TMI Blog2021 (4) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of arriving at the book loss and for the purpose of Minimum Alternate Tax in contrast with the returns filed under Section 139 of the Income Tax Act in a refund cannot be tested under Article 226 of the Constitution of India. Scope of enquiry under Article 226 of the Constitution of India is limited. It is best left to the Assessing Officer/Authorities in the hierarchy prescribed under the provisions of the Income Tax Act, 1961 to look into it. Mere declaration in the Auditors Report to the shareholders of the petitioner that as on 03.09.2003, the secured loans and the losses of the company have been understated to the extent of interest written back and the balance sheet and the profit and loss account dealt with in the said report were in compliance with the Accounting Standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956 is not sufficient to conclude that there was true and full disclosure by the petitioner at the time of filing of income tax returns for the purpose of assessment. The computation of income as per the Companies Act, 1956 seems to indicate that the petitioner had a whooping loss of ₹ 13,99,07,652/- which was carried fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitutions for a one-time settlement scheme. Pending final approval from the financial institutions, the company has written back the interest due to these financial institutions (refer note 3(v) of Schedule 14 financial statements). This in our opinion is incorrect and is in violation of Fundamental Accounting Assumption of Accrual as advocated by Accounting Standard-1 Disclosure of Accounting Policies issued by the Institute of Chartered Accountants of India. The Secured Loans and the Losses of the company have been understated to the extent of interest written back. Subject to the above, in our opinion, the balance sheet and the profit and loss account dealt with by this report are in compliance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable thereto. 4. The learned counsel for the petitioner further submits that the Assessing Officer passed a scrutiny assessment order under Section 143(3) of the Income Tax Act, 1961 after scrutinizing the records which included the financial statements and that the explanations were given pursuant to notice under Section 143(2) dated 27.07.2005, notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proposition Case Law 1 Disclosure in 'Notes on Accounts' annexed to the Balance Sheet is full and true disclosure. In case of scrutiny assessment and reopening beyond 4 years, the notice has to prima facie show the materials which point out the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Commissioner of Income Tax Vs. Eco Media (P.) Ltd. , 2012 SCC OnLine Mad 1439. 2 Where primary facts were disclosed in the return, it cannot be said that income chargeable to tax which had escaped assessment came to the notice only subsequently. Further, if the Assesse separately indicates the receipts in the income tax returns, Explanation (1) to Section 147 is not attracted. Principal Commissioner of Income-tax 6 Vs. Santech Solutions Pvt. Ltd. , [2019] 263 Taxman 248 (SC). 3 Duty of assessee is limited to fully and truly disclose all material facts, failure of AO to reach warrantd conclusion could not confer jurisdiction for reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Assessing Officer will not necessarily amount to disclosure within the meaning of Section 147 of the Income Tax Act, 1961. 12. The learned counsel for the respondent further submits that even as per Sub-Clause (c) to Explanation -2, the respondent is entitled to invoke the jurisdiction to re-open the assessment before the expiry of limitation under proviso to Section 147 of the Income Tax Act. Finally, the learned counsel for the respondent drew my attention to the decision of the Hon'ble Supreme Court in Calcutta Discount Co. Ltd Vs. Income Tax Officer , [1961] 41 ITR 191 (SC) which was relied by the learned counsel for the petitioner, wherein, the Court held as follows:- There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee to meet the possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been leased out to M/s.Paharpur Industries Ltd. and a lease rent charges has been treated as conversion charges and that the assessment was completed treating the conversion charges as rent and the expenditure relating to the manufacturing activity was reimbursed by M/s.Paharpur Industries Ltd. 19. Thus, the focus was only on the income derived from the said company. It was not on the method of computation of the income. There is no discussion on the issues relating to the computation of the loss. The said order aslo does not indicate as to whether there was any discussion regarding the reasons given for reopening of the assessment in a communication dated 30.06.2010 while passing the aforesaid assessment order. 20. While computing the book profit, the petitioner has deducted amounts from the gross income of ₹ 1,01,35,842/- [income from sales for a sum ₹ 10,34,33 + ₹ 91,01,609/- as other income]. 21. The petitioner has shown ₹ 3,22,71,677/- as loss before taxation. The petitioner has added another sum of ₹ 10,56,486/- being the alleged miscellaneous expenditure written off and thereby arrived at the total loss for the year as ₹ 3,33,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After all, the speaking order merely shows a prima facie view of the Income Tax Department to justify the re-opening of the assessment. It is not conclusive and it is open for the petitioner to meet of the points before the respondent by participating in the proceeding and persuade the respondent Income Tax Officer to drop the proceedings. 27. Therefore, I do not find any merits in this Writ Petition. I am therefore inclined to dismiss this Writ Petition while giving liberty to the petitioner to file additional submissions/representations with the respondent making its stand clear as to how the assessment that has been completed on 30.3.2006 has to be re-affirmed again. 28. The petitioner is therefore directed to give its additional reply/representation, if any, within a period of thirty days from date of receipt of a copy of this order. The respondent shall thereafter pass appropriate orders on merits in accordance with law. Needless to state, if desired, the petitioner shall also be heard through video conference through their authorised representatives. Entire exercise shall be completed within a period of ninety days from date of receipt of a copy of this order. 29. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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