(Per : HONOURABLE MR. JUSTICE AKIL KURESHI) 1. The petitioner has challenged a notice dated 25-2- 2004 issued by the respondent – Deputy Commissioner of Income Tax by virtue of which he sought to reopen the assessment of the petitioner for the assessment year 1998-99. Facts may be noted in brief.
2. The petitioner is a company registered under the Companies Act and is regularly assessed to tax under the Income Tax Act, 1961 ('the Act', for short). For the assessment year 1998-99, the petitioner filed his return of income on 30- 11-1998 declaring a total income of Rs.2,42,77,000/- under section 115JA of the Act. Such return was taken in scrutiny by the Assessing Officer. Assessment under section 143(3) of the Act was framed on 26-3-2001 at a total income of Rs.4,48,24,869/-. Such order gave rise to appeal proceedings with respect to which we are not concerned.
3. It is this assessment which was framed after scrutiny that the Assessing Officer seeks to reopen under section 147 of the Act for which the impugned notice dated 25- 2-2004 came to be issued. This is, therefore, a case where the assessment is sought to be reopened beyond a period of four years from the end of relevant assessment year.
4. At the request of the petitioner, the Assessing Officer supplied the reasons recorded by him for issuing the notice for reopening the assessment. Such reasons read as under:-
Reasons for reopening the assessment U/s.147 of the I.T.Act
I. The scrutiny assessment U/s.143(3) was completed in this case on 26.03.2001. While scrutinizing the return of income for assessment of subsequent years, it is seen that the assessee's claims are not proper. It is seen that the assessee has submitted voluminous details along with the return of income which are not at all required to be filed along with the return of income. What is required is the Tax Audit Report, Profit and Loss Account and Balance Sheet, Other Statutory Reports pertaining to deductions U/s.80HHC and 80IA, Computation of Income, Proof of payment of Advance Tax and TDS Certificates. The various details submitted by the assessee are very confusing and complicate the matter pertaining to the assessment. The details filed by the assessee are such as filing of which are necessitated with the object to create confusion in the matter and frustrate quick understanding. The assessee has furnished the branch wise details. The statements furnished are not straight forward. Please refer to the profit calculation sheet/statement u/s 80-IA (copy enclosed) for a period of April, 1997 to March, 1998. Though, the name of the statement is profit calculation u/s 80-IA, but I do not find anywhere figure of the profit which has been determined for the purpose of 80-IA. Thus, the assessee has deliberately presented the facts in such a manner so that it is not understood by the Tax Authority easily. For example, as per the Tax Audit Report, the R&D expenses are as under:-
Capital Expenses Rs.4,34,19,090/- Revenue Expenses Rs.1,86,22,844/- Deferred Revenue Exp. Rs.3,00,66,570/-
Total Rs.9,21,08,504/-
But, the Schedule-17 of the Annual Account shows R&D expenses of Rs.122.91 lacs and deferred revenue expenditure written off of Rs.58 lacs only. So, there is clear cut discrepancy between the R&D expenses reported in the Tax Audit Report and that mentioned in the Annual Accounts. Thus, it is not clear as to which figure is correct. The assessee has claimed weighted deduction u/s.35 on the figures mentioned in the Tax Audit Report pertaining to the R&D expenses which is much higher than that mentioned in the Annual Accounts.
Thus, it is not clear which figure is correct.
II. The assessee has shown export of Rs.46,.75 lacs out the goods produced from the Silvasa Unit. This amount has been considered for working out the deduction u/s.80HHC. Again, deduction u/s.80IA has been claimed @ 100% on this amount. This means that more than 100% deduction has been claimed on the export of Rs.46.75 lacs from the Silvasa Unit, which is not correct as per the provisions of section 80AB.
