PETITIONER:
PARASHURAM POTTERY WORKS CO. LTD.
Vs.
RESPONDENT:
INCOME TAX OFFICER, CIRCLE-1, WARD ’A’, RAJKOT,GUJARAT
DATE OF JUDGMENT16/11/1976
BENCH:
KHANNA, HANS RAJ
KRISHNAIYER, V.R.
CITATION:
1977 AIR 429 1977 SCR (2) 92
1977 SCC (1) 408
ACT
Income Tax Act, 1961--Secs. 147, 148, 149, Income Tax
Act 1922--Sec. 10(2) vi--Reopening of assessment--Omission
on the part of assessee to disclose fully and truly all
material facts--Duty to disclose primary facts--Duty to draw
references of I.T.O.--Whether I.T.O. can correct his error
or give effect to change in his opinion in reopening pro-
ceedings.
HEADNOTE
The appellant a Public Limited Company filed its Income
Tax Return relating to the assessment years 1957-58 and
1959-60 under the Income Tax Act, 1922. The Income Tax
Officer passed assessment orders on 16-4-1959 and on 30-3-
1961 respectively in respect of the two years. Certain
depreciation was allowed by the Income Tax Officer for both
the years. On 5-10-1965. the Income Tax Officer addressed
a letter to the appellant stating that there had been a
mistake in the calculation of the depreciation allowance.
The appellant was asked by that letter if it had any objec-
tion to. the rectification of the mistake in the calculation
of the depreciation amounts. for the above-mentioned two
years. On 2nd February, 1966, the Income Tax Officer ad-
dressed a letter under section 147(a) of the Income Tax Act,
1961 alleging that the income of the appellant had escaped
assessment for failure of the appellant to disclose all
materials facts. The appellant in his reply stated that the
depreciation was calculated by the Income Tax authorities
and there was no failure on the part of the appellant in
disclosing all the facts. Thereafter, the Income Tax Offi-
cer issued the notices on 4-3-1966 stating that he had
reasons to believe that the income of the appellant charge-
able to tax for the assessment years in question had escaped
assessment within the to meaning of section 147 of the 1961
Act. The appellant was called upon to furnish fresh return.
The appellant challenged the said notices by filing a
Writ Petition in the High Court. According to the appellant
there was no omission or failure on its part to disclose
fully and truly all material facts necessary for the assess-
ment; that all material facts were placed before the assess-
ing authority; and that the fact that initial depreciation
on the new assets had been allowed was also on the record of
the department. It was further contended that if there was
any oversight on the part of the Income Tax Officer the
appellant could not be held responsible. The respondent
filed an affidavit in the High Court contending that the
appellant did not disclose in the return that initially
depreciation in respect of certain items of capital assets
had been allowed in the past and that the same should be
taken into account while calculating the depreciation allow-
able for the assessment years in question. The High Court
dismissed the Writ Petition on the ground that there was an
omission or failure on the part of the appellant to disclose
truly and fully the fact that the initial depreciation had
been allowed in respect of items of capital assets in ques-
tion during the previous years.
Under section 10 of the 1922 Act an assessee is liable
to pay tax under the head "Profits and Gains of Business,
Profession or Vocation, carried on by him". Such profits or
gains shall be computed after making a number of allowances.
Those allowances included the allowances provided by section
10(2)(vi) which deals with depreciation under section 147(a)
of the Income Tax Act, 1961. if the Income Tax Officer has
reason to believe that the reason of the omission or failure
on the part of the assessee to disclose fully and truly all
material facts necessary for his assessment, income charge-
able to tax has escaped assessment for that year he may
subject to the provisions of sections 148 to 151 assess or
reassess such income or recompute the loss or the deprecia-
tion allow-
93
ance as the case may be. According to section 148 of 1961
Act before making the assessment, reassessment, or recompu-
tation under section 147, the income Tax Officer shall serve
on the assessee a notice containing all or any of the re-
quirements which may be included in a notice under section
149(1). The Income Tax Officer has also before issuing such
notice to record his reasons for doing so. Section 149
prescribes a time limit for the notice. The time limit in
respect of section 147(a) is 8 years.
