SMT SANTOSH JAWA V. ASTT COMMISSIONER OF I T JAIPU

ITA/349/2005

AI Insights

The case involves Smt. Santosh Jawa, a pharmaceutical manufacturer, who appealed against the decisions of the Income Tax Appellate Tribunal which had reversed the order of the Commissioner of Income Tax (Appeals) and allowed the appeals of the department. The core issues revolved around the legality of reassessment notices issued under Section 148 of the Income Tax Act, particularly questioning the justification and timing of these notices in relation to the original and subsequent assessments for the financial years 1994-95 and 1995-96. The High Court examined whether the reassessment notices were barred by limitation and whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, which are prerequisites for issuing a notice under Section 148 after the expiry of four years from the end of the relevant assessment year.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 738105 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 24-05-2017
• Assessment Year: misc
• Other Referred Cases: CIT vs. A.R. Enterprises, Calcutta Discount Co. Ltd. vs. Income Tax Officer, Associated Stone Industries (Kotah) Ltd. vs. Income Tax Officer, Mirza International Ltd. vs. Commissioner of Income Tax-II, Kanpur, Phool Chand Bajrang Lal vs. Income Tax Officer, Wel Intertrade (P) Ltd. vs. Income Tax Officer, Ward 18(3), Raunaq Finance Ltd. vs. Joint Commissioner of Income Tax, Ess Ess Kay Engineering Co. P. Ltd. vs. Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R B MATHUR
• Assessee Lawyers: SIDDARTH RA NKA
• Keywords: Income Tax; Limitation; Reassessment; Genuineness of Deposit; Security/Trade Credit
• Section: 148; 143(3); 263; 271(1)(c); 68

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 349 / 2005 Smt Santosh Jawa ----Appellant Versus Astt Commissioner Of I T Jaipu ----Respondent Connected With D.B. Income Tax Appeal No. 99 / 2006 Smt Santosh Jawa ----Appellant Versus Dy Commissioner I T Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Siddarth Ranka For Respondent(s) : Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 24/05/2017 In both these appeals, common questions of law and facts are involved and they relate to same assessee they are decided by this common judgment. 1. By way of these appeals, the appellant has assailed the judgment and order the Tribunal whereby the Tribunal has allowed the appeals of department and reversed the order of CIT(A). (2 of 18) [ITA-349/2005] 2. This Court while admitting the matters framed the following questions of law:- In DBITA No. 349/2005 “i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that notice for reassessment under Section 148 dated 28.3.2001 is justified and is not barred by limitation when original assessment was completed after detailed scrutiny under Section 143(3)? ii) Whether the Income Tax Appellate Tribunal was right in law in reversing the order of the Commissioner of Income Tax (Appeals) in respect of genuineness of the security/trade credit of Rs. 4,00,000/-.” In DBITA No. 99/2006 “i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in sustaining the addition for Security/trade deposit with interest amounting to Rs. 2,79,890/- from M/s Magadh Medicos and in holding it as bogus?” 3. The facts of the case are that the assessee is pharmaceutical manufacturer and assessed for the year 1994-95 on 19th October, 1995. Notice u/s 263 was issued on 31st March, 1998 and the order came to be passed on 29th February, 2000. The assessment order for the year 1995-96 is done on 8th February, 2001 and reassessment for the year 1994-95 was done on 28th March, 2001. 4. Counsel for the appellant has mainly taken us to para 3 of the assessment order which reads as under:- “The assessee vide her letter dated 11.2.2000 submitted that he had received a letter from ACIT, Range-5, Patna wherein it is mentioned that M/s (3 of 18) [ITA-349/2005] Medicana Agencies, Patna had deposited a sum of Rs. 4 Lacs during FY 93-94 with the assessee. The letter ACIT, Cir.5, Patna, submitted by the assessee was an unclear Xerox copy. However to verify the genuineness of the same a letter was written by this office on 13.2.2002 to ACIT, Cir.5, Patna enclosing his said letter and asking him to intimate whether M/s Medicana Medical Agency had advanced the sum of Rs. 4 Lacs Mrs. Santosh Jawa, Prop. M/s Jawa Laboratories. The ACIT, Cir. 5, Patna vide his letter dated 21.3.2002 has reported that the assessment in case M/s Medicana Medical Agency for Ays 94-95 to 96-97 are pending at his end u/s 146. The business of the assessee is closed down and the whereabouts of the proprietor is not being ascertained. Therefore nothing has been heard from him. Under the circumstances, the genuineness of the deposit is doubtful. Therefore, the deposit of Rs. 4 Lacs and interest thereon of Rs. 28110 is treated as income of the assessee u/s 68 of the IT Act, 1961. Penalty Proceedings u/s 271(1)(c) are initiated separately for filing inaccurate particulars of income and concealment of income.” 