TMI Blog1998 (5) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by the Assessing Officer. Subsequently, the Assessing Officer initiated proceedings under section 147(a) on the ground that excessive deduction under section 80J has been allowed due to failure of the assessee to disclose fully and truly material facts necessary for assessment. According to the Assessing Officer, no separate audited accounts in respect of Rail Track Division had been filed at the time of original assessment. In the profit and loss account, the assessee had debited an amount of Rs. 11,44,638 on account of interest paid to bank on the loans raised by the company and no part of this interest was allocated to Rail Track Division thereby resulting in inflated claim of deduction under section 80J. The Assessing Officer made the reassessment on total income of Rs. 7,73,060 wherein deduction under section 80J has been allowed at Rs. 78,638. The Assessing Officer has computed the profits of the Rail Track Division by allocating proportionate interest to this Division in the same ratio as sales of the Division (Rs. 2,51,37,258 bears to the total sales of the assessee ie. Rs. 8,22,34,835). On this basis, the net profit of the Rail Track Division has been worked out at Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions are fulfilled. The CIT(A) place reliance on the following decisions: (i) Renusagar Power Co. Ltd. v. ITO (No.1) [1979] 117 ITR 719 (All.), (ii) Oriental Carpet Mfrs. (India) Ltd v. ITO [1987] 168 ITR 296/31 Taxman 80 (Punj. Har.) Aggrieved with the orders of the CIT(A), the assessee has preferred the present appeals before us. 6. The ld. counsel for the assessee assailing the validity of reassessment under section 147(a) argued that full facts material for the purposes of assessments for both the assessment years have been duly disclosed during the original assessment proceedings and there was no justification for the Assessing Officer to take resort to section 147(a) merely on the basis of revenue audit objection. He further argued that books of account for the two assessment years involved were duly produced before the Assessing Officer and the same were scrutinised before finalising the original assessments. According to the Id. counsel, invocation of provisions under section 147(a) in the instant case is merely based on change of opinion on the part of the Assessing Officer and the reassessments are therefore liable to be quashed. Reliance is placed on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation of the assessee is to disclose primary facts which are material for the purposes of assessment. The assessee knows all the material and relevant facts - the assessing authority might not. In respect of the failure to disclose, the omission to disclose, may be deliberate or inadvertent. The court further held that if some material for the assessment lay embedded in the evidence which the revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. In this case, action under section 147(a) has been upheld on the ground that excess depreciation had been allowed owing to the failure on the part of the assessee to disclose fully and truly all material facts. The Supreme Court referred to Explanation 2 to section 147 and observed that mere production of books of account or other evidence would not absolve the assessee of its obligation to make full and true disclosure. 9. Reference may be next made to the decision of the Supreme Court in Sri Krishna (P.) Ltd. v. ITO[1996] 221 ITR 538/87 Taxman 315, where the court has again dwelt upon the scope and ambit of the expression "to disclose fully and truly,, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer while making the original assessment dated 28-3-1985 computed the deduction at Rs. 24,234 on the basis of written down value of the machinery as on 1st day of the accounting year with the observation that in case the assessee furnishes copy of the balance sheet of the Rail Track Division as on 30-9-1980, necessary rectification under section 154 would be made. From these facts, it is evidently clear that the assessee failed to disclose material facts necessary for assessment and the second condition under section 147(a) is satisfied. 12. As regards the second condition, we notice that the primary facts disclosed by the assessee, apart from being in complete as indicated above, do not tantamount to true declaration of material facts necessary for purposes of assessment. In both the years, a glaring attempt has been made by the assessee to project the profits of the Rail Track Division at enhanced figures by allocating the expenses on account of interest on borrowed funds utilised for the business of the new unit in the books of the head office. For the two assessment years 1981-82 and 1982-83, total interest paid to the bank aggregates to Rs. 11,44,618 and Rs. 10,55, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel. While making the assessment for assessment year 1982-83, the Assessing Officer has worked out the deduction under section 80J on the basis of WDV of the machinery as on the first day of the accounting year in the absence of the balance-sheet of the Rail Track Division as on 30-9-1980. Subsequently, when the balance-sheet as on 30-9-1980 is filed, the Assessing Officer has recomputed the deduction on the basis of eligible capital as on 30-9-1980. The rectification proceedings have limited scope and do not confer on the Assessing Officer plenary powers to scrutinise the claim of deduction under section 80J. The material fact that the assessee has allocated the expenses on account of interest relatable to the Rail Track Division in the books of the head office and thus projecting an untrue picture of profits derived from the Rail Track Division fell outside the purview of rectification proceedings carried out for assessment year 1982-83. These proceedings would not in any manner absolve the assessee of the failure to disclose fully and truly all material facts necessary for assessment at the time of initial assessment proceedings. The contention of the ld. counsel is therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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