TMI Blog2010 (6) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 115JB of Rs. 1.94 crores. An order of assessment was passed onMarch 7, 2005, under section 143(3). OnMarch 18, 2009, the Assessing Officer issued a notice under section 148. The reasons on the basis of which the assessment is sought to be reopened are stated in the notice and are as follows : "The assessee has filed its original return of income onOctober 31, 2002. Assessment under section 143(3) was completed onMarch 7, 2005computing income at Rs. 9,79,34,208. It is seen from the assessment records that as per clause 2.18 of Notes of Accounts the company has engaged ICICI InfoTech Inc. USA, the wholly owned subsidiary for providing market development and sales support in the US for project software and implementation services for onsite projects effective July 1, 2001. As per the arrangement, the company remunerates InfoTech Inc. on a cost plus basis for the aforesaid services and all the project revenues accrue to the company. Out of such remuneration, amount payable towards market development and support expenses of Rs. 218.54 million has been treated as deferred over a period of two years as in the opinion of the management benefit of such expenses would ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jections holding that it is at the stage of assessment that he would be dealing with these objections. 5. In assailing the exercise of the jurisdiction under section 147, the learned counsel appearing on behalf of the assessee submitted that: (i) there was a full disclosure by the assessee of all the material facts necessary for the assessment. The reopening of the assessment is after four years of the end of the relevant assessment year. There was no failure to disclose fully and truly all the material facts necessary for the assessment. Hence, the condition precedent to the exercise of the jurisdiction to reopen the assessment beyond four years has not been fulfilled ; (iii) Four reasons have weighed with the Assessing Officer in reopening the assessment. On each of the four issues, there was a full and true disclosure of all the material facts by the assessee for the assessment. As a matter of fact, the reasons which have been furnished for reopening the assessment are based on the assessment record and on the disclosures made by the assessee. Hence, the condition precedent to a valid exercise of the power to reopen an assessment beyond four years does not exist in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to a disclosure within the meaning of the first proviso. In other words, an assessee cannot rest content merely with the production of account books or other evidence during the course of the assessment proceedings and challenge the reopening of the assessment on the ground that if the Assessing Officer were to initiate a line of enquiry, he could with due diligence have arrived at material evidence. The primary obligation to disclose is on the assessee and the burden of making a full and true disclosure of material facts does not shift to the Assessing Officer. The assessee has to disclose fully and truly all material facts. Pro-ducing voluminous records before the Assessing Officer does not absolve the assessee of the obligation to disclose and the assessee, therefore, can-not be heard to say that if the Assessing Officer were to conduct a further enquiry, he would come into possession of material evidence with the exercise of due diligence. An assessee cannot throw ream ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had amortized Rs. 9.36 crores out of the amount of Rs. 21.85 crores. According to the Assessing Officer, the assessee had claimed a deduction of Rs. 21.85 crores in the computation of income while adding back the amortized amount. However, the expenditure should have been treated as capital expenditure and the assessee is stated to have wrongly claimed the deduction towards such expenses. On this ground, it has been stated that there has been an escapement of income to the extent of Rs. 21.85 crores. 12. Now, in considering the first ground on which the assessment is sought to be reopened reference may be made at the outset to schedule 12 of the schedules forming part of the accounts of the assessee. The assessee dis-closed that the market development and support expenses were amortized to the extent of Rs. 9.36 crores. In schedule 9 the deferred revenue expenditure for market development and support expenses reflected an addition of Rs. 21.85 crores during the year. Rs. 9.36 crores was amortized during the year and was charged to the profit and loss account leaving a balance of Rs.12.84 crores to be carried forward to the next year. The basis on which this was done w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of the assessment proceedings the assessee had made a full and true disclosure of all material facts in relation to the assessment. As a matter of fact, it would be necessary to note that the notice to reopen the assessment on the first issue is founded entirely on the assessment records. There is no new material to which a reference is to be found and the entire basis for reopening the assessment is the disclosure which has been made by the assessee in the course of the assessment proceedings. In Cartini India Ltd. v. Addl. CIT [2009] 314 ITR 275 (Bom), a Division Bench of this court has observed that where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to the Assessing Officer to reopen the assessment based on the very same material with a view to take another view. The principle which has been enunciated in Cartini must apply to the facts of a case such as the present. The assessee had during the course of the assessment proceedings made a complete disclosure of material facts. The Assessing Officer had called for a disclosure on which a specific disclosure on the issue in question was made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unity was granted to the Assessing Officer to deal with the objections of the assessee. The Assessing Officer in the order that he thereafter passed onApril 5, 2010, has not dealt with the objections of the assessee and has on the contrary held that the merits of the objections would be decided only at the stage of the assessment proceedings. Consequently, neither in the reasons advanced by the Assessing Officer for reopening the assessment nor in the order passed on the objections filed by the assessee is there any reference to the ground which has been urged in the submissions on behalf of the Revenue at the hearing of these proceedings. A ground which has no basis either in the notice for reopening the assessment or in the order dealing with the objections of the assessee cannot be heard to be urged for the first time in these proceedings, instituted under article 226 of the Constitution to challenge the reopening of the assessment. 16. The third ground on which the assessment has been sought to be reopened is that from annexure 2, clauses 20 and 22(b) of Form 3CD an amount of Rs. 31.32 lakhs is found to be debited to the profit and loss account on account of prior perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit under section 44AB. The assessee fulfilled the obligation. The disclosures which are made as part of the report under section 44AB cannot fall file within the interdict of Explanation 1 to section 147. 18. In so far as the fourth ground for reopening the assessment is con-cerned, the Assessing Officer has noted that the assessee debited an amount of Rs. 12.68 crores on account of the interest on a fixed loan to the profit and loss account which has not been capitalized. The assessee is noted to have capitalized an amount of Rs. 2.18 crores in the previous year 2000-01 on the same account. As regards this ground it would be important to note that the assessee had disclosed as part of its profit and loss account earnings before interest, depreciation and tax at Rs. 58.09 crores. The profit before tax was computed at Rs. 33.29 crores, after deducting from the aforesaid amount the interest on a fixed loan of Rs. 12.68 crores and amortization of premium on debentures at Rs. 12.11 crores. As part of its disclosure of significant accounting policies, in schedule 14 the assessee disclosed in paragraph 1.9 under the heading "Borrowing costs" that borrowing costs directly attributabl ..... 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