Arijit Pasayat, C.J:— Ambit, scope and meaning of the expression “disclose fully and truly all material facts necessary for his assessment” as appearing in S. 147 of the Income-tax Act, 1961 (in short ‘the Act’) falls for consideration in this Writ Appeal filed by the Revenue.

2. Factual position, which is almost undisputed, is as follows: First respondent is a Society registered under the Kerala Co-operative Societies Act, 1969 (in short ‘the Act’). For the assessment year 1989–90, it filed return of income on 30.10.1989 declaring a total income of Rs. 17,30,000/. In arriving at the aforesaid figure, assessee claimed a sum of Rs. 10,14,837/- as depreciation. The depreciation figure was arrived at on the following basis:

i) On building & Furniture: Written down value, ie., WDV Rs. 9,56, 930/- 10% Rs. 95,693.00 ii) On plant & machinery WDV Rs. 6,19,558/- - - 33⅓% Rs. 2,06,949.00 iii) On plant & machinery WDV Rs. 14,25,190/- - 50% Rs. 7,12,595.00 TOTAL DEPRECIATION Rs. 10,14,837.00

3. Assessment was made under S. 143(3) of the Act on 31.7.1991 by accepting the claim of deduction. Subsequently, an order of rectification under S. 154 of the Act was passed on 27.3.1996 on the ground that the petitioner had claimed depreciation on certain items of plant and machinery at 50% while the correct rate applicable was 33 ⅓%. This resulted in enhancement of the total income from Rs. 17,30,000/- to Rs. 19,67,530/-. In appeal, an order was passed annulling the order on the ground that there was failure of the principles of natural justice inasmuch as no opportunity was granted before the order was passed. Keeping said order of the first appellate authority in view notice was given to the assessee to show cause as to why the mistake in respect of depreciation which was apparent from the records shall not be rectified. An objection was filed by the assessee. Thereafter, a notice under S. 148, of the Act was issued to the assessee on the ground that income chargeable to tax and had escaped assessment within the meaning of S. 147 of the Act. Assessee filed objection taking stand that since the material facts necessary for the purpose of assessment had been fully and truly disclosed, the proceeding for re-opening assessment was misconceived. It was also submitted that the time limit prescribed for reopening the, assessment was four years. The Assessing Officer pointed out the provision contained in S. 149(1)(a)(iii) of the Act to the effect that notice could be issued as if the period was sixteen years, when the escaped income was more than rupees one lakh. Assessee was again directed to file return as required by notice under S. 148 of the Act. The said notice was challenged under Art. 226 of the Constitution of India, 1950 (in short the Constitution’) before this Court taking the ground that assessee had disclosed fully and truly all material facts necessary for the purpose of assessment and, therefore, notice under S. 148 of the Act proposing re-assessment is without legal sanctity. Case of the Revenue was that assessee had furnished inaccurate particulars by claiming excessive depreciation in respect of certain items of plant and machinery. Assessee ought to have made complete and true disclosure. In fact the percentage of depreciation claimed by the assessee at the rate of 50% is factually and legally incorrect and therefore, the action taken by the Department was proper.

4. Learned Single Judge held that the primary facts in support of the claim of the claim of the assessee had been furnished and the authorities have no case that the assessee had failed to disclose fully and truly all material facts necessary for the purpose of assessment. Accordingly, he quashed the notice under S. 148 of the Act.

5. Respective stands pressed into service by the parties before learned Single Judge were reiterated in this appeal. The only question that arises for consideration is whether the assessee had failed to disclose fully and truly all material facts necessary for its assessment, and whether conclusions of learned Single Judge are supportable in the factual background.

6. Ss. 147 and 148 of the. Act which deal with income escaping assessment and issue of notice where income has escaped assessment read as follows at the relevant time:

“147. Income escaping assessment. If—

(a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under S. 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for the 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 Assessing 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 Ss. 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in Ss. 148 to 153 referred to as the relevant assessment year).

