TMI Blog2006 (2) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in respect of the assessment year 2001-02. It is also directed against the order dated August 17, 2005, passed by the Income-tax Officer in response to the objections to the said notice of February 10, 2005, filed by the assessee (petitioner No. 1). By virtue of this order dated August 17, 2005, the assessee's objections have been overruled and its request to drop the proceedings under section 147/148 of the said Act have been rejected and the reassessment has been directed to be proceeded with. At the outset, it may be mentioned that two issues arise for our consideration in this writ petition. The first issue relates to the maintainability of the writ petition for quashing a notice under section 148 of the Act and/or a speaking order disposing of the objections filed thereto. It is the contention of the petitioners that if the initiation of proceedings under section 147, by issuance of a notice under section 148, is itself without jurisdiction then, they are entitled to challenge the same by way of a writ petition both at the stage of the issuance of the notice under section 148 as well as at the stage after the speaking order is passed disposing of the assessee's objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion had been allowed in excess and the Assessing Officer was within his rights to reopen the assessment as he had reason to believe that income had escaped assessment. Before we consider the two issues noted above, it would be pertinent to point out certain facts which are relevant. The assessee (petitioner No. 1) is a private limited company which was incorporated on October 5, 1998, under the Companies Act, 1956, and is engaged in the business of development and export of computer software and human resource services. The undertaking of the assessee engaged in the business of development and export of computer software is in a "software technology park" (STP) and is eligible for deduction under section 10A of the Act. In respect of the assessment year 2001-02, the assessee filed a return of income under section 139(1) of the said Act on October 25, 2001, declaring a loss of Rs. 3,31,301. The return was processed under section 143(1) and an intimation dated June 28, 2002, under section 143(1)(a) of the said Act was issued accepting the returned loss. Thereafter the return was selected for regular assessment under section 143(3) of the said Act and during the course of these pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htly allowed in the original assessment and there was no question of any income escaping assessment. It was also urged that the issuance of the notice under section 148 was without jurisdiction inasmuch as the reasons recorded reflected a mere change in opinion which was not permissible for reopening an assessment. In the objections, the assessee had also prayed that in view of the directions given in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC), the objections raised by the assessee be disposed of by a speaking order. It is in this background that the speaking order dated August 17, 2005, which is also impugned herein came to be passed. The objections of the assessee were rejected and it was directed that the assessment proceedings pursuant to section 148 notice be continued. The reason for rejecting the objections disclosed in the speaking order was as under: "The assessee-company was not maintaining any separate books of account from the very beginning of its business and for the period relevant to the assessment year under consideration. In subsequent assessment years the assessee-company itself has computed the income/expenses on pro rata basis." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied and came to the court at the earliest opportunity. There is nothing in its conduct which would justify the refusal of proper relief under article 226. When the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. In the present case we can find no reason for which relief should be refused." The Supreme Court, as is clear from the aforesaid, repelled the argument that a writ petition would not lie inasmuch as the question whether the Income-tax Officer had reason to believe that underassessment had resulted from non-disclosure of material facts could be agitated before the Income-tax Officer in the assessment proceedings and, if unsuccessful there, before the Appellate Officer or the Appellate Tribunal. This decision which was rendered as far back as in 1961 holds good even today inasmuch as no contrary decision of a larger Bench has been brought to our notice. On the contrary, there is affirmation by the Supreme Court in the case of Whirlpool Corporation v. Registrar of Trade Marks [1998] 8 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 the Supreme Court did not lay down the law that in no case the assessee could move the court under article 226 for challenging the reassessment notice. In view of the difference of opinion amongst the two judges of the Division Bench, the same was referred to a third judge (M.S. Shah J.) who agreed with the view taken by Mehta J., on the maintainability of a writ petition. The view taken by him was: "What the Supreme Court has now done in the GKN case [2003] 259 ITR 19 is not to whittle down the principle laid down by the Constitution Bench of the apex court in Calcutta Discount Co. Ltd. case [1961] 41 ITR 191 but to require the assessee first to lodge preliminary objection before the Assessing Officer who is bound to decide the preliminary objections to issuance of the reassessment notice by passing a speaking order and, therefore, if such order on the preliminary objections is still against the assessee, the assessee will get an opportunity to challenge the same by filing a writ petition so that he does not have to wait till completion of the reassessment proceedings which would have entailed the liability to pay tax and interest on reassessment and also to go through the ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . T.R. Varma [1957-58] 13 FJR 237; AIR 1957 SC 882; State of U.P. v. Mohammad Nooh, AIR 1958 SC 86 and K.S. Venkataraman and Co. (P.) Ltd. v. State of Madras [1966] 60 ITR 112; [1966] 17 STC 418, held that article 226 of the Constitution confers on all the High Courts a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision could not be adopted. In Harbanslal Sahnia v. Indian Oil Corporation Ltd. [2003] 2 SCC 107, the hon'ble Supreme Court held that the rule of exclusion of writ jurisdiction by availability of alternative remedy is a rule of discretion and not one of compulsion and the court must consider the pros and cons of the case and then may interfere if it comes to the conclusion that the petitioner seeks enforcement of any of the fundamental rights; where ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction or had purported to usurp jurisdiction without any legal foundation. It, however, remains a matter of discretion with the court as to whether in a particular case, it ought to interfere or not. But, a writ petition such as the one with which we are dealing, cannot be thrown out at the threshold on the ground that it is not maintainable. This brings us to the issue of whether the reassessment proceeding initiated in the present case is without jurisdiction. It is to be remembered that the assessee had contended that the reasons recorded for issuance of a notice under section 148 of the Act merely disclosed that there was a change in opinion. It is clear from the decision of this court in Jindal Photo Films Ltd. v. Deputy CIT [1998] 234 ITR 170 that "where the Income-tax Officer attempts to reopen an assessment because the opinion formed earlier by him was in his opinion incorrect, the reopening could not be done." This court clearly held that "the power to reopen an assessment was conferred by the Legislature not with the intention to enable the Income-tax Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, however, the only reason purportedly given for rejecting the objections raised by the assessee was that the assessee was not maintaining any separate books of account. But this was clearly considered by the Assessing Officer during the original assessment proceedings. In fact, this was expressly stated in the show-cause notice dated March 9, 2004, itself. It is evident that no new material came to light and on the same set of facts, the subsequent Assessing Officer merely had a change of opinion with regard to the deduction under section 10A allowed to the assessee. In this view of the matter, the reopening of the assessment would not be justified and would be without jurisdiction. Accordingly, the reopening of the assessment by issuance of the notice under section 148 as well as the speaking order dated August 17, 2005, and proceedings pursuant thereto are liable to be quashed. It must also be pointed out that the argument raised by the assessee in his objections with regard to the amendment of sub-section (4) to section 10A was not at all taken into account by the Assessing Officer in the impugned speaking order dated August 17, 2005. The specific argument raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into Special Economic Zone the period of ten years shall be reckoned from the date the unit first began to manufacture or produce articles or things or computer software. The proposed amendment being clarificatory, will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years." The relevant extracts of the Central Board of Direct Taxes Circular No. 14 [2001] 252 ITR (St.) 65, explaining the amendments made by the Finance Act, 2001, is as follows: "21. Rationalization of provisions related to undertakings in Free Trade Zone, Export Processing Zones, Special Economic Zones and Export Oriented Units. 21.1 Under section 10A of the Income-tax Act, newly established undertakings in free trade zones are entitled to a tax holiday for a ten year period. Similarly, section 10B of the Income-tax Act provides for a ten year tax holiday in respect of newly established hundred per cent, export oriented undertakings. The Finance Act, 2000, substituted sections 10A and 10B of the Income-tax Act. The newly substituted provisions of sections 10A and 10B provide for deduction of profits and gains of business derived by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated February 10, 2005. No costs. T.S. Thakur J.-I have had the advantage of reading the order proposed by my esteemed Brother, Badar Durrez Ahmed J. I agree with the conclusion drawn by his Lordship that the writ petition deserves to be allowed and the impugned notice under section 148 of the Income-tax Act, quashed. I would, however, add a few lines of my own on two distinct aspects that arise for consideration and that have been dealt with in the draft judgment authored by my noble Brother. The power of the High Court to issue prerogative writs under article 226, is untrammelled by any ordinary piece of legislation, whether enacted by Parliament or a State Legislature. The Income-tax Act, 1961, is one such piece of legislation which does not and cannot in the constitutional scheme of things affect the power of the superior courts in the country to issue appropriate writs in appropriate cases. Having said that, we need to remember that the writ jurisdiction is not only discretinary but equitable in nature. A court need not interfere, just because it is lawful to do so. The courts have, therefore, evolved certain self-imposed restrictions for the exercise of their power under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings. There may be cases where the material is available with the Assessing Officer but the same is either ignored or escapes his attention while making the assessment. There can be no legal impediment in the reopening of assessment in such cases, nor can it be said that the reassessment is based only on a change of opinion. A Division Bench of this court of which I was a member had in Consolidated Photo and Finvest Ltd. v. Asst. CIT disposed of on January 17, 2006 [2006] 281 ITR 394, an occasion to deal with a somewhat similar situation. Relying upon the decisions of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191; Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638; Malegaon Electricity Co. P. Ltd. v. CIT [1970] 78 ITR 466 and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and the decisions of the High Court of Gujarat in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT [1999] 236 ITR 832 and Gruh Finance Ltd. v. Joint CIT (Assessment) [2000] 243 ITR 482, this cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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