1. These two appeals by the Department are directed against the orders of Ld. CIT (Appeals), Palampur, dated 24-2-2005 and 11-2-2004 for the assessment years 2001 -02 and 2002-03 respectively. These appeals having the common grounds were heard together, so arc being disposed of by this common order for the sake of convenience. The common grounds raised in these appeals read as under: 1. The worthy CIT (A) has erred on both the questions of law and facts of the case in allowing the deduction under Section 80-IB of the Income-tax Act, 1961, which was disallowed to the assessee for not fulfilling the conditions for claiming the deduction under Section 80-IB as prescribed under the Income-tax Act, 1961.
2. That the crushing of the big stones (boulders) into small stones (bajri) is only a processing of the stones and not a manufacturing activity.
3. That even after cutting and crushing the stones, it does not lose its original identity as stones and nothing new is produced. Stone crushing industry is not entitled for exemption under Section 80-IB. 4. That the worthy CIT (Appeals) has erred in ignoring the case laws of CIT v. Gem India Mfg. Co. and Divisional Dy.
CST v. Bheraghat Minerals Industries similar 5. The worthy CIT (Appeals) has erred in comparing the case of the assessee with CIT v. Hemsons Industries and CIT v. Abdul Ahad Najar [2001] 114 Taxman 655 (J&K) which has no relevancy of nature of work as compared to with assessee's nature of work.
6. That the appellant craves to leave to add or amend the grounds of appeal before the appeal is heard or disposed of.
7. That the order of the learned CIT (Appeals) be set aside and that the Assessing Officer be restored.
The grievance of the Department in these appeals relate to the deducti on under Section 80-IB of the Income-tax Act claimed by the assessee and allowed by the learned CIT (Appeals).
2. The facts of the case in brief are that the assessee filed its returns of income declaring 'nil income' for the assessment year 2002-03 on 18-10-2002. The assessee claimed net profit of Rs. 98,775 as exempt under Section 80-IA being a new industrial undertaking. The Assessing Officer pointed out during assessment proceedings that with effect from assessment year 2000-01, the old Section 80-1 of the Income-tax Act has been split up into two Sections i.e., 80-IA and 80-IB and what-so-ever was available under the actual Section 80-IA was now available under Section 80-IB and the new Section 80-IA was applicable to the profit & gains from the industrial undertaking engaged in infrastructural development, whereas Section 80-IB was applicable to industrial undertaking manufacturing and producing article or thing. The Assessing Officer had not taken serious cognizance for the technical mistake committed by the assessee by wrongly mentioning the Section 80-IA instead of Section 80-IB. The nature of the business of the assessee was that of converting the boulder into stones and bajri. According to the Assessing Officer, there was no manufacturing or production but processing of large pieces of stones into small pieces of stones and the crushing of big stones into small pieces was not an activity which could properly be regarded as manufacture. He opined that the deduction under Section 80-IB was not available to the assessee. The reliance was placed on the judgment of Hon'ble Supreme Court in the case of CIT v. Gem India Mfg. Co.
. The contention of the assessee before the Assessing Officer was that the business of the assessee amount to an industrial undertaking who was engaged in manufacture or production of any article or thing. Reliance was placed on the following case laws: The Assessing Officer did not accept the aforesaid contention of the assessee and disallowed the claim. He also relied upon the following case laws: (i) Divisional Deputy CST v. Bheraghat Minerals Industries ,CIT v. Kutch Oil & Allied Industries (P.) Ltd. , In the assessment year 2001-02, the return was filed by the assessee on 24-10-2001 which was processed on 22-2-2002. However, the case was reopened by issuing the notice under Section 148 on 9-12-2003. The Assessing Officer did not allow the claim of assessee under Section 80-IB as was done for the assessment year 2002-03.
