TMI Blog1976 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Later on, the Income-tax Officer thought that such education cess had been wrongly allowed. He, therefore, initiated reassessment proceedings under section 147(b) to withdraw the education cess allowance. These reassessment proceedings were initiated on March 31, 1970, by issuing the appropriate notice under section 148. In the reassessment order which was passed by the Income-tax Officer on March 25, 1971, he held that the education cess had been wrongly allowed as an item of admissible expenditure. He, therefore, brought that item back for the purpose of taxation. He further held that rebate under clause 1(b)(ii) of Paragraph F of Schedule I of Finance Act, 1965, had been wrongly allowed at the rate of 35 per cent. in the original assessment order but on merits he found that it should have been allowed at the rate of 30 per cent., that rebate being called depreciation. The orders of the Appellate Assistant Commissioner and the Appellate Tribunal proceeded on the footing that it was withdrawal of depreciation as ordinarily understood but in reality it was 5 per cent. of the rebate under clause 1(b)(ii) of Paragraph F of Schedule I of Finance Act, 1965, as stated above. It is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to us. In order to appreciate the legal position, it must be pointed out that the decision to reopen the case was taken by the Income-tax Officer on March 31, 1970, and the decision in the reassessment proceedings was given by the Income-tax Officer on March 25, 1971. The decision of the Supreme Court in Jaipuria Samla Amalgamated Collieries Ltd. v. Commissioner of Income-tax [1971] 82 ITR 580 (SC), was delivered by the Supreme Court on August 31, 1971, and thus at the time when the Income-tax Officer decided to reopen the proceedings, that is, on March 31, 1970, he could not have had the benefit of the decision of the Supreme Court in Jaipuria Samla Amalgamated Collieries Ltd. v. Commissioner of Income-tax [1971] 82 ITR 580 (SC). The point which has directly arisen before us on the question referred to us also came up before this court in Commissioner of Income-tax v. Maneklal Harilal Spg. Mfg. Co. Ltd. [1977] 106 ITR 24 (Guj) (Income-tax Reference No. 77 of 1974, decided on November 24, 1975). There also the question was whether the reassessment proceedings could be said to be validly initiated when the ground on which the reassessment proceedings were initiated was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoning in Commissioner of Income-tax v. Maneklal Harilal Spg. Mfg. Co. Ltd. [1977] 106 ITR 24 (Guj) would directly apply to the case before us. However, Mr. B. R. Shah for the assessee, contended before us that there was no " information " before the Income-tax Officer when he initiated proceedings under section 147(b) read with section 148 and, therefore, the instant case on facts can be distinguished from the decision of this court in Commissioner of Income-tax v. Maneklal Harilal Spg. Mfg. Co. Ltd. [1977] 106 ITR 24 (Guj). It may be pointed out that the decision of this High Court in Kanji Ranchhod v. Commissioner of Income-tax [1966] 61 ITR 339 (Guj.), which was relied upon by the Tribunal, has been subsequently dissented from so far as the particular aspect applicable to this line of cases was concerned by a Full Bench of this court in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax [1974] 95 ITR 251, 269 (Guj) [FB], where all the cases up to the date of delivery of the judgment were considered and the legal position was summarized by the Full Bench as follows : " ......the correct legal position is that if there are some reasonable grounds for the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1970. The assessee submitted its return of income under protest on April 30, 1970. He has further pointed out in the reassessment order that the full implications of the Gujarat Education Cess Act were not within the knowledge of the Income-tax Officer when a claim was made for municipal taxes which also included the education cess. It was considered that this would be an allowable deduction under section 30 of the Act of 1961. The knowledge that education cess was a State levy was not apparent to the Income-tax Officer. Moreover, the nature of the education cess was also not known to the Income-tax Officer while completing the original assessment and it was only after receipt of the information as to the nature of the levy, that the Income-tax Officer became aware that it would not be an allowable deduction and the assessment was, therefore, reopened. Mr. Shah for the assessee has drawn our attention to a letter dated April 14, 1970, addressed by the Income-tax Officer to the assessee before us and in that letter it was pointed out that in view of the decision of the Allahabad High Court in Dehra Dun Tea Co. Ltd. v. Commissioner of Income-tax [1969] 74 ITR 139 (All) education c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons set out in the judgment in Special Civil Application No. 646 of 1970, in the instant case also, it must be held that the decision of the Allahabad High Court in Dehra Dun Tea Company Ltd. v. Commissioner of Income-tax [1969] 74 ITR 139 (All) supplied sufficient " information " to the Income-tax Officer to entertain a reasonable belief that income chargeable to tax had escaped assessment for the assessment year under reference. Mr. Shah, for the assessee, urged before us that much prior to the decision of the Allahabad High Court in Dehra Dun Tea Company Ltd. v. Commissioner of Income-tax [1969] 74 ITR 139 (All), the Privy Council in Commissioner of Income-tax v. Gurupada Dutta [1946] 14 ITR 100 (PC) had dealt with the question whether a rate imposed under similar circumstances could be held to be a deductible expenditure for purposes of business. The Privy Council in that case had considered the provisions of section 10(4) of the Indian Income-tax Act, 1922, comparable to section 40(a)(ii) of the Act of 1961. The Privy Council had held that the rate imposed under the provisions of the Bengal Village Self-Government Act, 1919, on a person occupying a building within the U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of opinion of the Allahabad High Court in Dehra Dun Tea Co. Ltd. v. Commissioner of Income-tax [1969] 74 ITR 139 (All), which decision was based on the observations of the Supreme Court in Travancore Titanium Products Ltd. v. Commissioner of Income-tax [1966] 60 ITR 277 (SC), it cannot be said that the entertainment of the belief by the Income-tax Officer that the education cess levied under the provisions of the Gujarat Education Cess Act was not admissible as a deductible expenditure was unreasonable. It cannot be said that there was no basis whatsoever for the Income-tax Officer to entertain this belief. We must point out that the conclusion that we are reaching on this particular aspect is because of the decisions in Travancore Titanium Products Ltd. v. Commissioner of Income-tax [1966] 60 ITR 277 (SC) and Dehra Dun Tea Co. Ltd. v. Commissioner of Income-tax [1969] 74 ITR 139 (All) which intervened between the decision of the Privy Council in Commissioner of Income-tax v. Gurupada Dutta [1946] 14 ITR 100 (PC) and the formation of the belief by the Income-tax Officer when he issued the notice on March 31, 1970. The bona fides of the Income-tax Officer in entertaining the be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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