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TMI Blog2016 (10) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... il and allowed the company to carry forward the unabsorbed depreciation of Rs. 3.81 Lakhs. 3. The Assessing Officer issued the impugned notice on 28.08.2009 seeking to reassess the petitioner's income for the said assessment year 2004-2005. This notice was thus issued beyond a period of four years from the end of the relevant assessment year. In order to do so, the assessing officer had recorded the following reasons :- "The return of income for the year under consideration, declaring a total income of Nil was filed on 01.11.04. Assessment in the case was completed u/s. 143(3) r.w.s. 147 of the Act on 28.12.07, determining the total income of the assessee at Nil. 2. The assessee company is engaged in the business of manufacturing of chemicals. On going through the office records, it is seen that the assessee company had claimed deduction of an amount of Rs. 89,92,832/- on account of depreciation, for the year under consideration. The assessee has acquired the status of company by undergoing registration under the Companies Act, 1956 w.e.f. 31.08.03. Prior to acquiring the status of company the assessee was a partnership firm viz M/s. Anupam Rasayan. According to the fifth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment within the meaning of section 147 of the Act. 4. It is also seen from the office records that the assessee was issued a debit note no.DTCPL/06/001, dtd. 30.06.02 of Rs. 3,53,624/- by M/s. Deviyani Tex Chem Ltd. towards interest charges @ 21% on late payments made by the assessee company. Though these expenses do not pertain to the year under consideration, the same has been debited by the assessee under the head 'Interest 'expenses' on 31.12.03, with a narration 'late payment interest' (entry no.PRO 31122003). The same is finally debited to the P&L account for the year as an expense under the head "Financial expenses". Since these expenses do not pertain to the year under consideration, the same is not allowable. Thus, the assessee has claimed excess expense to the extent of Rs. 3,53,624/- during the year under consideration, which has resulted in suppression of its income to that extent. Thus, income to the extent of Rs. 3,53,624/- has escaped assessment within the meaning of section 147 of the Act. 5. It is further seen from the office record that the assessee has debited interest expenses on unsecured loan as follows, which pertains to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company for the year under consideration, within the meaning of section 147 of the Act and the undersigned is satisfied that this case is a fit case for issue of notice u/s. 148 of the Act." 4. Upon being served with the reasons so recorded by the assessing officer, the petitioner raised objections to the notice of reopening under letter dated 26.02.2010. Such objections were rejected by the Assessing Officer by an order dated 17.09.2010. The petitioner has therefore, filed this petition challenging the authority of the assessing officer to reopen the assessment. 5. Appearing for the petitioner, learned Counsel Shri. R.K. Patel took us through the voluminous documents on record and contended that there was no failure on part of the assessee to disclose fully and truly all material facts. In the reasons recorded itself, the assessing officer has referred to documents on record to form a belief that income chargeable to tax has escaped assessment. Notice of reopening which was issued beyond a period of four years is therefore not valid. Counsel further submitted that all the grounds on which the notice of reopening is based were scrutinized by the assessing officer dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvise the Assessing Officer with regard to the inference which he should draw from the primary facts. If an Assessing Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by the proviso to Section 147 of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts." 7. On the other hand, learned Counsel Shri. Sudhir Mehta appearing for the Department has contended that the assessee had raised false claims of depreciation and further claims which were relatable to the period during which the business was being carried by the firm and the assessee company was not even in existence. Mere fact that in the books of accounts such depreciation was mentioned without any further clarification would not absolve the assessee from the liability to make true and full disclosures. Referring to the explanation to Section 147 of the Act, learned Counsel submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, all the grounds for reopening emerge from the materials on record. In other words, the assessing officer did not have any documents or material outside of the assessment proceedings on the basis of which he could form a belief that income chargeable to tax in case of the assessee had escaped assessment. The notice of reopening which has been issued beyond a period of four years from the end of relevant assessment year would therefore have to be judged on such basis. 9. Quite apart from the foundation of the assessing officer to form a belief that income chargeable had escaped the assessment being material already on record, we would also examine whether in the background of the documents on record and the scrutiny previously undertaken by the assessing officer, the assessee can be blamed for non disclosure of true and full facts under the explanation to Section 147 of the Act. 10. With this short preamble, we may refer to different reasons separately. The first reason can be summarised thus. According to the assessing officer, the petitioner had claimed deduction of Rs. 89.92 Lakhs (rounded off) by way of depreciation for the year under consideration. This amount of ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not have been claimed during the year under consideration in its entirety. Proportionately, therefore expenditure of Rs. 32,083/= had to be disallowed. 15. In this respect, the assessee had in the return itself claimed such sum of Rs. 35,000/= by pointing out that the same was towards subscription charges for the period between 01.03.2004 to 28.02.2005. Here also thus, there was full disclosure on part of the assessee. If the assessing officer was of the opinion that a part of the claim did not fall within the relevant period; during the original assessment, he could have disallowed the same. Not having done so, reopening beyond a period of four years would not be permissible. 16. The third reason was that one - Deviyani Tex Chem had issued a debit note towards interest on late payment by the assessee company. These charges did not pertain to relevant period and therefore could not have been claimed in the present assessment year. 17. In this context, the assessee had pointed out that alongwith the return of income, the assessee did produce a debit note. It was from this very note that the assessing officer was drawing an inference that the claim of expenditure which did not p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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