5. He further contended that CIT(A) while considering the case of AO in para 6 & 12 observed as under: “6. The issue has been carefully examined along with various precedents relied upon by the counsel. The Rajasthan High Court in the case of CIT vs. A.R. Enterprises in 255 ITR 121 has observed that as far as clause(a) of section 147 is concerned, admittedly the first part of the clause is not attracted, as it is not a case of omission or failure on the part of the assessee to make a return under section 139. As far as the second part of clause(a) of section 147 is concerned, it is now well settled that the duty of the assessee is only to disclose fully and truly all material facts necessary for his assessment for the relevant year. The expression “material facts” refers only to the primary facts. There is no duty cast on the assessee to indicate or draw the attention of the Assessing Officer to what factual or legal or other inferences can be drawn from the primary facts. Relying on the decision of the Apex Court in Calcutta Discount Co. Ltd.’s case (1961) 41 ITR 191, the Apex Court in a later decision, viz., Associated Stone Industries (Kotah) Ltd.’s case (1997) 224 ITR 560, held that the duty of the assessee is only to fully and truly disclose all material facts. Explaining the expression “material facts” as contained in section (4 of 18) [ITA-349/2005] 34(1)(a) of the IT Act, 1922, the court observed that it refers only to the primary facts and the duty of the assessee is to disclose such primary facts. The court further observed that there is no duty cast on the assessee to indicate or draw the attention of the Income Tax Officer to what factual or legal or other inferences can be drawn from the primary facts disclosed. There is not a word in the order of assessment if the respondent assessee omitted to disclose any material fact. 12. It has been contended by the assessee that during the course of original assessment proceedings the assessee has duly filed confirmation from the party with regard to the trade deposit and the said confirmation is lying in the assessment record. M/s Medicana Medical Agencies from whom the trade deposit of Rs. 4.00 lacs have been received have duly confirmed about the deposit having been made by them. It is seen that this deposit was accepted by the Assessing Officer while making the original assessment made u/s 143(3) dated 19.10.1995.” 6. The Tribunal without considering the reasoning adopted by the CIT(A) has reversed its finding and appeals of the department were allowed. 7. Counsel for the appellant Mr. Ranka has relied upon the following decisions of this Court in Tax Appeal No. 67/2012 & 69/2012 passed on 14th September, 2016 wherein in para 9 this Court held as under:- “9. We have heard and considered the material on record. Taking into consideration the material which has come on record pursuant to the survey which is carried out in February, 2004 whereas assessment was made much prior to the survey conducted in 2004. In the language of Section 147 & 148, it is very clear that the material which is sought to be relied upon was not available at time, on 23.3.2003 and the observations made by the Tribunal are just and proper and in consonance with the provisions of law. Provisions under Explanation (3) gives wide power but not in the present case.” (5 of 18) [ITA-349/2005] 8. He has also relied upon the decision of Delhi High Court in Writ Petition (C) No. 1841/2013 passed on 11th March, 2014, where the Division Bench held as under:- “10. It is evident from the above discussion that during the assessment proceedings, and the first reassessment proceeding (Pursuant to the earlier reassessment notice of 03.03.2010) the question of dealers’ commission as well as TDS on those amounts, had been gone into. The attempt to revisit this issue a third time, in the given circumstances of the case, is nothing but the tax authorities’ effort to overreach the law and resultantly a sheer harassment of the petitioner. The impugned notice and all further proceedings conducted pursuant to it are, therefore, without jurisdiction and hereby quashed. The writ petition is accordingly allowed but without any order on costs.” 