TMI Blog1992 (8) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... gly the said two grounds are rejected as not pressed. 4. This leaves us with Ground No. 1 wherein the assessee challenges the validity of the reopening of the assessment under section 147(a) of the Act. This contention would be considered later along with the connected contention in the Department's appeal against the decision of the CIT (Appeals) on merits. 5. In the Department's appeal, in Ground No. 2, objection is taken to the decision of the CIT (Appeals) directing the assessing authority to include the amount of Rs. 10,76,283 being the cost of incomplete job in the computation of capital employed for the purpose of calculating relief under section 80J of the Act. 6. The learned counsel on both sides are agreed that this issue is now concluded in favour of the assessee and against the revenue by the decision of the Calcutta High Court in CIT v. Indian Oxygen Ltd. [1978] 113 ITR 109 and that the Department only seeks to keep this issue alive to take up the matter on further appeal to the Supreme Court. We, therefore, respectfully follow the said decision of the Calcutta High Court and confirm the order of the CIT(Appeals). Accordingly, this ground is rejected. 7. In G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. For the next assessment year 1970-71 for which the previous year ended on 31-3-1970 (which is the assessment year under appeal), the ITO made the original assessment under section 143(3) of the Act on 29-5-1971, determining the loss of the assessee-company at Rs. 14,40,533. In this order the ITO mentioned inter alia as follows :--- " 4. The following would be carried forward : (a) Relief under section 80J at Rs. 6,17,160 for the assessment year 1969-70 Rs. 26,66,484 for the current year. " 12. However, subsequently, he reopened the assessment under section 147(a) of the Act by issuing a notice under section 143 which was served on the assessee on 5-7-1977. In response to this notice the assessee objected to the reopening of the assessment on several grounds such as limitation, lack of jurisdiction, etc. All these objections were overruled by the assessing authority who completed the assessment under section 143(3)/147(a) of the Act by his order dated 8-11-1985 and determined the loss of the assessee at Rs. 11,60,633 as against Rs. 14,40,533 determined in the original assessment. The Assessing Officer further held that the relief due to the assessee under section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan was thus repayable in not less than 7 years time and, therefore, comes under the exclusion provided in Rule 19A(3)(b). In this connection the assessee has referred to certain views of the Board as contained in the Minutes of a meeting held on 6-8-1984 between the Chairman and Members of the CBDT and the Bengal Chamber of Commerce (In the matter of computation of capital under the Companies (Profits) Surtax Act 1964). The Bank's letter dated 2-3-1976 a copy of which has been furnished by the assessee does not ". . . contain anything to show that the period of repayment was extended as claimed by the assessee. There is also nothing to show that the original terms of repayment were modified so as to cover a period of not less than 7 years. In the absence of any circular or instructions from the Board ; and in view of the clear provisions of Rule 19A(3)(b) in the matter, I am unable to accept the minutes of the meeting referred to above as authority in support of the assessee's contention. Re-computation of capital under Rule 19A shall, therefore, be made by deducting the loan of Rs. 1,64,40,000 as on 1-4-1969 from the gross value of the assets. " 14. The assessee appealed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r grounds for reopening the assessment under section 147(a) of the Act. The Commissioner, therefore, confirmed the action of the ITO in reopening the assessment under section 147(a) of the Act as valid and good in law and based on proper reasoning. 15. These findings of the Commissioner on the legal aspects of section 147(a) are being challenged by the assessee in its appeal in ground No. 1, as stated above. 16. On the merits of the case, the Commissioner accepted the contentions of the assessee and held that by the expression " provides for repayment thereof during a period of not less than 7 years ", it was meant that the period between the actual commencement of disbursement of loan, i.e., the first instalment of the disbursement and the date stipulated for repaying the last instalment should be taken into consideration. The Commissioner further held that it could never be the intention of the Legislature to mean that the period intervening between the date of first instalment of repayment and the date of the last payment thereof should be 7 years or more. He also rejected the assessee's plea that the actual date of disbursement of the first instalment of the loan and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst we shall consider the Department's objection in its ground No. 1 in the departmental appeal to the deletion of the sum of Rs. 1,64,40,000 on its merits. The relevant Rule 19A(3) which is applicable to the facts of the present case, reads as follows : " (3) From the aggregate of the amounts as ascertained under sub-rule (2) shall be deducted the aggregate of the amounts, as on the first day of the computation period, of borrowed moneys and debts due by the assessee (including amounts due towards any liability in respect of tax), not being,--- (a) in the case of an assessee being a company, the amount of its debentures, if any, and (b) in the case of any assessee (including a company), any moneys borrowed from an approved source for the creation of a capital asset in India, if the agreement under which such moneys are borrowed provides for the repayment thereof during a period of not less than seven years. " A perusal of the aforesaid Rule would show that borrowed moneys and debts due by the assessee as on the first day of the computation period are to be deducted from the aggregate of the