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Kesoram Industries Ltd. Vs. Inspecting Assistant - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(1993)44ITD18(Kol.)
AppellantKesoram Industries Ltd.
Respondentinspecting Assistant
Excerpt:
1. these are cross appeals filed by the assessee and the department.hence they were heard together and are disposed of by a common order for the sake of convenience.2. these appeals arise out of the income-tax assessment of m/s. kesoram industries ltd., the assessee herein, which was formerly known as m/s.kesoram industries & cotton mills ltd. the assessment year is 1970-71 for which the previous year ended on 31-3-1970. these appeals arise out of the re-assessment made by the iac, assessment, range-b(c), calcutta under section 143(3)/147(a) of the income-tax act, 1961 by his order dated 8-11-1985.3. at the time of hearing of these appeals shri r.n. bajoria, the learned counsel for the assessee stated that he was not pressing grounds no. 2 and 3 of the grounds of appeal filed by the.....
Judgment:
1. These are cross appeals filed by the assessee and the Department.

Hence they were heard together and are disposed of by a common order for the sake of convenience.

2. These appeals arise out of the income-tax assessment of M/s. Kesoram Industries Ltd., the assessee herein, which was formerly known as M/s.

Kesoram Industries & Cotton Mills Ltd. The assessment year is 1970-71 for which the previous year ended on 31-3-1970. These appeals arise out of the re-assessment made by the IAC, Assessment, Range-B(C), Calcutta under Section 143(3)/147(a) of the Income-tax Act, 1961 by his order dated 8-11-1985.

3. At the time of hearing of these appeals Shri R.N. Bajoria, the learned Counsel for the assessee stated that he was not pressing Grounds No. 2 and 3 of the grounds of appeal filed by the assessee.

Accordingly the said two grounds are rejected as not pressed.

4. This leaves us with Ground No. 1 wherein the assessee challenges the validity of the reopening of the assessment under Section 147(a) of the Act. This contention would be considered later along with the connected contention in the Department's appeal against the decision of the CIT (Appeals) on merits.

5. In the Department's appeal, in Ground No. 2, objection is taken to the decision of the CIT (Appeals) directing the assessing authority to include the amount of Rs. 10,76,283 being the cost of incomplete job in the computation of capital employed for the purpose of calculating relief under Section 80J of the Act.

6. The learned counsel on both sides are agreed that this issue is now concluded in favour of the assessee and against the revenue by the decision of the Calcutta High Court in CIT v. Indian Oxygen Ltd. [1978] 113 ITR 109 and that the Department only seeks to keep this issue alive to take up the matter on further appeal to the Supreme Court. We, therefore, respectfully follow the said decision of the Calcutta High Court and confirm the order of the CIT (Appeals). Accordingly, this ground is rejected.

7. In Ground No. 3, the Revenue objects to the decision of the CIT (Appeals) directing the assessing authority to include the amount of Rs. 10,94,158 representing the value of capital goods in transit in the computation of capital employed for the purpose of calculating relief under Section 80J of the Act. This issue is also concluded in favour of the assessee and against the revenue by the decision of the Calcutta High Court in CIT v. Union Carbide India Ltd. [1987] 165 ITR 546 which again follows the earlier decision of the Calcutta High Court in Indian Oxygen Ltd. 's case (supra). The Department only seeks to keep this issue alive to take up the matter on further appeal to the Supreme Court. We, therefore, respectfully follow the decisions of the Calcutta High Court and confirm the order of the CIT (Appeals) on this issue also and reject this ground.

8. This leaves us with Ground No. 1 of the grounds of appeal filed by the Department wherein the Revenue objects to the order of the CIT (Appeals) deleting the deduction of Rs. 1,64,40,000 representing loan from the State Bank of India, which the Assessing Officer had deducted as borrowed money, while computing the capital employed in the business for the purpose of calculating relief under Section 80J of the Act.

According to the Revenue, the decision of the CIT (Appeals) deleting this deduction made by the Assessing Officer was in contravention of the provisions of Rule 19A as it stood then and that further the period between the first instalment of the loan and the first instalment of the repayment was less than 7 years.

9. We would consider the objection of the Revenue along with the assessee's objection in its appeal to the validity of the reopening of the assessment under Section 147(a) of the Act.