3. The assessee had taken the matter to the learned CIT (Appeals) and submitted that the provisions of Sub-section (8) to Section 80-IB required the assessee to get its accounts audited by a Chartered Accountant and to furnish along with the return the report of such audit in the prescribed form duly signed and verified by such Chartered Accountant and that under Rule 18BBB, such report was required to be furnished in Form No. 3CCB. It was further submitted that prima facie on the face of those returns, there could not be any reason to believe that the said claim of the assessee was inadmissible. It was further submitted that the assessee's crusher was registered with the Industries Department, Dharamshala (H.P.). The crusher was also registered with H.P. State Environment Protection and Pollution Control Board, Hotel King's, The Mall, Shimla vide registration No. PCB (186) Jatinder Stone Crusher/2000/2708-12, dated 5-7-2001. It was submitted that the assessee had rightly claimed deduction under Section 80-IB of the Income-tax Act, as the industrial undertaking was established in the backward area as per requirement of Sub-section (2) of Section 80-IB. It was emphasized that the assessee had employed more than 10 workers, the details of whom had been filed with the Assessing Officer.Raj Kumar Singh and Co. v. ITO (iv) Aspinwal & Co. Ltd. v. CIT [2001] 251 ITR 323 118 Taxman 771 (SC), (v) Kehar Stone Crusher v. General Manager, Distt. Industries Centre, Jabalpur [1990] 79 STC 149 (MP)(FB), (vi) CWT v. Jagdish Singh Sekher [1987] 167 ITR 558 34 Taxman 343 (Pat), (ix) CIT v. Gogte Minerals (No. 2) 225 ITR 60 [1996] 89 Taxman 541 (Kar.), (xi) Asstt. CIT v. Oscar Laboratories (P.) Ltd. [2002] 83 ITD 408 (Chd.), It was further submitted that the rebate allowed in an earlier year could not be disallowed in the subsequent year. The reliance was placed on the following case laws:Union of India v. Onkar Section Kan 3.1 The learned CIT (Appeals), after considering the submissions of the assessee observed that the assessec was engaged in crushing of boulders into bajri and sale thereof, for this purpose had installed a Stone Crushing Unit at Pail Mohal Bari Khadd, Tehsil Nurpur, Distt. Kangra.
The said Unit was registered with the Industries Department, H.P. and HP. State Environment Protection and Pollution Control Board, Shimla.
According to the learned CIT (Appeals), the process of crushing of boulders into small pieces (bajri) involved a manufacturing process.
The reliance was placed on the following case laws: (i) Aspinwal & Co. Ltd. v. CIT [2001] 251 ITR 323 118 Taxman 771 (SC),CIT v. Goverdhanbhai Jethabhai Tobacco Industries (P.) Ltd. ,Union of India v. Onkar Section Kanwar 4. The learned DR strongly supported the order of the Assessing Officer and submitted that the assessee was not engaged in the manufacturing activities, so the deduction under Section 80-IB was not allowable. He further submitted that mere breaking the boulders into smaller pieces was not manufacturing activity. Reliance was placed on the following case laws:CIT v. Vijay Granites (P.) Ltd. 5. In his rival submissions, the learned Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee was engaged in the activity of manufacturing since the products i.e., stone (bajri) was different from boulders and it was manufactured with the help of machinery i.e., the stone crusher. The reliance was placed on the following case laws: (i) CWT v. Jagdish Singh Sekher [1987] 167 ITR 558 34 Taxman 343 (Pat.),CIT v. Best Chem & Limestone Industries (P.) Ltd. ,Union of India v. Delhi Cloth & General Mills Co. Ltd. 1977 ELT (J 199), (v) Kher Stone Crusher v. G.M., Distt. Ind. Centre, Jahalpur [1990] 79 STC 149 (MP),Union of India v. Onkar Section Kanwar (xi) Aspinwall & Co. Ltd. v. CIT [2001] 251 ITR 323 118 Taxman 771 (SC), (xiii) CIT v. Jalna Seeds Processing & Refrigeration Co. Ltd. ,CIT v. Goverdhanbhai Jelhabhai Tobacco Industries (P.) Ltd. [2002] 258 ITR 727 123 Taxman 825 (Guj.).
6. We have heard both the parties and gone through the material available on record along with various citations cited by both parties.
The crucial issue to be decided before us is whether the breaking of boulders into stones i.e., 'gitty' is a manufacturing activity or not and whether the assessee is eligible for deduction under Section 80-IB or not.
