TMI Blog2010 (8) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... and not within the proviso to Section 147 of the Act. Hence, there is no need to satisfy the second legal requirement - it is not necessary for the assessing officer to record as to whether the escapement of chargeable income from tax assessment was due to the failure of the assessee to make true and full disclosure of the income. It would be suffice, if the assessing officer had recorded the reasons for his belief that there had been escapement of taxable income from assessment. Change of opinion - It is only out of the available materials, the 2nd respondent has found the reasons to believe that there has been escapement of chargeable income from assessment since, instead of treating the expenditure in question as capital expenditure, the then assessing officer has treated the same as revenue expenditure. - would not amount to either "change of opinion" or "reviewing the earlier assessment order. Capital or revenue expenditure - it is for the 1st respondent to decide the question as to whether the expenditure on replacement of machinery and conversion of materials or any part of the same , would fall within the ambit of capital expenditure or revenue expenditure so as to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessments by stating that he had proposed to complete the reassessment for the assessment years referred to above disallowing the claim of the petitioner for replacement of machineries and conversion materials as revenue expenditure and he had further proposed to treat the said expenditures as capital expenditure with an entitlement of only depreciation. The petitioner submitted his objections in writing stating that the expenditures towards replacement of machineries and conversion of materials would squarely fall within the head of revenue expenditure and, therefore, the earlier assessments made under Section 143 (3) of the Act do not require any reopening for reassessment under Section 147 of the Act. The petitioner has also contended before the 1st respondent that these notices are barred by limitation as provided in Section 149 of the Act. But, so far no final order has been passed in any of these matters by the 1st respondent. When things stand thus, the petitioner has rushed to this Court with these three writ petitions. 5. In these writ petitions , the following common grounds have been raised:- (i) The notices issued under Section 148 of the Act by the 2n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the original records in order to substantiate all the above contentions. He would also rely on a few judgements of the Hon'ble Supreme Court as well as various High Courts about which I would make reference during the course of this order. 7. No counter has been filed by the respondents. The original files have been produced for perusal. However, the learned counsel appearing for the respondent would vehemently oppose all these writ petitions on the following grounds:- (i) The petitioner has got alternative remedy to submit his explanations before the 1st respondent and such a remedy is more efficacious. When such an alternative remedy is available for the petitioner, these writ petitions are not maintainable and, therefore, the same are liable to be dismissed. (ii) The 2nd respondent has recorded the reasons in the file to substantiate his belief that there was chargeable tax escaped from assessment during the relevant assessment years and such a recording would satisfy the legal requirements as required under Section 147 of the Act. (iii) There is no legal requirement that such reasons which made the 2nd respondent to believe that there have been escapement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that the formation of belief based on reasons to the effect that the income chargeable to tax has escaped from assessment, need to be based on any fresh materials collected subsequent to the original assessment. Even from the materials collected during the original assessment, if such escapement is noticed by the subsequent officer that itself can be the ground to reopen the assessment under Section 147 of the Act. And, it cannot be stated that the impugned notices have been issued merely based on a change of opinion as it is claimed by the petitioner. But, it is based on materials on record which formed the basis for reasons to believe that there have been chargeable income-tax escaped from assessments. 8. The learned counsel appearing for the respondents has taken me through the original files to substantiate his contentions and he has also placed reliance on a number of judgements of the Hon'ble Supreme Court as well as various High Courts including this Court about which also I would make reference at the appropriate places of this judgement. Maintainability:- 9. Let me now proceed to analyse the contentions of the rival parties. The first and foremost contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of this Court without disposal, if they are dismissed at this length of time on the ground of availability of alternative remedy thereby driving the aggrieved to go and avail the alternative remedy, in my considered opinion and as laid down by the Hon'ble Supreme Court in Calcutta Discount Company Limited v. Income-Tax Officer, 1961 (41) ITR 191 SC], surely, the same will not be in the interest of justice. Apart from that, when it is contended by the petitioner that all the proceedings impugned in these writ petitions are either barred by limitation as provided in Section 149 of the Act, or wholly without jurisdiction, it will also be in tune with the interest of justice to examine the said questions in these writ petitions. For all these reasons, I hold that these writ petitions are maintainable and,therefore, the objection raised by the learned counsel for the respondents regarding the maintainability of these writ petitions is rejected. Whether the impugned notices are without jurisdiction:- 12. Admittedly, the impugned notices in respect of the assessment years 1991-92 and 1992-93 were issued after the expiry of four years from the end of the relevant assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such "under-assessment" has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years, from the end of the year in question." 