Allowing the appeal,
HELD: 1. Two conditions have to be satisfied before an
Income Tax Officer acquires jurisdiction to issue notice
under section 148 beyond the period of 4 years but within
the period of 8 years:
(i) The Income Tax Officer must have reason
to believe that income chargeable to tax has
escaped assessment;
(ii) He must have reason to believe that
such income has escaped assessment by
reason of the omission or failure on the part
of the assessee to disclose fully and truly
material facts necessary for his assessment
for that year.
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. The duty of the assessee in any ease
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. [98 E-G, H, 99 A-B]
Income Tax Officer v. Lakhmani Mewal Dass, 103 ITR 437
followed.
2. What facts are material and necessary for assessment
will differ from case to case.
Calcutta Discount Co. v. Income Tax Officer, 41 ITR 191,
followed.
The Income Tax return has to be filled in form, No. C under
rule 19 of the Income Tax Rules, 1922. Part V of that form
deals with depreciation. The said part requires a number of
columns to be filled in by the assessee. It has not been
suggested that any of the information furnished or any of
the particulars given in those columns by the appellant
Company were factually incorrect. When Income Tax Officer
relies upon his own records for determining the amount of
depreciation ’and makes. a mistake in doing so, the respon-
sibility for the mistake cannot be ascribed to an omission
or failure on the part of the assessee. [99 D--100 B-D, E-
F]
Commission of Income Tax v. Bhanji Lavli, 79 ITR 582 fol-
lowed.
(Taxes are the price that is paid for civilisation. It
is essential that those who are entrusted with the task of
calculating and realising that price should familiarise
themselves with the relevant provisions and become well-
versed with the law on the subject. Any remissness on their
part can only be at the cost of the national exchequer and
must necessarily result in loss of revenue. At the same
time, it has to be borne in mind that the policy of law is
that there must be a point of finality in all legal proceed-
ings).
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1792 of 1971.
Appeal from the Judgment and Order dated the 31st March,
1970 of the Gujarat High Court in Special Civil Application
No. 545/66.
R.H. Dhebar, S.K. Dholakia and A.C. Bhatia for the appel-
lant.
R.M. Mehta and Girish Chandra, for Respondent.
94
The Judgment of the Court was delivered by
KHANNA, J. This appeal on certificate is against the
judgment of Gujarat High Court dismissing petition under
article 226 of the Constitution of India filed by the appel-
lant for a writ of certiorari or other appropriate writ to
quash two notices issued by the respondent to the appellant
under section 148 of the Income-tax Act, 1961 (hereinafter
referred to as the Act of 1961).
The matter relates to the assessment years 1957-58 and
1959-60. The appellant is a public limited company which
carries on the business of manufacture of pottery and sani-
tary wares at Morvi and other places in the State of Guja-
rat. In respect of the assessment year 1957-58, the corre-
sponding accounting year for which ended on July 31, 1966,
the appellant filed its return under the Indian Income-tax
Act, 1922 (hereinafter referred to as the Act of 1922). The
predecessor-in-interest of the responded by assessment order
dated April 16, 1959 assessed the total income of the appel-
lant at Rs. 4,60,372. In computing the said income the
Income-tax Officer allowed depreciations amounting to Rs.
5,05,487. For the assessment year 1959-60 the appellant
like wise filed return. Assessment order in respect of that
year was made on March 30, 1961 and the income of the appel-
lant was assessed at Rs. 11,04,650 after allowing
depreciation of Rs. 3,57,926.
On October 5, 1965 a letter was addressed on behalf of
the respondent to the appellant stating that there had been
a mistake in the calculation of the depreciation allowance
in respect of certain items of the capital assets of the
appellant for the period covered by the assessment years
1955-56 to 1962-63. As a result of the mistake, it was
stated, a sum of Rs. 2,39,723 had been allowed as deprecia-
tion allowance in excess of the permissible limit. Enclosed
with the letter was a chart showing excess depreciation
allegedly allowed during the above mentioned period. The
excess amounts of depreciation for the years 1957-58 and
1959-60 were mentioned in the chart to be Rs. 37,869 and Rs.
