TMI Blog2007 (10) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... vant previous year is year ended 30 th June, 1983. Search operations were carried out on 27 th September, 1988 at the business and residential premises amongst others of the petitioners. Assessment for the assessment years 1972-73 to 1984-85 was sought to be reopened. Petitioners challenged the assessment for some of the years by separate petition being Writ Petition No.1374 of 1989. Petitions had been admitted and interim relief had been granted. Subsequently those petitions have been allowed in favour of the petitioner by order dated 22 nd August, 2005. 2. The petitioner is in the business of manufacturing of ball pens and refills as also ink. In far as manufacture of ink is concerned the process involves mixing various chemicals and dyes, heating and otherwise processing the said mixture of ink chemicals and dyes. According to the petitioner by the very nature of the process, one unit of raw material cannot produce one unit of ink and hence considerable wastage occurs in the manufacture of ink itself. As far as ink refills are concerned, there is no uniform rate of consumption for any year. The amount of ink utilised depends upon the type and size of refills and pens pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturing process during the search, it was found that on an average 20 gross refills with x-10 tips were produced out of 1 kg. of ball pen ink and 18 gross eiko sharp long refills are produced out of 1 kg. of ball pen ink. Also 80 dozens of jotter refills are produced out of 1 kg. of ball pen ink. The data that had come to light on account of the information based on statements was then set out. It is, therefore, contended that for those reasons the petition filed should be dismissed and/or at any rate the petition was premature. In the additional affidavit of P.C. Maurya, the statement of Shri Dwarkadas J. Sanghvi and others recorded in the course of search and seizure have been annexed. 4. In the reasons for reopening the assessment under Section 147 in case of the petitioner for the assessment year 1984-85 at paras.4 and 6 it is set out as under:- "4. The one fact that came out during the recording of statements u/s.132(4) was that there is a definite ratio between the consumption of ink and the number of refills produced. One kg. of ink is required for producing 20 gross of eko refills. Consumption of ink is higher for producing sharp refills. The assessee is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d truly all material facts necessary for assessment, income chargeable to tax has escaped assessment the Officer subject to the other provisions could assess or reassess. There has been no omission or failure for the Assessing Officer to have reason to believe that the income chargeable to tax has escaped assessment for any assessment year. In other words before issuing the notice under Section 148 considering the statutory requirements of Section 147 the Assessing Officer must have reason to believe. The question is whether the reasons as disclosed would constitute 'reason to believe' warranting exercise of jurisdiction under Section 147 of the Income Tax Act and consequently to issue the notice under Section 148 of the I.T. Act recording the reasons. 8. We may first deal with the contention raised on behalf of the respondent that the petition was premature. Reliance was placed on the judgment in G. K. N. Driveshafts ( India ) Ltd. vs. Income-tax Officer Ors., [2003] 259 ITR 19 (SC). In that case pursuant to a notice under Section 148 the Appellant therein filed returns. The Appellant also received notice under Section 143(2) calling for further information on ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was 18 to 20 gross per 1 kg. In another statement it was 16 to 20 per 1 kg. Our attention was also invited to the balance sheet and the schedule thereto which show that for the year 1982-83 the production of ink was 3695 kg. and the ink sold for that year was 3695 kg. Therefore, from the raw materials of ink and ink chemicals, 3695 kg. of ink were produced and sold and the balance was used in ball pen refills. In the petition the petitioner brought on record that there are also wastages which statement has not been denied. In fact for the assessment year 1986-87 the Commissioner of Income Tax (Appeals) accepted based upon the report of the Chartered Certificate that while manufacturing ink, the ink waste is 3% to 4% and while putting the ink in refills the waste is to the extent of 10.7%. The ink which was used as raw material, that information was already available to the Assessing Officer and was not new information. The Assessing Officer considering the raw material consumed for the purpose of refilling has taken the maximum figures and on that basis only, held that there were reasons to believe the failure of the assessee to disclose the true income and to that income has ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