14. The only difference between the old Act and the present Act is that in the old Act the maximum period of limitation was eight years; whereas the same is six years in the present Act. Except the above, both the provisions viz., Section 34 of the Indian Income-Tax Act, 1922 and Section 149 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 597 (SC)] ; Raymond Woollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence of only the first condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to believe that the income chargeable to tax has escaped assessment and the approval is sought for." 19. Though it is true that in the notices issued for the assessment years 1991-92 and 1992-93, the reasons for reopening have not been indicated, indisputably, the above reasons were intimated to the petitioner in the reply when he required the same. From the records, as I have extracted above, the 2nd respondent has recorded the above reasons for his belief. A close reading of the above reasons recorded by the 2nd respondent would make it very clear that it satisfies only the first requirement of Section 147 of the Act as held by the Hon'ble Supreme Court in the aforesaid judgements. The second requirement has not been satisfied. To put it precisely, there is no mention in the above recorded reasons that the escapement of chargeable income for tax was due to omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Indisputably, these notices have been issued beyond the period of limitation of four years and that is the reason why the respondents make an attempt to bring the same within the scope of proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court, are satisfied by way of recording reasons for both the conditions in the order, the 2nd respondent will get jurisdiction to issue notice under Section 148 of the Act after the expiry of four years from the end of the relevant assessment year. Since the same has not been done so, the notices impugned in W.P.Nos.2498 and 2499 of 2000, as I have already concluded, are wholly without jurisdiction. 23. In view of the above definite conclusion, it is not necessary to examine the other grounds raised by the petitioner in respect of the notices impugned in W.P.Nos.2498 and 2499 of 2000. Thus, I hold that the impugned notices in respect of the assessment years 1991-92 and 1992-93 are liable to be quashed. 24. Assessment year 1993-94:- Now coming to the impugned notice in respect of the assessment year 1993-94, it has been issued within four years as provided in Section 149(1)(a) of the Act. This case falls within the sweep of the main provision of Section 147 and not within the proviso to Section 147 of the Act. Hence, there is no need to satisfy the second legal requirement as laid down by the Hon'ble Supreme Court in Assistant Commissioner of Income-Tax v.Rajesh Jhaver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to the original assessment, by mere change of opinion, the second respondent cannot call it as a capital expenditure. The reason for belief can never be the out come of the change of opinion. He would further submit that if an expenditure or deduction was wrongly allowed while computing the taxable income of the assessee, the same could not be brought to tax by reopening the assessment merely on account of the fact that the subsequent assessing officer formed an opinion that the then assessing officer had erred in allowing certain expenditure or deduction. For this proposition, the learned senior counsel would rely on a judgement of the Delhi High Court in Jindal Photo Films Limited v. Deputy Commissioner of Income-Tax and another reported in 1998 ITR 170 Delhi. He would also submit that unless new materials have come on record, merely a fresh application of mind by the same assessing officer to the same set of facts, cannot form the belief as provided in Section 147 of the Act. He would also rely on a judgement of this Court in Apollo Hospitals Enterprises Limited v. Assistant Commissioner of Income-Tax , [2006] 287 ITR 0025 wherein a learned single Judge of this Court has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials collected subsequent to the original assessment orders. Even from out of materials which are already available on record, if the subsequent officer finds reasons to believe that there has been escapement of assessment, surely he can issue notice under Section 148 of the Act. Such course, will not, in my considered opinion, amount to reviewing the earlier assessment. I am conscious that there is a vast difference between the original assessment and reassessment as held by the Hon'ble Supreme Court. In the instant case, there are sufficient materials available on record to hold that there has been escapement of income from assessment. It is only out of the available materials, the 2nd respondent has found the reasons to believe that there has been escapement of chargeable income from assessment since, instead of treating the expenditure in question as capital expenditure, the then assessing officer has treated the same as revenue expenditure. This, in my considered opinion, would not amount to either "change of opinion" or "reviewing the earlier assessment order". 30. Nextly, the learned senior counsel appearing for the petitioner would submit that the expenditure incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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