 607 wherein it was held that, the Revenue can take the benefit of extended period of limitation beyond four years and upto six years only if the Revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. In this case (NDTV), we note that the assessee had issued step-up convertible bonds to its subsidiary based in the United Kingdom (UK) named NDTV Network Plc. (hereinafter referred to as the 'NNPLC'). At the time of original assessment, the assessee had disclosed the issue of step- up coupon bonds for US$ 100 million to NNPLC. The assessee had also Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 12 :: disclosed the details of entities who subscribed to this issue and also the fact that the bonds were discounted at a lower rate, before the assessment was finalized. Subsequent to completion of the original assessment, the AO was in receipt of information that the assessee had undertaken round tripping of funds and that these funds raised by way of issue of bonds to group entities actually represented the unaccounted funds belonging to the assessee. The AO accordingly reopened the concluded assessment after expiry of four years and within six years. On these facts the question posed by the assessee before the Hon'ble Apex Court was, whether the assessee did not disclose fully and truly all material facts during the course of original assessment which led to the finalisation of the assessment order and undisclosed income escaping detection. Answering this question in favour of the assessee, the Hon'ble Apex Court held as under: \"24. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed. 25. The revenue has placed reliance on certain complaints made by the minority shareholders and it is alleged that those complaints reveal that the assessee was indulging in round tripping of its funds. According to the revenue the material disclosed in these complaints clearly shows that the assessee is guilty of creating a network of shell companies with a view to transfer its un-taxed income in India to entities abroad and then bring it back to India thereby avoiding taxation. We make it clear that we are not going into this aspect of the matter because those complaints have not seen light of the day either before the High Court or Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 13 :: this Court and, therefore, it would be unfair to the assessee if we rely upon such material which the assessee has not been confronted with. 26. Even before the assessment order was passed on 3-8-2012, the assessing officer was aware of the entities which had subscribed to the convertible bonds. This is apparent from the communication dated 8-4- 2011. The case of the revenue is that the assessee did not disclose the amount subscribed by each of the entities and furthermore the management structure of these companies. We are not in agreement with this submission of the revenue. It is apparent from the records of the case that the revenue was aware of the entities which subscribed to the convertible bonds. It has been urged that these are bogus companies, but we are not concerned with that at this stage. The issue before us is whether the revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso section 147 of the Act. This can only be done if the revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The assessee, in our view had disclosed all the facts it was bound to disclose. If the revenue wanted to investigate the matter further at that stage it could have easily directed the assessee to furnish more facts. 27. The High Court held that there was no \"true and fair disclosure\" in view of the law laid down by this Court in Phool Chand BajrangLal's case (supra), and the judgment of the Delhi High Court in Honda Siel Power Products Ltd. v. Dy. CIT [2011] 110 taxmann.com 2/197 Taxman 415/[2012] 340 ITR 53 (Delhi). We have already referred to the judgment in Phool Chand's case (supra), wherein it was held that where the transaction of a particular assessment year is found to be a bogus transaction, the disclosures made could not be said to be all \"true\" and \"full\". Relying upon the said judgment the High Court held that merely because the transaction of convertible bonds was disclosed at the time of original assessment does not mean that there is true and full disclosure of facts. 28. We are unable to agree with this reasoning given by the High Court. The assessee as mentioned above made a disclosure about having agreed to stand guarantee for the transaction by NNPLC and it had also disclosed the factum of the issuance of convertible bonds and their redemption. The income, if any, arose because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the assessing officer. The assessing officer knew who were the entities who had subscribed to other convertible bonds and in other proceedings relating to the subsidiaries the same Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 14 :: assessing officer had knowledge of addresses and the consideration paid by each of the bondholders as is apparent from assessment orders dated 3-8-2012 passed in the cases of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in our opinion there was full and true disclosure of all material facts necessary for its assessment by the assessee.