9. Thereafter, he has relied upon another decision of Delhi High Court in case of Wel Intertrade (P) Ltd. vs. Income Tax Officer, Ward 18(3) reported in [2009] 178 Taxman 27 (Delhi) wherein para 9 it has been held as under:- “9.We have considered these submissions and we are inclined to agree with the submissions made by the learned Counsel for the petitioner. The proviso to Section 147 reads as under: Provided that where an assessment under Sub- section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. A plain reading of the said proviso makes it more than clear that where the provisions of Section 147 are being invoked after the period of four years from (6 of 18) [ITA-349/2005] the end of the relevant assessment year, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee failing to make a return under Section 139 etc. or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the present case, the question of making of a return is not in issue and the only question is with regard to the second portion of the proviso, which relates to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Insofar as this pre- condition is concerned, there is not a whisper of it in the reasons recorded by the Assessing Officer. In fact, as indicated above, the Assessing Officer could not have made this a ground because the Assessing Officer had required the petitioner to furnish details with regard to loss occasioned by foreign exchange fluctuation which the petitioner did by virtue of the reply dated 05.02.2002. Since the petitioner had fully and truly disclosed all the material facts necessary for the assessment, the pre-condition for invoking the proviso to Section 147 of the said Act had not been satisfied.” 10. Another decision of Allahabad High Court in the case of Commissioner of Income Tax-II, Kanpur vs. Mirza International Ltd. reported in [2015] 54 taxmann.com 217 (Allahabad) wherein para 3, 4 & 5 reads as under:- “3. We find that the return of income was furnished by the assessee on 31.10.2001 and the assessment was framed by the Assessing Officer under Section 143(3) of the Income Tax Act on 18.03.2004. The notice under Section 148 of the Income Tax Act, was issued by the Assessing Officer on 31.03.2007 after a period of four years from the end of the relevant assessment year. In the said notice, the Assessing Officer nowhere disclosed that the assessee had failed to disclose truly and fully all material facts necessary for his assessment. This is an essential requirement as per the decision of the Hon'ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. Income-Tax Officer and others, 1981 Vol.130 ITR 1, the Supreme Court held : (7 of 18) [ITA-349/2005] \"It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a). First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are \"has reason to believe\" and these words are stronger than the words \"is satisfied\". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid.\" 4. In Phool Chand Bajrang Lal and another Vs. Income Tax Officer and another, 203 ITR 456 the Supreme Court held:- \"From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true ana full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has (8 of 18) [ITA-349/2005] escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which where not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if one the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment.\" 5. In view of the aforesaid, the Tribunal was justified in holding that the initiation of proceedings under Section 148 was barred by limitation.“ 11. He has also relied upon the two decisions of the Gujarat High Court in the case of Shree Sidhnath Enterprise vs. Assistant Commissioner of Income Tax reported in [2016] 240 Taxman 631(Gujarat) wherein para 18, 19 & 20, it has been held as under:- 18. Thus, it is the statutory duty of the assessee to record all its transactions in the books of account to explain the source of payments made by it and to (9 of 18) [ITA-349/2005] declare its true income in the return of income filed by it from year to year. In the present case, it is not the case of the respondent that the petitioner had not recorded all the transactions in the books of account. It is the case of the respondent that the petitioner in its cash book has not noted the addresses and the Permanent Account Numbers of the parties who made the cash deposits. In the present case, as noted hereinabove, the Assessing Officer reopened the assessment by issuing notice under section 148 of the Act on 31st March, 2008 in respect of cash deposits made by the assessee in its ICICI bank account. During the course of the assessment proceedings, the Assessing Officer had also called for details of all bank accounts and also had looked into the cash transactions recorded in the cash book. Thus, the primary facts regarding the transactions were before the Assessing Officer. He should, at the relevant time, have probed further before completing the assessment if he was of the view that the material provided by the petitioner was not sufficient for him to be satisfied that the