TMI Blog2012 (12) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 30.03.2011 issued by the respondent herein under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment in petitioner's case. It was also prayed to quash the decision reflected in communication dated 24.11.11, whereby the Assessing Officer rejected petitioner's objections to reopening of the assessment. 2. Summarizing the necessary facts at the outset, the petitioner, a partnership firm engaged in the business of manufacture and sale of art silk fabrics, filed its return of income for the Assessment Year 2004-2005 in which it declared total loss of Rs. 35,89,715/-. The return was accompanied by a statement of total income, an audited annual accounts, audit report in the prescribed form as well as the audited balance-sheet. The case was selected for scrutiny assessment, and notice under section 142 (2) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for sake of brevity) was issued on 19.06.2006 calling for various details. The details were supplied by the petitioner by letter dated 7.7.2006. Assessment order was passed under section 143(3) of the Act on 21.12.2006 . After passage of five years, the respondent Assessing Officer exercised hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings. It was submitted that only ground on which the Income Tax Officer reopened the reassessment was that the unutilized CENVAT credit of Rs.11,94,403/- was not credited to the profit loss account. It was submitted that the assessee had produced a copy of account showing CENVAT receivable and its utilization, which was within the knowledge of the Assessing Officer. The learned advocate relied on the apex decision in CIT Vs. Kelvinator of India [(2010) 320 ITR 561 (SC)] for the proposition that the jurisdiction to reopen the assessment could not be assumed on a mere change of opinion or in order to review the original assessment. 4.1 It was submitted that in any view of the matter, the alleged omission did not result in underassessment of income, because even if the alternative method of accounting was followed, it would not have resulted into any change of the total income. In support of that learned advocate relied on decisions in CIT Vs. Mahavir Aluminum Ltd. [297 ITR 77 (Delhi HC)] and in CIT Vs. Mahalaxmi Glass Works Pvt. Ltd. [318 ITR 116 (Bombay HC)] submitting further that Mahavir Aluminum (supra) was confirmed by the Apex Court and the SLP was dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... envate credit was required to be added to the total income even the assessee followed exclusive method of accounting. Omission resulted in under-assessment of income of Rs. 11,94,404/- involving short levy of potential IT as under : I T @ 35% on Rs. 11,94,403 Rs. 4,18,041 SC @ 2.5% Rs. 10,451 Total Rs. 42,28,492 5.1 Now, in the context of above reasons recorder for reopening and the conditions for exercise of powers for reopening, the details regarding the original assessment for the year 2004-2005 may be looked into. It would be seen that the petitioner submitted the accounts for the corresponding previous year with an audit report in the prescribed from. They were certified by the Chartered Accountant. 5.2 Secondly, in the statement of particulars furnished under section 44AB of the Act in Form No. 3CD, it was inter-alia mentioned in Part-B as under. 12. (a) Method of valuation of closing stock employed in the previous year. (b) Details of deviation, if any, from the method of valuation prescribed under section 145A, and the effect thereof on the profit and loss. Closing stock of Yarn has been valued at cost, Stock of Grey Dyed has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial. Secondly, the escapement of income is by itself, a requirement. It is sine qua non. An inquiry under section 147 would be inconsequential if the element of escapement does not exist. In the present case, the reopening being after expiry of four years, an additional limitation was that the escapement was required to be on account of failure on part of the assessee to disclose the material facts. It is evident from a bare reading of the reasons recorded by the respondent- Assessing Officer that nowhere he stated that the assessee failed to disclose fully and truly the facts which were necessary for his assessment. Therefore, on this count alone the action would fail to sustain. The ultimate yardstick to judge whether the reopening of assessment is on germane grounds permissible in law, is the reasons recorded by the Assessing Officer. 6.2 As already seen, only aspect mentioned in the reasons recorded is about the requirement of inclusion or non-inclusion of cenvet /modvat credit in closing stock. . The Assessing Officer stated in his reasons inter alia that on perusal of break up the loans and advances in the balance-sheet, it was found that the assessee had at the end of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision as to the existence of reasons and the belief is not in the mind of the Income-tax Officer. If it be asserted that the Income-tax Officer had reason to believe that income had been under-assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable. The expression predicates that the Incometax Officer holds the belief induced by the existence of reasons for holding such belief. It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income-tax Officer must on information at his disposal believe that income has been underassessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief may not be based on mere suspicion : it must be founded upon information. 7. The above reasons render the impugned action on part of the respondent to be bad in law. However, the crux of the matter may now be seen. What is reasoned by the Assessing Officer is that since the assessee foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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