III. While completing the assessment u/s.143(3) of the act in the case of Aditya Medisales Ltd., a sister concern of the Sun Group, it was found that the profit of the Industrial Unit of Silvasa of the assessee has been inflated because the same is exempt u/s.80 IA, by giving more interest on overdue bills by Aditya Medisales Ltd. Aditya Medisales Ltd. has been given the task of distributing the formulation drugs produced by the units at Silvasa and Vapi of Sun Pharma Industries Ltd. It pays the interest @ 24% to the latter on the overdue bills which is much more than the prevailing market rate of interest in this line of business which varies from 15% to 18%. By adopting this modus operandi, the Sun Group has reduced the taxable profit of M/s. Aditya Medisales Ltd. and at the same time it has increased the profit of Silvasa Unit because the interest income is directly added to the sales figure, on which the deduction u/s 80 IA is available. These facts are not clear from the working of deduction u/s 80IA given by the assessee along with the return of the income. This is not permissible as per the provisions of Section 80IA (10) of the Act and the rate of interest payable to SPIL has to be restricted @ 15% to 18% which will automatically reduce the profits of units entitled for 80IA deduction and consequently the deduction u/s.80IA claimed by the assessee will be reduced.
IV. In the assessment year 1999-2000, the A O had allocated 10% of the weighted deduction u/s. 35(1) to the Silvasa Units (Which are engaged in the manufacturing of formulation products) while working out the deduction u/s.80 IA. This allocation was accepted by the assessee before the CIT(A). However, in A.Y. 1998-99 the assessee has not allocated any expenditure on the R&D in the books pertaining to R&D to the unit at Silvasa. This year, the total expenditure on the R & D in the books is Rs.8,88,77,660/-. The A.O. had allocated 10% of the actual expenditure only amounting to Rs.88,87,766/-. The assessee has claimed weighted deduction u/s.35(1) of Rs.9,57,05,076/- in the computation of income. Hence, as per the order of CIT(A) in the case of the assessee, 10% of Rs.9,57,05,076/- amounting to Rs.95,70,508/- should have been allocated as expense to the Silvasa Unit. Hence, the 80IA deduction has been claimed more by Rs.95,70,508/-. The A.O. has disallowed Rs.50,01,0146/- only in the assessment order passed u/s.143(3) on 26-03-01. thus, the deduction u/s 80 IA has been allowed more to the tune of Rs.45,69,362/-.
It is seen that the assessee is allocating R & D expenses on arbitrary basis. There is intermixing of R & D expenses of all products, therefore, the best was to allocate the expenses under these circumstances should be on the basis of profitability ratio of various units. Since, the profitability of Silvasa Unit is very high, the allocation of R &D expenses should be more in this unit because there is a direct nexus between the profitability of a unit and R & D expenses (because better R & D means more profit margin in pharmaceutical line) rather that allocating only 10% of the R & D expenses.
V. In view of the above, I have reasons to believe that the above incomes which exceeds Rs.1 lac chargeable to tax have escaped assessments. Hence, notice u/s.148 of the Act is issued.
5. The petitioner raised objections to the reopening notice vide communication dated 10-5-2004. Such objections were, however, disposed of by the Assessing Officer by an order dated 20-8-2004. The petitioner, therefore, filed the present petition and opposed the proposal for reopening the assessment.
