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Judgment
Sanjiv Khanna, J.—The petitioner is engaged in the business of manufacture and sale of industrial generators and allied products. By the
present writ petition, the petitioner impugns reassessment proceedings initiated u/s 147/148 of the income tax Act, 1961 (Act, for short), vide
notice dated 31-3-2010 for the assessment year 2003-04 and the order dated 1-11-2010, passed by the Assessing Officer rejecting its
objections against the initiation of the reassessment proceedings. The petitioner''s case is predicted on two grounds (i) change of opinion; and (ii)
that the petitioner had made full and true disclosure of material facts. Therefore, the reassessment proceedings that have been initiated after four
years suffer from lack of ''inherent'' jurisdiction.
The reasons recorded by the Assessing Officer for reopening, as communicated to the petitioner vide letter dated 2-8-2010, read as under:-
Reasons for reopening the case u/s 148. -Return of income was filed on 2-12-2003 declaring an income of Rs. 14,72,90,755 u/s 115JB of the
Act. Assessment was completed u/s 143(3) on 20-3-2006 determining an income of Rs. 14,72,90,756 u/s 115JB of the Act and Rs. 2,52,08,776
under normal provision after following deduction of Rs. 12,57,29,939 u/s 80IB of the Act.
As per the provisions of section 80-IB(13) of the income tax Act, 1961 read with Rule 18BBB of income tax Rule, in order to claim deduction u/s
80IB, a separate report is to be furnished by each undertaking or, enterprise of the assessee claiming deduction u/s 80IB and shall be
accompanied by the Profit & Loss account and balance sheet of the undertaking or enterprise as if the undertaking or enterprise were a distinct
entity.
It has now been noticed that in the instant case the assessee had four units, out of which, two units were eligible for deduction u/s 80IB. The
assessee was required to furnish separate Profit and Loss Account and Balance Sheet in respect of each unit eligible for deduction as if it were a
separate entity. However the assessee had not maintained/furnished the separate accounts. The assessee worked out the eligible profit on the basis
of ratio of sales and total profit of the whole business. Since the assessee had not filed separate profit and loss account in respect of each unit
eligible for deduction as if it were a separate entity the correctness of the claimed and allowed deduction of Rs. 12,57,29,939 was not verifiable
and hence, not allowable to the assessee.
In respect of the assessment year 2003-04, the petitioner had filed a return declaring income of Rs. 14,72,90,755 u/s 115JB, and Rs.
1,77,92,055 under the normal provisions. Deduction of Rs. 13,19,53,499 u/s 80IB of the Act was claimed while computing the normal income.
Deduction u/s 80IB of the Act was in respect of two industrial units out of the four industrial units of the petitioner. These industrial units, called
Units I & II, are located at Silvassa, Union Territory of Dadra & Nagar Haveli.
The petitioner''s case was selected for scrutiny and assessment order u/s 143(3) of the Act dated 20-3-2006 was passed. Deduction claimed
by the petitioner u/s 80IB of the Act was examined and dealt with. The assessment order specifically notes that the deduction claimed under the
said section was in respect of two units and the amount claimed. It records:-
During the year the assessee has claimed deduction u/s 80IB for profit earned in respect of the two units at Silvassa to the tune of Rs.
13,19,53,499. It is seen that the profit computed from manufacturing/trading was shown at Rs. 13,53,83,449.
The Assessing Officer considered whether the interest earned on FDRs was income derived from qualifying business as referred to in section
80IB. It was held that this interest income cannot be considered as profit derived from eligible business. Thereafter, the Assessing Officer re-
computed the deduction u/s 80IB and the same was reduced to Rs. 12,57,29,939.58.
The aforesaid addition was made subject matter of the appeal before the Commissioner of income tax (Appeals), with substantial success and
disallowance of Rs. 62,23,560 and other miscellaneous disallowances u/s 80IB were deleted. Revenue preferred an appeal before income tax
Appellate Tribunal which was allowed and the disallowance stands restored.
