TMI Blog2008 (7) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... eing disposed of by this common judgement and order. 2. The assessment years involved are assessment years 1990-91, 1991-92, 1992-93 and 1994-95. 3. For the Assessment Year 1990-91, the petitioner filed its return of income on 31.12.1990. The revised return was filed on 31.12.1991. The original assessment order under Section 143(3) was passed by the Assessing Officer, wherein the claim of deduction under Sections 32A , 80HH and 80-I was allowed, stating that the Assessee is treated as manufacturing concern in view of Commissioner of Income-tax (Appeals)'s decision given in Assessment Years 1987-88 and 1989-90 and no second appeal is filed against the order of the Commissioner of Income-tax (Appeals) by the revenue before the Income Tax Appellate Tribunal. The notice under Section 148 for reopening of assessment was issued by the respondent on 29.07.1998, i.e. beyond a period of four years from the end of the Assessment Year 1990-91, that is, on 31.03.1991. On receipt of the reasons recorded by the Assessing Officer for reopening of the assessment, the petitioner has filed the present petition, praying for quashing and setting aside the notice of reopening. The petition was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd interim relief was granted in terms of paragraph 12(C) of the petition, whereby the order of status quo was passed and directed to be maintained during pendency and final disposal of the petition. 6. For the Assessment Year 1994-95, the petitioner filed its return of income on 30.11.1994. The revised return was filed on 28.01.1997. The notice under Section 148 was issued by the Assessing Officer for the Assessment Year 1992-93 on 26.03.1997. The regular assessment under Section 143(3) of the Act was completed on 31.03.1997 wherein depreciation at a higher rate was allowed by the Assessing Officer. The notice under Section 148 of the Act for the Assessment Years 1990-91 and 1991-92 was issued on 29.07.1998. The petitioner filed special civil applications challenging the notice issued under Section 148 of the Act for the Assessment Years 1990-91 and 1991-92 on 05.09.1998. The Assessing Officer issued notice under Section 148 for the Assessment Year 1994-95 on 06.10.2000, i.e. beyond period of four years from the end of the Assessment Year 1994-95 i.e. 31.03.1995. On receipt of the reasons recorded by the Assessing Officer, the petitioner filed the present petition before this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refining the only difference being the earlier oil being not refined and the subsequent oil being known as refined oil. The Assessing Officer has also considered certain judicial pronouncements and quoted in the reasons recorded. It was further observed by the Assessing Officer that on examination of records for the Assessment Year 1992-93 in connection with ongoing assessment proceedings for the Assessment Year 1994-95, it was found that the assessee was allowed deduction under Sections 80HH and 80-I on trading income of soap stock. The assessee was not entitled to deduction under Sections 80HH and 80-I. The Assessing Officer had reason to believe that the deduction was wrongly granted in the earlier Assessment Years and hence, the assessments are required to be reopened. Over and above this, it was also observed by the Assessing Officer that as per the rule prescribed in Appendix-I to Rule 5, the motor buses and motor lorries not used in the business of running them on hire are included in block of machinery and plant on which depreciation under Section 32 of the Act is admissible at the rate of 25% from Assessment Year 1988-89 onwards. The assessee has claimed depreciation at 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Years from 1986-87 to 1993-94. He has, therefore, submitted that the issue is squarely covered in favour of the assessee even on merits and hence, there is no justification for issuance of notice under Section 148 of the Act. 11. He has further submitted that so far as depreciation on trucks at the rate of 40% claimed by the assessee is concerned, the trucks were utilised by the petitioner on hire and in respect of which the petitioner has earned hiring charges which were shown as business income and also taxed as business income not only in the Assessment Year 1992-93, but also, up to the Assessment Year 1994-95. Simply because one Assessing Officer takes a different view than the view of the Assessing Officer, who made the assessment under Section 143(3) of the Act, the assessment cannot be reopened under Section 148 of the Act and that too, beyond a period of four years. He has further submitted that this issue is merely an academic issue because whether at 40% or 25%, no assessee gets depreciation of more than 100% and by now, even at 20%, 100% depreciation would have been exhausted and the Department does not get a rupee more by way of tax nor does the petitioner save ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment Year 1994-95, that vehicles purchased by the assessee during Assessment Year 1992-93 are being used for in the assessee's own business and that not on running them on hire as required for claiming 50% depreciation. ...." In view of this factual position pointed out by the respondent in his affidavit, it cannot be said that the respondent had not applied his mind during the course of assessment proceedings for the Assessment Year 1994-95. He has further submitted that the respondent had reopened the assessment for Assessment Year 1992-93 by issuance of notice under Section 148 on 26.03.1997 and for Assessment Years 1990-91 and 1991-92, on 29.07.1998. The reasons for reopening, inter alia, refer to the higher rate of depreciation on truck. He has, therefore, submitted that these facts were well within the knowledge of the Assessing Officer at the time of framing of the assessment for the Assessment Year 1994-95. There is another reason to show that the respondent was fully aware and had applied his mind to the allowability of depreciation at a higher rate. It is clear from the copy of the reasons recorded for reopening of assessment for the Assessment Year 1992-93 that the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Honourable Apex Court in the case of C.I.T. v. Foramer France, [2003] 264 ITR 566, wherein, while dismissing the civil appeals, the Court had not seen any reason to interfere with the decision of the Allahabad High Court in the case of Foramer v. C.I.T. [2001] 247 ITR 436. The High Court, inter alia, held that Section 147 substituted in the Income Tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987, had made a radical departure from the original Section 147, inasmuch as clauses (a) and (b) had been deleted and under the proviso thereto, notice for reassessment would be illegal if issued more than four years after the end of the assessment year, if the original assessments were made under Section 143(3) and that, the notices were bad as they were only on the basis of a change of opinion and the law that an assessment could not be reopened on a change of opinion was the same before and after amendment by the Direct Tax Laws (Amendment) Act, 1987, of Section 147. 