\" 13. Before the Hon'ble Apex Court, the Revenue had argued that, it was to avoid detection of the actual source of funds of its subsidiaries, that the assessee did not disclose the complete details of the subsidiaries at the time of original assessment. It was further contended that certain documents concerning the bond issue were also not furnished at the time of the original assessment which amounted to failure on the part of the assessee to fully and truly disclose all material facts. Moreover, complaints had been filed by shareholders against the assessee subsequent to completion of assessment, which according to Revenue, also showed that there was non-disclosure of facts. However, the Hon'ble Supreme Court rejected all these contentions raised by the Revenue, by observing as under: \"29. The fact that step-up coupon bonds for US$ 100 million were issued by NNPLC was disclosed; who were the entities which subscribed to the bonds was disclosed; and the fact that the bonds were discounted at a lower rate was also disclosed before the assessment was finalised. This transaction was accepted by the assessing officer and it was clearly held that the assessee was only liable to receive a guarantee fees on the same which was added to its income. Without saying anything further on merits of the transaction we are of the view that it cannot be said that the assessee had withheld any material information from the revenue. 30. According to the revenue the assessee to avoid detection of the actual source of funds of its subsidiaries did not disclose the details of the subsidiaries in its final accounts, balance sheets, and profit and loss Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 15 :: account for the relevant period as was mandatory under the provisions of the Indian Companies Act,1956. It is not disputed that the assessee had obtained an exemption from the competent authority under the Companies Act, 1956 from providing such details in its final accounts, balance sheets, etc. As such it cannot be said that the assessee was bound to disclose this to the Assessing Officer. The Assessing Officer before finalising the assessment of 3-8-2012 had never asked the assessee to furnish the details. 31. The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment. The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerned it does not appear to be correct. There is material on record to show that on 8-4-2011 NNPLC had sent a communication to the Deputy Director of Income Tax(Investigation), wherein it had not only disclosed the names of all the bond holders but also their addresses; number of bonds along with the total consideration received. This chart forms part of the assessment orders dated 3-8-2012 in the case of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. The said two assessment orders were passed by the same officer who had passed the assessment order in the case of the assessee on the same date itself. Therefore, the entire material was available with the revenue. 32. A number of decisions have been cited as to what is meant by true and full disclosure. It is not necessary to multiply decisions, as law in this regard has been succinctly laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. v. ITO AIR 1961 SC 372, wherein it was held as follows:— '(8)...The words used are \"omission or failure to disclose fully and truly all material facts necessary for his assessment for that year\". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise — the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 16 :: enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. (9) There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income- tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example — \"I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents.\" His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to \"omission to disclose fully and truly all material facts necessary for his assessment.\" Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them — including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. (10) Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else — far less the assessee — to tell the assessing authority what inferences — whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 17 :: meaningless to demand that the assessee must disclose what inferences — whether of facts or law — he would draw from the primary facts. (11) 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 communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn?' A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Nondisclosure of other facts which may be termed as secondary facts is not necessary. In light of the above law, we shall deal with the facts of the present case. 33. In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuiness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No. 1. However, that cannot lead to the conclusion that there is non-disclosure of true and material facts by the assessee.