10. The facts of the case are the following : The assessee-company set up a new cement plant at Basant Nagar in Karim Nagar District of Andhra Pradesh. The said cement plant commenced commercial production during the year ended on 31-3-1969 relevant for the assessment year 1969-70.

In the assessment, of the assessee-company for the assessment year 1969-70 the Assessing Officer determined the relief due to the assessee under Section 80J of the Act in respect of its new cement plant at Rs. 6,17,160 and allowed carry-forward of the said relief to later years as there was no profit from this new cement plant in that year.

11. For the next assessment year 1970-71 for which the previous year ended on 31-3-1970 (which is the assessment year under appeal), the 1TO made the original assessment under Section 143(3) of the Act on 29-5-1971, determining the loss of the assessee-company at Rs. 14,40,533. In this order the ITO mentioned inter alia as follows: (a) Relief under Section 80J at Rs. 6,17,160 for the assessment year 1969-70 & Rs. 26,66,484 for the current year.

12. However, subsequently, he reopened the assessment under Section 147(a) of the Act by issuing a notice under Section 143 which was served on the assessee on 5-7-1977. In response to this notice the assessee objected to the reopening of the assessment on several grounds such as limitation, lack of jurisdiction, etc. All these objections were overruled by the assessing authority who completed the assessment under Section 143(3)/ 147(a) of the Act by his order dated 8-11-1985 and determined the loss of the assessee at Rs. 11,60,633 as against Rs. 14,40,533 determined in the original assessment. The Assessing Officer further held that the relief due to the assessee under Section 80J of the Act in respect of its new industrial undertaking, namely, the new cement plant at Basant Nagar in Andhra Pradesh amounted to Rs. 13,78,255 only as worked out by him in Annexure A' to the assessment order as against Rs. 26,66,484 allowed in the original assessment and further held that this amount would be carried forward in accordance with the provisions of Section 80J(3) of the Act. In computing the relief under Section 80J the Assessing Officer deducted the medium-term loan of Rs. 1,64,40,000 taken by the assessee from the State Bank of India for the purpose of establishing this new industrial undertaking which was shown as outstanding in the Balance Sheet as at 31-3-1969.

The Assessing Officer held that this amount of Rs. 1,64,40,000 which was outstanding as on 1-4-1969 was liable to be deducted from the aggregate amount computed under Rule 19A(2) as the loan which was from an approved source, was to be repaid within a period of less than 7 years as provided in the agreement and thus the conditions of Rule 19A(3)(b) of the Income-tax Rules were not fulfilled. The Assessing Officer held that as a result of this omission to deduct this amount of loan in computing the capital as on 1-4-1969 excess relief to the extent of Rs. 9,86,400 had been allowed in the original assessment and this justified the reopening of the assessment under Section 147(a) of the Act. According to him, the nature of this loan, particularly the terms regarding the period of repayment came to his knowledge only on subsequent enquiries from the State Bank of India, 1, Strand Road, Calcutta. He did not agree with the assessee's plea that actually the agreement between the assessee and the bank provided for the repayment of the loan within a period of more than 7 years, as could be seen from the dates of actual repayment of the loan with reference to the date of granting of the loan.

13. We quote below paragraph 5.5 of the assessment order dated 8-11-1985 wherein the IAC rejected the assessee's contention in this regard for facility of reference : The assessee failed to produce before me the original loan agreement and the mortgage deed and for to furnish copies thereof as asked for. Stating that the loan was repaid after 7 years and that as per the Bank's letter dated 2-3-1976 the dates for repayment were allowed to be extended mutually, the assessee contends that the loan was thus repayable in not less than 7 years time and, therefore, comes under the exclusion provided in Rule 19A(3)(b). In this connection the assessee has referred to certain views of the Board as contained in the Minutes of a meeting held on 6-8-1984 between the Chairman and Members of the CBDT and the Bengal Chamber of Commerce (In the matter of computation of capital under the Companies (Profits) Surtax Act 1964). The Bank's letter dated 2-3-1976 a copy of which has been furnished by the assessee does not ". . . contain anything to show that the period of repayment was extended as claimed by the assessee. There is also nothing to show that the original terms of repayment were modified so as to cover a period of not less than 7 years. In the absence of any circular or instructions from the Board; and in view of the clear provisions of Rule 19A(3)(b) in the matter, I am unable to accept the minutes of the meeting referred to above as authority in support of the assessee's contention. Re-computation of capital under Rule 19A shall, therefore, be made by deducting the loan of Rs. 1,64,40,000 as on 1-4-1969 from the gross value of the assets.