It is well settled that an Assessing Officer cannot reopen or re-examine u/s 147, aspects and questions that had arisen and were considered for
decision in the original proceedings. The power to reopen cannot be exercised on the basis of change of opinion. It is not the power to review or
reassess aspects and questions that have been considered at the time of first/original assessment See Commissioner of Income Tax, Delhi Vs.
Kelvinator of India Limited,
However, the contention of the Revenue is that the Assessing Officer in the original assessment proceedings had not examined and considered
sub-section 13 of section 80IB of the Act read with Rule 18BBB of the income tax Rules. It is submitted by the that as per the said provisions to
claim deduction u/s 80IB, a separate report is to be furnished in respect of each undertaking or enterprise of the assessee and should be
accompanied with the profit and loss account and balance-sheet of the undertaking or enterprise as if the undertaking or enterprise is a distinct
entity.
It is lucid from the assessment order itself that the Assessing Officer specifically examined the quantum and computation of the deduction,
claimed u/s 80IB, when he went into the question whether interest earned on the FDRs has to be excluded. While doing so he has computed
business income of the two units, Units I and II separately. The said computation is indeed fairly detailed. The petitioner submitted that the
computation and consideration shows and establishes the examination of all aspects including requirement of sub-section (13) to section 80IB.
Revenue contends to the contrary. It is submitted that this provision was overlooked and the requirement went unnoticed. Thus, there is no change
in opinion. Even if there is some merit in the contention of the Revenue on the first issue of change of opinion, we do not think that the reassessment
proceedings can be sustained in view of the second ground/contention raised by the petitioner for the reasons stated below.
First proviso to section 147 applies when the reassessment proceedings are initiated after four years from the end of the relevant assessment
year. The said proviso reads as under:-
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action
shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax
has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return u/s 139 or in response to a
notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for
that assessment year.
[Emphasis supplied]
In the present case there is an original assessment order u/s 143(3) dated 20-3-2006. The question is whether there was a failure on the part
of the petitioner to disclose, fully and truly, all material facts necessary for reassessment for that year at the time of the first/original assessment.
There is no such allegation or statement in the reasons recorded. This contention was specifically raised by the petitioner in their objections to the
reassessment proceedings. The objection has been rejected in the order dated 1-11-2010 recording as under:-
Objection No. 1. -The assessee has objected that since there is no failure on the part of the assessee to disclose full and true all necessary material
facts for assessment u/s 147 of the Act, proceedings are without jurisdiction. The assessee has further stated that there is no such allegation even in
the purported reasons recorded u/s 147 of the Act.
It is an admitted fact that the assessee had failed to get the accounts of its undertakings audited separately and prepare balance sheet and profit
and loss account separately for these undertakings which it was required as per section 80-IB(13) read with section 80-IA(7) of the income tax
Act and Rule 18BBB. The failure to submit these documents during assessment proceedings amounted to failure on its part to submit truly and
correctly all material facts. Regarding the objection that there is no such allegation even in the purported reasons recorded u/s 147 of the Act, para
4 of the reasons recorded u/s 148 of the income tax Act on 26-2-2010 is reproduced hereunder:
Return of income was filed on 2-12-2003 declaring an income of Rs. 14,72,90,755 u/s 115JB of the Act. Assessment was completed u/s 143(3)
on 20-3-2006 determining an income of Rs. 14,72,90,756 u/s 115JB of the Act and Rs. 2,52,08,776 under normal provision after allowing
deduction of Rs. 12,57,29,939 u/s 80IB of the Act.
As per the provisions of section 80-IB(13) of the income tax Act, 1961 read with Rule 18BBB of income tax Rule, in order to claim deduction u/s
80IB, a separate report is to be furnished by each undertaking or enterprise of the assessee claiming deduction u/s 80IB and shall be accompanied
by the profit and loss account and balance sheet of the undertaking or enterprise as if the undertaking or enterprise were distinct entity.
