TMI Blog2015 (4) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment was completed for the assessment year 2003-04 and the subsequent years beginning from assessment year 2004-05. Hence, there could be no contention raised as to there being no full and true disclosure of material facts. If essential and basic documents which are to be necessarily examined before grant of exemption, if not gone into, then it is the default of the officer and not the assessee as held in Calcutta Discount Co. Ltd. (1960 (11) TMI 8 - SUPREME Court). Further, as held by the Hon'ble Supreme Court, here too the grant of exemption, is an inferential conclusion of the Assessing Officer and it cannot be said that the assessee while claiming exemption under Section 10A should have, in the same breath, pointed out that they are not entitled to it. This Court would not look into the question of whether there is a change of opinion or not, since the assessment of a subsequent year, which was challenged on the ground of exemption being disallowed, assailed as a mere change of opinion, has been declined consideration under Article 226 and the assessee relegated to the statutory remedy. This Court, hence, would not refer to the decisions on that aspect too. Any obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s necessary for the assessment. Issue of notice to proceed under Section 147 has to be under Section 148 and Section 149 prescribes the time limit for notice. Under clause (d) of sub-section (1) of Section 149, no notice under Section 149 can be issued beyond six years from the relevant assessment year. 3. In the instant case, Section 147 of the IT Act is sought to be invoked after four years but within six years on the ground that the assessee has failed to disclose fully and truly all material facts. The exemption granted has to be withdrawn for absence of such disclosure and assessment made afresh of the income returned. 4. The petitioner is the Subsidiary Company of an International Business Services Group Private Limited, Thiruvananthapuram and had a Business Corporation Agreement [for brevity BCA ] with the Holding Company. The business commenced in the previous year of the assessment year 2001-02 as per the BCA and the assessee was before the Assessing Officer, claiming exemption under notification SO.243(E) dated 22.03.1994 or in the alternative, under Section 10A of the IT Act. In the assessment year 2001-02 the assessee was found to be disentitled to the exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar, and Exhibit P8 in W.P.(C).No.27373 of 2011 is referred to herein. 10. The reason for issuing the notice under Section 147, according to the Assessing Officer, was that the BCA No.001/99 dated 31.10.1999 between the assessee and their Holding Company indicated that the assessee's business came into existence only with the takeover of the entire infrastructure facilities, employees and all pending orders of the Holding Company, which later Company had been in existence for the last three years. The business thus having been formed, by splitting up or the reconstruction of the business already in existence and also by transfer to a new business, of machinery or plant previously used for any purpose, the conditions under Section 10A(2) of the Act was found to be not satisfied and, hence, the exemption under Section 10A was not permissible. The grant of exemption was irregular and illegal and occurred only due to the assessee's failure to disclose all material facts, truly and fully; i.e., the non-production of the BCA. 11. The final orders referred to above, produced in the writ petitions too followed the very same reasoning. Ext.P2 finds that as a matter of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 191] to contend that the satisfaction arrived at, that the exemption was granted only for the default of the assessee in not having truly and fully disclosed the material facts, cannot be sustained. It was also pointed out that the exemption had been granted in the year 2001-02 and had been continued on all the subsequent years. The assessee has also relied on a number of decisions to buttress their alternate plea, that the present attempt, to decline exemption under Section 10A, is a mere change of opinion, which may not be relevant, as would be noticed later; and hence not referred to. 15. Learned Senior Counsel for Government of India (Taxes) Sri.P.K.R. Menon supported the order of the Assessing Officer on the strength of the decisions reported in Malegaon Electricity Co. P.Ltd. v. C.I.T. [(1970) 78 ITR 466 (SC)], C.I.T. v. Central India Industries Ltd. [(1971) 82 ITR 555 (SC)], Asst.CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [(2007) 291 ITR 500 (SC)], Bengal Luxmi Cotton Mills Ltd. v. I.T.O. [(1973) 87 ITR 618 (Cal.)], M.Varadarajulu v. I.T.O. [(1974) 97 ITR 476 (Mad.)], Iqbal Singh Atwal v. C.I.T. [(1984) 147 ITR 599 (Cal.)], Tiwari Kanhaiya Lal v. C.I.T. [(1985) 154 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the same could be discerned from a detailed and scrupulous examination of the books of accounts which have been produced before the Assessing Officer. Such a suppression made could definitely be considered as escaped assessment merely for reason of there being no full and true disclosure of facts. 