14. The assessee appealed to the CIT (Appeals) objecting, inter alia, to the reopening of the assessment both on the question of jurisdiction as well as merits. The CIT (Appeals) upheld the reopening of the assessment under Section 147(a) of the Act as validly done. On an examination of the assessment records for the relevant year, the Commissioner held that he did not find any separate Balance Sheet for the unit under consideration, furnished at the stage of the original assessment, that on the other hand the assessee had furnished a computation of the calculation of the relief under Section 80J in respect of the cement unit in which the figure of the written down value of the fixed assets pertaining to the unit as on 1-4-1969 was taken to be Rs. 4,15,55,450, that the said figure was again found to have been taken from the depreciation statement of the fixed assets belonging to the cement division and that it was correct that no mention of the aforesaid secured loan relating to the cement unit was made in the computation of relief under Section 80J. The Commissioner also referred to Schedule 'C at page 25 of the printed accounts of the assessee-company where the secured loan was disclosed. The Commissioner held with reference to this note that the assessee had not mentioned anything about this loan from State Bank of India which had specifically been taken by mortgage of cement unit and also in connection with the cement unit itself in the statement showing the computation of relief under Section 80J, that nowhere did the appellant furnish any information as to the terms and time or period for repayment of the said loan, that simple mention of the loan in the printed accounts of the assessee-company did not seem to serve the purpose of supplying all the necessary information for the purpose of fulfilment of the conditions as laid down in Clause (b) of Rule 19A(3).

The Commissioner held that it was the duty of the assessee to furnish the relevant information relating to the actual terms and specifically the period during which the aforesaid bank loan was stipulated to be repayable and for this failure on the part of the assessee to do so, the Commissioner was of the view that the assessee failed in its duties to disclose all the primary information necessary for the assessment and that on account of the said failure on the part of the assessee, the assessing authority had, therefore, proper grounds for reopening the assessment under Section 147(a) of the Act. The Commissioner, therefore, confirmed the action of the ITO in reopening the assessment under Section 147(a) of the Act as valid and good in law and based on proper reasoning.

15. These findings of the Commissioner on the legal aspects of Section 147(a) are being challenged by the assessee in its appeal in ground No.1, as stated above.

16. On the merits of the case, the Commissioner accepted the contentions of the assessee and held that by the expression "provides for repayment thereof during a period of not less than 7 years", it was meant that the period between the actual commencement of disbursement of loan, i.e., the first instalment of the disbursement and the date stipulated for repaying the last instalment should be taken into consideration. The Commissioner further held that it could never be the intention of the Legislature to mean that the period intervening between the date of first instalment of repayment and the date of the last payment thereof should be 7 years or more. He also rejected the assessee's plea that the actual date of disbursement of the first instalment of the loan and the actual date of repayment of the last instalment of the loan should be taken into consideration, as he was of the view that the relevant rule clearly stated that it was the provision in the Agreement under which the moneys were borrowed which was to be taken into consideration for this purpose and there was, therefore, no scope for taking into consideration the actual date of repayment. At the same time, the Commissioner agreed with the assessee's contention that the agreement with the Bank was later on modified, in accordance with which the date of repayment of the last instalment was fixed to be 30-11-1975 and held that the said argument required to be accepted. He held that the expression "agreement under which such moneys are borrowed" should not be taken to have a narrow meaning of taking into consideration the original agreement only regarding the loan, but if the original agreement be modified at a later date, provisions of the said modified agreement should also necessarily be taken into consideration. He was, therefore, of the view that for the purpose of computing the stipulated period of repayment, the date of first instalment of disbursement being 15-10-1968 as mentioned by the ITO in the brief reasons for reopening the assessment, and the date fixed for repayment of the last instalment being 30-11-1975, as mentioned in the letter of SBI dated 2-3-1976 filed on record of the IAC, were actually to be taken into consideration. Since the time lag between these two dates exceeded 7 years, the Commissioner was of the view that the assessee was not hit by the provision relating to the period during which the loan in question was agreed to be repaid and hence the assessee got the benefit of Clause (b) of Rule 19A(3) and that the medium term loan from SBI should not be deducted from the computation of the capital employed. Accordingly, the Commissioner deleted the deduction of Rs. 1,64,40,000 on this account from the computation of the capital employed relating to relief under Section 80J of the Act. This is being objected to by the Revenue in ground No.1 in the departmental appeal.