6. In case of this very petitioner, we had occasion to examine the notice for reopening of assessment wherein the reasons recorded were similar in nature. With respect to the first two reasons recorded by the Assessing Officer on 25-2- 2004 in the present case, we may notice that similar reasons came up for consideration before us in the assessee's own case in Special Civil Application No.12468/2004. By our judgment dated 31-7-2012, we had found that such reasons were not germane and would not give jurisdiction to the Assessing Officer to reopen the assessment on the basis of such reasons. Relevant observations of the said judgment read as under:-
“18. Insofar as ground Nos.1 and 2 are concerned, they overlap. We, therefore, discuss them together. In response to such reasons recorded, the petitioner had in connection with these grounds, specifically raised objections and pointed out that all figures tally and that there was no double deduction claimed. It was contended that there was no failure on the part of the assessee to fully and truly disclose all material facts. In particular, with respect to the claim of double deduction of the fixed assets and R & D expenses by way of depreciation and thereafter under section 35 of the Act, it was pointed out that the assessee had claimed deduction under section 35 of the Act towards R & D expenses. On such expenses, no depreciation by way of fixed assets was claimed. In short, the case of the assessee is that there was no double deduction. Along with such objections, the petitioner had produced certain annexures to establish its case of reconciliation of the accounts and of not having claimed any double deductions. With respect to the first ground, the assessee reconciled the accounts in following manner:
“Assessment Year: 1997-1998 Financial Year : 1996-1997 Reconciliation of R & D Revenue expenses as per Annual Report, 3CD and claimed in the Income Tax Return Assessment Year: 1997-1998 Financial Year : 1996-1997 Balance addition to Building which are considered in working of dep. As per Income Tax Act 408.52 Break up:
claimed on Additions to P & M at Nagar of Rs. 132.97 lacs which includes additions to ETP building of Rs. 87.32 Lacs
[2] Additions to Plant & Machineries as per Schedule 5 of Annual Report:
Less Addition to various R & D assets as per Annexure No. III of the form No. 3 LCD Break up:
1157.65 Break up:
& M at Nagar of Rs.
132.97 lacs which includes additions to P & M of Rs.
45.90 Lacs
[3] Additions to Furniture & Fixtures as per Schedule 5 of Annual Report:
Less Addition to R & D Furniture & Fixture per Annexure No. III of the form No. 3CD 40.70 2.28 Difference in additions 0.06 Balance addition to F & F which are considered in working of depreciation as per Income Tax Act 38.48 Having perused such detailed account, we find that the relevant entries have been properly explained and reconciliation has been satisfactorily explained. In particular, with respect to double deduction on R & D expenditure by way of depreciation on fixed assets and deduction under section 35AB of the Act, even the Revenue could not point out how the same amount has been reflected in two separate claims. In fact, to the extent the R & D expenditure was presented before deduction under section 35AB of the Act, the same was reduced from the fixed assets drawing depreciation. More importantly and significantly, in the order that the Assessing Officer passed disposing of such objections, he did not dispute such reconciliation figures. He in fact stated as under :
“On a deeper scrutiny of the schedule showing additions to the fixed assets, it is noticed that the depreciation has been claimed on a higher amount. As per Schedule-5 of Annual Accounts, the addition in plant and machinery is Rs.1157.65 lacs. As per 3 CD Report, addition of plant and machinery pertaining to R & D is Rs.143.44 lacs. Hence, the depreciation u/s.32 should have been claimed on addition of plant and machinery worth Rs.1157.65 lacs (-) Rs.143.44 lacs = Rs.1014.21 lacs. However, in the depreciation chart as per Income-tax Act, the depreciation has been wrongly claimed on addition of Rs.1101.29 lacs (Rs.857.06 lacs + Rs.111.26 lacs + Rs.132.97 lacs).”
To our mind, this line of reasoning that the Assessing Officer took in the order disposing of the objections was entirely different from what emerged from the reasons recorded. As already noted, in the reasons recorded, he raised two contentions with respect to certain claims of deduction. Firstly, he contended that certain figures do not match with the Tax Audit Report and, secondly, that with respect to certain expenditure of R & D, double benefits were claimed in the form of depreciation as well as deduction under section 35AB of the Act. When the assessee objected to such grounds and pointed out in detail that the claims were valid and that there was no double claims made, the Assessing Officer in the order rejecting the objections went on yet different aspect altogether. We are not commenting on the validity of this new angle sought to be brought in by the Assessing officer. Suffice it to note that the notice for reopening must fail or succeed on the basis of the reasons recorded. If a new ground occurs to the Assessing Officer after he recorded the reasons for reopening of assessment and issued notice for such purpose, surely this cannot be a ground to support the notice. Under the circumstances, ground 1 and 2 noted above would not form valid basis for reopening the assessment.”
