TMI Blog2005 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... n - notices in question are quashed and set aside holding them to be bad and illegal. - WRIT PETITION NO. 1374 OF 1989 - - - Dated:- 22-8-2005 - Judge(s) : V. C. DAGA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by V.C. Daga J.- In this petition, the petitioners are challenging the notices dated March 30, 1989, for reopening of the assessment for the assessment years 1975-76, 1976-77 and 1977-78 issued by respondent No. 1 under section 148 of the Income-tax Act, 1961 ("the Act" for short). Facts: The petitioners are engaged in the business of manufacture of ball pens and refills. The petitioners' manufacturing process involves, inter alia, the machining of brass wire/rods so as to produce tips, nozzles an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the concerns belonging to the group and the employees were examined. Their statements under section 132(4) were also recorded. The main business of the assessee is manufacture of pen and pen parts. The raw materials consumed in this business include brass-wire, brass-rod, brass strips, plastic powder, stainless steel balls and tips and ink. It was noticed during the search operation that the brass scrap and plastic powder scrap generated in the manufacturing process is of significant quantity and value. On the basis of the observations made from the statements of the directors/partners who were examined under section 132(4) and from the manufacturing process carried out before the search party, it is noticed that the brass scrap i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction recorded in the bills of account is only 1,54,15,776 refills. Thus, there was suppression of sale of 1,30,97,224 pcs. of refills. The value of this suppressed sales works out to Rs. 12,27,299. In view of the above, I have reason to believe that by reason of failure on the part of the assessee to disclose the income from sale of scrap and also the income from sale of excess production, income to the extent of Rs. 13,32,833 has escaped assessment within the meaning of section 147(a) of the Income-tax Act, 1961. It is, therefore, requested that approval under section 151(1) of the Income-tax Act, 1961, may kindly be accorded to issue the notice under section 148 read with section 147(a) of the Income-tax Act, 1961, for the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powder scrap was generated but the same were not accounted for. Learned counsel submitted that during the assessment proceedings the Assessing Officer did enquire into the generation of scrap generated during the manufacturing process as can be seen from the assessment order itself. Once the explanation given by the petitioner is accepted by the Assessing Officer, it is not open to the succeeding officer to reopen the assessment merely because he disagrees with the views expressed in the original assessment order. Learned counsel for the petitioner further submitted that the dispute regarding the consumption of stainless steel balls is also without any substance because there is no dispute regarding the quantity shown in the opening bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process whenever sold in the subsequent years, has been accounted for and the same has been accepted by the Assessing Officer. Therefore, it cannot be said that the scrap arising in the manufacturing process was not disclosed during the course of the original assessment. Hence, reopening of the assessment on the ground that the assessee has failed to disclose the scrap arising during the manufacturing process cannot be sustained. Similarly, the reopening of the assessment on the ground that the assessee has suppressed the production of ball pens is also baseless because the quantity of stainless steel balls in the opening stock and the closing stock shown in the books of account maintained by the assessee have been found to be correct. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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