petitioner's contention was correct. However, the Assessing Officer despite having all the transactions as recorded in the cash book before him, was satisfied with examining certain samples of the transactions and upon being satisfied with the genuineness of the same, did not deem it fit to look into each and every transaction recorded in the cash book. As held by the Supreme Court in the case of Income-Tax Officer, I Ward, Distt. VI. Calcutta and Others v. Lakhmani Mewal Das, MANU/SC/0241/1976MANU/SC/0241/1976 : (1976) 103 ITR 437 (SC), the duty is cast upon the assessee to make true and full disclosure of the primary facts at the time of the original assessment. Production before the Income Tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income Tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that, his duty ends. It is for the Income Tax Officer to draw the correct inference from the primary facts. It is not the responsibility of the assessee to advise the Income Tax Officer with regard to the inference which he should draw from the primary facts. If an Income Tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to (10 of 18) [ITA-349/2005] that inference would not justify initiation of action for reopening assessment. In the present case, the Assessing Officer, at the time of the first reopening, examined the cash transactions to the extent he thought necessary and on the basis of the inference drawn by him, accepted the return as filed by the petitioner. However, the successor Assessing Officer now finds the inference drawn by the Assessing Officer to be erroneous, which amounts to a mere change of opinion and does not justify initiation of action under section 147 of the Act. Moreover, the Assessing Officer while recording the reasons, does not appear to have applied her mind to the information furnished by the Investigation Wing, inasmuch as, if she had ascertained the facts from the record, she would have found that certain cash deposits have already been examined at the time of assessment under section 143(3) read with section 147 of the Act and had been accepted while framing assessment under section 143(3) read with section 147 of the Act and would not have sought to reopen the assessment in respect of total amount of cash deposits recorded in the cash books. It is not the case of the respondent that the cash deposits of Rs. 96,85,63,426/- in respect of which the assessment is sought to be reopened are in addition to the cash deposits of Rs. 4,70,11,830/- in respect of which the assessment was reopened on the earlier occasion and the cash deposits which the Assessing Officer had examined while framing the assessment under section 143(3) read with section 147 of the Act. 19. In the opinion of this court, in the present case on the self same material, namely, the entries made in the cash book, the Assessing Officer had formed the belief that income to the tune of Rs. 4,70,11,830/- had escaped assessment in the earlier proceedings under section 147 of the Act. In the said proceedings, the Assessing Officer called for details of all the bank accounts and after lengthy discussion, ultimately accepted the income as returned by the assessee. Now on the self same material, the Investigation Wing is of the opinion that the cash deposits need to be verified and on the basis of such information received from the Investigation Wing, the Assessing Officer has reopened the assessment. Prior to recording the reasons, it does not appear as if the Assessing Officer has verified the record of the case, else he would have found that in relation to part of the cash deposits, information had already been called (11 of 18) [ITA-349/2005] for and that the Assessing Officer had been satisfied about the genuineness thereof. 20. Thus, it is apparent that at the time when the earlier assessment came to be framed under section 143(3) read with section 147 of the Act, all the primary facts were before the Assessing Officer and he had thought it fit to examine certain transactions and on being satisfied about the genuineness thereof, had accepted the return as filed by the petitioner. Now, on the basis of the very same set of facts, the assessment is sought to be reopened merely by placing reliance upon the survey carried out by the Investigation Wing under section 133A of the Act during the course of which no fresh material has come to light, but on the basis of the very same transactions recorded in the cash book, the assessment is sought to be reopened. Under the circumstances, it cannot be said that there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the year under consideration. In the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, the Assessing Officer lacks jurisdiction to reopen the assessment beyond a period of four years from the end of the relevant assessment year. The impugned notice which has been issued beyond a period of four years from the end of the relevant assessment year, without there being any basis for formation of the requisite belief that income chargeable to tax has escaped assessment on account of any failure on the part of the petitioner to disclose fully and truly all material facts, therefore, cannot be sustained.” 