amounts ascertained under Rule 19A(2) for the purpose of ascertaining the capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned was already extracted in the said para-4 of the appellate order of the CIT (Appeals). There cannot also be any dispute that even though the mortgage deed was executed by the assessee-company on 23-8-1968, the actual disbursement of loan to the assessee commenced on 15-10-1968 when the first instalment of Rs. 1 crore was given by the Bank to the assessee-company. The last instalment of loan amounting to Rs. 4,60,000 was advanced to the assessee-company on 16-12-1969, thus making up the total loan of Rs. 2 crores sanctioned by the Bank under the mortgage deed. According to the repayment schedule fixed by the Bank, the first instalment was to be repaid on or before 31-3-1970 and the last of the instalments was to be paid on or before 31-3-1975. It is further seen from the Bank's letter dated 2-3-1976, a copy of which is at page-2 of the assessee's paper book, that the repayment schedule of the instalments was, however, modified and rearranged so as to extend the period of repayment from 31-3-1975 to 30-11-1975. This letter of the Bank gives the dates fixed for repayment as well as the actual dates of repayment of the loan by the assessee. 21. On behalf of the Revenue, Shri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso to be taken into account for the purpose of this Rule, as it represents a modification of the agreement from time to time by the parties, as could be seen from the letter dated 2-3-1976. A perusal of this letter would show that the assessee had repaid a major portion of the loan taken from SBI, viz., Rs. 1.60 crores out of Rs. 2 crores by 31-3-1974 leaving a balance of Rs. 40 lakhs only to be paid by 31-3-1975. This amount of Rs. 40 lakhs was paid by the assessee almost on a monthly instalment basis, as could be seen from the dates fixed for repayment, viz., 30-4-1975 to 30-11-1975 while the actual dates of repayment were from 30-4-1975 to 27-2-1976. This letter further establishes that by 30-11-1975 the assessee had paid Rs. 1.95 crores out of the total loan of Rs. 2 crores when it paid the instalment of Rs. 5 lakhs on 22-11-1975 leaving a balance of Rs. 5 lakhs only and this balance of Rs. 5 lakhs was paid by the assessee on 27-2-1976. Obviously, the Bank had also extended the time till this date for the payment of this instalment. If this last date of actual payment viz., 27-2-1976 is also taken into consideration along with the first date of disbursement of the loan, viz., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition abundantly clear. The principles have also been well-settled and reiterated in numerous decisions of this court : See Kantamani Venkata Narayana Sons v. First ITO [1967] 63 ITR 638 (SC) and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). Hidayatullah, J., as the learned Chief Justice then was, observed in Calcutta Discount Co.'s case [1961] 41 ITR 191 (SC) that mere production of evidence before the Income-tax Officer was not enough, that there may be omission or failure to make a true and full disclosure, if some material for the assessment lay embedded in the evidence which the revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts - the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then, subject to the other conditions, jurisdiction to reopen is attracted. It is sufficient to refer to the decision of this Court in Calcutta Discount Co.'s case [1961] 41 ITR 191 (SC) where it had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself by stating that the loan was repaid after 7 years as per the Bank's letter dated 2-3-1976 and that the dates of repayment were alleged to be extended mutually. The assessee, therefore, argued before the IAC (Assessment) that the loan was thus repayable in not less than 7 years time and would, therefore, come under the exclusion provided for in Rule 19A(3)(b) of the Rules. There is now no dispute before us that there was no separate Balance Sheet for this new cement unit and that the terms of repayment of this mortgage loan taken from SBI were also not disclosed in the course of the original assessment proceedings. There can hardly be any dispute that the terms and conditions under which this mortgage loan was granted and the repayment schedule of the loan was provided for, were vital facts within the special knowledge of the assessee and that it was the duty of the assessee to disclose the same in the course of the original assessment proceedings. The assessee's failure or omission to disclose these primary facts which are necessary for computing the capital employed in the new industrial undertaking had resulted in escapement of income and that, therefore, the ITO could hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relief under section 80J of the Act for the whole year was to be allowed to the assessee for that year instead of for 3 months as was done in the original assessment for that year. In fact, we had looked into the reasons recorded by the Assessing Officer for dropping the proceedings under section 147(a) of the Act for the assessment year 1969-70 as the records were produced by the learned Departmental Representative at our instance. In our view, Shri Sen, the learned Departmental Representative, is right in his submission that the dropping of the proceedings under section 147(a) of the Act for the assessment year 1969-70 would be of no avail to the assessee to contend that there was true and full disclosure of all the primary facts necessary for making the assessment for the year under appeal. Shri Sen, the learned Departmental Representative, particularly relied on the fact that the assessee had filed its original return for the assessment year 1970-71 on 10-2-1971 and that the original assessment was completed on 29-5-1971. He pointed out that it was not the case of the assessee that it had disclosed the period of repayment of the mortgage loan from SBI at the time of the orig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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