17. We have carefully considered the arguments which were urged at great length by the learned counsel on both sides on these two issues and also studied the written arguments filed by them as well as the case law relied on by them in support of their arguments.

18. First we shall consider the Department's objection in its ground No. 1 in the departmental appeal to the deletion of the sum of Rs. 1,64,40,000 on its merits. The relevant Rule 19A(3) which is applicable to the facts of the present case, reads as follows : (3) From the aggregate of the amounts as ascertained under Sub-rule (2) shall be deducted the aggregate of the amounts, as on the first day of the computation period, of borrowed moneys and debts due by the assessee (including amounts due towards any liability in respect of tax), not being,-- (a) in the case of an assessee being a company, the amount of its debentures, if any, and (b) in the case of any assessee (including a company), any moneys borrowed from an approved source for the creation of a capital asset in India, if the agreement under which such moneys are borrowed provides for the repayment thereof during a period of not less than seven years.

A perusal of the aforesaid Rule would show that borrowed moneys and debts due by the assessee as on the first day of the computation period are to be deducted from the aggregate of the amounts ascertained under Rule 19A(2) for the purpose of ascertaining the capital employed in the new industrial undertaking. It will further be noticed that borrowed moneys and debts due by the assessee included amounts towards any liability in respect of tax also under this sub-rule. However, two categories of debts and borrowings are excluded out of the scope of this sub-rule, as could be seen from Clauses (a) and (b) of this sub-rule. Under Clause (a), the amount of debentures issued by a company in the case of a company, is not to be deducted. In other words, the amounts raised by a company by issuing debentures are treated as part of its capital for the purposes of this Rule. Clause (b) further provides that in the case of any assessee including a company, borrowings from an approved source for the creation of a capital asset in India and which is repayable over a period of 7 years and above are also not to be deducted under this sub-rule. In other words, such borrowings are also treated as forming part of the capital base of the company. The rationale for this is not far to seek. Such borrowings which are repayable over a period of 7 years or more, are treated as long-term borrowings and hence treated as forming part of the capital base of a new industrial undertaking.

19. There is no dispute in the present case that the assessee had borrowed moneys from an approved source, viz., State Bank of India for the purpose of erecting its new cement plant in Basant Nagar in Andhra Pradesh. The controversy in this appeal is confined to the meaning to be given to the following clause in Rule 19A(3)(b): If the agreement under which such moneys are borrowed provides for the repayment thereof during a period of not less than seven years.

20. A perusal of the reasons recorded by the ITO for reopening the assessment which are fully quoted in paragraph-4 of the appellate order of the CIT (Appeals) contained the repayment schedule for the repayment of this loan to SBI in instalments as well as the dates of actual disbursement of this loan by the Bank to the assessee and the actual dates of repayment of this loan by the assessee to the Bank. There is now no dispute that the assessee had executed a mortgage deed in favour of the SBI securing the repayment of the loan of Rs. 2 crores on the assets of the new cement unit at Basant Nagar. Schedule 'C' at page-25 of the printed accounts of the assessee-company where the secured loan is mentioned was already extracted in the said para-4 of the appellate order of the CIT (Appeals). There cannot also be any dispute that even though the mortgage deed was executed by the assessee-company on 23-8-1968, the actual disbursement of loan to the assessee commenced on 15-10-1968 when the first instalment of Rs. 1 crore was given by the Bank to the assessee-company. The last instalment of loan amounting to Rs. 4,60,000 was advanced to the assessee-company on 16-12-1969, thus making up the total loan of Rs. 2 crores sanctioned by the Bank under the mortgage deed. According to the repayment schedule fixed by the Bank, the first instalment was to be repaid on or before 31-3-1970 and the last of the instalments was to be paid on or before 31 -3-1975. It is further seen from the Bank's letter dated 2-3-1976, a copy of which is at page-2 of the assessee's paper book, that the repayment schedule of the instalments was, however, modified and rearranged so as to extend the period of repayment from 31-3-1975 to 30-11 -1975. This letter of the Bank gives the dates fixed for repayment as well as the actual dates of repayment of the loan by the assessee.

