Smt. Abhilasha Kumari, J.:— Rule. Learned counsel for the respondent is directed to waive service of notice of rule for the respondent. With the consent of the learned counsel for the respective parties, the petition is heard and finally decided today.

2. By filing this petition under article 226 of the Constitution of India, the petitioner-assessee has challenged the notice dated March 31, 2008, issued under section 148 of the Income-tax Act, 1961 (“the Act” for short) in respect of the assessment year 2001-02 by the Assessing Officer, on the ground that the same is illegal, without jurisdiction and beyond the period of limitation, as prescribed under the Act. Briefly stated, the facts of the case are that the petitioner, which is a limited company, filed its original return of income on October 24, 2001, declaring therein, a total income of Rs. 18,26,66,410. On February 23, 2004, the assessment was framed under section 143(3) of the Act. On March 31, 2008, the Assessing Officer issued the impugned notice under section 148 of the Act for reopening the assessment for the assessment year 2001-02. The petitioner, vide communication dated April 24, 2008, addressed to the respondent-Assessing Officer, requested him to treat the original return as return filed under section 148 of the Act with a further request to be supplied with a copy of the reasons recorded, for reopening the assessment, as well as a copy of the approval required, for the purpose of initiation of reopening proceedings. By letter dated April 28, 2008, the respondent supplied the copy of the reasons recorded for reopening the assessment. As per the reasons recorded, the assessment has been reopened on the ground that the petitioner has shown long-term capital gains of Rs. 1,09,47,296 under the head “Capital gains” and has wrongly been assessed at a lower slab of tax. That the said income should have been assessed under the head “Profits and gains of business or profession and not capital gains”. The petitioner raised various objections, by letter dated July 7, 2008, both on the ground of jurisdiction as well as on the merits, and requested the respondent to drop the reassessment proceedings. The respondent rejected the objections filed by the petitioner by letter dated August 28, 2008, holding that the assessment is valid, and within jurisdiction.

3. Mr. Saurabh N. Soparkar, learned senior counsel for the petitioner, has submitted that the notice dated March 31, 2008, under section 148 of the Act, is bad in law inasmuch as that the assessment for the assessment year 2001-02 was framed under section 143(3) of the Act and it could not have been reopened beyond the prescribed period of limitation, unless one of the conditions mentioned in the proviso to section 147 was fulfilled which is not the case in the present proceedings. It is submitted that admittedly, it is not the case of the Revenue that the income chargeable to tax has escaped assessment for the relevant assessment year, by reason of the failure on the part of the petitioner to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 of the Act. It is strenuously argued by the learned senior counsel that the case of the petitioner does hot fall under the only other condition imposed by the said proviso, i.e, failure to disclose fully and truly all material facts necessary for the assessment for the relevant assessment year. It is submitted that, in the present case, all the primary facts have been fully disclosed in the return of income filed by the petitioner and that the working of long-term capital gain of Rs. 1,09,47,296 was attached with the return of income, as enclosure B, in which there is a detailed summary of short-term and long-term capital gains and item-wise computation, running into several pages. Under the circumstances, it is not open for the respondent to issue the impugned notice beyond the period of four years from the end of the relevant assessment year and, therefore, the same deserves to be quashed and set aside, as being without jurisdiction. The learned senior counsel has submitted that at the time of assessment, a detailed inquiry was made by the Assessing Officer and the relevant documents and submissions, which were placed on record by the petitioner, were considered and thus all the primary facts having been placed for consideration on the record, the impugned notice is patently illegal and the petition deserves to be allowed. In support of these submissions, reliance has been placed upon Krishna Metal Industries v. H.M Alogotar, [1997] 225 ITR 853 (Guj) and Calcutta Discount Co. Ltd. v. ITO, [1961] 41 ITR 191; AIR 1961 SC 372.

4. Mr. Manish R. Bhatt, learned senior counsel for the respondent, has submitted that the petition has been filed at a premature stage, inasmuch as only a notice under section 148 of the Act has been issued and if the petitioner is aggrieved by the reassessment order, he can avail of the appellate remedy. It is further submitted that the impugned notice has been rightly issued and the reasons recorded in the order disposing of the objections preferred by the petitioner would demonstrate that the proviso to section 147 of the Act has been rightly invoked, as the petitioner did not disclose the details and other related facts, as enumerated therein. It is urged that in view of the above submissions, the petition does not deserve consideration. The affidavit-in-reply filed by the respondent is also on the same lines.

5. It is not disputed that the impugned notice has been issued beyond the prescribed period of limitation, i.e, after expiry of four years from the end of the relevant assessment year. As provided in the proviso to section 147 of the Act, where an assessment under sub-section (3) of section 143 of the Act has been made for the relevant assessment year, no action can be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year (i) by reason of the failure on the part of the assessee to make a return under section 139, or (ii) in response to a notice issued under sub-section (1) of section 142 or section 148, or (iii) to disclose fully and truly all material facts necessary for assessment, for that assessment year. It is the say of the respondent that there is an omission to disclose fully and truly all material facts necessary for his assessment, on the part of the petitioner, necessitating the issuance of the impugned notice.