12. Another decision of Gujarat High Court in case of Commissioner of Income Tax vs. Ankit C. Maheshwari reported in [2014] 48 taxmann. com 147 (Gujarat) wherein it has been held as under:- 9. We have heard Mr. Sudhir Mehta, learned advocate appearing on behalf of the appellant-Revenue and have gone through the orders passed by the learned Commissioner of Income-tax (Appeals) and the learned Income-tax Appellate Tribunal. We have also gone through the reasons recorded by the Assessing Officer for reopening the assessment under section (12 of 18) [ITA-349/2005] 148 of the Act, which are reproduced hereinabove. Considering the above, it is required to be noted that, as such, in the reasons recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, it was not the contention of the Assessing Officer that there was any failure on the part of the assessee to disclose the material facts truly and correctly. At this stage, it is required to be noted that, as such, there are concurrent findings recorded by both the authorities below that the reassessment proceedings were initiated/assessment was reopened beyond a period of four years. We are in complete agreement with the view taken by the learned Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal that the reassessment was opened after a period of four years and if that be so, unless and until it was alleged or established that there was any failure on the part of the assessee to disclose the material facts truly and correctly, it was not permissible to the Assessing Officer to reopen the assessment under section 148 of the Act. Even in the reasons recorded by the Assessing Officer, it is not alleged that there was failure on the part of assessee to disclose the material facts truly and correctly, and hence, no error has been committed by the learned Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal in holding that the reassessment proceedings were bad in law. 13. He has further relied upon the decision of Madras High Court in case of Commissioner of Income Tax vs. A.V. Thomas Exports Ltd. [2007] 163 Taxman 718 (Madras) wherein it has been held as under:- 4. Heard the counsel. The original assessment was completed under Section 143(3) of the Act. The assessing officer applied, his mind and completed the said original assessment. There is no finding by the assessing officer that there is any failure on the part of the assessee resulting in the escapement of income. The assessing officer must give categorical finding for the purpose of initiating reassessment under the proviso to Section 147 of the Act. In this case the reassessment proceedings were initiated after 31-3-1995 and, hence the proceedings initiated by issue of notice under Section 148 is ab initio barred by limitation. In this case, the initiation of (13 of 18) [ITA-349/2005] proceedings is after a period of four years and the finding given by the Tribunal is that no income has escaped assessment by reason of failure on the part of the assessee. Hence, there is no jurisdiction to reopen the assessment under the provision of Section 147 of the Act. The scope of the said provision has been considered by this Court in the case of CIT v. Elgi Finance Ltd. : [2006]286ITR674(Mad), and the same reads as follows: The law relating to the reassessment has undergone a change from 1-4-1989. The change was brought in by the Direct Tax Laws (Amendment) Act, 1987. Two sets of provisions were available under Section 147 in Clause (a) and Clause (b). This distinction has now been taken away by the Amendment Act. Previously, the line of distinction was a limitation period of four years and the limitation period exceeding four years. The assessing officer would reopen a back assessment within a period of four years as long as he had reason to believe in consequence of any information, that income has been under-assessed or income has escaped assessment. In the case of limitation, providing for a period exceeding four years, there should have been a failure on the part of the assessee to disclose fully and truly all material facts leading to the escapement of income. But as a result of the amendment brought with effect from 1- 4-1989, the above distinction had been obliterated and the assessing officer could reassess the income as long as he had reason to believe that income chargeable had