TaxTMI 
TaxTMI 
2010 (9) TMI 350
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....he facts appearing in this appeal before spelling out the exact formulation of the question of law that arises for consideration. 2. The assessee is engaged in manufacturing of xerographic machines, toner, developer and photoreceptor. It filed return of income for the Assessment Year 1986-87 on 30.06.1986. The returns for subsequent years up to 1990-91 were filed on different dates. During the assessment proceedings in respect of first assessment year, the assessee claimed that commercial production had not commenced at company‟s Modipur plant. As on the date of balance sheet, no provision of depreciation on fixed assets capitalized at Modipur was made. A note was appended to the aforesaid effect and in that note, it was also averred that the investment allowance reserve would be credited in the year of assessable profits. As per the assessee, the accounting year ended on 30.04.1985 and though trial production stated on 01.02.1985, the commercial production began only from 01.05.1985. Since no production commenced in the assessment year under consideration and there was only trial run production of 53 machines, that is why no depreciation on the plant and machinery had bee....
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....t were similar to Section 32A of the Act and, therefore, the assessee was also not entitled to investment allowance. 6. On the basis of this order of CIT (A) for the assessment year 1994-95, the AO initiated reassessment proceedings by issuing notice under Section 148 of the Act on 20.03.1997, for all the assessment years. The AO completed the reassessment under Section 147 read with Section 143(3) of the Act on 12.03.1999 for all the assessment years whereby investment allowance claimed by the assessee for these assessment years was withdrawn on the ground that items manufactured by the assessee fell in the prohibited category mentioned at Sl. No.22 of Schedule XI of the Act. 7. The Ld. CIT (A) considered the submission and noted that the provisions of Section 147 have been amended with effect from 1.4.1989. He considered the action of the Assessing Officer for initiating the reassessment proceedings for the assessment year 1986-97, 1987-88 and 1988-89, under the pre-amended provisions. The Ld. CIT (A) observed that assessee had furnished complete details of the items manufactured before allowing the investment allowance for the various assessment years. It was for the Asses....
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....or commission on the part of the assessee to disclose fully and truly all material facts necessary for the assessment in respect if subsequent assessment years. However, Ld. CIT (A) observed that the decision of the Ld. CIT(A) for the assessment year 1994-95, had become available after completion of the original assessments u/s 143 (3) and therefore, the reopening of the assessment even for the subsequent assessment years was valid. Thus he upheld the action of the AO for initiating the reassessment proceedings in respect of all the assessment years. 10. As regards the merits of the claim of the assessee under Section 32A the Ld. CIT (A) held that provisions of Section 32A were similar to section 80-I. The issue for deduction u/s 80-I came up before the ITAT, Delhi Bench in the case of assessee in ITA No. 3034 (Del)/1996 and ITA No. 3290(Del.)/1997 for the assessment year 1991-92 and 1992-93 reported in 67ITD 252 where it was held that the Xerographic machine was the article which came within the ambit of item 22 of XI schedule. Whereas, toner, developer and photoreceptors were not the items included in XI schedule. Thus, the Tribunal held that the assessee was entitled to deduc....
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.... by the AO at the time of completing the original assessment under Section 143(3) of the Act. However, the CIT (A) upheld the initiation of the reassessment proceedings only on the ground that the AO had rightly entertained a plea that income chargeable to tax had escaped assessment for the reason that the assessee was not entitled to investment allowance. This, according to the Tribunal, was not permissible in view of proviso to Section 147 of the Act, which provided limitation of four years for issuing notice under Section 147 of the Act and since beyond four years it could be reopened only if there was non-disclosure of full and complete material facts. The Tribunal further observed that even in the reassessment order passed by the AO, there was no allegation made in the reasons recorded that the escaped assessment was by reason of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment for these assessment years. That apart, observed the Tribunal, necessary material was placed on record and referred to by the AO in the original assessment proceedings clearly demonstrating that the assessee had disclosed all material facts relating....