6. A perusal of the communication dated April 28, 2008, which states the reasons recorded for reopening the assessment for the assessment year 2001-02 discloses that the respondent has considered the subsequent assessment order for the assessment year 2005-06 passed under section 143(3) of the Act on December 31, 2007, and, on the basis of that order has arrived at the conclusion that as the income shown under the head “Capital gains” in the assessment year 2005-06 was held to be income assessable under the head “Profits and gains of business or profession”, the same analogy would apply retrospectively to the relevant assessment year 2001-02, and the amount of Rs. 1,09,47,296 shown as long-term capital gain under the head “Capital gains”, should be assessed under the head “Profits and gains of business or profession”, thereby bringing it to the net of the higher slab of tax. On the basis of the above inferences, the respondent has come to the following conclusion:

“In view of the facts of the case as above, I have reason to believe that income chargeable to tax under the head profits and gains of the business or profession has escaped assessment.”

7. It is relevant to notice that the communication dated April 28, 2008, nowhere states that the petitioner-assessee has failed to disclose fully and truly, all material facts necessary for assessment for the relevant assessment year. There is not a whisper to this effect in the letter dated April 28, 2008, and this is not one of the reasons mentioned for reopening the assessment for the relevant assessment year. On the contrary, the reasons recorded say this income has wrongly been assessed under the head “Capital gains” which should have been assessed under the head “Profits and gains of business or profession”. Thus, in fact, not only there is no failure on the part of the assessee even alleged, but it is accepted that an incorrect assessment is framed due to an error on the part of the Assessing Officer. In the case of Parashuram Pottery Works Co. Ltd. v. ITO, [1977] 106 ITR 1 the Supreme Court has stated (page 10):

“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 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, 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 stale 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 the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment 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.”

8. It is evident from communication dated April 28, 2008, that the Assessing Officer has drawn an inference, belatedly, on the basis of the assessment for the year 2005-06 that the amount of Rs. 1,09,47,296 assessed under the head of “Capital gains” for the relevant assessment year 2001-02, has incorrectly been assessed under that head and should have been assessed under the head “Profits and gains of business or profession”. The assessment of tax under a wrong head by the Assessing Officer cannot justify the imposition of the burden of tax on the assessee beyond the prescribed period of limitation, especially as none of the conditions mentioned in the proviso to section 147 of the Act exist. In our view, therefore, the assessment for the year in question cannot be permitted to be reopened in the absence of fulfilment of the pre-requisite conditions, as contained in the proviso to section 147 of the Act.

9. The objections raised by the petitioner have been rejected by order dated August 28, 2008. A perusal of the said order discloses that the respondent has relied upon Explanation 1 to section 147, stating that the assessee has not disclosed details and other related facts as to the volume of transaction, buying and selling of shares/securities, which would enable the Assessing Officer to ascertain and determine the real nature and character of the transactions and in the absence of such primary details, which should have been furnished by the petitioner-assessee, it cannot be said that there is a full and true disclosure of all material particulars relating to the assessment year under consideration. This, clearly, is nothing but an attempt to supplement and improve upon the reasons recorded as reproduced in the letter dated April 28, 2008, by adding something which is not recorded initially. We find from the material on record, that the petitioner has made a full disclosure of material facts in the return of income filed by him for the relevant assessment year, which is accompanied with several enclosures, including enclosure B in which a summary of short-term and long-term capital gains has been disclosed meticulously, and item-wise. The enclosure runs into as many as seven pages and the schedule attached to the balance-sheet also provides details of the investments, purchases and sales during the relevant year. We, therefore, find that all primary facts have been disclosed by the petitioner at the time of filing his return of income. In Calcutta Discount Co. Ltd. v. ITO, [1961] 41 ITR 191; AIR 1961 SC 372, the Supreme Court has held as under (page 202 of 41 ITR):

“It is the duty of the assessee to disclose all the facts which have a bearing on the question; but whether the assessee had the intention to make a business profit as distinguished from the intention to change the form of the investments is really an inference to be drawn by the assessing authority from the material facts taken in conjunction with the surrounding circumstances. The law does not require the assessee to state the conclusion that could reasonably be drawn from the primary facts. The question of the assessee's intention is an inferential fact and so the assessee's omission to state his ‘true intentions behind the sale of shares’ cannot by itself be considered to be a failure or omission to disclose any material fact within the meaning of section 34.”

10. As the petitioner has disclosed the primary facts, it was for the Assessing Officer to draw the necessary inferences in regard to the factual and legal aspects, in order to ascertain the tax to be levied. If the Assessing Officer had reason to believe that the assessee had not disclosed fully and truly all material facts, then it should have been stated clearly in the reasons recorded, which has not been done. Instead, We find that the order dated August 28, 2008, rejecting the objections of the petitioner, seeks to supplement the reasons which have been recorded, so as to fill in the lacunae, attempting to bring it within the ambit and scope of the proviso to section 147 of the Act. In view of the disclosure of material facts by the petitioner, Explanation 1 to section 147 will have no application and the reference thereto, in the order dated August 28, 2008, is misconceived. In fact, the order dated August 28, 2008, travels far beyond the reasons recorded as have been communicated, which is not permissible and, therefore, we cannot look into the contents thereof, which seek to supplement the reasons recorded. It is the statutory duty of the Assessing Officer to record reasons for issuing notice under section 148 of the Act and reasons recorded cannot further be supplemented or explained by a subsequent order so as to give an entirely different complexion to the case.

11. For the aforesaid reasons, we are of the view that the petition deserves to be allowed. The impugned notice dated August 28, 2008 is, therefore, quashed and set aside. Rule is made absolute. There shall be no orders as to costs.