TMI Blog2004 (5) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of Rs.7,82,43,801 under Chapter VI-A of the Act including a deduction of Rs. 7,74,92,451 under section 80HHC of the Act. The return was accompanied by a copy of the audited accounts as well as tax audit report required to be filed under section 44AB of the Act. The claim for deduction under section 80HHC of the Act was supported by a report from an accountant under sub-section (4). Initially, an intimation was issued under section 143(1)(a) of the Act. Subsequently, respondent No. 1 selected the case of the petitioner for scrutiny. After scrutiny of the return, annexures and documents filed along with the return as well as during the course of discussion, respondent No. 1, by an order dated March 22, 1994, assessed the income of the petitioner to be Rs. 1,43,70,410. While doing so respondent No. 1 modified certain figures of income and also modified the figure of deduction under section 80HHC of the Act to Rs. 8,64,11,622. An appeal filed by the petitioner before the Commissioner of Income-tax (Appeals), was partly allowed by an order dated January 8, 1996. Nothing further happened thereafter till May, 2001. On May 31, 2001, respondent No. 1 issued the impugned notice pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includible in the business profits for the purpose of section 80HHC deduction. Taking into consideration the ratio laid down by the Bombay High Court the profits of the assessee from the abovementioned business is required to be omitted. (iii) During the year, the sale of vessels is of Rs. 1,83,83,986 and the profit from the same is determined at 30 per cent. of Rs. 55,15,195. The services receipt are Rs. 13,78,53,269 and the profit from the same is determined at Rs. 6,89,634. The shipping agency fees are at Rs. 2,76,476 and the profit at 50 per cent. is determined at Rs. 1,38,238. Thus, the total profit included in the business profit is Rs. 7,45,80,067. Because of this, the excess deduction under section 80HHC at Rs. 6,10,10,272 was given to the assessee. (iv) I am satisfied that due to furnishing the false particulars of the income by way of the incorrect certificate which means failure on the part of the assessee to disclose fully and truly all material facts required for assessment, income of Rs. 6,10,10,272 has escaped assessment. (Though no paragraph numbers are given to the reasons in the annexure to the affidavit, they are given herein for the sake of identification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Chhotalal reported in [2000] 246 ITR 439. He further submitted that any interpretation of law made by a court can certainly be taken into consideration by the Assessing Officer while initially making an assessment under section 143(3) of the Act. However, interpretation of a law by a court in a subsequent decision between different parties cannot be a ground for reopening of an assessment under section 147 of the Act after the expiry of a period of four years. He submitted that proceedings under section 147 of the Act can be initiated after a period of four years only if the Assessing Officer had a reason to believe that income chargeable to tax had escaped assessment on account of a failure of the assessee to disclose fully and truly all the material facts necessary for the assessment. Further, a sanction of the Commissioner must also be obtained before reopening of the assessment. A mere change of opinion, though such change of opinion is based upon the interpretation of law made in a subsequent decision of a High Court or the Supreme Court is not a ground for reopening of an assessment after the expiry of the period of four years. He further submitted that in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1.- Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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." A judicial order once made unless set aside in appeal, is binding on the parties. Ordinarily, all statutes confer a power on a tribunal or judicial authority deciding a matter, to correct typographical or arithmetical errors in its orders. However, power to review one's own orders is different from the power to correct arithmetic or typographic errors and is not an inherent power in any tribunal or judicial authority. Power to review is required to be conferred by a statute. This principle is also applicable even to the orders passed by an Assessing Officer under the Income-tax Act. An assessment order once made is ordinarily final. Section 154 of the Act confers a power of rectification of mistakes apparent from the record. Section 147 of the Act empowers the Assessing Officer to assess or reassess the income in the circumstances mentioned therein. The power to reopen an assessment under section 147 is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make a return under section 139; or (b) to respond to the notice issued under section 142(1) or 148 of the Act, or (c) to disclose fully and truly all the material facts necessary for his assessment of income for that year. Both the aforementioned conditions imposed must co-exist to confer jurisdiction on the Assessing Officer to reopen the assessment under section 147. Sub-section (2) of section 148 of the Act makes it imperative for the Assessing Officer to record his reasons before initiating proceedings. Where a notice under section 147 of the Act is to be issued after the expiry of four years from the end of the relevant assessment year, the Commissioner or the Joint