7. With respect to ground No.IV of the recorded reasons dated 25-2-2004, we notice that such ground had not come up for consideration in the previous matter. We are, therefore, independently examining the same. If we peruse the ground more closely, the same pertains to the weighted deduction under section 35(1) of the Act pertaining to Silvasa unit of the petitioner company. The Assessing Officer was of the opinion that for the year 1998-99, the assessee had not allocated any expenditure on the R&D pertaining to the Silvasa unit. Total expenditure towards R&D in the books of accounts of the assessee was Rs.8,88,77,660/-. The assessee had claimed weighted deduction under section 35(1) of the Act at Rs.9,57,05,076/- pertaining to such Silvasa unit. The Assessing Officer was of the opinion that 10% of such deduction should have been disallowed being allocated as expenditure for R&D to Silvasa unit. He was, therefore, of the opinion that the assessee had claimed excess deduction under section 80IA of the Act by Rs.95,70,508/-. As against this, in the original assessment, the Assessing Officer disallowed only Rs.50,01,146/-. Thus, the assessee got excess deduction under section 80IA of the Act to the tune of Rs.45,69,362/-.
8. In our opinion, the reason recorded itself clearly demonstrates that all facts and figures were available on the record. The Assessing Officer while processing the return during the original assessment, in fact, scrutinised the claim and disallowed part of the claim of deduction under section 80IA of the Act. This was, therefore, not a case where the assessee can be stated to have failed to disclose truly and fully all material facts. The Assessing Officer has not referred to any new material on the basis of which he could be stated to have reason to believe that excess deduction under section 80IA of the Act was granted. More importantly, the assessee had disclosed all facts in the original return. Such claim was scrutinised and even partly disallowed. In our opinion, therefore, assessment previously framed after scrutiny could not be reopened beyond a period of four years from the end of the relevant assessment year. This ground also, therefore, must fail.
9. Coming back to the sole surviving ground No.III, in essence, it pertains to the deduction under section 80IA of the Act. The Assessing Officer noted that the assessee had received interest on overdue bills of Aditya Medisales Ltd. at the rate of 24% per annum. He was of the opinion that such interest rate was much more than the prevailing market rate in this line of business which varies between 15% to 18%. He noticed that Aditya Medisales and the present assessee were sister concerns. He was, therefore, of the opinion that such excess interest should have been adjusted as provided in section 80IA(10) of the Act. We had occasion to deal with this very ground in our judgment dated 31-7-2012 in assessee's own case being Special Civil Application No.12468/2004. We had found that on such ground, it would be open for the Assessing Officer to reopen the assessment. Our discussion in this regard reads as under:-
24. We may now refer to ground No.3. In this respect, the stand of the Assessing Officer is that the assessee had sold certain goods to its sister concern Aditya Medisales during the year under consideration. On delayed payments of such goods, Aditya Medisales paid interest at the rate of 24% which was much higher than the prevailing market rate of interest which varies between 15% to 18%. By adopting such modality, the assessee had reduced the taxable profit of Aditya Medisales and at the same time increased the profit of Silvasa unit of the assessee company which was eligible for deduction under section 80-IA of the Act. These facts were not clear from the working out of deductions under section 80IA of the Act along with the return of income. According to the Assessing Officer, case of the petitioner would be covered under section 80IA(10) of the Act. Therefore, interest payable to the petitioner company should be restricted to 15% to 18% which would reduce the profit of the said unit and resultantly deduction under section 80IA of the Act would also be reduced.
25. In the objections raised, the petitioner contended that details of interest charged on overdue sale proceeds were on record. In the original assessment, the assessee had dealt with such interest for the purpose of computation of deduction under section 80HHC of the Act. Thus there was no non- disclosure on the part of the assessee. It was further contended that interest was not on higher side looking to the fact that the debt was unsecured and the Company was exposing itself to higher risk. It was lastly contended that even if the interest was charged at a higher rate, the resultant income earned by the assessee was offered to tax.