18. Mr. Divetia further relied on the decision of the Madras High Court in the case of C.I.T. v. ELGI Finance Ltd., [2006] 286 ITR 674, wherein it is held that when the factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gle line was written in the assessment order about the eligibility of the claim. Similarly, the Assessing Officer has allowed deductions under Sections 80HH and 80-I to the assessee in the Assessment Year 1992-93 on trading income from soap stock. The assessee is not entitled to the deductions under Sections 80HH and 80-I and yet the Assessing Officer allowed the same without verifying the claim. He has further submitted that in the Assessment Year 1992-93, it is seen that as per the rules prescribed in Appendix-I to Rule 5, motor buses and motor lorries not used in the business of running them on hire, are included in the group of machinery and plant on which depreciation under Section 32 of the Act is admissible at the rate of 25% from Assessment Years 1988-89 onwards. The assessee has claimed depreciation at 40% on transportation vehicles used in its own business and not in the business of running them on hire. This has resulted in excess depreciation allowance of Rs.3,73,892. These facts were noticed by the Assessing Officer while finalising the assessment for the Assessment Year 1994-95 and hence, the notice under Section 148 was issued to the assessee on 26.03.1997 as income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was further held that the Income Tax Officer could have in the original assessment proceedings found out the correct position by further probing did not exonerate the appellant from the duty to make a full and true disclosure of material facts. 24. Mr. Bhatt further relied on the decision of the Honourable Supreme Court in the case of Sowdagar Ahmed Khan (Decd.) v. ITO [1968] 70 ITR 79, wherein it is held that there was some material before the Income Tax Officer on which he formed prima facie belief that the assessee had omitted to disclose fully and truly all material facts and that in consequence of such non-disclosure income had escaped assessment. The Income Tax Officer had, therefore, jurisdiction to issue the notices under Section 34(1)(a). 25. Mr. Bhatt further relied on the decision of the Honourable Supreme Court in the case of Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638, wherein it is held that in proceedings under Article 226 of the Constitution of India, challenging the jurisdiction of the Income Tax Officer to issue a notice under Section 34(1)(a), the High Court is only concerned to decide whether the conditions which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2), Ahmedabad while the impugned notice (Exhibit-I) dated 29.07.1998 has been issued by one Mr. Ramesh Chander. The Court, therefore, asked the learned Standing Counsel to verify the records of the respondent-Department and state whether the officer, who has issued the notice under Section 148 of the Act, has recorded his satisfaction as to escapement of income, or whether there is any noting to suggest that the successor officer has agreed with the reasons recorded by the predecessor officer. While issuing such directions, the Court observed that the aforesaid exercise is necessitated in light of the opening portion of Section 147 of the Act which stipulates that action may be initiated if Assessing Officer "has reason to believe" that any income chargeable to tax has escaped assessment for any Assessment Year. When this provision is read in conjunction with section 148(2) of the Act which mandates that the Assessing Officer shall, before issuing any notice under Section 148 of the Act, record his reasons for issuing the notice. It is, therefore, clear that the Officer recording the reasons under Section 148(2) and the Officer issuing notice under Section 148(1) has to be the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1989-90 and no second appeal was filed against the order of the Commissioner of Income-tax (Appeals) by the Department before the Income Tax Appellate Tribunal. Even otherwise, from the reasons recorded, it appears that during the course of assessment proceedings for the Assessment Year 1994-95, the Assessing Officer had come to knowledge that the assessee is not entitled to the relief under Sections 80I and 80HH and that the Assessee has claimed depreciation at a higher rate and therefore, the reasons were recorded on 26th March, 1997 for Assessment Year 1992-93 and 21st January, 1998 for Assessment Years 1990-91 and 1991-92. Despite these facts, the claim of the assessee was allowed by the Assessing Officer while framing the assessment for the Assessment Year 1994-95 on 31.03.1997. It, therefore, becomes clear that there was no omission or failure on the part of the assessee to disclose all material facts fully and truly. At the most, it is merely a change of opinion which cannot empower the Assessing Officer to issue the notice of reopening under Section 148 of the Act beyond the period of four years. 29. Even with regard to depreciation, the reasons recorded by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be allowed to the assessee. It is, therefore, clear that only for the limited purpose, if the notices are issued under Section 148 of the Act, its validity cannot be upheld. The Court derives support from the observations made by the Bombay High Court in the case of Commissioner of Income-Tax, Delhi, Ajmer, Rajasthan and Madhya Bharat vs. Nagri Mills Co. Ltd., [1958] 33 ITR 681, wherein it is observed that "we have often wondered why the Income Tax Authorities, in a matter such as this, where the deduction is obviously a permissible deduction under the Income Tax Act, raise disputes as to the year in which deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different, but, in the case of income of a company, tax is attracted at a uniform rate and whether the deduction in respect of bonus was granted in the assessment year 1952-53 or in the assessment years corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department and one should have thought that the Department could not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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