21. On behalf of the Revenue, Shri S.C. Sen, the learned Departmental Representative, urged that we should consider only the dates fixed for repayment of the loan which were from 31-3-1970 to 30-11-1975 and as this period was less than 7 years, this loan taken from the State Bank of India could not be excluded under Rule 19A(3)(b), as contended by the assessee. On the contrary, on behalf of the assessee, the contentions that were urged before the CIT (Appeals) were reiterated with reference to the actual dates of repayment plus the date of the first disbursement of the loan, viz., 15-10-1968.

22. In our view, these contentions urged on behalf of the revenue as well as on behalf of the assessee, as set out above, are untenable and have been rightly rejected by the CIT (Appeals). These contentions are not in conformity with Rule 19A(3) quoted above. The Commissioner had rightly taken the date of the first disbursement of the loan by the Bank to the assessee, viz., 15-10-1968 as the starting point for the purpose of this Rule since the liability to repay this loan would commence from 15-10-1968 only and not earlier when the mortgage deed was executed by the assessee on 23-8-1968. The letter written by SBI on 2-3-1976 shows that the repayment schedule which was to commence from 31 -3-1970 and end on 31-3-1975 was modified by the Bank and the time was further extended till 30-11-1975. This modification of the repayment schedule could only be by mutual agreement. Therefore, the Commissioner rightly took 30-11-1975 as the last date for repayment of the loan as provided for in the agreement entered into between the assessee and SBI. It would be seen that the period between the date of the first disbursement of loan of Rs. 1 crore on 15-10-1968 and the last date for repayment of the last instalment of the loan on 30-11-1975 covered a period of more than 7 years and that, therefore, the medium-term loan granted to the assessee-company by SBI fulfilled the requirements of Clause (b) of Rule 19A(3) of the Income-tax Rules for its exclusion from the borrowed funds and debts which are liable to be deducted out of the aggregate of the amounts determined under Rule 19A(2). In other words, this medium-term loan qualified to be included in the capital base of the new industrial undertaking. We also find force in the arguments urged on behalf of the assessee that the actual dates of repayment of the loan are also to be taken into account for the purpose of this Rule, as it represents a modification of the agreement from time to time by the parties, as could be seen from the letter dated 2-3-1976. A perusal of this letter would show that the assessee had repaid a major portion of the loan taken from SBI, viz., Rs. 1.60 crores out of Rs. 2 crores by 31-3-1974 leaving a balance of Rs. 40 lakhs only to be paid by 31-3-1975. This amount of Rs. 40 lakhs was paid by the assessee almost on a monthly instalment basis, as could be seen from the dates fixed for repayment, viz., 30-4-1975 to 30-11-1975 while the actual dates of repayment were from 30-4-1975 to 27-2-1976. This letter further establishes that by 30-11-1975 the assessee had paid Rs. 1.95 crores out of the total loan of Rs. 2 crores when it paid the instalment ofRs. 5 lakhs on 22-11-1975 leaving a balance of Rs. 5 lakhs only and this balance of Rs. 5 lakhs was paid by the assessee on 27-2-1976. Obviously, the Bank had also extended the time till this date for the payment of this instalment. If this last date of actual payment viz., 27-2-1976 is also taken into consideration along with the first date of disbursement of the loan, viz., 15-10-1968, the assessee's case fully qualifies for exclusion under Rule 19A(3)(b) of the Rules. The Commissioner, therefore, rightly deleted this loan of Rs. 1,64,40,000 as not deductible as a debt in the computation of the capital employed in the new industrial undertaking under Rule 19A(3) of the Rules for the purpose of computing the deduction due to the assessee under Section 80J of the Act. We, therefore, agree with his reasoning and conclusion and confirm his order on this issue. Accordingly, ground No. 1 in the Revenue's appeal is rejected.