escaped assessment. The new law has inserted a proviso to Section 147 in the following words: Provided that where an assessment under Sub- section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In addition to the time-limits provided for under Section 149, the law has provided another limitation of four years under the proviso to Section147. As far as the above proviso to Section 147 is concerned, the law prescribes a period of four years to initiate (14 of 18) [ITA-349/2005] reassessment proceedings, unless the income alleged to have escaped assessment was made out as a result of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. (p. 678) 5. The Tribunal has applied the correct principle of law and held as follows: But whether recourse to Section 147 could be made beyond four years is the real question in the present appeal. Circumstances for extending limitation beyond four years do not exist in the facts of the present case. As such on the ground of limitation assumption of jurisdiction under section 147 is bad. In the case of CIT v. Foramer France : [2003]264ITR566(SC), it was held that if there is no failure to file return or to disclose fully and truly all material facts, issuance of notice beyond the period of four years is barred by limitation. In the case of CIT v. Annamalai Finance Ltd : [2005]273ITR451(Bom) it was held that Section 147 of the Act does not postulate conferment of power upon the assessing officer to initiate reassessment proceedings upon a mere change of opinion. It is incumbent on the assessing officer to prove that there was a failure to disclose material facts necessary for the assessment for the issuance of notice beyond the period of four years. 11. It is true that the Apex Court does not make the law from the date it is pronounced but from ab initio. This theory is based on the principle of ACTUS CURIAE NEMINEM GRAVABIT (An act of the court shall prejudice no man). The party ought not to be prejudiced by the delay, but should be allowed to enter up his judgment retrospectively to meet the ends of justice. When highest court of the land declares a principle of law, it should be assumed as if this was the law for all time. But law is not an antique to be abroad, dusted and put back on the shelf. It is dynamic in nature. It is often difficult to describe with exactitude the correct position of law at a given point of time. Till the time apex body determines the correct position things go as per the interpretation of law made by competent courts. At time there may arise cleavage of judicial opinion. But matter gets settled when Supreme Court adjudicates it. Inability to anticipate the view to be taken by the Apex Court cannot be termed as failure on the part of the assessee. Previous knowledge never becomes non-existent it goes on developing in the lap of time. Human knowledge is always improving and progressing. The world was assumed to be flat until it (15 of 18) [ITA-349/2005] became known that the world is found. That does not mean that gravitation did not exist before Newton's discovery of the law of gravitation. Human knowledge is never static. Theory of evolution of Darwin does not make the previous knowledge non-existent. Human knowledge, as we have mentioned, is always progressing. So relativity was always there but we became aware only after Einstein. This is the basic difference between discovery and invention. The information about the law on the basis of which Section 147 proceedings were initiated, was not there until the Supreme Court say it to be so. Therefore, what the Orissa High Court has held at that time was a relevant judicial interpretation as to the law. In the circumstances it cannot be said that income escaped assessment by reason of failure on the part of the assessee. From a reading of the above, it is clear that the Tribunal had given a categorical finding by applying the law enunciated by the Supreme Court judgment in the case of CIT v. Foramer France [2003]264ITR566(SC), as well as this Court judgment cited supra and come to the correct conclusion. Hence we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference. Under these circumstances, no substantial question of law arises for consideration of this Court and accordingly the tax case is dismissed. No costs.” 14. Taking into consideration, he contended that initiation of the third notice is not sustainable. 