1998 (5) TMI 20 - HC - Income Tax

Notices under section 148 quashed for AYs 1991-93 as mere change of opinion, not new material under section 147

HC held that notices under s.148 for assessment years 1991-92, 1992-93 and 1993-94 were without jurisdiction and quashed. Although the revenue contended ... Reopening of assessment - reason to believe - change of opinion - income escaping assessment - disclosure of primary facts - jurisdictional foundation for section 147/148Reopening of assessment - reason to believe - change of opinion - income escaping assessment - Validity of notices under section 148 read with section 147 where no new information or change in law occurred and the Assessing Officer sought to reopen assessments on the ground that deductions under section 80-I were wrongly allowed - HELD THAT: - The court held that the Assessing Officer cannot reopen completed assessments under section 147/148 merely because, on subsequent reflection, he considers that deductions earlier allowed (here, under section 80-I) were wrongly granted. The statutory phrase 'has reason to believe' in section 147 must be founded on new and relevant material or information coming to the officer's notice after the original assessment, or on information which exposes the untruthfulness or non-disclosure of material facts previously made. Mere disagreement or a second thought on inferences drawn from primary facts already before the Assessing Officer does not supply such a reason. The court relied upon the established principle that an assessee is required to disclose primary facts but not the inferences to be drawn therefrom; it is for the Assessing Officer to draw those inferences. Where nothing new transpired between the original assessment and the date of reopening - no fresh material, no change of law, no information revealing concealment or untruthfulness - the formation of an opinion that the earlier assessment was erroneous amounts to a mere change of opinion which does not confer jurisdiction to invoke section 147. The court noted that the Assessing Officer's reasons merely recorded that the deduction was 'wrongly allowed' and that no fresh material had emerged; therefore the purported 'reason to believe' was absent and the notices under section 148 lacked the necessary jurisdictional foundation. The court referred to and applied the line of authority emphasizing these principles, including Calcutta Discount Co. Ltd. v. ITO , Phool Chand Bajrang Lal , A. L. A. Firm v. CIT , Indian and Eastern Newspaper Society v. CIT , and Kalyanji Mavji and Co. v. CIT to the extent discussed in the judgment.Notices issued under section 148 for the assessment years 1991-92, 1992-93 and 1993-94 were quashed as the Assessing Officer had no jurisdictional 'reason to believe' based on fresh or new material and the action amounted to a mere change of opinion.Final Conclusion: All three writ petitions were allowed and the notices under section 148/147 in respect of assessment years 1991-92, 1992-93 and 1993-94 were quashed for want of jurisdiction; no order as to costs. Issues Involved:1. Entitlement to Investment Allowance u/s 32A.2. Entitlement to Deduction u/s 80-I.3. Validity of Reopening Assessments u/s 147/148.Summary:1. Entitlement to Investment Allowance u/s 32A:The petitioner, a public limited company engaged in manufacturing photosensitive film, claimed investment allowance u/s 32A for the assessment year 1990-91. The Assessing Officer disallowed this claim, citing that colour film rolls were included in the prohibited list in the Eleventh Schedule of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) later observed that after the exclusion of 'cinematographic films' from the Eleventh Schedule, there was no justification for including colour film rolls in the same list. However, the Commissioner held that the petitioner was not entitled to investment allowance for the current year but could claim it in the next assessment year.2. Entitlement to Deduction u/s 80-I:For the assessment years 1991-92, 1992-93, and 1993-94, the petitioner initially did not claim any deduction u/s 80-I. After the Commissioner's order, the petitioner claimed deduction u/s 80-I, which was allowed by the Assessing Officer for all three years. The Assessing Officer noted that the petitioner fulfilled the conditions laid down in sub-section (2) of section 80-I and was entitled to the deduction, relying on the Commissioner's finding that colour roll film was not an item specified in the Eleventh Schedule.3. Validity of Reopening Assessments u/s 147/148:The Assessing Officer issued notices u/s 147/148 to reopen the assessments for the years 1991-92, 1992-93, and 1993-94, claiming that income had escaped assessment because the deduction u/s 80-I was wrongly allowed. The petitioner argued that all relevant facts were disclosed, and the reopening was merely a 'change of opinion,' which is not permissible. The court held that the Assessing Officer had no new material or information and merely re-evaluated the same facts, constituting a change of opinion. This does not provide jurisdiction to initiate proceedings u/s 147. The court quashed the notices issued u/s 148 for all three assessment years, stating that the absence of new material meant the Assessing Officer lacked jurisdiction to reopen the assessments.Conclusion:The court allowed the petitions, quashing the notices u/s 148 for the assessment years 1991-92, 1992-93, and 1993-94, due to the absence of new material and the reopening being based on a mere change of opinion. No order as to costs was made.