Explanation 1.— For the purpose of this Section, the following shall not be deemed to be cases where income chargeable to tax has escaped assessment, namely:

(a) where income chargeable to tax has been underassessed; or

(b) where such income has been assessed at too low a rate; or

(c) where such income has been made the subject of excessive relief under this Act or under the. Indian Income Tax Act, 1922 (XI of (1922); or

(d) where excessive loss or depreciation allowance has been computed.

Explanation 2.— Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of mis Section.

S. 148. Issue of notice where income has escaped assessment.— (1) Before making the assessment, reassessment or recomputation under S. 147, the Assessing Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of S. 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section.

(2) The Assessing Officer shall before issuing any notice under this Section, record his reason for doing so.”

7. Prior to amendment by Direct Tax Laws (Amendment) Act, 1987, the words “Income Tax Officer” existed in place of “Assessing Officer”. Incidentally, sub-s. (1) of S. 149 which prescribes the time limit for notice needs to be noted. Same reads as follows:

(1) S. 149(1): No notice under S. 148 shall be issued,

(a) in cases falling under clause (a) of S. 147—

(i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-clause (i);

(ii) for the relevant assessment year, where eight years, but not more than 16 years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year;

(b) in cases falling under clause (b) of S. 147, at any time after the expiry of four years from the end of the relevant assessment year.”

8. The provisions of Ss. 147 to 153 of the Act correspond to those of S. 34 of the Indian Income-tax Act, 1922 (hereinafter referred to “the old Act”). There have been some points of departure from the old law, but it is not necessary to refer them in detail for the purpose of the present case.

9. Two conditions have to be satisfied before the Assessing 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, ie., (1) he must have reason to believe that income chargeable to tax has escaped assessment, and (2) 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 (i) to make a return under Section 139 for the assessment year to the Assessing Officer, or (ii) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist in order to confer jurisdiction on the Assessing Officer.

10. The first important judgment which dealt with the matter is Calcutta Discount Co. v. IT. Officer ((1961) 411 TR 191 (SC). Following observations have become locus classicus as an exposition of the position in law:

“The wonts used are ‘omission or failure to disclose fully and truly all material facts necessary for his assessment for that year’. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment What facts are material and ncessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tux due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the bass of the facts disclosed, or otherwise, the assessing authority lias to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facte inferred them, the authority has to draw the proper legal inferences, and ascertain on a correct nuerpretation of the taxing enactment, the proper tax leviable.

Does the duty, however, extend beyond the full and truthful disclosure of all primary tacts? mouropinion, 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 her to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn.”

11. 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 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 Assessing Officer will not necessarily amount to disclosure completed 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 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 Assessing Officer with regard to the inference which he should draw from the primary facts. If an Assessing Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation or action for re-opening assessment (See I.T.O v. Lakhmani Mewal Das, (1976) 103 ITR 437 (SC)).

12. As was observed in the aforesaid case the grounds or reasons which lead to the formation of the belief contemplated by S. 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and ruly all material facts.

13. In C.I.T, Calcutta v. Burlop Dealers Ltd., (1971) 79 ITR 609 (SC) also, it was observed that mere production of the books of account or other evidence from which material facts could with due diligence have been discovered does not necessarily amount to disclose within the meaning of S. 34(1) of the old Act, but where on the evidence and the materials produced the Income-tax Officer could have reached a conclusion other than the one which he has reached, a proceeding under S. 34(1)(a) of the old Act will not lie merely on the ground that the Assessing Officer has raised an inference which he may later regard as erroneous. It was further observed that the assessee had disclosed his books of accounts and evidence from which material facts could be discovered; it was under no obligation to inform the Assessing Officer about the possible inferences which may be raised against him. It was for the Assessing Officer to raise such an inference and if he did not do so the income which has escaped assessment cannot be brought to tax under S. 34(1)(a) of the old Act. The position was again reiterated by the Apex Court in Indo-aden Salt Mfg. & Trading Co. P. Ltd. v. C.I.T (1986 (159) ITR 624) and it was observed that the fact that the Assessing Officer could have in the original assessment proceedings found out the correct position by further probing did not exonerate the assessee from the duty to make a full and true disclosure of material facts.

