TMI Blog1998 (11) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... ome for the assessment year 1989-90 relevant to the accounting year ended March 31, 1989 on September 11, 1989. Revised returns were filed on April 27, 1990, and May 10, 1990, and in the last of the returns an income of Rs. 20,64,850 was admitted. The petitioner's case was selected for a detailed scrutiny of accounts for that assessment year and notice was issued to the petitioner under section 143(2) of the Act. All the information in detail, required by the Assessing Officer was furnished by the assessee and thereafter regular assessment was completed under section 143(3) of the Act on March 25, 1992, determining a total income of Rs. 1,61,85,637 as against the sum of Rs. 20,64,850 admitted by the petitioner in its revised return. More than six years after the end of that assessment year 1989-90, the petitioner was served with the notice under section 148 of the Act requiring the petitioner to deliver a return of income in the prescribed form within 30 days on the ground that the Assessing Officer has reason to believe that the income of the petitioner chargeable to tax has escaped assessment within the meaning of section 147 of the Act. The petitioner has filed a return in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80HHC has excessively been allowed resulting in underassessment. Since the income chargeable to tax has thus escaped assessment within the meaning of section 147 of the Act, action under section 147 is called for. (ii) In the assessment under section 143(3) deduction under section 32AB was allowed to the extent of Rs. 26,33,971 stating that it was restricted to the amount utilised for the purchase of machinery. However, in annexure to the documents enclosed to the return of income, the amount eligible for deduction was arrived at Rs. 25,52,973 in Form No. 3AA as a sum of Rs. 80,998 relates to purchases made prior to the accounting period, i.e., prior to September 1, 1987. Thus, due to the allowance of excessive deduction under section 32AB income chargeable to tax has escaped assessment to the extent mentioned above within the meaning of section 147. (iii) The assessee has debited a sum of Rs. 1,331.72 lakhs (Rs. 592.18 + 739.54 lakhs) towards excise duty paid for the year ended March 31, 1989, including Modvat adjustment of Rs. 157.83 lakhs but the corresponding credit was not taken into account in the profit and loss account with the result that the profit for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss of or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : 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." The pre-condition for the exercise of the power under section 147 in cases where power is exercised within a period of four years fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147. After an assessment has been made, in the normal circumstances, there would be no reason for anyone to doubt that the assessment has been made on the basis of all relevant facts. If the Assessing Officer chooses to entertain the belief that the assessment has been made in the background of the assessee's failure to disclose truly and fully all material facts, it is necessary for him to record that fact, and in the absence of a record to that effect, it cannot be held that a notice issued without recording such a fact is capable of being regarded as a valid notice. As to whether the material facts disclosed by the assessee are full and true is always a question of fact and unless the facts disclosed had been examined in relation to the extent of failure if any on the part of the assessee, it is not possible to form the opinion that there had been a failure on the assessee's part to truly and fully disclose the material facts. A notice issued without a record of the Assessing Officer's reasonable belief that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me towards the amount shown as "assets" in the profit and loss account as the amount "paid" as "excise duty". Counsel submitted that it is only the amount paid through the deposit account that can be termed as having been paid, and the adjustment from and out of the Modvat account cannot be described as amount paid towards the excise duty. Learned counsel for the assessee/petitioner rightly pointed out that the assessee's obligation under the Central Excise Act is to pay duty on the goods manufactured by it and all amounts paid as duty can only be described as having been paid and by no other term, as any adjustment made towards that payment will only result in the assessee not having to pay the same once over and the result of the adjustment is the discharge of the assessee's liability for payment of excise duty. The profit and loss account can only show the amount of excise duty paid by it on the products manufactured by it and that is how the amount has been shown in the profit and loss account and the assessee, therefore, has not in any manner failed to disclose any fact necessary for ascertaining the amount paid by it as excise duty. Learned counsel for the Revenue also invi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the levy of excise duty on all excisable goods produced or manufactured in India. The duty is to be "levied and collected in such manner as may be prescribed". The manner in which it is to be collected may be by one or more modes. However, after such collection, the result is the discharge of the obligation of the manufacturer to pay the duty which it is required to pay under section 3. One of the modes of payment of the excise duty is by way of adjustment of the credit given to the manufacturer of the duty paid by it on excisable goods used as inputs, towards the duty payable by the manufacturer on the finished product. Rule 57A of the Central Excise Rules, 1944, provides for allowing credit of any duty of excise or the additional duty under section 3 of the Customs Tariff Act as may be specified in the notification on the goods used in or in relation to the manufacture of final products and for "utilising the credit so allowed towards the payment of duty of excise leviable on the final products....". The credit allowed is, therefore, a credit which is to be utilised towards the payment of duty. To state the obvious, the utilisation of the Modvat credit results in the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is for the Assessing Officer to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as the assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the Assessing Officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income, if any, on this account is not on account of any failure on the assessee's part to disclose the material facts fully and truly. The notice issued by the Assessing Officer in exercise of his power under section 147, therefore, cannot be sustained. As the error here is one of jurisdiction it is not necessary for the assessee to have recourse to the remedies by way of appeal, revision, etc. It is well settled that when a jurisdictional error is brought to the notice of this court such errors are capable of being corrected by this court in exercise of the court's powers under article 226 of the Constitution of India. The Supreme Court in the case of CIT v. Progressive Engi ..... 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