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TMI Blog2017 (8) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... e established sometime in the year 2005 and with the passage of time three separate units came to be established, one at Baddi and two at Shimla. 4. For the Assessment Year 2006-2007, the Assessee filed return, under Section 139 of the Act, which came to be scrutinized on 29.12.2008 and order passed under Sub Section (3) of Section 143 of the Act. Noticeably, accounts of the Assessee were audited and audit reports filed, disclosing that Assessee is an undertaking/enterprise located in an area notified by the Board, for the purposes of Section 80-IC of the Act and since the Assessee is engaged in the business of information technology, by virtue of the activity of the business specified in the Fourteenth Schedule, is entitled for statutory deductions, so prescribed under the provisions of Section 80-IC of the Act. The declaration to that effect came to be made on 28.2.2008, the date prior to the passing of the order of assessment. The Assessing Officer, accepting the contention of the Assessee, assessed the income, holding the Assessee eligible for statutory deductions, referred to supra. 5. It is a matter of record that for three successive Assessment Years, i.e. 2007-2008, 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/ sub-classifications. These facts are noticed during the assessments proceedings for the A.Y. 2010-11." (Emphasis supplied) 10. Objections, so filed by the Assessee, pursuant to the notices so issued under Section 148 of the Act, also stand dismissed by the Assessing Officer, holding as under: "Thus it can be concluded that the activities undertaken by the Assessee 'Altruist Technologies Private Limited' do not come under the purview of manufacturing as required by 'NIC code classification of 1998' in 30006 or 30007' for which he is taking the deduction u/s 80IC of the Income Tax Act' 1961. Further the deduction claimed by him for the activities being carried out by it are not covered as per Item No.13 under Part C of 14th Schedule referred under Section 80IC(2) of Income Tax Act, hence not eligible for deduction u/s 80IC(2). The Issuance of Notice under Section 148 of the Income Tax Act is based upon the material on record and I had 'Reasons to believe' that Income has escaped assessment due to wrong statement of facts and claiming the wrong deduction by the assessee." (Emphasis supplied) 11. Evidently, the opinion formed by the Assessing Officer is that information, inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..................... ................................ "13.Information and 84.71 30006/7" Communication Technology Industry, Computer hardware, Call Centres. 14. That the activity carried out by the Assessee falls in the categories specified in the category so mentioned at Sr. No.13 of the Schedule, is not in dispute. The only objection being that since the Assessee does not possess NIC code and Excise Classification, it is not entitled to the statutory deduction. It is here, we find the Assessing Officer to have committed grave illegality in correctly and completely construing the provisions of the Schedule. In fact, from the observations of the Assessing Officer, reproduced supra, it stands admitted that the code/ classification, reproduced supra, is required only for such of those activities, which fall under the category of 'manufacture'. Assessee is running a Call Centre. It does not deal with computer hardware or is in the business of manufacturing information and communication technology. It is not into the business of manufacture or production of any articles referred to in item at Sr. No.13. It carries out operation of such items, which do not require registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces came to be issued only on 20.3.2014 and all these with respect to the Assessment Years 2007- 2008, 2008-2009 and 2009-2010. For all these Assessment Years, Assessing Officer had passed orders under Section 143(3) of the Act. 18. Now, there is nothing on record to establish, much less, even prima facie showing any opinion, formed by the Assessing Officer, to the effect that with respect to these Assessment Years, the Assessee had not filed his Returns, under Section 139 of the Act or that it did not disclose material facts, either fully or truly, necessary for carrying out the Assessment. In fact, Assessee had made full disclosures. Opinion of the Assessing Officer in reopening the assessments for these years is also not on this ground, but on the ground that even though the activity carried out by the Assessee was not manufacturing of the items specified in the Schedule and was otherwise not required to obtain the code, but since it otherwise did not have the same, was not entitled to statutory deductions. 19. It is in this backdrop, we find the action initiated by the revenue in trying to reopen the assessments, beyond a period of four years, i.e. with respect to the years 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated 31st October, 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 number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Co., AIR 1968 SC 49, held that: "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 information in his possession he should commence a proceeding for assessment or reassessment, must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act; if he has information from which it may be said prima facie, that he had reason to believe that income chargeable to tax had escaped assessment, it is not open to the High Court, exercising powers under Article 226 of the Constitution, to set aside or vacate the notice for reassessment on a re-appraisal of the evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the reasons of the Assessing Officer to be totally "flimsy" and not "sufficient to draw conclusion about the escapement of income" and there being "no material" before the Assessing Officer, entitling him to reopen the case of assessment, the Court found the notice so issued to be ex-facie, bad in law. Hence it exercised its discretionary power in quashing such action. Significantly, the Court observed that a writ would lie only if the impugned action is ex-facie without jurisdiction or again in excess of the jurisdiction vested in the authority or the action being totally arbitrary. It cautioned that extra ordinary jurisdiction cannot be allowed to be availed as a matter of course and while deciding the issue of jurisdiction, finding of the authority on the factual aspect may be necessary, in which case, necessarily the assessee would be required to approach the Assessing Officer." "29. Thus it cannot be said that jurisdiction of this Court, in entertaining a petition even when an equally efficacious remedy is available to a party, is totally ousted. Notwithstanding the statutory remedies available to the aggrieved party, restriction imposed by a writ Court is more in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders passed by a Statutory authority are always amenable for challenge in a writ Court which power, perhaps the Court may exercise, when warranted, in the attending facts and circumstances." 24. Significantly, the Assessing Officer himself admits that (a) petitioner is not a manufacturer, and (b) the code is not required for the activity/operations so carried out by it. 25. In the instant case, it cannot be said that the action taken is in good faith. Whether the Assessee is required to obtain sanction/permission/code, so prescribed or not, is not in dispute. It is true that notice is only subjective satisfaction and not final opinion, but then the Assessing Officer has decided the objections, already expressing an opinion on the assessee's entitlement for statutory deduction. The question is not whether the action taken is in good faith or not. What is important is that the Assessing Officer has exceeded its jurisdiction erroneously. Which, in our considered view, he has so done, rendering the action to be absolutely illegal and unsustainable in law. The impugned action cannot be said to be only in the nature of show cause notice. 26. Learned counsel have referred to several ..... X X X X Extracts X X X X X X X X Extracts X X X X
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