26. Such objections of the petitioner were disposed of by the Assessing Officer in following manner :
“2.3 Regarding the claim of higher deduction u/s.80IA by recovering higher interest from M/s.Aditya Medisales Ltd., it is stated that all the details are on record and there is no non-disclosure on this account. However, this is not correct. M/s.Aditya Medisales Ltd., a group concern, had paid interest @24% on the overdue bills, which is much more than the prevailing market rate of interest in in this line of business which varies from 15% to 18%. By adopting this modus operandi, the taxable profits of M/s.Aditya Medisales Ltd. on the one hand has been reduced and the profits of 'Silvasa Unit' of M/s.Sun Pharmaceuticals Industries Ltd. has been inflated which is exempt u/s.80-IA. This is a clear cut violation of section 80-IA(10) of the Act. The fact that M/s.Aditya Medisales Ltd. had paid interest @24% on over due bills is not available from the record of M/s.Sun Pharmaceuticals Industries Ltd. The interest component has been merged in the figure of sales of the Silvasa Units making it difficult for the A.O. to discover this modus operandi. This fact could be detected while verifying/examining the records for Assessment Year 2001-02 of M/s.Aditya Medisales Ltd. This issue is discussed in detail in the Assessment Order u/s.143(3) in the case of M/s.Aditya Medisales Ltd.”
It is not in dispute that Aditya Medisales is the sister concern of the petitioner Company. It is also not in dispute that on the delayed payments of sales proceeds, Aditya Medisales paid interest at the rate of 24% to the petitioner Company. Section 80IA of the Act, as is well known, pertains to deduction in respect of profits and gains from industrial undertakings engaged in infrastructural development. Section 80-IA(10) reads as under:
“(10) Where it appears to the Assessing Officer, that owning to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer, shall in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom.”
Under section 80IA(10) of the Act, thus, if it appears to the Assessing Officer that owing to the close connection between the assessee carrying on the business eligible for deduction under such section, and any other person or for any other reason, the course of business between them is so arranged that the business transacted produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall in computing the profits and gains of such eligible business for deduction, take the amount of profits as may be reasonably deemed to have been derived therefrom. Under the circumstances, if it is found that the assessee had charged higher rate of interest from the sister concern and thereby, arranged its business in such a way that the eligible profit for deduction under section 80IA of the Act was exaggerated, it was within the power of the Assessing Officer while computing the deduction to take amount of profit as may be reasonably deemed to have derived from such dealing. In exercise of such powers, therefore, when the Assessing Officer finds that there is exaggeration of income by an assessee, which is eligible for deduction 80IA of the Act dealing with closely associated entity, he would make necessary adjustments in this regard.
27. Thus, it cannot be said that belief of the Assessing Officer that income chargeable to tax had escaped assessment is baseless. As noted, at this stage, it is not necessary for this Court to ascertain whether such addition would ultimately succeed or not. Sufficiency of the reason on which the Assessing Officer forms such belief is also not for the Court to decide.
28. In the case of Sri Krishna Pvt. Ltd. v. I.T.O., 221 ITR 538, the Apex Court reiterated the ratio laid down in the case of Phool Chand Bajrang Lal and observed that inquiry at the stage of finding out whether the reassessment notice is valid is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escapement of income is established. Since the belief is that the Income Tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge.
29. In the case of I.T.O. v. Selected Dalurband Coal Co. P. Ltd., 217 ITR 597, the Apex Court held that the formation of belief by the Income Tax Officer is essentially within his subjective satisfaction. At the stage of issue of notice, the only question is whether there was relevant material on which the reasonable person could have formed the requisite belief.
30. In the case of Raymond Woollen Mills Ltd. v. ITO, 236 ITR 34, the Apex Court observed that “in this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case”.