20. Here, it would be worthwhile to notice the decision in Calcutta Discount Co. Ltd. v. Income Tax Officer [(1961) 41 ITR 191]. Therein, the original assessments of the Company for three years was sought to be revised on the ground that the profits realised by the Company, by sale of shares were not assessed to tax. The reassessment was proposed on the ground that at the time of assessment, the assessee had stated that the sale of shares were casual transactions, in the nature of mere change of investments. However, it was later revealed that there were systematic transactions in shares carried on by the assessee and the true intention was not disclosed at the time of assessment. The Hon'ble Supreme Court, by majority, found that the assessee had in fact disclosed the fact of sale of shares and whether the same was with an intention to make a business profit or with an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not disclosed, raised two contentions, one that the sale had not been disclosed and the other the Memorandum of Articles of Association of the Company had not been shown. The first contention was repelled on the claim made by the Income Tax Officer itself that the disclosure of sale of shares was made; but on the professed intention of change in form of investment. As to the aspect of non-production of Memorandum of Articles of Association, it was held that the Income Tax Officers could not have concluded the proceedings without reference to such documents. The Company had claimed to be an investment Company and the question whether the sales were in the nature of trade or in the nature of change of investment could not have been considered without examining the said documents and the nature of the sale which were disclosed by the Company. The said observations squarely apply in the aforesaid case where it is the contention of the Revenue that the exemption was granted without looking at the constitution of the assessee; the BCA 24. The decisions relied on by the Revenue are the following: (a). (1970) 78 ITR 466 (SC) was a case in which the reopening of assessment was effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) 286 ITR 553 (Ker.) dealt with a deduction claimed of penal interest, which liability had accrued in the earlier years, and not in the previous year relevant to the assessment year. The Assessing Officer was aware that the assessee was following the mercantile system of accounting and that the liability of earlier years would not be entitled for deduction in a subsequent year. But the fact remained that, the liability of penal interest for non-payment of sales tax being of the previous year, was not disclosed by the assessee, though discernible from the books of account. (e). (1971) 82 ITR 555 (SC) is placed to refute the contention of the assessee that the exemption granted in the earlier years would stand against the reopening. No benefit can be claimed based on an erroneous order; but the specific period provided for reopening, that too on the aspect of absence of full and true disclosure would disable the Revenue from opening even an erroneous assessment, after the limitation prescribed. None of these decisions apply herein. 25. In the present case what is alleged is, an escapement of income, on the ground that the assessee was granted an exemption, which they were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e C.I.T. (Appeals) was allowed and the challenge made to it by the Revenue before the Tribunal was rejected. The Division Bench specifically noticed that there was no discussion in the assessment order, by the Assessing Officer, as to the allowance of the claim. Deduction was merely allowed in terms of the claim and it was held that, hence, there could be no ground urged of change of opinion being the basis of such reopening. The Full Bench of the Delhi High Court in CIT v. Kelvinator of India Ltd. [(2002) 256 ITR 1] was specifically noticed to hold that the said decision is no longer good law in view of the decision of the Hon'ble Supreme Court in Asst. CIT v. Rajesh Jhaveri Stock Brokers (P.)Ltd. [(2007) 291 ITR 500]. The Hon'ble Supreme Court had held that the amendment introduced with effect from 01.04.1989 to Section 147 has brought out substantial difference in the meaning and content of the Section and, hence, the finding of the Delhi High Court that the amendment was inconsequential was overruled. On the facts of the aforesaid case, it was found that the Tribunal had wrongly assumed that re-assessment was completed beyond four years from the end of the relevant asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer (Ms.Dolly) passed an assessment order with respect to the Holding Company, just a day previous to that of the assessment carried out in the case of the assessee Company. Exhibit P4 is the assessment order of the assessee Company for the year 2004-05 dated 27.12.2006 and Exhibit P5 is the assessment order of the Holding Company for the very same assessment year dated 26.12.2006. The assessment of both the assessee and the Holding Company were carried out by the very same Assessing Officer, Ms.R.Dolly. True a wrong assessment made with respect to the Holding Company cannot be relied on by the Subsidiary Company, so as to perpetrate that wrong in the latter's assessment too. But here, the assessee has also, by I.A.No.2445 of 2015, produced a document as Exhibit P13, which discloses that at least in the previous assessment year the BCA was forwarded to the Assessing Officer on 03.02.2006 and the same was available in the files of the Assessing Officer before the completion of assessment of the assessment year 2003-04. 31. There is no dispute on that count raised by the Revenue. However, the learned Senior Counsel for the Revenue would assert that it is not the non-disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for the Department to reopen the said assessments; for reason only of such proceedings being hit by limitation. We are specifically concerned with the exemption granted from the year 2004-05 onwards. The proceedings initiated under Section 147 is on the ground that there is reason to believe that there is escapement of income for reason of an ineligible deduction being granted and the grant of such deduction is alleged to be on the assessee not fully and truly disclosing material facts before the Assessing Officer. The adequacy of the reasons or the eligibility to deduction cannot be gone into by this Court. But the ground of absence of full and true disclosure of material facts stands demolished. 34. Even with respect to the grant of exemption for the earlier years, this Court is unable to find any absence of full and true disclosure as is contemplated under the provision, since an exemption claimed cannot be granted for the mere asking. It was the duty of the Assessing Officer to examine whether the exemption claimed under Section 10A was applicable to the Company. The assessee having claimed such exemption on the first assessment year after incorporation and commencement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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