Commissioner, as the case may be, should be satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. The power of reassessment conferred under section 147 of the Act can be exercised within a period of four years from the end of the relevant assessment year without restrictions imposed by the proviso to that section. However, after the expiry of four years from the end of the relevant assessment year, power of the Assessing Officer is restricted by the limita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso to section 147. The restriction of four years would be applicable unless the income chargeable to tax has escaped assessment by reason of failure of the assessee to make a return under section 139 or in response to a notice under section 142 or 148 of the Act or the failure of the assessee to disclose fully and truly all material facts. If the reassessment is required to be made on account of the failure of the assessee to disclose fully and truly all material facts necessary for his assessment, obviously, the restriction of four years put under the proviso to section 147 would not be applicable and notice can be issued after the expiry of a period of four years, but within the time limit of 7 or 10 years, as the case may be, prescribed under section 149 of the Act. The object of section 149 in imposing the restriction of seven years or ten years where the income likely to have escaped assessment is less than Rs. 50,000 or Rs. 1,00,000, as the case may be, is not to permit reopening of the assessment where the tax liability would not be significant as compared with the efforts that would be required for reopening of an assessment after a passage of seven or ten years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation of deduction under section 80HHC of the Act. In view of this decision, according to the Assessing Officer, the deduction under section 80HHC was not properly computed in accordance with the principles laid down by the Division Bench of this court in the case of CIT v. K. K. Doshi and Co. [2000] 245 ITR 849. This was expressly stated in paragraph No. 2 of the reasons recorded. In paragraph No. 3 of the reasons, it is stated excess deduction under section 80HHC of the Act has been allowed on the basis of wrong inclusion of profit from sale of vessels, service receipts and shipping agency fees in computing business profit (of exports) escaped assessment on account of the interpretation of law as laid down by this court in CIT v. K. K. Doshi and Co. [2000] 245 ITR 849. It is clear to us that the only ground on which the Assessing Officer believed that the income of the assessee had escaped assessment was on the basis of erroneous computation of deduction under section 80HHC of the Act based on the interpretation of the manner of computation of export profits made by the Division Bench of this court in CIT v. K. K. Doshi and Co. [2000] 245 ITR 849. It is not the case that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Dastur, the apex court, while considering section 34 of the Indian Income-tax Act, 1922, has held that while it is the duty of the assessee to fully and truly disclose all primary facts necessary for the purpose of assessment, it is no part of his duty to point out what legal inference should be drawn from the facts disclosed. It. is for the Income-tax Officer to draw an appropriate inference. Shri Dastur also relied upon the judgment of the decisions of the Gujarat High Court in Meghdoot Laminart P. Ltd. v. Rajiv Sinha reported in [1999] 238 ITR 918 at 922, the Calcutta High Court in Mercury Travels Ltd. v. Deputy CIT [2002] 258 ITR 533 at pages 537 to 540 and the Madras High Court in Fenner India Ltd. v. Deputy CIT [2000] 241 ITR 672. In all these decisions, it has been held that law casts an obligation on the assessee only to disclose fully and truly all material facts, i.e., primary facts and there is no obligation on the assessee to instruct the Assessing Officer as to what inference should be drawn on the basis thereof. It is the duty of the Assessing Officer to draw the necessary inference based on the primary facts disclosed by an assessee. We respectfully follow these de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r issuance of the notice under section 148 and thereafter should have raised before the Assessing Officer its objections thereto. Thereupon, the Assessing Officer would have decided the objections raised by the petitioner by passing a speaking order. The petitioner should not have rushed to the court and this court, in exercise of its jurisdiction under article 226, should not quash the impugned notice. The ratio of the decision of the Supreme Court in GKN Driveshafts India Ltd.'s case [2003] 259 ITR 19 has been considered and explained by two Division Bench of this court in Caprihans India Ltd. v. Tarun Seem, Deputy CIT reported in [2004] 266 ITR 566, and Ajanta Pharma Ltd. v. Asst. CIT reported in [2004] 267 ITR 200. In the former decision, the Division Bench held that the petition which was filed by the assessee challenging the notice could not be dismissed as the reasons subsequently disclosed by the Assessing Officer show that there was no prima facie finding that the assessee had failed to make true and full disclosure of all material facts. The Division Bench entertained the petition and quashed the notice. In the present case, the petitioner by his letter dated June 28, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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