26,945 respectively. The appellant company was asked if it
had any objection to the rectification of the mistake,
the above letter was followed by another letter wherein the
respondent wrote to the appellant that "the mistake in
depriciation arose because the initial depriciation was
not taken into account in finding out whether the total
depreciation allowed exceeded the original cost". On Febru-
ary 2, 1966 the Income-tax Officer addressed ’another
letter to the appellant stating that for the assessment
years 1957-58 and 1959-60 the income of the appellant had
escaped assessment for failure of the-appellant to disclose
all material facts within the meaning of section 147(a) of
the Act of 1961. The appellant in reply stated that depre-
ciation calculation sheets had been worked by the income-tax
authorities and there was no failure on the part of the
appellant to disclose all facts. The impugned notices were
thereafter issued on March 4, 1966 by the Incometax Officer
to the appellant stating that he had reason to believe that
income of the appellant chargeable to tax for the assessment
years in question had escaped assessment within the meaning
of section 147 of the Act of 1961. The Income-tax Officer
accordingly stated that he proposed to recompute and reas-
sess the income/loss/depreciation
95
allowance for the aforesaid years. The appellant was called
upon to furnish returns in the prescribed form within 30
days from the date of the service of the notices. It was
also mentioned that the notices were being issued after
obtaining the necessary satisfaction of the Commissioner of
Income-tax.
The appellant thereafter filed writ petition in the High
Court on April 29, 1966. According to the case of the
appellant, there was no omission or failure on its part to
disclose fully and truly all material facts necessary for
the assessment. All material facts, it was stated, regard-
ing the acquisition of various capital assets from time to
time were on the record of the department. The fact that
initial depreciation on the new assets had been allowed was
also on the record of the department. If there was any
oversight on the part of the Income-tax Officer, the appel-
lant, it was claimed, could not be held responsible for
that.
The petition was resisted by the respondent and the
affidavit of Shri N.M. Baxi, Income-tax Officer was filed in
opposition to the petition. According to that affidavit,
the appellant did not disclose in the return that initial
depreciation in respect of certain items of capital assets
had been allowed in the past and that the same should be
taken into account while calculating the depriciation allow-
able for the assessment years in question.
The High Court found that the first requirement of
section 147(a) of the Act of 1961 was satisfied inasmuch as
the Income-tax Officer had reason to believe that the income
of the appellant for the two assessment years in question
had escaped assessment. The mistake arose because of the
fact that the initial depreciation allowance which had been
allowed to the appellant in respect of some of the items of
the capital assets was not taken into account while comput-
ing the depreciation allowance during the relevant years.
As a result of that, it was found that the depreciation
allowance during the various years, including the initial
depreciation, exceeded the original cost of those items of
the capital assets to the appellant. Dealing with the
question as to whether there was omission or failure on the
part of the appellant to disclose truly and fully all mate-
rial facts, it was observed that the appellant was bound to
disclose the fact that initial depreciation had been allowed
in respect of the items of capital assets in question during
the previous years. The appellant as such .was held to
have failed to disclose all material facts. The plea of the
appellant that all the material facts were already on the
record of the department, in the opinion of the High Court,
did not make material difference. In result, the petition
was dismissed.
Before dealing with the contentions advanced in appeal,
it may be apposite to refer to the relevant provisions.
According to section 10 of the Act of 1922, the tax shall be
payable by an assessee under the head "Profits and gains of
business profession or vocation" in respect of the profit
or gains of any business, profession or vocation carried on
by him. Such profits or gains shall be computed after
making a number of allowances. Those allowances include
those
96
allowed in respect of depreciation, as mentioned in clauses
(vi) and (vi-a) of sub-section (2), the material part of
which at the relevant time read as under:
(vi) in respect of depreciation of such
buildings, machinery plant or furniture being
the property of the assessee, a sum
equivalent ...... to such percentage on the
written down value thereof as may in any case
or class of cases be prescribed, and where the
buildings have been newly erected or the
machinery or plant being new, not being
machinery or plant entitled to the development
rebate under clause (vi-b), has been
installed, after the 31st day of March, 1945,
and before the 1st day of April, 1956, a fur-
ther sum (which shall however not be
deductible in determining the written down
value for the purposes of this clause) in
respect of the year of erection or
installation equivalent,--
(a) in the case of buildings the erection
of which is begun and completed between the st
day of April 1946 and the 31st day of March
1956 (both dates inclusive), to fifteen per
cent, of the cost thereof to the assessee;
(b) in the case of other buildings, to ten
per cent of the cost thereof to the assessee;
(c) in the case of machinery or plant, to
twenty per cent, of the cost thereof to the
assessee;
Provided that--
(a)...................
