Arbitrariness in assessment orders leads to writ interference where fresh grounds are introduced beyond the show-cause notice.

An assessment order disallowing deduction under section 10B was set aside in writ jurisdiction because it was arbitrary on its face and did not conform to the show-cause notice. The assessing authority introduced a fresh basis by disputing whether the assessee's granite-related activity amounted to manufacture or production, instead of confining itself to the notice. The order also failed to consider the statutory scheme, the approval for the 100% export oriented unit, the CBDT's role in that approval process, the explanatory circular on section 10B, and the assessee's contention on the relevant date for testing the machinery criterion. The matter was remitted for fresh consideration after hearing the assessee.

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Issues: Whether the assessment order disallowing deduction under section 10B of the Income-tax Act, 1961, was liable to be interfered with for arbitrariness, lack of conformity with the show-cause notice, and failure to consider the relevant legal and factual materials.

Analysis: The writ petition was entertained despite the availability of an alternative appellate remedy because the assessment order disclosed arbitrariness on its face. The reasons recorded in the assessment order were found to be different from the grounds set out in the show-cause notice, and the assessing authority introduced a fresh basis by disputing whether the petitioner's activity amounted to manufacture or production. The judgment noted that the activity involved exploration, extraction, processing, dressing and polishing of granite, and that the issue of manufacture or production had to be examined in the light of the statutory scheme, the applicable rules, the approval granted for the 100% export oriented unit, the CBDT's role in the approval process, and the explanatory circular explaining the object of section 10B. The order also failed to address the petitioner's contention on the relevant date for testing the machinery criterion under the provision.

Conclusion: The assessment order could not be sustained and was set aside.

Final Conclusion: The matter was remitted to the assessing officer for fresh consideration in accordance with law after giving the petitioner an opportunity to place supporting material.

Ratio Decidendi: Where an assessment order introduces grounds not contained in the show-cause notice and omits consideration of relevant statutory and factual issues, it is vulnerable to interference in writ jurisdiction and may be set aside for fresh adjudication.

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