It has now been noticed that in the instant case the assessee had four units, out of which two units were eligible for deduction u/s 80IB. The
assessee was required to furnish separate Profit and Loss Account and Balance Sheet in respect of each unit eligible for deduction as if it were a
separate entity. However the assessee had not maintained/furnished the separate accounts. The assessee worked out the eligible profit on the basis
of ratio of sales and total profit of the whole business. Since the assessee had not filed separate profit and loss account in respect of each unit
eligible for deduction as if it were a separate entity the correctness of the claimed and allowed deduction of Rs. 12,57,29,939 was not verifiable
and hence, not allowable to the assessee.
The escapement of income has been on account of failure on the part of the assessee to truly disclose all the material facts necessary for
assessment. In view of the above, I have reason to believe that an amount of Rs. 12,57,29,939 has escaped assessment within the meaning of
section 147 of the income tax Act, 1961.
From above, it is clear that the objection of the assessee on this ground is not valid.
(Emphasis supplied)
The aforesaid reasoning of the Assessing Officer refers to the failure of the assessee to submit separate profit and loss accounts of two units
and it is stated that the assessee had worked out eligible profits on the basis of ratio of sale and profit of the whole business. It records that the
assessee had not maintained or furnished separate books of account in respect of each unit. Therefore, correctness of the claim and deduction
allowed was not verifiable.
It is not possible to accept the contention that the aforesaid reasoning discloses or shows that the petitioner had failed to disclose fully and truly
all material facts. It is incorrectly recorded and stated that it was ""now"" noticed that the petitioner had 4 units and the deduction u/s 80IB was
claimed in respect of two units. The fact that two units out of four were eligible for deduction u/s 80IB is recorded in the first/original assessment
order. This is not a new revelation or a fact discovered or known after the first/original order. It may be noted here that it has been stated and
accepted that in respect of the units I and II, the petitioner assessee has been claiming deduction for the last 6 and 4 years respectively. The
sentence ""however the assessee had not maintained/furnished the separate account"" shows a lack of clarity and considerable ambiguity with which
the Assessing Officer has proceeded. What was furnished by the petitioner was on record and not unknown. It was ex facie apparent. The
petitioner had filed the documents/accounts in support of the claim before the Assessing Officer along with the return and had furnished further
details during the course of the assessment proceedings. Accounts and details related to computation and the method of computing of deduction
u/s 80IB of the Act. The petitioner assessee did not conceal any fact. It had made full and true disclosure of all material facts. It was for the
Assessing Officer thereafter to examine and consider whether the claim for deduction was allowable in law. It is not the case of the Revenue that
they have come across any new material or evidence on the basis of which reassessment has been initiated. At best, the case of the Revenue as
made out in the aforesaid reasoning is that the Assessing Officer, on the basis of the material disclosed, should not have allowed the deduction u/s
80IB of the Act as the legal requirements/preconditions of sub-section 13 to section 80IB and Rule 18BBB were not satisfied. The material facts
were truly and correctly disclosed to the Assessing Officer but as per the reasons, he failed to apply ""law"" to the said facts.