(b)...................
(c) the aggregate of all allowances in
respect of depreciation made under this clause
and clause (vi-a) or under any Act repealed
hereby, or under the Indian Income-tax Act,
1886 (II of 1886), shall, in no case, exceed
the original cost to the assessee of the
buildings, machinery, plant or furniture, as
the case may be; (vi-a) in respect of
depreciation of buildings newly erected, or of
machinery or plant being new which has been
installed, after the 31st day of March, 1948,
a further sum (which shall be deductible in
determining the written down value) equal to
the amount admissible under clause (vi)
(exclusive of the extra allowance for double
or multiple shift working of the machinery or
plant and the initial depreciation allowance
admissible under that clause for the first
year of erection of the building or the
installation of the machinery or plant) in not
more than five successive assessments for the
financial years next following the previous
year in which such buildings are erected and
such machinery and plant installed and falling
within the period commencing on the 1st day of
April, 1949, and ending on the 31st day of
March, 1959,"
97
It is apparent from the above provisions that depreciation
of three distinct kinds could be allowed in respect of
buildings, machinery and plant. The first category was of
ordinary depreciation equivalent to such percentage on the
written down value thereof as may be prescribed. The second
category was of depreciation of buildings, newly erected, or
new machinery or plant not being machinery or plant entitled
to development rebate under clause (vi-b) which has been
installed after the 31st day of March 1945 and before the st
day of April 1956 equivalent to such percentage if the cost
thereof as is prescribed. Such initial depreciation was
granted in the first year of the construction of the build-
ing or installation of the plant or machinery. This cate-
gory of depreciation was not deduction in determining the
written down value for the purpose of clause (vi). The
third category of depreciation was additional depreciation
which was claimable for a period of five years in respect of
buildings, newly erected, or new machinery or plant in-
stalled after the 31st day of March 1948 in terms of clause
(via). The depreciation permissible under this category was
deduction in determining the written down value.
Clause (c) of the proviso to clause (vi) of sub-section
(2) of section 10, however, makes it clear that the aggre-
gate of all three categories of depreciation allowance was
in no case to exceed the original cost to the assessee of
the building, machinery or plant, as the case may be.
The case of the respondent is that the amount of depre-
ciation allowed to the appellant in respect of certain items
of capital assets for the two assessment years in question
was so much that the aggregate of all allowances in respect
of depreciation made under clauses (vi) and (vi-a) of sub-
section (2) of section 10 of the Act of 1922 exceeded the
original cost to the appellant of those items of the capital
assets. There was thus a violation of the provisions of
clause (c) of the proviso to section 10 (2)(vi) of the Act.
The above mistake, it is stated, occurred because the
initial depreciation which had been allowed in respect
of those items of the capital assets was not taken
into account in computing the depreciation regarding
those items in the two assessment years in question. The
present is, therefore, a case, according to the respondent,
of income escaping assessment under section 147 of the Act
of 1961. Reliance in this connection is placed upon clause
(d) of Explanation (1) to section 147 of the Act of 1961,
according to which it would be a case of income escaping
assessment where excessive depreciation allowance is comput-
ed.
The material part of section 147 of the Act of 1961
reads as under:
147. Income escaping assessment.-- If --
(a) the Income-tax Officer has reason to
believe that, by reason of the omission or
failure on the part of an assessee to make a
return under section 139 for any
8--1458SCI/76
98
assessment year to the Income-tax Officer or
to disclose fully and truly all material facts
necessary for his assessment for that year,
income chargeable to tax has escaped
assessment for that year, or
(b) Notwithstanding that there has been no
omission or failure as mentioned in clause (a)
on the part of the assessee, the Income-tax
Officer has in consequence of information in
his possession reason to believe that income
chargeable to tax has escaped assessment for
any assessment year,
he may, subject to the provisions of sections
148 to 153, assess or reassess such income or
recompute the loss or the depreciation
allowance, as the case may be, for the assess-
ment year concerned (hereafter in section 148
to 153 referred to as the relevant assessment
year) ."