14. In Indian Oil Corpn. v. I.T.O (1986 (159) ITR 956) the Apex Court observed that there must be materials to come to the conclusion that there was omission or failure to disclose fully and truly all material facts necessary for the assessment of the year. This postulates a duty on every assessee to disclose fully and truly all material facts necessary-fat-assessment. Therefore, the obligation is firstly to disclose facts; secondly, those facts should be material; thirdly, the disclosure must be full and, fourthly, true. What facts are material and necessary for assessment will differ from case to case. In every assessment proceedings for computing or determining the proper tax due from the assessee, it is necessary to know all the facts which help the assessing authority in coming to the correct conclusion. From the primary facts in his possession, 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 to certain other facts. But, on the primary facts, it is for the taxing authority to draw inferences; it is not necessary for the assessee to draw inferences for him.

15. In Malegaon Electricity Co. P. Ltd. v. C.I.T (1970 (78) ITR 466) the Apex Court reiterated the view expressed earlier in Calcutta Discount Co. Ltd.'s case (supra) to the effect the 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 reasonable 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 often 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 of law he would draw from the primary facts.

16. The words used are “omission or failure to disclose fully and truly all material facts necessary for assessment for that year.” It postulates a duty on every assessee to disclose dully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case, as was observed in Indian Oil Corporation's case (supra). The question therefore, is as observed in Calcutta Discount Co. Ltd.'s case (supra), does the duty extend beyond the full and truthful disclosure of all primary facts? It is to be noted that the assessee does not discharge his duties to disclose fully and truly all material facts necessary for the assessment of the relevant year by merely producing the books of accounts or other evidence. He has to bring to the notice of the Assessing Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that, from the books produced by the Assessing Officer, if he had been circumspect, could have found out the truth, he is not on that account precluded from exercising the power to assess income which had escaped assessment (See Kantamani Venkata Narayana & Sons v. 1st Addl. I.T.O, (1967) 63 ITR 638 (SC) and Sowdagar Ahmad Khan v. I.T.O, (1968) 70 ITR 79 (SC).

17. At this juncture it is to be taken note of that Explanation 1 to S. 147 of the Act is explicit and clear that books of account or other evidence has to be traced out to disclose further facts which could be discovered by the assessing officer. Nor will the assessee be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence which might have been discovered by the assessing officer if he had pursued investigation on the basis of what has been disclosed. The position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed.

18. It is to be noted that Explanation I has nothing to do with inferences and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Assessing Officer could have discovered them from the facts actually disclosed, The Explanation has not the effect of enlarging me Section, by casting a duty on the assessee to disclose inferences to draw the proper inferences being the duty imposed on the Assessing Officer. It is to be noted that the obligation of the assessee is to disclose only primary facts and not inferences. If some material for the assessment lay embedded in the evidence which the revenue could have uncovered but did not, men 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. The principles have been well settled and reiterated in numerous decisions of the Apex Court in Kantamm Venkata Narayana & Sons v. First AM. I.T.O, (1967) 63 ITR 638), I.T.O v. Lakhmani Mewal Das ((1976) 103 ITR 437) and Indo-Aden Salt Mfg. & Trading Co. P. Ltd. v. C.I.T (1986 (159) ITR 624).

19. With reference to Explanation 2 to S. 147, more particularly Clause (c) thereof, it is submitted that where an assessment has been made, but excessive loss or depreciation allowance has been computed for the purpose of S. 147, the same shall be deemed to be a case where income chargeable to tax has escaped assessment There is no quarrel to this proposition as the statute makes it very clear. But that is not a determinative factor while considering the question in hand. Explanation per se has nothing to do with the question whether was foolproof disclosure of material facts.