15. Mr. Mathur has taken us to the order of the CIT(A) and contended that the view taken by the Tribunal is just and proper more particularly, in view of the judgment reported in case of Raunaq Finance Ltd. vs. Joint Commissioner of Income Tax reported in [2005] 272 ITR 210 (Raj) wherein in para 10, 11, 12, 13 & 14, it has been held as under:- “10. It is true that mere statements of Shri Manish Mehrotra, proprietor of Longman Industrial Traders cannot be the basis for disbelieving the transaction, but if it is corroborated and some other materials are available on record to support the statements of Shri (16 of 18) [ITA-349/2005] Manish Mehrotra, the statement of Shri Manish Mehrotra, proprietor of Longman Industrial Traders cannot be brushed aside for considering the genuineness of transaction. But, so far the question of reopening of the assessment is concerned, if the person concerned, from whom the material has been purchased, he himself states subsequently before the authorities that the transaction was not genuine and AO received this information, that can be a ground for reopening of assessment as that is only a stage of show-cause notice. If the AO has any such material or information to take the prima facie view that income has escaped, on the basis of such information, the show-cause notice for reopening of assessment can be issued at this stage. At notice stage no final finding of the fact is necessary that the transaction was not genuine. If, on the material information, prima facie view can be taken regarding escapement of income, the AO is well within his jurisdiction to issue the show-cause notice for reopening of the assessment. 11. In the case of Rattan Gupta v. Union of India and Ors. : [1998]234ITR220(Delhi) , Delhi High Court has considered the similar issue. The Delhi High Court has occasioned that- what is the condition precedent for reopening of the assessment. The Delhi High Court has taken the view that the letter and the appraisal report constituted the relevant material for formation of belief 'that the assessee's income had escaped assessment and notice under Section 147 r/w Section 148 for reopening of the assessment is valid. 12. In the case of Phool Chand Bajiang Lal and Anr. v. ITO and Anr. : [1993]203ITR456(SC) , the facts before their Lordships are that after completion of the assessment, subsequent information has been received from the AO that company's that its managing director had confessed that company had not advanced any loan to any person during period covering the date of cash loan. At p. 477 their Lordships observed as under : \"From a combined review of the judgments of this Court, it follows that an ITO acquires jurisdiction to reopen an assessment under Section 147(a) r/w Section 148 of the IT Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true arid full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains (17 of 18) [ITA-349/2005] chargeable to Income Tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts.\" 13. Considering the view taken by Delhi High Court and Hon'ble Supreme Court in the aforesaid cases and also the reasons recorded by the AO for reopening of the assessment, we see no infirmity in the issue of show- cause notice under Section 147 r/w Section 148 for reopening of the assessment. 14. Consequently, in our considered opinion, there is no infirmity in the order of the AO for reopening of the assessment. 16. He has also placed reliance on another decision in case of Ess Ess Kay Engineering Co. P. Ltd. reported in 247 ITR 818 which reads as under:- “This is a case of reopening. We have perused the documents. We find there was material on the basis of which the Income Tax Officer could proceed to reopen the case, it is not a case of mere change of opinion. We are not inclined to interfere with the decision of the High Court merely because the case of the assesseee was accepted as correct in the original assessment for this assessment year. It does not preclude the Income Tax Officer to reopen the assessment of an earlier year on the bais of his findings of fact made on the basis of fresh materials in the course of assessment of the next assessment year. The appeal is dismissed. No order as to costs.” 17. We have heard counsel for both the sides. 18. Before proceeding with the matter it will not be out of place to mention that the second assessment order for the year 94-95 was over on 29th February, 2000. (18 of 18) [ITA-349/2005] 19. Taking into consideration that the second reassessment order was between the same parties, the transactions were examined and reopened for the third time after a lapse of almost one year on 28th March, 2001. This is nothing but against the fact that has been observed by Delhi High Court in para 10 referred hereinabove. It is nothing but harassment and in the year 95-96 in Tax Appeal No. 99/2006 in para 8 which has been considered by the CIT(A) is complete answer to the issue. 20. In that view of the matter, both the issues are required to be answered in favour of the assessee against the department. 21. The appeal stands allowed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. A.Sharma/120-121 "