In the case of Berger paints India Ltd. v. JCIT (115TAX3) the assessing officer allowed a deduction of Rs.3939096 u/s 43B in the original assessment but at the same time included Rs.9910108 as duty payable on closing stock thus disturbing the bottomline figure. In an action u/s 147 the assessing officer alleged that the amount of deduction allowed at Rs.3939096 constituting custom duty on import of raw materials was left out from the valuation of closing stock leading to income escaping tax. To this the assessee replied that the original addition made for Rs.9910108 already include Rs.3939096 and further argued that since the addition of Rs.9910108 is already before the Commissioner (Appeals) the assessing officer cannot take any action u/s 147.
Following the Apex Court ruling in the case of Calcutta Discount Co. Ltd. V. ITO (41ITR191) the Calcutta High Court held that mere failure of the assessing officer to apply his mind to the facts before him in the course of original assessment proceedings does not give him any right to reassess when the connected issue had been the subject matter of appeal. The Supreme Court held a majority view in stating that there are certain prima facie facts, which are relevant for the purpose of consideration. It is the assessee’s duty to disclose all of them including particular entries in the account books, particular portion of the documents, and documents and other evidence which could have been discovered by the assessing officer from the documents and other evidence disclosed. The duty, however, does not extend beyond the full disclosure of all primary facts. Once all the primary facts are before the assessing officer, it is for him to decide what inferences of facts could be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for anybody else – far less the assessee – to tell the assessing authority what inference, whether of facts or law, should be drawn.
In the same manner the Commissioner of Income tax is prevented from taking an action u/s 263 in similar circumstances.