TMI Blog1987 (4) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... fall under section 150(1) of the Act, and hence, the notice is bad. Sri Srinivasan, learned senior standing counsel for the Department, has argued, justifying the notice and has produced the assessment records in which the reasons for reopening the assessment are recorded by the Income-tax Officer. The reasons recorded are reproduced hereinbelow : " The assessee had incurred expenditure totalling Rs. 4,81,760 during the period relevant to the assessment years 1974-75 and 1975-76 towards installation of ropeway equipment. This was held to be capital expenditure. The Income-tax Officer had allowed depreciation on this amount for the assessment year 1976-77 and on the WDV after deducting the depreciation allowed for 1976-77, depreciation was again allowed for the assessment year 1977-78. In appeals relating to the assessment years 1974-75 and 1975-76, the Income-tax Appellate Tribunal held that the amount of Rs. 4,81,760 constituted revenue expenditure to be deducted in arriving at the business income of those two years. As regards facts, the Tribunal's decision has become final. In consequence of the finding given by the Tribunal, I have reason to believe that the allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation' for purposes Of reopening under section 147(b) of the Act ? The facts relevant for initiating the action to reopen the assessments are set out in the reasons recorded by the Income-tax Officer. The scope of enquiry in this writ petition is to find out whether the two conditions necessary for reopening the assessment under section 147(b) existed on the day the Income-tax Officer initiated action. Before considering whether there was ' information ' on the facts of the case as recorded by the Income-tax Officer and whether the action initiated by the Income-tax Officer is saved by the provisions of section 150(1) of the Act, it is necessary to refer to the relevant facts chronologically. They are: The assessee-company which manufactures cement had incurred expenditure on ropeways during the years 1974-75 and 1975-76 and the total expenditure was Rs. 4,81,757. The assessee did not claim this expenditure during the relevant assessment years in the course of assessments nor was depreciation claimed on the said amount treating it as capital expenditure. For the first time, the petitioner claimed depreciation on Rs. 4,81,757 for the assessment year 1976-77 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mistake apparent from the record and has to be rectified. It is to be noted that the assessments for the two years in question had been completed on July 22, 1977, and June 30, 1978. The appellate order for the year 1976-77 was passed on March 31, 1980. The application for rectification was also made on August 5, 1980. Having come to the conclusion that there was an error in the assessment order, it remains to be seen whether the finding in a subsequent assessment year can lead to a rectification of the earlier assessment order. The authority for this proposition is the Supreme Court's decision in the case of Mahendra Mills Ltd. v. P. B. Desai, AAC [1975] 99 ITR 135. In that case, additions were made to the (value of) closing stock in one year. Consequently the Income-tax Officer had enhanced the (value of) opening stock for the next year. When the addition to the closing stock was deleted, the Income-tax Officer applied to the Appellate Assistant Commissioner to rectify the proceedings of the subsequent year for reducing the opening stock. The Supreme Court held that the Appellate Assistant Commissioner was justified in reducing the opening stock of the subsequent year by recti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 148(1): Before making the assessment, reassessment, or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section." " Section 148(2): The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so. " Section 149 imposes a time limit for issuing notice under section 148. Section 150 provides for the issue of notice under section 148 in cases where assessment is done in pursuance of an order on appeal, etc. Section 151 provides for sanction for the issue of notice after a lapse of 4 years or 8 years from the end of the relevant assessment year, as the case may be. Section 153(1) imposes a time limit for completion of assessment and reassessment envisaged under section 143 or 144. Section 153(2) imposes a time limit to complete the assessment or reassessment or recomputation envisaged under section 147. Section 153(3) exempts applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified by the learned counsel. The impugned notice is issued after obtaining the permission of the Commissioner, as required under section 151 of the Act. It is also brought to my notice that so far as the assessment year 1976-77 is concerned, the permission of the Central Board is sought for reopening the assessment. Sri Sarangan has, in support of his contention opposing the reopening, relied upon several decisions of the Supreme Court. They are: 1. ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335, 2. N.K.T.Sivalingam Chettiar v.CIT[1967]66 ITR 586 and 3. Rajinder Nath v. CIT [1979] 120 ITR 14. It is argued on the strength of the ratio laid down by the Supreme Court in the above cases that the finding of the Tribunal in the appeals relating to the assessment years 1974-75 and 1975-76 cannot be made use of for justifying the action under section 150(1) of the Act. It is the contention of the learned counsel that the said finding cannot be construed as " information " for the purpose of reopening the assessment under section 147(b) of the Act. It is, therefore, vehemently argued that the notice issued under section 148 of the Act is without jurisdiction and is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which arise in a particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing ................ 'finding', therefore, can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. The expression 'direction' cannot be construed in vacuum, but must be collated to the directions which the Appellate Assistant Commissioner can give under section 31 ...... Therefore, the expression 'finding' as well as the expression 'dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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