6.1 The deduction under Section 80-IB is available to an Industrial Undertaking if it manufactures or produces any article or thing not being any article or thing specified in the list in the Eleventh Schedule. The words 'Industrial Undertaking' has not been defined in the Income-tax Act, however, cropped up many a time before the Hon'ble Supreme Court and various High Courts. In the present case, interpretation of the words 'Industrial Undertaking' does not pose much difficulty before us because nobody has disputed that the assessee is an industrial undertaking. It is true that each and every industrial undertaking would not be eligible for the deduction under Section 80-IB of the Income-tax Act because it is only the industrial undertaking which specifies test indicated in Section 80-IB, would only be eligible and qualified for such deduction. An 'industrial undertaking' which is engaged in manufacture and production of an article or thing would be eligible for the deduction under Section 80-IB.For allowing the deduction under Section 80-IB it is necessary to understand the meaning of the word 'manufacture'. The word 'manufacture' used as a verb is generally understood to mean as that bringing into existence a new substance and does not mean merely to produce some change in a substance, however, minor in a consequence the change may be. In the case of B.S. Bajaj & Sons v. CIT , the Hon'ble jurisdictional High Court interpreted the word 'manufacture' and observed that the distinction between processing and manufacturing is well brought about in a passage quoted in Permanent Addition of Words and Phrases Vol. 26 the passage runs thus: Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.
The Hon'ble jurisdictional High Court had also considered, and opined on the word 'manufacture' in the case of Sidhu Ram Atom Parkash v.State of Haryana [1974] 34 STC 344 (Punj. & Har.)(at page 346) as under: Applying the above definition to the instant case, the question is when the logs are converted into planks and rafters, does it mean that a manufacturing process has been gone into? In other words, has a new substance has occurred? As we look at the matter, when a log, either by manual labour or mechanical process, is converted into a plank or a rafter, a new substance does not come into being, and this process is not covered by the definition of the word 'manufacture' as given by the Supreme Court.Shah Scott Distilleries (P.) Ltd. v. Asstt. CIT [2002] 255 ITR (AT) 14 [2001] 76 Taxman 89, also interpreted the meaning of the word 'manufacturing' in the following words: Manufacturing normally involves consumption of a particular commodity in the process of manufacturing of another commodity. The goods purchased should be consumed, the consumption should be in the process of manufacture and the result must be the manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture, is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place.
6.3 It is also relevant to point out that under Clause (iii) to Sub-section (2) of Section 80-IB, the Legislature has used two separate words i.e., 'manufactures' and 'produces' any article with an 'or' in between. Thus, both have to be read separately and the meaning assigned to them. These two words cannot have the same meaning. The word 'produce' an article has a wider connotation than 'manufacture', every manufacture can be said to be production but not vice versa. Their Lordships of the Hon'ble Apex Court in the case of CIT v. N.C.Budharaja & Co. considering the provisions of That the word 'production' has a wider connotation than the word 'manufacture'. Every 'production' may not amount to 'manufacture' whereas every 'manufacture' can be termed as 'production'.
'Manufacture' does not imply only a change but something more is necessary. A new and different article must emerge having a distinct name, character or use to bring it within the meaning of the word 'manufacture'. The word produce an article may not amount to a 'manufacture' but it would include all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. It was held as under (at page 423): The words 'manufacture' and 'production' have received extensive judicial attention both under this Act as well as the Central Excise Act and the various sale tax laws. The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterized as production, every production need not amount to manufacture. The meaning of the expression 'manufacture' was considered by this Court in Deputy CST v. Pio Food Packers (1980) 46 STC 63 among other decisions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognized in the trade as a new and distinct commodity. Pathak J., as he then was, stated the test in the following words (at page 65): Commonly, manufacture is the end result of one or more process through which the original commodity is made to pass.
The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place'.
The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' taken in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods.