23. This leaves us with the legal contention raised by the assessee in ground No. 1 challenging the reopening of the assessment under Section 147(a) of the Act. In our view, this ground raised by the assessee has now become purely academic and need not be decided, as we have upheld the order of the CIT (Appeals) on merits deleting the deduction of Rs. 1,64,40,000 which was made by the Assessing Officer while computing the relief under Section 80J of the Act. However, for the sake of completeness, we would consider this objection raised by the assessee also as we had heard the parties at some length on this issue also.

24. In Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT [1986] 159 ITR 624', the Supreme Court held that whether there was non-disclosure of primary facts as had caused escapement of income from assessment was basically a question of fact. At page-627 of the Reports, Their Lordships held as under : The only question, therefore, is, whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and further whether such income had escaped assessment and whether such escapement or under-assessment had been caused as a result of the failure or omission on the part of the assessee to disclose fully and truly all material facts. What facts are material facts would depend upon the facts and circumstances of a particular case. This follows from the scheme of the section and is well-settled by the authorities of this court.

The assessee's contention is that the Income-tax Officer could have found out the position by further probing. That, however, does not exonerate the assessee to make full disclosure truly. Explanation 2 to Section 147 of the Act makes the position abundantly clear. The principles have also been well-settled and reiterated in numerous decisions of this court: See Kantamani Venkata Narayana & Sons v. First ITO(SC) and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). Hidayatullah, J., as the learned Chief Justice then was, observed in Calcutta Discount Co.'s case [1961] 41 ITR 191 (SC) that mere production of evidence before the Income-tax Officer was not enough, that there may be omission or failure to make a true and full disclosure, 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. 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. That was immaterial. But if there is omission to disclose material facts, then, subject to the other conditions, jurisdiction to reopen is attracted. It is sufficient to refer to the decision of this Court in Calcutta Discount Co.'s case [1961] 41 ITR 191 (SC) where it had been held that if there are some primary facts from which a reasonable belief could be formed that there was some non-disclosure or failure to disclose fully and truly all material facts, the Income-tax Officer has jurisdiction to reopen the assessment. This position was again reiterated by this court in Malegaon Electricity Co. (P.) Ltd. v. CIT [1970] 78 ITR 466 (SC).

Furthermore, bearing these principles in mind, in this particular case, whether there has been such non-disclosure of primary facts which has caused escapement of income in the assessment was basically a question of fact.

Since this decision has referred to all the earlier decisions of the Supreme Court and followed the principles settled therein, we do not consider it necessary to refer to other decisions relied on by the learned counsel on both sides.