\" 14. From the above binding ratio of decision of the Hon'ble Apex Court, the principle which thus emerges is that, the Revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso to Section 147 of the Act only if the Revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The requirement of law in this regard is that, the assessee must disclose the primary facts before Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 18 :: the AO and the assessee is not required to give any further assistance to the AO by disclosure of other facts. Thereafter, it is for the AO to decide as to what inference should be drawn from the primary facts disclosed and, the non-disclosure of other facts which may be termed as secondary facts is not necessary, so as to empower the AO to assume jurisdiction u/s 147/148 of the Act to reopen the concluded assessment in terms of the first proviso to Section 147 of the Act. 15. From the aforesaid understanding of law governing the issue at hand, we have to examine the reasons recorded by AO to reopen which has been already set out above, and test whether the condition precedent necessary to usurp the re-opening jurisdiction as required u/s. 147 of the Act is satisfied or not ? And in the present case, since four years have elapsed from the end of the relevant AY and original assessment has been completed u/s. 143(3) of the Act, it needs to be examined as to whether the addition condition precedent as laid down in first proviso to section 147 of the Act is also satisfied or not ? For doing that we have to examine on a standalone basis the reasons recorded by the AO to reopen the assessment, which is found placed at Page Nos. 1 & 2 of the Paper book, which reads as under: The assessee company is engaged in manufacture of commercial vehicles and automobile spare. For the A/Y 2010-11, the assessee e-filed the ROI on 30/09/10. Subsequently the assessee filed two revised returns, on 31/03/12 declaring income 'NIL'. The processed return was taken up for scrutiny and the same was completed on 21/05/14 by making certain additions and arriving at total income of Rs. 328.88 crores. Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 19 :: The depreciation statement reveals that the assessee had claimed additional depreciation on electrical installation and data processing equipment as shown: Asset Block Addl. Depn. @20% Addl. Depn. @10% Total Electrical installation 40,59,060 1,89,59,781 2,30,18,841 Data Processing Equipment 21,39,308 27,20,398 48,59,706 Additional depreciation is not allowed on the above assets and hence the total additional depreciation claimed for Rs.2,78,78,547/- requires to be withdrawn. Further, exchange fluctuations amounting to Rs. 39,21,957/- (1st half) and Rs. 5,46,29,562/- (1st half) were added to the asset value and additional depreciation was claimed on the Plant and Machinery. Additional depreciation is allowable only to addition made during the year and not on the value of exchange fluctuations. Hence an amount of Rs.62,47,347/- (Rs.7,84,391/- & Rs.54,62,956/- requires to be disallowed. Thus, a total amount of Rs.3,41,25,894/- allowed as additional depreciation is required to be withdrawn and if this is considered, there would be an additional tax effect of Rs. 1,15,99,391/-. 16. On perusal of the recorded reasons, it is noted that, the AO had examined the depreciation statement which was furnished by the assessee and noted that, the assessee had claimed additional depreciation on electrical installation and data processing equipment, which in AO’s view, was not allowable on such assets. The AO is noted to have further observed from the depreciation statement that, exchange fluctuation loss was added to the WDV block of Plant & Machinery on which additional depreciation was claimed by the assessee. The AO was of the opinion that, additional depreciation is allowable only on new additions and not the exchange fluctuation loss. According to the AO therefore, excess additional depreciation had been allowed to the assessee as a consequence of which there was income escaping assessment. Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 20 :: 17. Now, admittedly the assessment for AY 2010-11 was reopened by the AO, beyond four years. Therefore, apart from the requirement of law to form a reasonable belief that income otherwise chargeable to tax had escaped assessment, it was also incumbent upon the AO to satisfy the condition precedent set out in the first proviso to Section 147 of the Act. From the facts as available on record, we note that the AO in his requisition issued u/s 142(1) of the Act had inter alia called for the tax audit report in Form 3CD along with all annexures, to which the assessee pointed out that, it had already submitted the same in his office, which is found to inter alia include the details of tax depreciation for the year was enclosed as Annexure – IV, statement of additions by way of Annexure – V and details of fixed assets capitalized as Annexure – VI. The Ld. AR brought to our notice that, these details furnished by the assessee comprised of the complete details of the additions made to fixed assets inter alia including the electrical installation and data processing equipment which were installed at the factory premises and the exchange fluctuation loss on the borrowings obtained for acquisition of fixed assets and the details of additional depreciation claimed thereon u/s 32(1)(iia) of the Act. The Ld. AR further invited our attention to the assessee’s response to notice issued u/s 142(1) of the Act dated 15.07.2013, copy of which was placed at Pages 56 to 78 of the Paper Book. It is observed from these records that, the AO, after examining the details of new Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 21 :: additions & depreciation, had specifically requisitioned the details of assets on which additional depreciation was claimed, and, the assessee is noted to have provided the same by way of Annexure – C. The Ld. AR invited our attention to the details of the electrical installation, data processing equipment and exchange loss, which formed part of the said details and is found placed at Pages 43 & 44 of the Paper Book. The AO is also noted to have sought for the reconciliation of additions to fixed assets as per books