20. In the present case, it is to be noted that the rates of depreciation admissible are indicated in Appendix I to the Income Tax Rules, 1962 (in short ‘the Rules’) which were applicable from 2.4.1987 under Serial No. III relating to machinery and plant Different rates are provided varying between 33.33% to 100%. Sub-item (1) deals with machinery and plant other than those covered by sub-items (2) and (3). “Plant and machinery” covered by item (1) qualify for depreciation allowance at 3333%. Sub items (2) and (3) deal with various other categories of plant and machinery to which the rate applicable is 50%.

21. Depreciation statement as filed before the assessing officer contained 8 items in respect of which 33.33% was claimed, and in respect of other 12 items 50% was claimed. Details of the plant and machinery, Written Down Value (in short ‘WDV), additions during the year, depreciation claimed and WDV on the close of the assessment year were indicated. Assessment order itself shows mat examining books of accounts produced and after verifying the necessary details, me total income is computed. In a case of claiming for depreciation, the material facts required to be disclosed are the nature of the plant and machinery in respect of which depreciation is claimed the value thereof at the beginning of the assessment year and at the end of the year, addition or disposal if any. These facts were disclosed in the statement filed. As indicated above, details of the plant and machinery were given along with the value. It was for the Assessing Officer to apply the rate of depreciation correctly. Merely because he did not do so, it cannot lead to an inference that material facts have not been supplied. It is not a case where facts material for the purpose of assessment were wrongly withheld. It is not the case of the Revenue that there was any wrong or misleading description given.

22. In the aforesaid factual background and the legal principles analysed above, it is to be seen whether there was disclosure of material facts. As indicated above, such a question has to be decided on the fact situation of every easel Material or primary facts are to be disclosed, and not inferential facts. In other words, significant facts are to be disclosed. It must not be derived from or dependent on something else. Present case has a great deal of similarity with the one which was under consideration of the Apex Court in Paraslwram Pottery Works Co. Ltd. v. I.T.O ((1977) 1 SCC 408). As observed in para 13 thereof, there is no suggestion mat the particulars disclosed in the requisite portion of the return were factually incorrect Nor is it the case of the Revenue mat assessee failed to furnish the particulars required to be furnished. Dispute is the rate applicable.

23. Stand of learned counsel for the Revenue that the return filed cannot be treated as one under S. 139 of the Act, as the correct rate of depreciation was not indicated. For the purpose of claiming depreciation, the correct rate at which depreciation is allowable has to be indicated, and otherwise, return cannot be treated as one under S. 139 of the Act. This argument has to be noticed to be rejected.

24. Proviso to S. 147 of the Act provides that where any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under S. 139, consequences will follow. According to learned counsel for me Revenue, return under S. 139, has to be a return complete in all respects. This plea is clearly untenable. Return under S. 139 has to be filed in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. Merely because the return is not complete, it nevertheless is a return under S. 139 which is clear from reading of sub-s. (5) of S. 139 as it stood at the relevant time. It says that if any person has furnished any return under sub-s. (1) or sub-s. (2) discovers any omission or any other statement therein, he may furnish revised return. Such revised return can also be filed in respect of return which has filed in pursuance ofthe notice under sub-s. (1) of S. 142. With effect from 1.9.1980, sub-s. (9) has been introduced which provides that where the assessing authority considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within stipulated time and if the defect is not rectified, the return shall be treated as an invalid return and the reposition of the Act shall apply as if the assessee had failed to furnish the return and if the defect is rectified, the Assessing Officer shall treat the return as a valid return. In which circumstances the return is to be regarded as defective have been laid down in the Explanation to sub-s. (9). Above being the position, the irresistable conclusion is that assessee had disclosed all material facts fully and truly. That being the position, conclusions of learned Single Judge cannot be faulted.

25. Writ Appeal being without any merit is dismissed.