TMI Blog2010 (1) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... mble for the Respondents. CORAM: DR.D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.): Rule. By consent of the Counsel and at their request, made returnable forthwith and taken up for hearing and final disposal. 2. The challenge in these proceedings under Article 226 of the Constitution of India, is inter alia to a notice issued under Section 148 of the Income Tax Act, 1961, seeking to reopen assessment proceedings. The relevant Assessment Year is 2002-03. 3. The Petitioner engages in the business of developing and constructing buildings. During the Assessment Year 2002-03, the Petitioner filed a return of income on 14th January 2004 and claimed a deduction of Rs.3,85,75,992/- under Section 80IB(10) of the Act. The return of income was initially processed under Section 143(1) and the declared income was accepted by the Assessing Officer. The case of the Petitioner was thereupon selected for scrutiny. Notices were issued under Sections 143(2) and 142(1) of the Act. In response, the Chartered Accountant of the Petitioner submitted representations on 30th November 2004 and 20th December 2004. On 17th January 2005, an assessment order wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (iv) No finding has been recorded that there was a failure on the part of the assessee to disclose the material facts and hence, the exceptional power which is conferred upon the Revenue to reopen an assessment after the expiry of four years, has not been lawfully exercised. 6. When the Petition came up for admission, we had indicated to Counsel that having regard to the nature of controversy involved, this Court is inclined to dispose of the Petition finally at the stage of admission. Accordingly, an affidavit in reply has been filed on behalf of the Revenue in which the reasons which have been specified as grounds for reopening the assessment, have been reiterated. 7. The admitted position before the Court, on the basis of the material on the record, is that by the notice under Section 148 issued on 30th November 2009, the assessment pertaining to the year 2002-03 was sought to be reopened after the lapse of four years. Section 147 postulates inter alia that if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment for any Assessment Year, he may subject to the provisions of Sections 148 to 153, assess or reassess such income and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered Accountant to the Assessing Officer. The letter inter alia contains an explanation of the other income as reflected in the profit and loss account. The assessee also furnished to the Assessing Officer a statement of sales and other income for each wing and for the flats comprised in the construction as of 31st March 2002. 9. In this background, it would be necessary to scrutinize the basis on which a notice was issued under Section 148 for reopening the assessment. The basis of the notice is to be found in the reasons disclosed to the assessee on 6th November 2009. The reasons postulate that on a verification of the case records, it emerges that the assessee was claiming a deduction under Section 80IB in the amount of Rs.3.85 crores. However, "as per details filed and P L A/c." it was observed that the assessee had during the year, other income of Rs.50.13 lakhs which mainly comprised of society deposit, stilt parking and sundry credit balances. Since this income did not qualify as income eligible for deduction under Section 80IB, it was stated that there was reason to believe that the income had, to that extent, escaped assessment. Now, exfacie, the reasons which have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the ITO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If an ITO 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." A similar view was taken in a subsequent judgment in Ganga Saran Sons (P) Ltd. vs. Income Tax Officer, (1981) 130 ITR 1 where the Supreme Court held thus: "It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the ITO can assume jurisdiction to issue notice under s.147(a). First, he must have reason to believe that the income of the assessee has escaped assessment and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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