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....he AO for initiating reassessment proceedings was only on the basis of mere change of opinion. Such course of action is not permission under law. Reliance in this regard, is placed on the judgment of the Hon'ble Delhi High Court in the case of Jindal Photo Films Ltd., Vs. CIT 234 ITR 170, where it was held that re-assessment proceedings could not be initiated merely on the basis of change of opinion. The High Court further observed that from the date of order of assessment sought to be reopened and the date of forming of opinion by Income-tax Officer nothing new had happened. There was no change of law and no material had come or record. Thus, the action of the AO for initiating the reassessment proceedings was held to be bad in law. The full Bench of the Hon'ble Delhi High Court in the case of CIT Vs. Kelvinator of India Ltd., 256 ITR 1; again considered this issue. It was held that if an order had been passed without application of mind, the same could not confer jurisdiction upon the AO to reopen the proceeding without anything further, as the same could amount to giving premium to an authority exercising quasi judicial function to take benefit of its own wrong. Hence, section 1....
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....nvestment allowance. Otherwise, contended the learned counsel, the issue about the permissibility of the allowance under Section 32A of the Act was not examined on merit at all. She submitted that the AO did not go into the question as to whether the goods manufactured by the assessee would fall in any of the entries mentioned in Schedule-XI and therefore, the investment allowance would be impermissible, except in the case of small scale industries. She further submitted that there was not full disclosure of the facts, as the assessee never informed that it was not a small scale industry. Thus, there was no evidence before the AO on the basis of which the deduction of investment allowance could be given. It was, therefore, not a case of full disclosure of all material facts by the assessee, contended the learned counsel. 17. Proceeding further on the basis of the above, she also argued that when the issue regarding applicability of Schedule XI and whether the assessee-company is small scale industry or not was not even in the contemplation of the AO and was not discussed, the question of change of opinion does not arise. This becomes clear when the CIT(A) made observations in hi....
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.....B. Wadkar [268 ITR 332 (Bom.)] 21. On the aspect of change of opinion, Mr. Vohra‟s forceful submission was that complete details of the items manufactured by the assessee were given. Whether they fall in Schedule XI or not was hotly debated and discussed. Even certificate under Section 80CC (3) was given. Two views were possible on this aspect. According to him, when the matter was discussed in detail by the AO in the original assessment and the deduction for investment allowance was granted, as admissible, thereafter holding a different view that too by the CIT (A) in the assessment proceedings relating to the Assessment Year 1994-95 would amount to change of opinion. 22. Mr. Vohra further pointed out that even this view held by the CIT(A) has been reversed by the Tribunal in the appeal filed by the assessee vide its decision dated 22.03.2004. 23. Mr. Vohra, also referred to the following judgments in support of his submissions that where two views were possible mere change of opinion would not provide sufficient ground for a reopening of the assessment:- (i) CIT Vs. Kelvinator of India Ltd. 256 ITR 1 (Del) (ii) KLM Royal Dutch Airlines Vs. ADIT, 292 ITR 49 (....
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.... mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd. V. ITO (2009) 308 ITR 22 (Delhi) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania V. Asst. CIT (2003) 269 ITR 192 that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under Section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated March 29, 2004, under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated March 2, 2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above" 27. Similar view is taken by the ....
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....closed true, full and complete particulars/information , the notice under Section 148 was rightly quashed by the Tribunal on this ground itself. 29. In Calcutta Discount Co. Ltd's case (1961) 41 ITR 191, the Apex Court clearly held that once the primary facts are before the assessing authority he requires no further assistance by way of disclosure. It was observed by the apex court that:- "It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts." As regards the scheme of the Act, the Apex Court held:- "The scheme of the law clearly is that where the Income-tax Officer has reason to believe that an under assessment has resulted from non-disclosure he shall have jurisdiction to start proceedings for re-a....