6.4 From the combined reading of the ratios laid down in the aforesaid referred to cases, it can be concluded that when the change or a series of changes lakes one commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognized as a new and distinct article, then it can be said that 'manufacture' takes place. In the present case, the assessee had broken the boulders in small pieces, but there is no change in the composition of the boulder. Only the big size had been reduced to small size. So, it cannot be said that breaking of boulders into small pieces of stone is a manufacturing activity.
6.5 A similar issue had been considered and decided by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. Lai Kunwa Stone Crusher (P.) Ltd. respondent was a dealer engaged in purchasing of stone boulders and crushing them into small chips, gitty and dust for the purpose of further sale. The contention put-forth by the dealer was that the process adopted by him in conversion of boulders to the small stones, dust etc. was physically and chemically not different from the original goods. The assessing authority rejected the contention of the dealer and the Assistant Commissioner of Sales Tax noticed that the trader had not manufactured gitty nor had sold it having crushed boulders into small stones and dust. The view of the Assistant Commissioner was upheld by the Tribunal. The matter was carried to the Hon'ble High Court wherein the petition was dismissed. In the appeal before the Hon'ble Supreme Court, the question raised was whether gitty, stone chips and dust continued to be stone or on crushing stone boulders into gitty, stone chips and dust different commercial goods emerged. On behalf of the Department, it was contended that the process adopted by the dealer would amount to 'manufacture' as per definition of 'manufacture' under Section 2(e-1) of the U.P. Sales Tax Act, 1948.
Under the said provision, 'manufacture' has been defined to mean producing, making, mining, collecting, extracting, altering, ornamenting, finishing or otherwise processing, trading or adopting any goods. Thus, it was submitted that the definition used for the purpose of manufacture in the Act made it very clear that every activity in relation to goods not only altering the same but also processing of the same had also been included.
Their Lordships had pointed out at page 1162 para 5 that the view taken by the Tribunal and affirmed by the High Court was that the goods continued to be stone and they were not commercially different goods to be identified differently for the purpose of sale tax.
6.6 In the aforesaid discussed case, their Lordships of the Hon'ble Apex Court have held that the stone, as such and 'gitty' and articles of stone are all of similar nature though by size, they may be different. Even if 'gitty', 'kankar', stone, blast etc. may all be looked upon a separate in commercial character from stone boulders offered for sale in the market, yet it cannot be presumed that entry 40 of the Notification is intended to describe the same as not stone at all. In fact the term 'stone' is wide enough to include the various forms such as gitti, kankar, stone blast.Lucky Minmat (P.) Ltd. v. CIT , Their Lordships of the Hon'ble Apex Court at page No. 831 while distinguishing the judgment of the Hon'ble Rajasthan High Court in the case of CIT v. Best Chem & Limestone Industries (P.) Ltd. had observed that the conversion into lime and lime dust or concrete by stone crusher could legitimately be considered to be a manufacturing process while the mere mining of lime stone and marble and cutting the same before it was sold in the market could not be so considered. In the present case also, there was cutting of boulders into small pieces. So, it cannot be said that it was a manufacturing activity, because by breaking the boulders i.e., big stone into small pieces i.e., small stone or bajri no new and distinct commodity came into existence, so it can neither be a production by the process of manufacture or a thing otherwise produced, because in either case, bringing into existence a new product is a necessary condition.Aman Marble Industries (P.) Ltd v. CCE [2003] 58 RLT 595 has held that cutting of marble block into marble slabs or tiles does not amount to manufacture, as in both the forms, marble remains marble. In the present case the boulder is the big stone while the pieces of the boulders i.e., gitty or bajri are small stones but there is no change in the composition of the material, so it cannot be said that the breaking of boulders into 'gitty' (small stones) is a manufacturing activity. Since activity of the assessee was not a manufacturing, the deduction under Section 80-IB was not available to the assessee. In that way of the matter, for this issue, we reverse the orders of the learned CIT (Appeals) and restore that of the Assessing Officer.
6.9 It is relevant to point out that in the cases relied by the learned Counsel for the assessee, the judgment of the Hon'ble Supreme Court (which is the law of land), in the cases of Lai Kunwa Stone Crusher (P.) Ltd. (supra) and Lucky Minmat (P.) Ltd. (supra), had not been considered.
