THE COMMISSIONER OF INCOME TAX vs. PARRY AGRO INDUSTRIES LTD.

The assessee is a company having plantations of its own and also carries on trade in tea and coffee. The assessee deals in tea grown in their plantations as also tea purchased from outside sources. For the assessment year 1994-95, assessment was completed by Annexure-A order on 31.03.1997. The loss from Packet Tea Division (PTD) as found in the original assessment order was at Rs.1,86,29,034/-; which was allowed by the Assessing Officer. After four years, notice was issued for re-assessment under Section 147 alleging that the entire loss of PTD cannot be claimed by the company as deduction. The reasoning was that the sale effected by the PTD also included tea grown in its own plantations, at a proportion of 39% of the total tea sales. According to the Revenue 60% of the loss attributable to sale of tea grown in its own plantations has to be apportioned, applying Rule 8 of the Income Tax Rules; ie., 40% towards Income Tax under the Income Tax Act and 60% towards Agricultural Income Tax under the Agricultural

The Commissioner of Appeal reversed the order of the Assessing Officer, finding that there cannot be alleged non-disclosure of full and true facts and the Tribunal too affirmed the view of the first appellate authority. The Tribunal found that what was attempted to be done on re-assessment, was to apply an inference which the original Assessing Officer could have drawn from the facts disclosed in the returns and the books of accounts when the original assessment itself was taken up.

The learned Senior Counsel appearing for the Revenue would contend that it was the duty of the assessee to have apportioned the loss as applicable to the sale of tea from the PTD, which was sourced from its own plantations to be adjusted against the agricultural income tax; since the income too is to be apportioned as provided under Rule 8 of the Income Tax Rules. The ITA No.1123/2009 - 4 - apportionment having not been made in the returns, this would lead to non-disclosure of full and true material facts which would enable re-assessment under Section 147, even after the 4 year period is the compelling argument of the revenue.

The learned Senior Counsel would challenge the finding of the Tribunal that there was a consideration by the Assessing Officer in Annexure A1 as to the loss from PTD, pointing out the mere computation carried out in Annexure A1. This does not lead to a presumption that the matter was considered elaborately by the Assessing Officer; is the argument. The learned Senior Counsel relies on [1967] 66 ITR 714 [Killick Nixon and Co. v. Commissioner of Income-Tax, Bombay City I] to urge that a mere

The learned Counsel appearing for the assessee would argue that the apportionment of income under the Agricultural Income-tax Act and the Income-tax Act was a matter specifically

The Income-tax Act by Section 143 provides for the Assessing Officer to assess any income or make such dis-allowances contrary to that claimed by the assessee in its returns. The Act also by Section 147 provides for bringing to tax any income, which escaped assessment within four years; without anything more than sufficient reasons being recorded under Section 148(2). The Revenue cannot exercise such right to reassess for all time especially when the statute prohibits it, other than on specific contingencies as laid out in the proviso to section 147, beyond the period of limitation of four years. One of such contingency is failure to disclose fully and truly all material facts; which is resorted to in the instant re-assessment.

The first argument is that the original assessment having not considered the apportionment of loss, in the same proportion as the income; the reassessment beyond four years is not a mere change of opinion. Killick Nixon and Co. and Malegaon

Killick Nixon and Co. was a case in which the Appellate Assistant Commissioner estimated the value of three assets, which was affirmed by the Tribunal. The specific contention of the assessee before the Tribunal was that there was evidence on record showing that the market value exceeded the estimated value. The mere affirmation made by the Tribunal and the conclusion

Malegaon Electricity Co. P. Ltd. was a case in which though sale of assets and consideration received were shown in the return, the written down value was never brought to the notice of the Assessing Officer; despite the fact that the consideration received was far in excess of the written down value. The Income Tax Officer had, in the original assessment, made a cryptic statement that no adjustment is necessary based on which the Tribunal held that the reassessment was on a mere change of opinion. The assessee argued that the sale of assets and the consideration received where before the Assessing Officer and there could be no allegation raised of non-disclosure of full and true facts. The Hon'ble Supreme Court found that the written down value having not been placed before the Assessing Officer there could not be said to be disclosure of all full and true material facts.

The reliance placed, on Calcutta Discount Co. Ltd. by the Hon'ble Supreme Court and Tata Ceramics Ltd by this Court, does not support the Revenue's view. The judgment of this Court was one in which the judgment of the Hon'ble Supreme Court was relied on and there was found absence of full and true disclosure of material facts necessary for assessment. In Tata Ceramics Ltd., the assessee filed a return disclosing a total income just above

Tata Ceramics Ltd., referring to Calcutta Discount Co. Ltd., found a distinction on facts but relied on the dictum as laid down by Calcutta Discount Co. Ltd., itself, but on facts upheld the re-assessment in that case. As had already been noticed there was only a portion of the interest income disclosed in the returns. There was hence non-disclosure of full and true material facts which resulted in the re-assessment proceedings being upheld. We are of the opinion that in the present case, the facts are more similar to that in Calcutta Discount Co. Ltd., than that of Tata Ceramics Ltd.

We see from the Annexure A1 order that the question of application of Rule 8 was specifically taken into account by the Assessing Officer. Income from tea under Rule 8, ie: 40% of the income so computed was assessed to tax leaving 60% to be assessed under the Agricultural Income-tax Act. The sale carried out by the assessee from the PTD would obviously include the tea

Rule 8 was applied to the income generated from agricultural operations and the Assessing Officer merely failed to apply it in the case of loss occasioned. Even within the four year period the question would arise whether it was a mere change of ITA No.1123/2009 - 14 - opinion or otherwise. To permit a re-assessment after the four year period, there should be failure to disclose all full and true material facts, on detection of which alone there could be proceedings under Section 147. This element of non-disclosure we fail to see in the instant case. We hence answer the question of law in favour of the assessee and against the revenue and as a consequence reject the appeal. No order as to costs. K. Vinod Chandran, Judge Ashok Menon, Judge jma