of accounts with the depreciation statement as per TAR, which was also submitted by the assessee in its reply at Annexure – E. The Ld. AR further invited our attention to the specific query raised by the AO questioning allowability of additional depreciation on assets which were installed during the second half of earlier year, and after considering the response of the assessee, the AO is noted to have made disallowance of Rs.9,53,49,197/- out of the additional depreciation claimed by the assessee u/s 32(1)(iia) of the Act. 18. Having gone through the notices/requisitions issued by the AO’s predecessor, details submitted by the assessee in original assessment, and the assessment order passed u/s 143(3) of the Act dated 21.05.2014, we of the considered view that , the assessee had disclosed all the primary facts before the AO in the original assessment concerning the additional depreciation claimed on electrical installations & data Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 22 :: processing equipments installed at the factory premises as well as the exchange fluctuation loss component which was capitalized to the new additions to plant & machinery. Even the AO is found to have enquired into the claim of additional depreciation by his notice u/s 142(1) of the Act and to the extent to which he disagreed with the claim, he is found to have made disallowance in the original assessment order. According to us therefore, there was no failure on the assessee’s part to disclose the relevant material facts truly or fully in the original assessment completed u/s 143(3) of the Act. We find that the AO was also unable to demonstrate as to which relevant material fact did the assessee fail to declare truly or fully in the assessment completed u/s 143(3) of the Act on 21.05.2014, based on which the AO had usurped jurisdiction u/s 147 to reopen the assessments beyond four years. We are therefore inclined to hold that the AO did not satisfy the condition precedent in the first proviso to Section 147 of the Act for reopening of the assessment of AY 2010-11 beyond four years. 19. Further a bare perusal of the reasons recorded (supra) also does not reveal any statement by the AO to the effect which would throw light as to what was found by the AO which can be construed to be a failure on the part of the assessee to disclose fully & truly the material facts necessary for assessment during the original assessment, recording of Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 23 :: which was sine qua non and had to be spelt out by the AO in the reasons recorded to validly assume jurisdiction u/s. 147 of the Act. 20. The AO in the reasons recorded is noted to have admitted the fact that the assessee had filed RoI for AY 2010-11 and revised the return declaring income as ‘nil’. The AO notes that, later the ITR was selected for scrutiny and the AO completed the original assessment u/s.143(3) of the Act on 21.05.2014 making certain additions arrived at a total income at Rs.328.88 Crs. In the second paragraph, he notes that the depreciation statement reveals that the assessee had claimed additional depreciation on ‘electrical installations and data processing equipments’ which he has reproduced in the chart format (supra). Thereafter, he simply notes that the additional depreciation is not allowable on the above assets and hence, additional depreciation claim of Rs.2,78,78,547/- requires to be withdrawn. In Para No.3, he notes that the assessee had claimed Rs.2,78,78,547/- on account of exchange fluctuation capitalized to plant & machinery block to the tune of Rs.5,85,51,519/- and that also needs to be withdrawn. Thus, it can be noted that from the reasons recorded before issuance of notice u/s.148 of the Act on 31.03.2017 [6th year from the end of the relevant assessment year] that the AO had not made any such averment that the assessment has been reopened for the failure on the part of the assessee to disclose fully and truly all the material facts Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 24 :: necessary for that assessment year. It was not the AO's remark that, the material facts relating to, the new additions made to fixed assets, foreign exchange loss capitalized & additional depreciation claimed u/s 32(1)(iia) of the Act, were not disclosed truly and fully in the assessment completed u/s 143(3) of the Act, which is the precise requirement of law as can be discerned on reading of first proviso to section 147 of the Act. Thus, in our view, on this score also, the usurpation of jurisdiction u/s. 147 by the AO to reopen the assessment completed u/s. 147 of the Act after four years is bad in law and, therefore, has to be struck down for not satisfying the jurisdictional fact in law, which is a condition precedent to legally assume jurisdiction to reopen assessment after 4 years from the end of the relevant assessment year. 21. In this regard, it would be gainful to refer to the decision of the Hon’ble Supreme Court in the case of CIT v. Avadh Transformers (P.) Ltd. 51 Taxmann.com 369 wherein, the Apex Court upheld the judgment of the Allahabad High Court, holding that in absence of failure on the part of the assessee in disclosure of material facts, the reassessment proceedings could not be initiated after expiry of four years. For the sake of reference, the relevant portion of the decision rendered by the Hon’ble Allahabad High Court is as follows:- “11. From the reasons recorded, it is apparent the assessment is sought to be reopened only on