7. In ITA No. 463/2005 for the assessment year 2001-02, the Department had also raised an additional ground, which reads as under: The worthy CIT(A) has erred on both the question of law and facts of the case in quashing the assessment order passed under Section 143(3)/147 on the ground of change of opinion.
7.1 The learned Counsel for the assessee objected the admission of the additional ground while learned DR stated that no new investigation is required and the additional ground emerged from the impugned order of the CIT (Appeals). It was emphasized that facts are already available on record and the ground being legal in nature, can be raised any time.
8. After considering the rival submissions, we are of the opinion that no new investigation is required for adjudicating this additional ground. This ground arises out of the order of the learned CIT (Appeals), so it can be admitted as per the ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v.CIT . We, therefore, admit this additional ground.
9. The facts related to this issue in brief are that the return of income filed by the assessee on 24-10-2001 for the relevant assessment year was processed on 22-2-2002 and the returned income was accepted.
Thereafter, notice under Section 148 of the Income-tax Act was issued on 9-12-2003 for reassessment. The main point on which the notice under Section 148 was issued for reassessment was whether the assessee qualified for deduction under Section 80-IA/80-IB of the Income-tax Act. The Assessing Officer pointed out that Hon'ble Supreme Court in the case of CIT v. Gem India Mfg. Co. Ltd. held that where there was no material on record to support the claim that either in common parlance or in commercial parlance, raw diamonds were not the same thing as polished and cut diamonds and they were different entities in the commercial world; the process of cutting and polishing of raw diamonds could not be said to be as result of manufacturing or production. On the same analogy, the Assessing Officer was of the view that the crushing of big stone boulders into small pieces i.e., bajri involved only the process of cutting and removing of the larger mass and it was not an activity which could be treated as manufacturing and that the process carried out by the assessee did not involve any complexity or transformation of input into some thing new and different. Accordingly, the case was reopened considering that the assessee had made a wrong claim.
9.1 Before the learned CIT (Appeals) it was submitted that the notice could be issued only if there were 'reasons to believe' that a particular deduction/exemption claimed by the assessee was inadmissible, it was stated that the 'reasons to believe' was a term which was much stronger than term 'reasons to suspect'. It was argued that the claim under Section 80-IB was made and the audit report as required in Form No. 10CCB was furnished along with the return of income, thus, prima facie, there could not be any reason to believe that the said claim of the assessee was inadmissible when it had been allowed. Accordingly, it was submitted that the jurisdiction under Section 147 had been wrongly assumed.
9.2 The learned CIT (Appeals), after considering the submissions of the assessee observed that the assessee filed the return of income along with audit report in Form No. 10CCB, audited statements of account and balance sheet. The return was accepted under Section 143(1) and subsequently notice under Section 148 was issued. According to the learned CIT (Appeals), the reasons recorded by the Assessing Officer to assume jurisdiction under Section 147 of the Income-tax Act did not indicate that between the date of assessment under Section 143(1) of the Act and the date of forming of opinion and recording the reasons, anything new had happened. The learned CIT (Appeals), further observed that no new material had come to the record, no new information had been received. According to the learned CIT (Appeals) the reasons recorded were that the nature of business of the assessee was that of converting stones to bajri wherein there was no manufacturing or production but processing of large pieces of stones into small pieces of stones, as such, assessee did not manufacture or produce anything new which was an essential condition to claim exemption, as the assessee did not fulfil this condition for claim of deduction under Section 80-IB. The learned CIT (Appeals) was of the view that above facts were already on the record at the time of processing the return under Section 143(1) of the Income-tax Act. The learned CIT (Appeals), therefore, was of the view that the reasons recorded by the Assessing Officer did not bring out any new ground making out an objective satisfaction arrived at by the Assessing Officer. He further observed that it was merely a fresh application of mind to the same set of facts or merely a change of opinion which did not confer jurisdiction on the Assessing Officer to reassess income under Section 147 of the Act.