According to section 148 of the Act of 1961, before
making the assessment, reassessment or recomputation under’-
section 147, the Income-tax Officer shall serve on the
assessee a notice containing all or any of the requirements
which may be included in a notice under sub-section (2) of
section 139; and the provisions of the Act shall, so for as
may be, apply accordingly as if the notice were a notice
issued under that sub-section. The Income-tax Officer has
also, before issuing such notice, to record his reasons for
doing so. Section 149 prescribes the time limit for the
notice. The time limit in a case not falling under clause
(ii) of sub-section (1) of section 149, with which we are
not concerned, shall be eight years from the end of the
relevant assessment year. In case falling under clause (b)
of section 147, however, the time limit for the notice is
four years from the end of the relevant assessment year.
Clause (a) of section 147 of the Act of 1961 corresponds to
clause (a) of sub-section (1) of section 34 of the Act of
1922. The language of clause (a) of section 147 read with
sections 148 and 149 of the Act of 1961 as also the corre-
sponding provisions of the Act of 1922 makes it plain that
two conditions have to be satisfied before an Income-tax
Officer acquires jurisdiction to issue notice under section
148 in respect of an assessment beyond the period of four
years but within a period of eight years from the end of the
relevant year, viz., (i) the Income-tax Officer must have
reason to believe that income chargeable to tax has escaped
assessment, and (ii) he must have reason to believe that
such income has escaped assessment by reason of the omission
or failure on the part of the assessee (a) to make a return
under section 139 for the assessment year to the Income-tax
Officer, or (b) to disclose fully and truly material facts
necessary for his assessment for that year. Both these
conditions must co exist to confer jurisdiction on the
Income-tax Officer. It is also imperative for the Income-
tax Officer to record his reasons before initiating pro-
ceedings as required by section 148(2). Another require-
ment 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. The duty which is cast upon the asses-
see is to make a true and full disclosure of the primary
facts at the time of the original assessment.,
99
Production before the Income-tax Officer, of the account
books 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 contem-
plated 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 axis 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 re-opening assessment [see Income-tax Officer v.
Lakhmani Mewal Das(1)].
The words "omission or failure to disclose fully and
truly all material facts necessary for his assessment for
that year" postulate a duty on the assessee to disclose
fully and truly all material facts necessary for his assess-
ment. What facts are material and necessary for assessment
will differ from case to case. In every assessment proceed-
ing, the assessing authority will, for the purpose of com-
puting or determining the proper tax due from an assessee,
require to know all the facts which help him coming to the
correct conclusion. From the primary facts in his posses-
sion, whether on disclosure by the assessee,or discovered by
him on the basis of the facts disclosed, or otherwise the
assessing authority has to draw inference as regards certain
other facts; and ultimately from the primary facts and the
further facts inferred from them, the authority has to draw
the proper legal inferences, and ascertain on a correct
interpretation of the taxing enactment, the proper tax
leviable see Calcutta Discount Co. v. Income-tax Offi-
cer(2)] as further observed in that case:
"Does the duty, however, extend beyond
the full and truthful disclosure of all
primary facts ? In our opinion,
the answer to this question must be in the
negative. Once
all the primary facts are before the assessing
authority, he
requires no further assistance by way of
disclosure. 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 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."
Keeping in view the principles enunciated above, we may
deal with the contention advanced on behalf of the appel-
lant that the present is not a case in which action could
be taken under section 147(a) of the Act of 1961. This
contention has been controverted
(1) 103 I.T.R. 437. (2) 41 I.T.R. 191.
100
by the learned counsel for the respondent, who has canvassed
for the correctness of the view taken by the High Court in
the judgment under appeal.