the ground that as per the Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 25 :: explanation given below sub-section (13) of section 80-IA of the Act, which has been substituted by the Finance Act No.2 of 2009 with retrospective effect from 1.4.2000, deduction under section 80-IA would not be admissible to an assessee who carries on business which is in the nature of works contract and as such, the petitioner/assessee being engaged in the business of works contract is not eligible for deduction under section 80-IA but the same has been claimed by the assessee, hence, there was reason to believe that income chargeable to tax has escaped assessment for the assessment years under consideration. The record of the case does not in any manner indicate that proceedings under section 147 are sought to be reopened by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for assessment years under consideration. 12. The respondents has not disputed the fact that there is no failure on the part of the petitioner to disclose fully and truly all material facts. Only by way of submission advanced before the Court it is contended that in the light of the amendment of section 80-IB, it is deemed that the petitioner has failed to disclose the correct facts. As to whether or not there is any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment, is a matter of fact and there can be no deemed failure as is sought to be contended on behalf of the respondents. 13. In the circumstances, in absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment years under consideration, the notice under section 148 of the Act having been issued after the expiry of a period of four years from the end of the relevant assessment years, the very initiation of proceedings under section 147 of the Act stand vitiated and as such cannot be sustained.” 22. We may also refer to the decision of in the case of Tao Publishing (P.) Ltd. v. Dy. CIT [2015] 370 ITR 135 wherein the Hon'ble Bombay High Court has held that where the reasons supplied by the AO do not Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 26 :: disclose that there was any failure on the part of the assessee to provide all the material facts, then it will have to be presumed that the assessee did not fail to make full and true disclosure of all material facts and hence the jurisdictional requirement set out in the first proviso to Section 147 for initiating reassessment, after the expiry of period of four years, shall be held to be not fulfilled. The relevant observations of the Hon'ble High Court is extracted below: \"9. The learned counsel for the Petitioner rightly pointed out that the ground that the Petitioner had failed to disclose all the relevant material was not incorporated in the Reasons supplied to the Petitioner. The object of furnishing Reasons for reopening, is to put the assessee to notice as to why the Assessing Officer has reason to believe that income has escaped assessment. Apart from this position, in the present case the Reasons supplied do not state that there was any failure on the part of the Petitioner to provide material particulars. That an assessee has not made a full and true disclosure of facts, is one of the jurisdictional requirement for proceeding with reassessment after a period of four years. In the case of Hindustan Levers v. R.B. Wadkar [2004] 268 ITR 332/137 Taxman 479, this Court had held that the notices for reassessment would stand or fall on the basis of Reasons and the Reasons cannot be improved upon, substituted or supplemented. This view has been followed by this Court in several other cases. 10. As stated above, the reasons supplied to the Petitioner do not disclose that there was any failure on the part of the Petitioner to provide all the material facts. That being the position, this ground could not have been taken up against the Petitioner at the time of disposing of the objections. Once this was not the basis for issuance of notice for Reassessment, it cannot be held against the Petitioner that the Petitioner had failed to make a true and full disclosure. It will have to be held that the Petitioner did not fail to make full and true disclosure of all material facts. The jurisdictional requirement for carrying out the reassessment, after the expiry of period of four years, is not fulfilled in the present case.\" Printed from counselvise.com ITA No.601/Chny/2025 (AY 2010-11) M/s. Ashok Leyland Ltd. :: 27 :: 23. For the above reasons and following the law laid down by the Hon'ble Supreme Court in the case of NDTV Ltd. (supra), and other case laws, we hold that the reopening of the assessment for AY 2010-11 was bad in law in as much as the AO did not satisfy the condition precedent in first proviso to Section 147 of the Act which was sine qua non for usurping jurisdiction u/s 147 of the Act. As a consequence thereto, the order passed u/s 147/143(3) dated 28.09.2018 for AY 2010- 11 is held to be ab initio void and are therefore quashed. 24. In the result, appeal filed by the assessee is allowed. Order pronounced on the 29th day of July, 2025, in Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद /ACCOUNTANT MEMBER (एबी टी. वक ) (ABY T. VARKEY) \u0001याियक सद\bय/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 29th July, 2025. TLN आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ\u0010/Appellant 2. \u0011\u0012थ\u0010/Respondent 3. आयकरआयु\u0018/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0011ितिनिध/DR 5. गाड फाईल/GF Printed from counselvise.com "