TMI Blog2010 (9) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived in case of U. P. Straw Board and Agro Product Ltd., M/s. V. L. S. Finance Ltd. and Kotak Mahindra Finance Ltd. and the list of interest charged showing the basis of charging interest, whereas at the time of proceeding it imposed interest on year end basis. (iii) That the third objection was also dealt with as per schedule 8 of the balance-sheet, which was furnished by the assessing authority. Thus, the petitioner had disclosed the matter fully and truly and the material facts necessary for assessment in course of the regular assessment proceeding under section 143(3) of the Income-tax Act. Notice for assessment year 1995-96 in March 2002 – Notice barred by limitation - - - - - Dated:- 9-9-2010 - RAJES KUMAR, BHARATI SAPRU MS., JJ JUDGMENT Rajes Kumar J.- In the present writ petition, the petitioner is seeking the following reliefs : (a) issue a writ, order or direction in the nature of certiorari quashing the notice dated March 5, 2002 (annexure 6) issued by the Assistant Commissioner of Income-tax, Najibabad, District Bijnor, respondent No. 1. (b) issue a writ, order or direction in the nature of certiorari quashing the notice dated September 27, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the notice are reproduced herein below: Office of the Assistant Commissioner of Income tax, Najibabad F. No. D-1026th July, 2002 To, M/s. Dhampur Sugar Mills Ltd. Khampur. Sub. : Reassessment proceeding under section 147 of the Income-tax Act, 1961, the assessment year 1995-96. Reasons regarding. With reference to your letter dated15-3-2002on the subject stated above, the reasons recorded for assessment are being supplied here under : 1. Perused of the profit and loss account reveals that you have debited a sum of Rs. 7,50,24,520 on account of excise duty has not been taken into consideration while valuing the closing stock. There was an increase of Rs. 1,91,838 quintals in closing stock, so, at the prevailing rate of excise duty i.e. at Rs. 85 quintals, value of closing stock should have been increased by Rs. 1,63,06,230. 2. The details of interest transferees that in the same case flat rate of interest has been applied, while in some other case product basis, has been applied, resulting in short computation Rs. in lakhs (i) M/s. U. P. Straw Board and Agro Products Ltd., Agwanpori 8.49 (ii) V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessing authority to raise the issue relating to the valuation of closing stock and to reopen the proceeding on this ground. So far as the second ground is concerned, it is stated that, vide letter dated September 15, 1997, the petitioner has filed the details of the interest received and receivable during the course of the assessment proceeding and the reconciliation chart reveals that an amount of Rs. 11,49,978 has already been charged to income-tax. The interest was calculated on product basis. It was duly considered during the course of the assessment proceeding and in the assessment order and has been charged to tax. So far as ground No. 3 is concerned, it is submitted that the figure of rupees 5 lakhs interest recoverable is taken by mistake as there is no such amount in the balance-sheet as onMarch 31, 1995. He submitted that the notice under section 148 of the Act has been issued merely on the basis of the audit objection and merely on account of change of opinion and without any material of escaped assessment. In support of the contention that the proceeding is barred by limitation inasmuch as it has been initiated beyond the period of four years, he relied upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d within a period of six years in case where there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment is justified. Therefore, the notice issued onMarch 5, 2002, which was within the period of six years was within limitation. He submitted that there was sufficient material on record to show that there was escaped income and, therefore, the notice has been legally issued under section 148 of the Act. He further submitted that mere production of books of account during the course of assessment proceeding does not amount to disclosure of all material facts in view of Explanation 1 to section 147 of the Act. He placed reliance on the decision of the apex court in the case of Phool Chand Bajrang Lal v. ITO reported in [1993] 203 ITR 456 (SC), the decision of the Punjab and Haryana High Court in the case of Grover Nursing Home v. ITO reported in [2001] 248 ITR 493 and the decision in the case of Sri Krishna Pvt. Ltd. v. ITO reported in [1996] 221 ITR 538. 8. We have considered the rival submissions and gone through the records. 9. It would be useful to refer the relevant provisions of the Act. 147. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148. 148. Issue of notice where income has escaped assessment. (1)Before making the assessment, reassessment or recompilation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant assessment year, unless the case falls under clause (b) ; (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year. 10. Admittedly, the notice under section 148 issued onMarch 5, 2002, was beyond the period of four years. There is no whispe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the contents of paragraph 23 of the writ petition are not admitted as stated and it is submitted that the figure of Rs. 5,00,000 has been inadvertently mentioned as interest receivable in letter dated July 26, 2002. This is actually claims recoverable amounting to Rs. 27,35,365. In this view of the matter so far as ground No. 3 is concerned, the amount has been inadvertently mentioned. Therefore, it is not the case of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. 11. It is also pertinent to refer to some paragraphs of the writ petition, which have not been specifically denied in the counter-affidavit. 23. That regarding third objection, figure of Rs. 5 lakhs of interest recoverable, it appears that they have mistakenly mentioned it as there is no such amount or head in the balance-sheet as onMarch 31, 1995, of the petitioner. 26. That the petitioner had disclosed the matter fully and truly at the time of regular assessment proceedings. It had also furnished the details regarding closing stock specifically asserting that no provision of excise duty/liability in respect of goods manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the proviso itself. No case has been made out that the case falls under the exception. In the reason recorded also there is no mention that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment and it could not be because, as stated above, the assessee has furnished complete details relating to valuation of closing stock and interest, which have been duly examined in detail by the assessing authority in the assessment order. The assessing authority has made an addition on account of undervaluation of stock, which has been deleted in the appeal on the ground that the assessee has followed the same method of valuing the stock, which had been followed in the earlier years. Moreover, the apex court has held that excise duty is payable at the time of removal of goods and, therefore, the excise duty cannot be included in the closing stock. 14. We do not find any substance in the argument of the learned standing counsel that where the escaped income exceeds rupees one lakh the limitation to issue notice is six years under section 149 of the Act, whether the case falls under the exception of the proviso to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome is less than one lakh, the tax incidence may be small the action under section 147 should not be taken beyond the period of four years in any case. 16. Thus, on the plain reading of section 147 and section 149 the legal position in respect of limitation emerges as follows : (i) In view of the proviso to section 147 no action can be taken under section 147 beyond the period of four years if there is no case of failure on the part of the assessee to disclose fully and truly all material facts which are necessary for assessment for the year of assessment. (ii) If the case falls under the exception mentioned in the proviso to section 147, namely, there is failure on the part of the assessee to disclose fully and truly all material facts which are necessary for assessment for the year of assessment then action can be taken beyond four years subject to the issue of notice under section 148 within the period of limitation pro-vided under section 149 of the Act. (iii) Where the case falls under the exception to the proviso to section 147 and escaped income exceed rupees one lakh the notice under section 148 can be issued beyond the period of four years but within six ..... X X X X Extracts X X X X X X X X Extracts X X X X
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