TMI Blog2005 (2) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... since none of the conditions precedent for assumption of the jurisdiction under section 147 of the Income-tax Act have been satisfied. The petitioner is engaged in the business of carriage of goods by ship. The ships are dry docked for carrying out periodical repairs. The said repairs are also mandatory for seaworthiness of the ship. The petitioner, as the assessee, had been claiming deduction for the expenditure on such repairs spread over in four years in all its assessments for several assessment years under the Income-tax Act and the said claim was all along allowed by the respondents. Learned counsel for the petitioner submits that the petitioner duly filed its return of incomes with the appropriate assessing authority having jurisdiction over the petitioner's assessments and all the assessments for the aforesaid assessment years excepting the assessment year 1994-95 were duly completed under section 143(3) of the Income-tax Act. It has been urged on behalf of the petitioner that in the course of the assessment proceedings for all the aforesaid six assessment years and also in the returns filed in all the said assessment years, the petitioner herein had duly and properly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, West Bengal-I. The reasons for reopening of the assessments for all the aforesaid seven years are identical. However, the petitioner has denied and disputed that any income for any of the aforesaid assessment years 1990-91 to 1996-97, has escaped assessment as alleged in the aforesaid notices issued by the respondent authorities under section 148 of the Income-tax Act. Mr. R. N. Bajoria, learned senior counsel appearing on behalf of the petitioner, submits that respondent No. 1 had no reason to believe that any income of the petitioner for any of the assessment years had escaped assessment. According to Mr. Bajoria, there is no material or ground whatsoever for the formation of any belief as mentioned in the aforesaid notices issued by the respondent authorities under section 148 of the Income-tax Act. Section 147 of the Act confers jurisdiction on the Assessing Officer to reopen a completed assessment subject to the conditions laid down therein. The relevant provisions of section 147 of the Act are as under: "147. If the Assessing Officer has reason to believe that any income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by such Assessing Officer, the Commissioner or Chief Commissioner or the Joint Commissioner is satisfied that it is a fit case for issue of such notice. The relevant provisions of section 151 are as under: "151.(1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice. Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer being the adjudicating authority and the assessee has no duty and/or authority to instruct the Assessing Officer in this regard in any manner whatsoever. Learned senior counsel for the petitioner specifically urged before this court that it is for the Assessing Officer to decide whether any amount is assessable as income or not or whether any particular expenditure is allowable or not. Mr. Bajoria referred to and relied upon the decision of the Bench of five learned judges of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 in support of his arguments. Mr. Bajoria also referred to and relied upon the subsequent decisions of the hon'ble Supreme Court wherein the law laid down by the hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. [1961] 41 ITR 191 has been followed: (1) Gemini Leather Stores v. ITO [1975] 100 ITR 1 (SC); (2) Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC); (3) Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC); and (4) Indian Oil Corporation v. ITO [1986] 159 ITR 956 (SC). Mr. Bajoria also submits that the aforesaid principles laid down by the hon'ble Supreme Court have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessments. From the said recorded reasons, it is evident that on account of the changed view of the Assessing Officer in the assessment year 1998-99, the said proceedings have been sought to be reopened. Thus it is evident from the recorded reasons that the basic condition namely of any alleged escapement on account of omission or failure to disclose the material facts by the assessee does not exist in the instant case. In the case of Calcutta Discount Co. Ltd. [1961] 41 ITR 191, the apex court held as hereunder: "To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within 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 full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of limitation only not touching the question of jurisdiction. The scheme of the law clearly is that where the Income-tax Officer has reason to believe that an under-assessment has resulted from non-disclosure he shall have jurisdiction to start proceedings for reassessment within a period of 8 years." In the aforesaid decision, the Supreme Court has considered the provisions of section 34(1)(a) of the Indian Income-tax Act, 1922 which is similar to the provisions of section 147 of the Income-tax Act, 1961. In the case of Simplex Concrete Piles (India) Ltd. [2003] 262 ITR 605, the Division Bench of our High Court at page 612 held as under: "Now, so far as the amended provision is concerned, on a comparison between these two provisions, it does not appear that there has been any substantial change in the principle or the scheme envisaged either under the 1922 Act or the 1961 Act before April 1, 1989, and thereafter under the amended provision. The power to reopen is prescribed under section 147 with effect from April 1, 1989, in a little different manner from the earlier