According to the learned CIT (Appeals), all the primary facts were disclosed and there was no omission or failure on the part of the assessee to disclose fully and truly, all material facts for claiming the deduction and necessary for assessment. He further stated that all the information required was available on the record when the original assessment was framed. The Assessing Officer did not found it necessary to require the assessee to justify the claim for deduction at the time of processing return or within 12 months from the end of the assessment year and that the information available on the record clearly demonstrated that there was no new facts, no new material came on the record which was not already part of the record at the time of original assessment. The learned CIT (Appeals) was of the view that the parameters laid down under Section 147 of the Act were not satisfied in the present case. Reliance was placed on the following case laws: (i) CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 123 Taxman 433 (Delhi)(FB), (iv) Vipin Khanna v. CIT [2002] 255 ITR 220 122 Taxman 1 (Punj. & Har.), (vi) Siesta Steel Construction (P.) Ltd. v. K.K. Shikare , (vii) Jt. CIT v. George Williamson (Assam) Ltd. Everyday Industries (India) Ltd. , 10. Learned DR strongly supported the order of the Assessing Officer and submitted that the case was rightly re-opened in accordance with Explanation 2(b) appended to the proviso to Section 147 of the Income-tax Act, which states that: Explanation 2 : For the purpose of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return.
It was stated that in the present case, the Assessing Officer had not made regular assessment i.e., the assessment under Section 143(3) but only a processing of return was done as required by the statutory provisions of the Income-tax Act and since the assessee had claimed wrong deduction under Section 80-IB, the case was rightly reopened by invoking the provisions of Section 147 of the Income-tax Act. The reliance was placed on the judgment of Hon'ble jurisdictional High Court in the case of Swaraj Engine Ltd. v. Asstt. CIT .
11. In his rival submissions, the learned Counsel for the assessee reiterated the submissions made before the learned CIT (Appeals) and further stated that the re-opening was only due to the change of opinion because no new fact was brought on record and all the necessary documents were already furnished to the Assessing Officer who had accepted the claim of the assessee while processing the return under Section 143(1) of the Income-tax Act. So, the re-opening was not valid as was held by the learned CIT (Appeals).Marudhar Hotels) (P.) Ltd. v. Dy. CIT 12. We have heard both the parties on this issue and gone through the material available on the record along with the various judicial pronouncements cited by both the parties. In the present case, it is not in dispute that the Assessing Officer processed the return under Section 143(1)(a) of the Income-tax Act within one year of filing the return by the assessee.
In our considered view, the Assessing Officer while processing the return, is not supposed to express any opinion, but only an intimation is to be sent to the assessee specifying if any tax or interest is due on the basis of such return after adjustment of any tax deducted at source/advance tax paid/tax paid on self-assessment and any amount paid otherwise by way of tax or interest. In other words, the Assessing Officer initially process the return under Section 143(1)(a) of the Income-tax Act and determine the amount payable or refundable on that basis and it is not necessary for him to frame an assessment in each and every case. The Hon'ble jurisdictional High Court in the case of Swaraj Engine Ltd. (supra) had held as under: An Income-tax Officer acquires jurisdiction to reopen an assessment under Section 147(a) read with Section 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, profits or gains chargeable to income-tax and escaped assessment. He may start reassessment proceedings either because some fresh facts had 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 the present case also, the Assessing Officer was of the opinion that the deduction claimed by the asscssee under Section 80-IB of the Income-tax Act was excessive. The Assessing Officer, on the basis of judgment of the Hon'ble Supreme Court in the case of Gem India Mfg. Co.
(supra) recorded his satisfaction that the activity of the assessee in breaking the boulders into small stones was not manufacturing activity.
Therefore, he has reasons to believe that the deduction claimed by the assessee was not correct. As such, a part of his income chargeable to income-tax has escaped assessment. In our opinion, in view of the ratio laid down by the Hon'ble jurisdictional High Court in the aforesaid referred to case i.e., the case of Swaraj Engine Ltd. (supra), the Assessing Officer rightly started the reassessment proceedings. In that view of the matter, we set aside the order of the learned CIT (Appeals) and accordingly, this ground of the departmental appeal is allowed.