The method of computation and whether or not the assessee had maintained/furnished separate accounts, was known to the Assessing Officer
at the time of first assessment. He did not proceed under any doubt or his apprehension on the said subject. This is clear, if we examine the
computation made by the Assessing Officer made in the original assessment order dated 20-3-2006. The computation begins with the net profit as
shown in the profit and loss appropriation account from which inadmissible expenses were subtracted. Expenses disallowed under sections 43B,
36(1)(va) etc., are also subtracted. Thereafter, the income credited to the profit and loss account but not considered as a part of business income,
was computed and not included for consideration for the purpose of deduction u/s 80IB. The Assessing Officer then has computed income of the
two units for deduction u/s 80IB, recording as under:-
Sales of Silvassa Unit-I 26,287,287.00
Sales of Silvassa Unit-II 1,919,621,444.00
Add: Installation charge received 596,867.00
Sales of DG Set transferred from Silvassa
Unit-II but included in sales of Delhi unit 4,950.674.00 1,925,168,985.00
Sales of Delhi Unit 11,785,378.05
DG Set sales (Inc. installation & erection) 97,283,825.00
109,069,203.05
Less: Sales of D.G. Set transferred from
Silvassa Unit-II 4,950,674,00 104,118,529.05
Sales of 100 per cent EOU Unit 81,577,256.00
Total Sales of the company, is computed as under 2,137,152,057.05
Business income attributable to Silvassa Unit In the ratio of sales is worked out as under:
139,099,406.1226,287,287.00
= 17,10,943.30
�
2,137,152,057.05
Deduction u/s 80IB in respect of Silvasia unit-II @ 25 per
cent of Rs. 17,10,943.30 = 4,27,735.83
Business income attributable to Silvassa Unit-II in the ratio of sales is worked out as under:
139,099,406.121,925,168,985.00
= 12,53,02,203.75
�
2,137,152,057.05
Deduction u/s 80IB in respect of Silvassa Unit-II @ 100 per cent
of Rs. 12,53,02,203.75 = 12,53,02,203.75
Total Deduction u/s 80IB 12,57,29,939.58.
It is clear from all the doubt that the petitioner assessee had made full and true disclosure of all material facts necessary for the assessment and
there was no concealment. The fact that the petitioner had not submitted a separate profit & loss account or furnished/maintained separate
accounts was known as without knowing these facts, the computation or quantification u/s 80IB was not possible. Inspite of knowing the full and
true material facts, the Assessing Officer computed the said deduction in the original assessment proceedings. Thus, it cannot be said that the
assessee had not disclosed fully and truly all the material facts necessary for the assessment. This is a case where the material facts were truly and
fully disclosed by the assessee but as per the case of the Revenue, the Assessing Officer had made the assessment without considering the
requirements of sub-section (13) to section 80IBof the Act.
Learned counsel for the revenue has relied upon Explanation 1 to the proviso to section 147 which reads as under:-
Explanation 1. -Production before the Assessing Officer of account books or other evidence from which material evidence could with due
diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 1 to the proviso stipulates that mere production of books of account and other material from which the Assessing Officer could
with due diligence, have discovered escaped income, does not bar reassessment proceedings. This does not amount to disclosure. The aforesaid
explanation does not help the Revenue in the present case. As noticed above, the material facts were fully and truly disclosed. Further inference, or
new discovery of facts by exercise of due diligence, is not the error or ground made out by the Revenue. The alleged error or mistake pointed out
by the Revenue is the failure to apply the law, i.e., provision of sub-section (13) to section 80IB, to the known and accepted facts. The Assessing
Officer, as per the Revenue, did not examine and consider whether there was compliance or violation of section 80-IB(13) and Rule 18BBB of the
Rules, inspite of known and accepted facts recorded in the first/original assessment order. The petitioner was not required to ""disclose"" the law.
The proviso and explanation draws out a distinction between law and disclosure of facts and this is not obliterated. As noticed above, Revenue has
pleaded and stated that the Assessing Officer had overlooked and disregarded the said provisions and therefore it is not a case for change of
opinion as no opinion was formed at the first instance. This plea of the Revenue has been accepted. Thus, the petitioner had disclosed true and full
material facts and these were within the knowledge of the Assessing Officer. The failure alleged by the Revenue is an alleged error in applying the
law to the facts on record. This is not covered by Explanation 1.
Reliance placed by the Revenue on our decision, Honda Siel Powers Products Ltd. v. Dy. CIT [2011] 197 Taxman 415 : 10 taxmann.com 2
(Delhi) is inappropriate and misconceived. In the said case, the contention of the assessee was that they were required to disclose facts as when
they had filed the return. This contention of the assessee was rejected as disclosure is not only restricted to the income tax return but also relates to
the assessment proceedings.
Way back in 1961, the Supreme Court in the case of Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and
Another, had observed as under:-
...It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for
somebody else-far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is
remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the
assessee must disclose what inferences-whether of facts or law-he would draw from the primary facts.
