TMI Blog2012 (4) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee - SPECIAL CIVIL APPLICATION No. 17722 of 2011 - - - Dated:- 12-3-2012 - BHASKAR BHATTACHARYA, J.B.PARDIWALA, JJ. JUDGMENT Bhaskar Bhattacharya, Actg. CJ. By this writ-application under Article 226 of the Constitution of India, an assessee under the Income Tax Act, 1961 ["the Act"] has prayed for a direction upon the income tax authority not to proceed further in pursuance of the notice issued under Section 147 of the Act, being Exhibit-I. It has also prayed for quashing the order passed by the respondent rejecting the objection of the writ-petitioner, being Exhibit-M to this application. 2. The facts relevant for the purpose of disposal of this writ-application may be summed up thus: 2.1 For the Assessment Year 2006-07, the writ-petitioner submitted a return with computation of income showing gross total income of Rs. 1,64,00,177/- and claimed deduction of Rs. 1,06,28,939/-under Section 80-IA of the Act. The return was also accompanied by the requisite audit report under Section 80-IA [7] in form No. 10CCB. The return was also accompanied by the annual report of the petitioner company for the said year. 2.2 Assessing Officer of the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the assessee is an enterprises carrying out business of developing infrastructure facilities fulfill all the conditions laid down in sub clause [a][b][c] of Section 80IA[4][i] of the I.T. Act and also claimed that it has developed irrigation project. It has come to my notice that the assessee is engaged in manufacturing of irrigation projects i.e. Drip irrigation, Sprinkler irrigation, Micro sprinkler, Gravity fed family drip system etc. and the same irrigation products have been supplied to various Companies and in some cases the assessee has worked as contractor. As discussed above, as the assessee is a contractor or supplier of irrigation products and it cannot be called a developer of any new infrastructural facility. Therefore it cannot be said that the assessee has entered into agreement for developing a new infrastructure facility. In view of the above facts, assessee has not fulfilled the condition of Section 80IA [4] of the I.T. Act and has wrongly claimed deduction u/s. 80IA [4] of the I.T.Act, 1961. In view of the facts discussed above, I have reason to believe that income of Rs. 106,28,939/- being the amount of inadmissible deduction wrongly clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of regular assessment. According to Mr. Bhatt, it appears that while granting relief under Section 80-IA of the Act in the regular assessment, the Assessing Officer overlooked certain materials including the provision contained in Explanation added to sub-section (13) to Section 80-IA of the Act, which was substituted in the year 2009 with retrospective operation from April 1, 2000. Mr. Bhatt also relies upon Explanation 3 to Section 147 of the Act in support of his contention that the above point, although not taken in the reason assigned in support of invoking the provisions contained in section 147, can be availed of by him in this proceedings. Mr. Bhatt, therefore, prays for dismissal of the present writ-application. 8. Therefore, the only question that arises for determination in this writ-application is whether the Assessing Officer was justified in issuing notice under Section 148 of the Act in the facts of the present case. 9. In order to appreciate the aforesaid question, it will be profitable to refer to the provisions contained in Section 147 of the Act, which is quoted below. Income escaping assessment. "147. If the Assessing Officer has reason to bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance or relief in the return; ( c ) where an assessment has been made, but-- ( i ) income chargeable to tax has been under assessed; or ( ii ) such income has been assessed at too low a rate; or ( iii ) such income has been made the subject of excessive relief under this Act; or ( iv ) excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3.-- For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section [2] of section 148." 10. In the case before us, the assessee having challenged the notice of reassessment in a proceeding under Article 226 of the Constitution, before proceeding further, we propose to deal with the scope of interference in such a matter. 11. The Supreme Court in the case of The Commissioner of Income tax, Gujarat v. M/s. A. Raman and Co. reported in AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer has jurisdiction to assess or reassess income under Section 147 (1) (b) of the Income-tax Act, 1961, Information in his possession that income chargeable to tax has escaped assessment furnishes a starting point for assessing or re-assessing income. If he has that information, the Income-tax Officer may commence proceedings for assessment or reassessment. To commence the proceeding for reassessment it is not necessary that on the materials which came to the notice of the Income-tax Officer, the previous order of assessment was vitiated by some error of fact or law. 6. The High Court exercising jurisdiction under Article 226 of the Constitution has power to set aside a notice issued under Section 147 of the Income-tax Act, 1961, if the condition precedent to the exercise of the jurisdiction does not exist. The Court may, in exercise of its powers, ascertain whether the Income-tax Officer had in his possession any information: the Court may also determine whether from that information the Income-tax Officer may have reason to believe that income chargeable to tax had escaped assessment. But the jurisdiction of the Court extends no further. Whether on the informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper inferences as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assessee during the relevant year. In such a situation, it was held that it was plainly a case of oversight and the Income-tax Officer could not take recourse to Section 147 (a) to remedy the error resulting from his own oversight and that therefore the notice under Section 148 should be quashed. 14. In the case of Nawab Mir Barkat Ali Khan Bahadur, Hyderabad (supra ), the Supreme Court even went to the extent that non-production of the documents at the time of the original assessments cannot be regarded as non-disclosure of any material facts necessary for the assessment of the respondent for the relevant assessment years, where such documents conform to the documents already filed by the assessee in material particulars. 15. The following observations are in this connection relevant and are quoted below: "Non-production of the documents executed in 1957 at the time of the original assessments cannot therefore be regarded as non-disclosure of any material fact necessary for the assessment of the respondent for the relevant assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the assessing officer. 8. We quote hereinbelow the relevant portion of Circular No. 549 dated 31-10-1989, which reads as follows: "7.2. Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in Section 147. A number of representations were received against the omission of the words 'reason to believe' from Section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the officer concerned it appears that it is not the case of the Revenue that the assessee had suppressed any material at the time of regular assessment and that any new document has come from which the above opinion was formed. It would appear from the documents supplied by the assessee at the time of original assessment that the fact that the assessee was engaged in manufacturing of irrigation projects i.e. Drip irrigation, Sprinkler irrigation, Micro sprinkler, Gravity fed family drip system etc. and that the same irrigation products have been supplied to various Companies and in some cases the assessee has worked as contractor could have been arrived at . In spite of existence of those materials on record, the Assessing Officer gave the relief under Section 80 IA of the Act. Now the concerned officer has changed his views from the selfsame materials on record. Thus, the Assessing Officer at the time of original assessment from the materials on record could arrive at a conclusion, which now he has reached. 22. The reason disclosed, therefore, does not come within the purview of Section 147 of the Act, as it is a case of second thought on the same materials. 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a contractor or supplier of irrigation products, it cannot be called a developer of any new infrastructural facility. 26. From the materials placed before him by the petitioner, the Assessing Officer earlier did not arrive at such conclusion and thus, the amended Explanation subsequently added cannot be of any help to him in arriving at the second opinion based on the alleged new law . 27. Moreover, in the reason assigned in support of initiation of reopening proceedings, such reason has not been disclosed. 28. We, thus, find that the condition precedent for issue of notice impugned in this Special Civil Application has not been established from the materials on record and consequently, the notice is liable to be quashed on that ground. 29. We now propose to deal with the decision cited by Mr. Bhatt. 30. In the case of GKN Driveshafts (India) Ltd vs. Income tax officer and others reported in 259 ITR 19 (SC) relied upon by Mr. Bhatt, as the judgment is a short one consisting of seven small paragraphs, we quote the entire judgment for the purpose of ascertaining whether the same is a binding precedent in the facts of the present case. The same is quoted below: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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