It would appear from what has been’ discussed above that
one of the essential requisites for proceeding under clause
(a) of section 147of the Act of 1961 is that the income
chargeable to tax should escape assessment because of the
omission or failure on the part of the assessee to dis-
close fully and truly all material facts necessary for his
assessment. The present is not a case where the assessee
had omitted or failed to file the return. Question then
arises as to what has been omission or failure on the part
of the assessee to make a full and true disclosure. There
is nothing before us to show that in the return filed by the
assessee-appellant, the particulars given were not cor-
rect. Form C under rule 19 of the Indian Income-tax Rules,
1922 at the relevant time gives the form of return which had
to be filed by the companies. Part V of that form deals
with depreciation. The said part requires a number of
columns to be filled in by the. assessee. It has not been
suggested that any of the information furnished of any of
the particulars given in those columns by the appellant
company were factually incorrect. Nor is it the case of the
revenue that the appellant failed to. furnish the particu-
lars required to be inserted in those columns. Indeed, the
copy of the return has not been filed and consequently no
argument on that score could be or has been addressed before
us. Part V of the form no doubt requires the assessee to
state the written down value in column No. (2). Such writ-
ten down value had to be specified without taking into
account the initial depreciation because such depreciation
in terms of clause (vi) of section 10(2) of the Act of 1922
could not be deducted in determining the written down value
for the purpose of that clause. The case of the appellant is
that in determining the amount of depreciation at the time
of the original assessment for the two assessment years in
question, the Income tax Officer relied upon the written
down value of the various capital assets as obtaining in the
records of the department. This stand has not been contro-
verted. When an income-tax officer relies upon his own
records for determining the amount of depreciation and makes
a mistake in doing so, we fail to understand as to how
responsibility for that mistake can be ascribed to an
omission or failure on the part of the assessee. It also
cannot be disputed that initial depreciation in respect of
items of capital assets in the shape of new machinery, plant
and building installed or erected after the 31st day of
March 1945 and before the 1st day of April 1956 is normally
claimed and allowed. It seems that the Income-tax Officer in
working ’the figures of depreciation for certain items of
capital assets lost sight of the fact that the aggregate of
the depreciation, including the initial depreciation, al-
lowed under different heads could not exceed the original
cost to the assessee of those items of capital assets. The
appellant cannot be held liable because of this remissness
on the part of the Income-tax officer in not applying the
law contained in clause (c) of the proviso to section
10(2)(vi) of the Act of 1922. As observed by Shah J. in
Commissioner of Income-tax v. Bhanji Lavji,(1) section
34(1)(a) of the Act of 1922 (corresponding to section
147’(a)
(1)79 I,T.R. 582. S.C.
101
of the Act of 1961) does not cast a duty upon the assessee
to instruct the Income-tax Officer on questions of law.
It may also be mentioned that so far as the assessment
for the assessment year 1957-58 is concerned, the assess-
ment order was once rectified and at another time revised.
Despite such rectification and revision, the above mistake
in the calculation of the depreciation remained undetected.
It was only in October 1965 that the Income-tax Officer
realised that higher. amount of depreciation had been al-
lowed to the appellant than was actually due. A letter to
that effect was consequently sent to the assessee on Octo-
ber 5, 1965. It was, however, nowhere mentioned in that
letter that the higher amount of depreciation had been
allowed and the income as such had escaped assessment
because of the omission or failure on the part of the asses-
see to disclose truly and fully all material facts. Refer-
ence to such omission or failure came only in a subsequent
communication. The submission made on behalf of the appel-
lant is not without force that reference was made to asses-
see’s omission or failure to disclose truly and fully all
material facts because it was realised that after the expiry
of four years from the end of the relevant assessment year,
no action for reopening of assessment could be taken on the
basis of detection of mistake alone unless there was also an
allegation that the income had escaped assessment because of
the omission or failure of the appellant to disclose fully
and truly material facts. Looking to a11 the facts, we are
of the opinion that it cannot be said that the excess depre-
ciation was allowed to the appellant company and its income
as such escaped assessment because of its omission or fail-
ure to disclose fully and truly all material facts.
It has been said that the taxes are the price that we
pay for civilization. If so, it is essential that those who
are entrusted with the task of calculating and realising
that price should familiarise themselves with the relevant
provisions and become well versed with the law on the sub-
ject. Any remissness on their part can only be at the cost
of the national exchequer and must necessarily result in
loss of revenue. At the same time, we have to bear in mind
that the policy of law is that there must be a point of
finality in all legal proceedings, that state issues should
not be reactivated beyond a particular stage and that lapse
of time must induce repose in and set at rest judicial and
quasi-judicial controversies as it must in other spheres of
human activity. So far as income-tax assessment orders are
concerned, they cannot be reopened on the scope of income
escaping assessment under section 147 of the Act of 1961
after the expiry of four years from the end of the assess-
ment year unless there be omission or failure on the part of
the assessee to disclose fully and truly all material facts
necessary for the assessment. As already mentioned, ’this
cannot be said in the present case. The appeal is conse-
quently allowed; the judgment of the High Court is set aside
and the impugned notices are quashed. The parties in the
circumstances shall bear their own costs throughout.
P.H.P.
Appeal aIlowed.
102