TMI Blog1990 (6) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessability of the service charges as income from business cannot be raised in the reassessment proceedings ? 4. Whether, on the facts and in the circumstances of the appellant's case, the Tribunal was justified in holding that depreciation and insurance premium in respect of various installations cannot be allowed in computing the income from service charges under section 57(2) of the Act ? " The assessment years involved in this case are the assessment years 1973-74 and 1974-75 for which the relevant periods of account are the calendar years ending on December 31, 1972, and December 31, 1973, respectively. The relevant facts of this case are as follows: "The common point involved was regarding the reopening of the assessment under section 147(b) for both the years. The Inspecting Assistant Commissioner of Income-tax was the assessing authority who noted in the assessment order that the original assessment was completed earlier on a total income of Rs. 86,86,852 and in consequence of information that came into his possession, he had reasons to believe that income chargeable to tax had escaped assessment. He initiated proceedings under section 147(b) and issued notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or profession'. They are chargeable under the head 'Other sources', and are charged under that head from year to year'. " "In the computation of income, the assessee deducted a sum of Rs. 1,51,039 (Rs. 1,30,813 for 1974-75), being the depreciation on the assets. Insurance premium Rs. 5,505 (Rs. 5,493 for 1974-75). This deduction is not permissible under law. While scrutinising the records in connection with the assessment proceedings for the assessment year 1972-73, I found that this deduction was allowed. It is clear that in the original assessment excessive depreciation allowance had been computed. Thus, in consequence of information that has come to my possession, I have reason to believe that income chargeable to tax has escaped assessment for the assessment year 1973-74 (1974-75). The assessment requires to be reopened under section 147(b). Issue notice under section 148." On the basis of the aforesaid recorded reasons, it was found by the Commissioner of Income-tax (Appeals) that, in consequence of information that came to this possession, the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment for both the years. Before the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1972-73 and thus rejected the contention of the assessee on the point. The Commissioner of Income-tax (Appeals) also considered the contention of the assessee that, along with the original return, a statement was filed disclosing receipt of service charges, etc. He found on perusal of the record that it was a fact that a statement of this nature was filed by the assessee at the time of the original assessment. But, at the same time, the Commissioner of Income-tax (Appeals) found from the records that even though a statement had been filed regarding the assessee's claim for depreciation for plant and machinery, etc., the Assessing Officer had never applied his mind to those details and no enquiry was made at any stage of the original assessment. He was, there fore, of the view that it was clear that this aspect of the matter was completely overlooked at the initial stage and the knowledge about this mistake came to the possession of the Assessing Officer after the original assessment was completed. According to him, section 147(b) was applicable to such type of situation. He thus rejected the contention of the assessee on this point. The assessee took up the matter befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it cannot be said that there was a change of opinion, when no earlier opinion was formed at the time of the original assessment, as held by the Hon'ble Delhi Court in the case of Delhi Glass Works P. Ltd. [1971] 81 ITR 95. Similar is the view of the Hon'ble Delhi High Court in the case of Nawabganj Sugar Mills Co. Ltd. [1980] 123 ITR 287. 20. It is submitted before us that along with the return, the assessee has filed a certain statement containing various claims, etc., on which the Assessing Officer, as claimed by the Revenue, had not applied his mind. In this connection, we may refer to the decision of the Hon'ble Calcutta High Court in the case of Sudhir Kumar Bhose [1972] 84 ITR 60, in which, on the facts of that case, it was held that the Assessing Officer would have jurisdiction to issue notice under section 147 immediately after the omission to file the return or failure to disclose all the material facts therein and no subsequent act on the part of the assessee can take away this jurisdiction and the assessee cannot resist the notice under section 147 contending that he had furnished the particulars by other means. It has been contended on behalf of the Revenue that eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax (Appeals) is sustained. Mr. Sukumar Bhattacharjee, learned counsel appearing on behalf of the assessee-applicant, submitted that the condition precedent for invoking the provisions of section 147(b) of the Income-tax Act, 1961, was wholly absent, inasmuch as there was no fresh material before the Income-tax Officer conferring jurisdiction upon the Income-tax Officer. It was further submitted that the reasons, as recorded by the Income-tax Officer, did not indicate that any material had come into his possession on the basis of which he could have reason to believe that the income chargeable to tax had escaped assessment for both the years in question. It was further submitted that there was a mere change of opinion by the Income-tax Officer inasmuch as, at the time of the original assessment, the assessee had furnished a statement along with the returns regarding service charges and in that statement, the assessee had claimed deduction on account of depreciation as well as insurance premium on the plant and machinery and since all the facts were disclosed at the time of original assessment and, on the basis of those facts, the Assessing Officer had taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. An error discovered on a reconsideration of the same material (and no more) does not give him that power. " The Supreme Court in that case reiterated the contention of the Revenue that " information " in section 147(b) refers to realisation by the Income-tax Officer that he has committed an error while making the original assessment. The Supreme Court thus observed at page 1005 of the said decision as follows : . " The submission appears to us inconsistent with the terms of section 147(b). Plainly, the statutory provision envisages that the Income tax Officer must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words 'reason to believe', and it follows from the 'information' received by the Income-tax Officer. The information is not the realisation, the information gives birth to the realisation. On behalf of the Revenue, reliance was placed on a single Bench decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But, if it is found from the materials which had been disclosed that no reasonable man with ordinary prudence could form the opinion, as is required under the law, then certainly the court can look into it and can interfere in the matter and can hold that there were no materials on the basis of which such an opinion could be formed. In this particular case, in our view, the materials disclosed did not indicate any omission or error or mistake which had escaped assessment at the time of the original assessment made by the Income-tax Officer and consequently on the basis of the materials on record, the provisions of section 147(b) of the Income tax Act, 1961, could not be invoked. Further, in view of the law laid down by the Supreme Court, as referred to above, the Income-tax Officer can not reopen the assessment on a mere change of opinion in respect of the materials already on the record and in respect of the materials which were considered by the Income-tax Officer at the time of the original assessment. On the basis of mere change of opinion, an assessment could not be reopened under section 147(b) of the Income-tax Act, 1961. Accordingly, in our view, the Tribunal was wrong in h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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