K.C. Agrawal, J.
1. This is a petition under Article 226 of the Constitution for quashing the notice dated March 31, 1976, issued under Section 148 of the I.T. Act, and for a direction to the respondents not to proceed with the reassessment for the year 1969-70, on the basis of the said notice. The petitioner challenges the validity of the said notice on the ground that as the assessment order in respect of the said year had been passed after being fully satisfied and scrutinising the records, the ITO had no justification in issuing the notice under Section 148 of the I.T. Act. The petitioner claimed that the ITO had no material justifying the issue of the notice under Section 148 of the Act.
2. The petition was contested by the respondents. The respondents contended in the counter-affidavit that as the petitioner had not fully and truly disclosed the income liable to tax, the notice issued under Section 148 was valid. Along with the counter-affidavit, the respondents filed a copy of the reasons for re-opening the case under Section 148. The reasons mentioned in respect of this year were in respect of :
Deferred guarantee commission
Start-up and commencingexpenses
Construction of brick-kilnwritten off
3. The respondents claimed that as the petitioner-company did not fully and truly disclose materials in respect of the aforesaid items and the incomehad escaped assessment due to the non-disclosure, the income-tax authorities were entitled to reopen the assessment proceedings and to pass a fresh order of assessment.
4. We have already dealt in detail with (1) deferred guarantee commission, (2) start up and commencing expenses, and (3) development rebate, in Writ Petition No. 581 of 1976 [Since reported in : 117ITR719(All) ]. The only difference between the assessment year 1968-69, which is the subject matter of the said writ petition, and that of the year 1969-70 is that the amounts of the claims differ. We have held in the said writ petition that the revenue cannot press into service Clause (a) of Section 147 so far as deferred guarantee commission was concerned. Our view was that the escapement could not be said to be due to the failure on the part of the petitioner-company to disclose fully and truly the amount claimed as capital expenditure instead of revenue. If at all, this was due to the wrong view taken by the ITO. So far as the items relating to start-up and commencing expenses and development rebate are concerned, we have given our detailed reasons for holding that a case for escapement due to the non-disclosure of the materials was made out, and that the ITO was prima facie justified in starting proceedings on the basis of those grounds. For the reasons given in that writ petition, we find in this case as well that the notice issued under Section 148 of the I.T. Act cannot be said to be without jurisdiction.
5. There remains to be considered only three other items, viz., 'exchange loss', 'construction of brick-kiln' and 'training expenses'. In respect of 'exchange loss' and 'construction of brick-kiln', our definite view is that the escapement was not due to the non-disclosure of the materials on the part of the petitioner-company. It could be only due to the failure of the ITO to appreciate the correct position of law. Accordingly, a case for reopening of the assessment in respect of these items under Clause (a) of Section 147 was not made out.
6. So far as the item relating to training expenses is concerned, it may be mentioned that the escapement appears to be due to the non-disclosure of the correct factual position by the assessee to the ITO. Admittedly, the assessee maintains the accounts on mercantile basis. According to the claim of the petitioner, the amount in 'training expenses 'was spent, in 1969-70. Had the relevant and material facts, which were in the possession of the assessee, been disclosed by it, the amount would not have been allowed as a deduction in the year 1969-70. This is clearly covered by Section 147(a) of the Act.
7. It was, however, emphasised by the learned counsel appearing for the assessee that since the petitioner had produced all the material acts before the ITO, the mistake was not attributable to it. The submission does not impress us. The production before the ITO of the account books and other evidence will not necessarily amount to disclosure of all the necessary facts needed for the assessment. [See Sowdagar Ahmed Khan v. ITO : 70ITR79(SC) ]. It is true and indisputable that the duty cast upon an assessee is only to disclose primary facts and he is not to indicate all the factual or legal inferences. But, as we are not satisfied that the allowance of training expenses was not due to the non-disclosure of the material facts by the petitioner-company, we are not prepared to hold that the notice issued under Section 148 by the ITO was liable to be quashed.
8. For the reasons given in this petition and Writ Petition No. 581 of 1976 [Renusagar Power Co. Ltd. v. ITO (No. 1) : 117ITR719(All) ], the writ petition is allowed in part, and the ITO is directed not to proceed with reassessment of the petitioner-company on the basis of the grounds relating to, (1) deferred guarantee commission, (2) exchange loss, and (3) construction of brick-kiln written off. He will only be entitled to proceed with the assessment on the basis of the notice under Section 148 of the I.T. Act in respect of other items mentioned in the same. In the circumstances, we direct the parties to bear their own costs.