1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2890 OF 1990 M/s.Nibs India & anr. ..Petitioners V/s. M/s.Arti Handa & anr. ..Respondents Mr.Arun Sathe,Senior Counsel with Mr.Mandar Vaidya, Mr.Panjabrao Naik i/b.Mr.Rajesh Shah, Advocate, for the petitioners Mr.S.M.Shah with Mr.P.S.Sahadevan, Advocate, for the Respondents CORAM : F.I.REBELLO & R.S.MOHITE,JJ. DATE : 4TH FEBRUARY, 2008 JUDGMENT (PER R.S.MOHITE, J.) . By this Writ Petition the petitioners seek to quash and set aside a notice under Section 148 dated 30th March, 1989, by which the revenue seeks to re-open the assessment of the petitioners for the assessment year 1984-85. 2. After filing the returns the petitioners sought the reasons for re-opening the assessment 2 and the same was furnished to the petitioners. 3. Perusal of reasons for re-opening assessment reveals that there was a search & seizure operation under Section 132 of the Income Tax Act which was carried out on 27th September, 1998 at the business and residential premises of various persons. During the course of the search operation the statements of the Directors/Partners and the employees were recorded. The main business of the petitioners/assessee was manufacture of ball pens, refills, ink and other allied items and the raw material consumed in their business included refills, ink and other allied items. On the basis of observation of the manufacturing process carried out during the search operation and from the various statements which were recorded, it was noticed that Plastic scrap generated amounted to 45% of the total consumption of the brass items i.e.brass wire/rods. It was also noticed that the wastage could be as much as 12% of the consumption 3 of brass powder. It was noticed that in the previous year relevant to the assessment year 1984- 85, the assessee had not shown any sell of scrap. Apart from this, the assessee had not shown value of scrap either by way of sale or by way of auction. Suppression of profit by non-disclosure of value of scrap in the account was therefore, worked out as Rs.47,532/- by applying average rate of consumption of raw material for the relevant previous year. 4. The second reason which is given for issuing a notice under Section 148 is that in the course of the search operation, on 3rd December, 1988, certain books and records were seized from the premises of M/s.Sanghvi Swiss Refills Pvt. Ltd. which was a sister concern. It was noticed that one M/s.Micro Injection Moulding had paid an amount of Rs.80,000/- to the assessee but, this income had not been recorded in the assessee's books of account. It was also seen that M/s.Sanghvi Swiss 4 Refills Pvt. Ltd. which was another sister concern had paid Rs.16,408/- to the assessee on 30th September, 1985 but this receipt had also not recorded in the assessees book of accounts. 5. In so far as the first ground is concerned, the same is covered by the Division Bench of this Court in the case of Sanghvi Swiss Refills Pvt. Ltd. V/s. Smt.Arti Handa, Assistant Commissioner of Income-Tax and Another, reported in (2006)284 ITR 427 (Bom). In that case also the assessee was also engaged in the business of manufacture of Ballpen and in its returns for three years no value of scrap was shown. Subsequently, there were search and seizure operations during which statements of various persons were recorded. On such basis, the assessments were sought to be re-opened. It was held that the issue of scrap arising out of manufacture was in fact raised by the assessee before the officer at the time of the original assessment. It was further held that whenever the 5 scrap had been subsequently sold, the sale had been disclosed in the succeeding years. On this basis, a notice under Section 148 was quashed by the Division Bench. In the present case also it is the contention of the petitioners that during the assessment year 1983-84 and 1987-88, the petitioners sold the scrap generated. Such sale was of the approximate weight of 1.65 tonnes. Such sale was disclosed whenever made and the proceeds of Rs 4,44,055/- accruing from such sale were taxed by the respondents. From these facts, it appears that sell of scrap in the year 1987-88 was known to the department. The amounts received were taxed. The search and seizure carried out in this matter on 27th September, 1988 was subsequent. There is no mention in the statement of reasons about the disclosure of sale of brass scrap in the year 1987- 88. The petitioners also contend that the schedules and annexures to the petitioners' annual account which they had filed along with their original returns, indicated consumption of raw material 6 during the assessment year. All this material was therefore, available with the respondents when the original assessment was carried out. Taking into account the aforesaid facts we find that the first ground given for re-opening the assessment is not tenable. 6. As regards the second ground, from the affidavit dated 21st January, 2008, it appears that the amount of Rs.80,000/- and 16,408/- found in a re-conciliation statements were paid by two different companies on behalf of the assessee and therefore, these amounts were liable to be entered into books of account and necessary entries were passed on 30th September, 1985 giving credit to both these parties. The xerox copy of these entries is annexed to the said affidavit. This being the factual situation, the second ground which is pertaining to the receipt of such income would also not be tenable. 7 7. In the net result, the petition must succeed and hence, rule is made absolute in terms of prayer clause (a). (R.S.MOHITE, J.) (F.I.REBELLO, J.)