provisions. It has provided that reopening can be done in case where the Assessing Officer has reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods." At page 18 of the said Reports it was held as under: "It is, therefore, evident that even according to the Central Board of Direct Taxes, a mere change of opinion cannot form the basis for reopening a completed assessment." At page 19 of the said Reports it was held as under: "In the event it is held that by reason of section 147 if the Income-tax Officer exercises his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional. We are therefore, of the opinion that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion." The undisputed facts in the instant case are that in the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by virtue of the provisions of section 148(2) at the relevant time. Only the reasons so recorded can be looked at for sustaining or setting aside a notice issued under section 148. In the case of Equitable Investment Co. (P.) Ltd. v. ITO [1988] 174 ITR 714, a Division Bench of the Calcutta High Court has held that where a notice issued under section 148 of the Income-tax Act, 1961, after obtaining the sanction of the Commissioner of Income-tax is challenged, the only document to be looked into for determining the validity of the notice is the report on the basis of which the sanction of the Commissioner of Income-tax has been obtained. The Income-tax Department cannot rely on any other material apart from the report. In the case before it, the Calcutta High Court refused to take into consideration the affidavit filed by the Income-tax Department giving some additional reasons." Scrutinising the recorded reasons, it is clearly evident that the basic conditions, namely, alleged escapement on account of the omission or failure to disclose the material facts by the assessee do not exist in the instant case and accordingly, the proceedings initiated are wholly without jurisdiction. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessment year ultimately. It is thus evident that it is not a case of any omission or failure on the part of the assessee to disclose any material fact relating to the said expenditure. It is merely a case of a change of opinion on the same facts. The condition precedent for assumption of jurisdiction therefore, does not exist. Although in the assessment year 1994-95, no assessment under section 143(3) of the Act was made and the notice for the assessment year 1996-97 was issued just before the expiry of four years from the end of the assessment year the proceedings for reassessment cannot be justified even for those years since the recorded reasons for all the assessment years are the same and for all the assessment years the facts are identical. Such expenditure has been allowed over a decade and also for the assessment years 1990-91 to 1996-97 involved in the present writ proceedings. As held by the Delhi High Court in the case of Kelvinator of India Ltd. [2002] 256 ITR 1 [FB], no proceedings on a mere change of opinion can be initiated even within the period of four years. On behalf of the respondents, it has been contended by relying on the decision of the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he apex court in Calcutta Discount Co. Ltd.'s case [1961] 41 ITR 191, that the High Courts have ample powers under article 226 of the Constitution of India, and are in duty bound thereunder, to issue such appropriate orders or directions as are necessary in order to prevent persons from being subjected to lengthy proceedings and unnecessary harassment by an executive authority acting without jurisdiction. The alternative remedies that are provided by the Income-tax Act, 1961, cannot always be a sufficient reason for refusing quick relief in a fit and proper case." Mr. Shome, learned counsel of the respondents, placed reliance on the following decisions in order to justify the reopening of the assessment in the present case. (1) Ess Ess Kay Engineering Co. P. Ltd. v. CIT [2001] 247 ITR 818 (SC); (2) Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC); and (3) Praful Chunilal Patel v. M. J. Makwana, Asst. CIT [1999] 236 ITR 832 (Guj). In my view, none of the aforesaid decisions support the contention of the Revenue and on the other hand, from the said decisions it would be apparent that those were not cases of mere change of opinion on the same materials but cases wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income has escaped assessment notwithstanding that there was full disclosure of material facts on record. The assessee in such cases cannot defend the initiation of action on the ground that the facts were already placed on record and that the Assessing Officer must have or ought to have considered them." In any event, the aforesaid decision in so far as it lays down that within a period of four years reassessment proceedings can be initiated on a mere change of opinion does not lay down the correct law. The above decision of the Gujarat High Court was considered by the Full Bench of the Delhi High Court in the case of Kelvinator of India Ltd. [2002] 256 ITR 1. The Full Bench of the Delhi High Court dissented from this decision. While dissenting with the decision of the Gujarat High Court in the case of Praful Chunilal Patel [1999] 236 ITR 832 (Guj), the Full Bench of the Delhi High Court at page 15 of the Reports observed as under: "We are, with respect, unable to subscribe to the aforementioned view. If the contention of the Revenue is accepted the same, in our opinion, would confer an arbitrary power upon the Assessing Officer. The Assessing Officer who had passed the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