31. In the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., 291 ITR 500 (SC), the Apex Court observed as under :
“Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [1999 (236) ITR 34 (SC)].”
32. In the case of Phool Chand Bajrang Lal (supra), the Apex Court observed as under :
“From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under S. 147(a) read with S. 148 of the Income-tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief.”
33. In view of the above settled legal position, at this stage, we do not find that the reasons recorded lack validity. The above observations of various decisions noted would also be relevant when we examine whether such escapement of income was due to failure on the part of the assessee in truly and fully disclosing all material facts. In this respect, the assessee had disclosed that it had received interest of Rs.3,03,48,973/-. It is an admitted position that in the return filed, the assessee did not indicate whether the entire interest or part thereof was received from Aditya Medisales. Further, there is no indication that from Aditya Medisales, which was a sister concern, the assessee had received interest at the rate of 24% on the outstanding amounts. Counsel for the petitioner, however, submitted that in the tax audit report, the petitioner had disclosed that the petitioner company and Aditya Medisales are closely associated. In our opinion, this would not be a sufficient disclosure. From the facts on record, it was not possible for the Assessing Officer to ascertain that the petitioner received interest from Aditya Medisales which was higher than the normal rate of interest. Three essential facts, namely, that the petitioner received interest on overdue payments from Aditya Medisales, that Aditya Medisales was a sister concern of the petitioner Company and that such interest was charged at the rate of 24% per annum, were not discernible from the record at all.
34. Under the circumstances, from the material on record, it was not possible for the Assessing Officer to make adjustment under section 80IA(10) even if it was required. It may be that the petitioner did give the total figure of interest received. However, from such figures, it was not possible for the Assessing Officer to ascertain these vital facts. Section 147 of the Act, explanation 1 provides that “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 foregoing proviso”. In the present case, even from the account books and other evidence which the assessee had produced, even after due diligence, it was not possible for the Assessing Officer to discover these three vital facts.
35. In the case of Sri Krishna Pvt. Ltd. (supra), the Apex Court observed that obligation of the assessee is to disclose all material facts necessary for his assessment for that year fully and truly. It was further observed that the idea is to save the assessee from harassment resulting from mechanical reopening of reassessment. This protection avails only to those assessees who disclose all material facts truly and fully.
36. In the case of Phool Chand Bajrang Lal (supra), the Apex Court held as under:
“Where the transaction itself, on the basis of subsequent information was found to be a bogus transaction, mere disclosure of that transaction at the time of original proceedings could not be said to be a disclosure of true and full facts and officer would have jurisdiction to reopen the concluded assessment in such a case.”
37. In the present case, as already noted, the only disclosure was that the assessee had earned interest income of Rs.3,03,48,973/-. There was no further information available on record that such interest included overdue payment charges at the rate of 24% received from the sister concern, viz. Aditya Medisales. Even without the aid of explanation (1) to proviso to section 147, therefore, it was perhaps open for the Assessing Officer to contend that there was no true and full disclosure on the part of the assessee in this respect. At any rate, by applying such explanation, it can be easily gathered that the assessee failed to disclose fully and truly all material facts. Counsel for the petitioner, however, vehemently contended that these were not primary facts. Only primary fact was that the assessee had earned interest income. We are, however, of the opinion that in the context of the close connection between the petitioner and Aditya Medisales, the fact that the assessee was eligible for deduction under section 80IA of the Act and the interest income received from the sister concern had relevance to the provisions of section 80IA(10) of the Act, primary facts were not on record.
38. Under the circumstances, in so far as ground No.3 is concerned, we find that the same cannot be stated to be invalid.