....
...The scheme of the law clearly is that where the income tax Officer has reason to believe that an underassessment has resulted from non-
disclosure he shall have jurisdiction to start proceedings for reassessment within a period of eight years; and where he has reason to believe that an
under assessment has resulted from other causes he shall have jurisdiction to start proceedings for reassessment within four years. Both the
conditions, (i) the income tax Officer having reason to believe that there has been under assessment and (ii) his having reason to believe that such
under assessment has resulted from non-disclosure of material facts, must co-exist before the income tax Officer has jurisdiction to start
proceedings after the expiry of four years. The argument that the court ought not to investigate the existence of one of these conditions, viz., that
the income tax Officer has reason to believe that underassessment has resulted from non-disclosure of material facts, cannot therefore be accepted.
Following this judgment in Income tax Officer, Calcutta and Others Vs. Lakhmani Mewal Das, it was observed as follows:-
...Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the
Commissioner should be satisfied on the reasons recorded by the income tax Officer that it is a fit case for the issue of such notice. We may add
that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment.
Production before the Income- tax Officer of the account book or other evidence from which material evidence could with due diligence have been
discovered by the income tax Officer will not necessarily amount to disclosure contemplated by law. 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 income tax Officer to draw the
correct inference from the primary facts. It is no responsibility of the assessee to advise the Income- tax Officer with regard to the inference which
he should draw from the primary facts. If an income tax 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 section 147(a) 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.
Once there exist reasonable grounds for the income tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to
issue notice. Whether the grounds are adequate or not is not a matter for the Court to investigate. The sufficiency of grounds which induce the
income tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the income tax Officer did not
hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of
reasons for the belief. The expression ""reason to believe"" does not mean a purely subjective satisfaction on the part of the income tax Officer. The
reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the
belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the
section. To this limited extent, the action of the income tax Officer in starting proceedings in respect of income escaping assessment is open to
challenge in a Court of law (See observations of this Court in the case of Calcutta Discount Company Limited Vs. Income Tax Officer, Companies
District, I and Another, and S. Narayanappa and Others Vs. Commissioner of Income Tax, Bangalore, while dealing with corresponding
provisions of the Indian income tax Act, 1922).
The decision above holds good even after the amendment with effect from 1-4-1989 as has been observed by a Division Bench of this Court
in IPCA Laboratories Ltd. Vs. Gajanand Meena, Deputy Commissioner of Income Tax and Others (No. 2), wherein it has been observed as
under:-
The position of law after 1st April, 1989, is not in dispute. By virtue of a proviso to section 147, no action can be taken for reopening after four
years unless the Assessing Officer has reason to believe that income has escaped assessment by reason of the failure on the part of the assessee to
disclose fully and truly all material facts necessary for assessment. In the present case, the affidavit and the reasons disclosed indicate that the
Department has purported to reopen the assessment only on the basis of change of opinion. This position is, in fact, conceded vide para 3 of the
affidavit-in-reply dated 13th March, 2001. The reasons also do not spell out failure on the part of the assessee to disclose fully and truly all
material facts.... We are satisfied on the facts of the present case that reopening is sought on the basis of change of opinion. Further, even in the
reasons, there is nothing to indicate that reopening is sought on the ground of the failure on the part of the Petitioner to disclose fully and truly all
material facts.
Viewed in this light, the proviso to section 147 of the said Act, carves out an exception from the main provisions of section 147. If a case were to
fall within the proviso, whether or not it was covered under the main provisions of section 147 of the said Act would not be material. Once the
exception carved out by the proviso came into play, the case would fall outside the ambit of section 147.
The Supreme court in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., has expounded and explained:-
The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the
provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the
circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction u/s
147(a) two conditions were required to be satisfied: firstly the Assessing Officer must have reason to believe that income, profits or gains
chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by
reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year.
Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice u/s 148 read
with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for
whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be
noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the
main provision and not the proviso.
(Emphasis supplied)
In Haryana Acrylic Manufacturing Company Vs. The Commissioner of Income Tax IV and Another, a Division Bench of this Court has
observed:-
Examining the proviso [set out above], we find that no action can be taken u/s 147 after the expiry of four years from the end of the relevant
assessment year if the following conditions are satisfied:
(a) an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and
(b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee:
(i) to make a return u/s 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or
(ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year.
Condition (a) is admittedly satisfied inasmuch as the original assessment was completed u/s 143(3) of the said Act. Condition (b) deals with a
special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return
u/s 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the
petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This
leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all
material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material
facts necessary for its assessment, then no action u/s 147 could have been taken after the four year period indicated above. So, the key question is
whether or not the petitioner had made a full and true disclosure of all material facts.
In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly
all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely
having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated
above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts,
fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar
would operate and no action u/s 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not
contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period
remains unfulfilled. In our recent decision in Wel Intertrade (P.) Ltd. (supra) we had agreed with the view taken by the Punjab & Haryana High
Court in the case of Duli Chand Singhania (supra) that, in the absence of an allegation in the reasons recorded that the escapement of income had
occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken
by the Assessing Officer u/s 147 beyond the four year period would be wholly without jurisdiction....
With reference to Explanation 1, it has been elucidated and clarified :
...In the present case, what is to be seen is whether the petitioner failed to make a full and true disclosure of all the material facts necessary for his
assessment for the assessment year 1998-99. Explanation I to section 147 also makes it clear that mere production before the Assessing Officer of
account books or other evidence from which material evidence could, with due diligence have been discovered by the Assessing Officer, will not
necessarily amount to disclosure within the meaning of the said proviso. This explanation, however, does not mean that production of account
books and other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not in any
event amount to disclosure within the meaning of the said proviso. The said explanation only stipulates that such evidence will not necessarily
amount to disclosure"" within the meaning of the said proviso. However, we need not labour on this aspect any further inasmuch as we find that in
this case, the Assessing Officer had made specific queries, inter alia, with regard to the share application money of Rs. 5 lakhs received from
Hallmark Healthcare Limited. The petitioner had supplied, in the course of the original assessment proceedings all the relevant documents such as
the share application money form, confirmation from the applicant and the bank statement relating to the receipt of the Cheque No. 201845 dated
17-10-1997 from Hallmark Healthcare Limited. It is only thereafter that the assessment was completed by the Assessing Officer on 7-3-2001.
We have already noted above that in the assessment order itself, the Assessing Officer has recorded that the details as required were filed and
verified. This in itself indicates that the Assessing Officer had applied his mind to the issue of the share application money and had accepted the
assessee''s claim after due verification. Furthermore, in the impugned order dated 2-3-2005 itself, the Assessing Officer has indicated that during
the course of assessment proceedings, the petitioner had filed details in respect of share application money of Rs. 5 lakhs in the name Hallmarks
Healthcare Limited. However, the Assessing Officer has now sought to wriggle out of his remarks in the assessment order by stating that only
photocopies for the application for equity shares were filed and that the copy of the bank account with the Indian Bank which was available did not
indicate that verification had been done incorrectly and that the facts as presented by the petitioner had been accepted in the normal course of
assessment proceedings. The Assessing Officer cannot be permitted to retract from the position that he did ask for specific information and that the
information was supplied by the petitioner. And, more importantly, that the Assessing Officer had examined and verified the information before
finalizing the assessment u/s 143(3) of the said Act. In this background also, we feel that the petitioner had not failed to disclose fully and truly all
material facts necessary for its assessment in respect of the assessment year 1998-99.
In view of the aforesaid reasoning, the present writ petition is allowed. The writ of certiorari is issued quashing the impugned order dated 1-11-
2010 and the impugned notice dated 31-3-2010. The reassessment proceedings are set aside. In the facts of the case, there is no order as to
costs.