25. When we examine the facts of the present case in the light of the ratio of the decision of the Supreme Court quoted above, we find that apart from Schedule 'C at page-25 of the printed accounts of the assessee-company where the secured loan from SBI was disclosed, there were no other particulars furnished by the assessee regarding the terms and conditions of this loan as well as the repayment schedule provided for in the mortgage deed. The CIT (Appeals) has quoted the reasons recorded by the Assessing Officer in its entirety in paragraph-4 of his order. These reasons disclose that the Assessing Officer came to know of the repayment schedule, the dates of actual disbursement of the loan made by the Bank as well as the actual dates of repayment of the loan by the assessee subsequent to the original assessment, on his enquiry with SBI, Calcutta Main Office, 1, Strand Road, Calcutta. This factual position has not been controverted by the assessee at any stage of the proceedings. Apart from stating in Schedule 'C of the printed accounts that the loan taken from SBI is a medium-term loan, there is no material to show that the assessee had disclosed the period over which it was to repay the loan to the Bank under the mortgage deed executed by it on 23-8-1968. In fact, paragraph-5.5 of he order of reassessment dated 8-11-1985 shows that the assessee failed to produce before the IAC (Assessment) the original agreement and the mortgage deed and for to furnish copies thereof even though called for by him. The assessee contented itself by stating that the loan was repaid after 7 years as per the Bank's letter dated 2-3-1976 and that the dates of repayment were alleged to be extended mutually. The assessee, therefore, argued before the IAC (Assessment) that the loan was thus repayable in not less than 7 years time and would, therefore, come under the exclusion provided for in Rule 19A(3)(b) of the Rules. There is now no dispute before us that there was no separate Balance Sheet for this new cement unit and that the terms of repayment of this mortgage loan taken from SBI were also not disclosed in the course of the original assessment proceedings. There can hardly be any dispute that the terms and conditions under which this mortgage loan was granted and the repayment schedule of the loan was provided for, were vital facts within the special knowledge of the assessee and that it was the duty of the assessee to disclose the same in the course of the original assessment proceedings. The assessee's failure or omission to disclose these primary facts which are necessary for computing the capital employed in the new industrial undertaking had resulted in escapement of income and that, therefore, the ITO could have had reason to believe that there was escapement of income within the meaning of Section 147(a) of the Act. The above conclusion follows on an application of the ratio of the decision of the Supreme Court quoted above. We are unable to agree with the argument on behalf of the assessee that since the nature of the loan as a medium-term loan was clearly stated in the Balance Sheet, it was sufficient disclosure of primary facts. It is not the case of the assessee that it had filed copies of the mortgage deed and the loan agreement entered into with SBI either in the course of the original assessment proceedings for the year under appeal or for the earlier assessment year, viz., 1969-70 and had drawn the attention of the ITO to the terms and conditions regarding repayment of the loan to enable the ITO to appreciate the facts and complete the assessment. The further argument on behalf of the assessee based on the rectificational proceedings initiated by the ITO under Section 154 of the Act for this year, is also untenable. No inference can be drawn in favour of the assessee as having made a full and true disclosure of all the primary facts in the course of the original assessment proceedings nor any adverse inference can be drawn against the Revenue because they had initiated action under Section 154 of the Act. It is always open to the revenue to resort to any of the provisions for rectifying a mistake in the assessment order so as to bring to charge the correct income which has escaped assessment either by means of proceedings under Section 147 or under Section 154 or under Section 263 of the Act though the powers, scope and ambit of these proceedings may be different. On that account no inference or presumption one way or the other could be drawn against the revenue or in favour of the assessee, as contended on behalf of the assessee. The further argument urged on behalf of the assessee is that the departmental authorities had taken similar action under Section 147(a) for the earlier assessment year 1969-70 on similar grounds but had dropped the proceedings and, therefore, it is not open to them to reopen the assessment for the year under appeal. This argument is also equally untenable because the reopening of assessment for 1969-70 under Section 147(a) was finally dropped by the ITO as he found that there was really no escapement of income for that year if the relief under Section 80J of the Act for the whole year was to be allowed to the assessee for that year instead of for 3 months as was done in the original assessment for that year. In fact, we had looked into the reasons recorded by the Assessing Officer for dropping the proceedings under Section 147(a) of the Act for the assessment year 1969-70 as the records were produced by the learned Departmental Representative at our instance. In our view, Shri Sen, the learned Departmental Representative, is right in his submission that the dropping of the proceedings under Section 147(a) of the Act for the assessment year 1969-70 would be of no avail to the assessee to contend that there was true and full disclosure of all the primary facts necessary for making the assessment for the year under appeal. Shri Sen, the learned Departmental Representative, particularly relied on the fact that the assessee had filed its original return for the assessment year 1970-71 on 10-2-1971 and that the original assessment was completed on 29-5-1971. He pointed out that it was not the case of the assessee that it had disclosed the period of repayment of the mortgage loan from SBI at the time of the original assessments for the two years 1969-70 and 1970-71. He is, therefore, right in his submission that these facts came to light and to the knowledge of the Assessing Officer only subsequent to the completion of the original assessment proceedings for the year under appeal when he made enquiries with SBI, as stated in the reasons recorded by him for reopening the assessment.

26. We are, therefore, satisfied that the CIT (Appeals) had rightly held that there was failure on the part of the assessee to furnish the primary facts relating to the actual terms of repayment of the loan, specially the period during which the mortgage loan from SBI was stipulated to be repaid, that the mere production of the Balance Sheet of the company would not amount to sufficient disclosure within the meaning of Explanation 2 to Section 147 of the Act and that the reopening of the assessment under Section 147(a) of the Act was valid.

We, therefore, agree with the reasons and conclusion of the CIT (Appeals) on this issue also and confirm the reopening of the assessment under Section 147(a) of the Act as valid in law by respectfully following and applying the decision of the Supreme Court referred to above. Accordingly, ground No. 1 of the assessee's appeal is rejected.


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