10. In view of the above discussion, we would not have examined this ground any further. In the present case, however, counsel for the petitioner sought to make a distinction. On the basis of an additional affidavit dated 11-8- 2012, he contended that even assuming that there was initial failure on the part of the assessee to disclose material facts in this regard before the Assessing Officer, during the course of the assessment proceedings, such material had come on record and that therefore also, reopening should not be permitted. In such affidavit, it is averred that in case of the sister concern i.e. Aditya Medisales, the Assessing Officer had issued notice under section 142(1) of the Act for the assessment year 1998-99. Various details asked by the Assessing Officer were provided under letter dated 14-3-2001. Such details included the interest paid by Aditya Medisales to the petitioner and the rate at which such interest was paid. Alongwith such affidavit, the petitioner has also produced a communication dated 14-3-2001 made by Aditya Medisales to the Assessing Officer supplying various details during the course of the assessment for the year 1998-99 in which at item No.8 appears “Details of interest paid is as per Annexure - 4”. Counsel for the petitioner took us to such annexure in which at Sr. No.8, the following entry is mentioned:-
DETAILS OF INTEREST PAID DURING ACCOUNTING YEAR 1997-98
11. Counsel also drew our attention to the assessment order passed by the Assessing Officer in case of Aditya Medisales for the same assessment year to highlight that the Assessing Officer was common in both cases and in fact, several dates of hearing were also common. On the basis of such additional materials, the counsel would contend that in the present case, when full details regarding the rate of interest paid to Aditya Medisales had come on record, the Assessing Officer now cannot reopen such assessment beyond a period of four years.
12. On the other hand, learned counsel for the revenue opposed this contention submitting that the assessee had not made full disclosure as already held by this court in the previous judgment. If such material has come on record in the assessment proceedings of some other assessee, that by itself would not absolve the assessee from the primary duty to disclose truly and fully all material facts. He further submitted that unless and until such material was pointedly brought to the notice of the Assessing Officer, he cannot be expected to correlate the two from independent assessment proceedings merely because the Assessing Officer happens to be common in both the cases.
13. Having thus heard learned counsel for the parties on this sole surviving issue, we are of the opinion that in the present petition, we should not go into such details. As already noted, in absence of this additional element of the rate of interest on outstanding bills being received from Aditya Medisales having come on record, in the assessment proceedings in case of the assessee, we have already concluded that the reopening would be otherwise permissible in law. What would be the effect of the additional material in the present case, must be left to be judged at the time of assessment proceedings and if need be, in further hierarchical appeals under the Act. We say so because in the present case, without minute examination of various facts and details, it would not be possible to give a definite finding whether the requirements of reopening of assessment as per the proviso to section 147 of the Act would be satisfied. At the outset, therefore, when the assessment is yet to be framed, we would not be inclined to examine such questions which depend on various facts. We are conscious that even if initially the assessee had not made certain disclosures in the returns filed, however, during the course of the assessment proceedings, if additional material comes on record which would bring before the Assessing Officer primary facts, he cannot take recourse to the proviso to section 147 of the Act to contend that since the assessee failed to disclose truly and fully all material facts, reopening would still be permissible beyond a period of four years. However, in the present case, whether such facts had come on record in case of assessment of the present petitioner albeit through the proceedings in case of Aditya Medisales, is a question of fact which is needed to be judged on the basis of several factors. For example, we do not have the queries in response to which Aditya Medisales had occasion to address a communication dated 14-03-2001 to the Assessing Officer and make several disclosures and in particular with respect to details of interest paid during the assessment year. What was the purpose for which the Assessing Officer had called for such details and what was the angle from which such details were being examined by him may be relevant factors for deciding whether he was conscious of the excess interest paid to the present petitioner by a sister concern for which adjustments were required to be made under section 80IA(10) of the Act. This and several other facts may have to be examined before giving any final conclusion or opinion on such aspect. We are, therefore, advised not to decide this issue in the present petition but leave it open to the assessee to urge the same before the Assessing Officer in the pending assessment and before the appellate forum in future, if need so arises.
14. In the result, subject to above rider, the petition is dismissed. Rule discharged. Interim relief vacated. No costs.
( Akil Kureshi, J. ) ( Harsha Devani, J. ) hki