TMI Blog2003 (7) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... on is taken up for final hearing. Heard learned counsel on both sides. In this case, the arguments were heard by us on July 24, 2003. After hearing the arguments, the following order was passed: "For the reasons to be given subsequently rule is made absolute in terms of prayer clause (a) with no order as to costs." Accordingly, we propose to give reasons for allowing the petition. Reasons: By this petition under article 226 of the Constitution, the petitioner seeks to challenge impugned notice dated January 22,2003, issued under section 148 of the Income-tax Act, 1961, for the accounting year ending March 31, 1997, corresponding to the relevant assessment year 1997-98. Facts: The petitioner is engaged in the business of manufacture of PVC sheets and industrial laminates. The petitioner filed its return of income for the assessment year 1997-98. This was on November 28, 1997. The return was initially processed under section 143(1)(a). This was on December 17, 1997, accepting the returned loss. Thereafter, the Assessing Officer issued notice under section 143(2) calling upon the petitioner to give certain details. Thereafter, he completed the assessment vide order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the earlier assessment year 1996-97, had been allowed during the assessment year in question and, therefore, according to the Assessing Officer, this issue was also required to be looked into. At this stage, it may be noted that if one goes through the reasons annexed to the affidavit, there is no clear prima facie finding that the petitioner had failed to make true and full disclosure of the material facts. The Assessing Officer merely states that certain issues need to be looked into. This aspect is important because we are concerned with the assessment year 1997-98 and the reopening is sought to be made beyond a period of four years from the end of the assessment year 1997-98. Arguments: Mr. Pardiwala, learned counsel for the petitioner, contended that, in this case, the Assessing Officer seeks to reopen the assessment after a period of four years from the end of the assessment year and in view of the judgment of this court in the case of IPCA Laboratories Ltd. v. Gajanand Meena, Deputy CIT (No.2) [2001] 251 ITR 416, the Assessing Officer cannot act in the matter of reopening of assessment beyond four years, unless he has reason to believe that income has escaped assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment was made on April 20, 1996, and, therefore, the then Assessing Officer had disallowed the payment under section 43B on the ground that the payment was not made during the accounting year ending March 31, 1996, corresponding to the assessment year 1996-97. However, payment was made during the accounting year commencing after April 1, 1996, corresponding to the assessment year 1997-98 which is in the assessment year in question and, therefore, the said amount of Rs. 3.42 lakhs has been allowed as deduction in the assessment year in question. Hence, he contended that there was no reason for reopening the assessment on this count. Mr. Pardiwala next contended that one of the reasons for reopening the assessment given by the Assessing Officer was that an amount of Rs. 34.92 lakhs had escaped assessment as it represented interest expenditure (financial cost) relating to capital work-in-progress and, therefore, it should have been capitalized to the cost of the assets. He contended that this alleged ground was on pure assumption that the borrowings had financed the capital work-in-progress. He submitted that, in this case, on the facts, the borrowings did not finance the capital wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounting year ending March 31,1997. Mr. R.V. Desai, learned senior counsel appearing on behalf of the Department, on the other hand, contended that the petition is premature and no interference is called for at this stage. He contended that when a notice under section 148 is issued, the proper course of action for the noticee is to file the return if he seeks reasons and on receipt of reasons the noticee is entitled to file objections to the issuance of notice and, thereafter, the Assessing Officer has to dispose of those objections by passing a speaking order. He contended that, in this case, on receiving the impugned notice, the petitioner failed to file the return. Hence, no interference is called for under article 226 of the Constitution. In this connection, Mr. Desai has placed reliance on the judgment of the Supreme Court reported in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19. Mr. Desai contended that the petitioner should be directed to file the return and to seek reasons and, thereafter, the petitioner-assessee should be directed to file objections which objections would be disposed of by the Assessing Officer by passing a speaking order and it is only the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are not inclined to dismiss the petition in limine because the reasons now disclosed by the Assessing Officer, on the face of it, show that there is nothing in the reasons to indicate failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the case of IPCA Laboratories Ltd. [2001] 251 ITR 416, this court has held that in view of the proviso to section 147 of the Income-tax Act, no action for reopening after four years could be taken unless the Assessing Officer has reason to believe that income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Admittedly, the period of four years has expired. Hence, we are not inclined to dismiss the petition in limine. Further, as stated above, even the reasons do not disclose a finding, viz., that the petitioner had failed to disclose fully and truly all material facts necessary for assessment. In fact, the reasons show that from the case record itself certain conclusions are sought to be drawn. Hence, we are not inclined to dismiss the petition in limine. We may clarify that this judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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