TaxTMI 
TaxTMI 
2010 (8) TMI 449
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....f the Act on 28.03.1994, 21.03.1995 and 25.03.1996 respectively by the Deputy Commissioner / Assistant Commissioner. In the said assessment orders, replacement of assets to the tune of Rs.1,06,56,527/-, Rs.64,71,550/- and Rs.75,77,340/- respectively for the assessment years 1991-92, 1992-93 and 1993-94 were allowed treating the same as revenue expenditure. Similarly, a sum of Rs.2,73,012/-, Rs.15,96,179/- and Rs.2,29,567/- respectively for the above assessment years spent towards conversion of materials were also considered and allowed as revenue expenditure. These orders have become final. 4. While so, the 2nd respondent has issued the impugned notices U/s.148 of the Act to the petitioner on 05.09.1997 for the assessment years 1991-92 and 1992-93 respectively and on 08.07.1997 for the assessment year 1993-94 in order to reassess. Though initially, the notices were issued by the 2nd respondent, the jurisdiction was subsequently taken over by the 1st respondent and thus the same are now pending before the 1st respondent. In the said notices, the 2nd respondent has not stated under what account and for what purpose the same have to be reopened which were already assessed an....
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....e subsequent assessing officer viz., the 2nd respondent to say that it is only capital expenditure with an entitlement of depreciation. Such a change of opinion, according to the petitioner cannot be a reason for reopening the assessments under Section 147 of the Act. (ii) Since there was no failure on the part of the petitioner to disclose fully and truly all material facts which were necessary for the assessment for the relevant assessment years, these cases would not fall within the ambit of the proviso to Section 147 of the Act. Therefore, in any event, the reopening should have been done within four years from the end of the relevant assessment year. Thus, the limitation provided in Section 149(1) (a) of the Act bars the notices in respect of the assessment years 1991-92 and 1992-93. (iii) Insofar as the assessment year 1993-94 is concerned, it falls under main provision of Section 147 of the Act. Since there is no reason stated either in the notice or reply notice dated 07.01.2000 issued by the 2nd respondent to the effect that there are reasons to believe that chargeable tax has escaped from assessment to satisfy the requirement of Section 147 of the Act,....
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....ices for the assessment years 1991-92 and 1992-93, they have been issued within six years from the end of the relevant assessment year. Thus , the notices in respect of reopening of the assessment in respect of the assessment years 1991-92 and 1992-93 are not barred by limitation as provided in Section 149 (1)(b) of the Act. (v) Insofar as notice relating to the assessment year 1993-94 is concerned, it falls within the ambit of main provision of Section 147 of the Act, for which, the period of limitation provided in Section 149 (1)(a) of the Act is four years. Admittedly, the notice was issued on 08.07.1997 which was within four years from the end of the assessment year 1993-94. Thus, the said notice is also not barred by limitation. (vi) The expenditure made towards replacement of machinery and conversion of materials would fall only within the ambit of capital expenditure with an entitlement of depreciation. But, by mistake, they were treated as revenue expenditure by the then assessing officer for the purpose of assessment. When this was noticed by the subsequent assessing officer viz., the 2nd respondent, he has rightly issued notices under Section 148 of th....
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....elf-imposed. One such restriction is to decline to entertain a writ petition in a case where there is an alternative remedy available to the party which is more efficacious to workout. It is only on the basis of such self-imposed restriction, the High Courts have been declining to entertain the writ petitions by directing the aggrieved to work out the remedy available under the alternative mechanism. But, it is also well settled that in a case where, if the court is of the opinion that either the alternative remedy available would not be efficacious or the same cannot be secured without undue delay or in a case where the entire proceeding is wholly without jurisdiction or barred by limitation and allowing the authority to go ahead further with the proceeding will only be a wasteful exercise, in such a case, it would be very appropriate for this Court to come out of the self-imposed restriction and to entertain the writ petition to render justice to the aggrieved who knocks at the doors of the Writ Court. It has also been well settled by the Hon'ble Supreme Court that having entertained a writ petition, if the same is dismissed after several years on the ground of availability of al....
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....hat the notices in respect of the assessment years 1991-92 and 1992-93 fall within the proviso to Section 147 of the Act; whereas the impugned notice in respect of the assessment year 1993-94 falls within the scope of the main provision of Section 147 of the Act. 13. Assessment year 1991-92 and 1992-93:- Let me now, at first, take up the notices for the assessment years 1991-92 and 1992-93. In order to fall within the proviso to Section 147 of the Act, apart from stating that there were reasons for the authority to believe that there had been escapement of chargeable income, it should have also been recorded that such escapement was due to the failure of the assessee to disclose fully and truly all material particulars necessary for his assessment for that assessment year. Such a recording is absolutely mandatory as per the provision and as laid down in various judgements. In this regard, I may refer to some of the judgements relied on by the learned counsel appearing on either side. The earliest judgement on this point is a judgement rendered by a Constitution Bench of the Hon'ble Supreme Court in Calcutta Discount Company Limited v. Income-Tax Officer, 1961 (41) ITR 191....
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....son to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant....
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....ition of law that in order to bring the case within the ambit of proviso to Section 147 of the Act, the above two conditions are necessarily to be satisfied, otherwise, the issuance of notice under Sections 148 r/w 147 of the Act shall be wholly without jurisdiction. 17. Now, let us look into the reasons recorded by the 2nd respondent on 08.07.1997 for issuance of notices under Section 148 of the Act for reopening the assessment in respect of the assessment year 1991-92. It reads as follows:- "The assessment for the year 1991-92 has been completed under Section 143(3) of the Act on 28.03.1994. While doing so, the claim of replacement of machinaries to the tune of Rs.1,06,57,527/- has been allowed wrongly as revenue expenditure instead of treating it as capital in nature and the same is eligible only for normal depreciation on the additions to the machinarieis. Hence, I have reason to believe that the income chargeable to tax has escaped assessment and the approval is sought for." 18. The reasons recorded on 08.07.1997 by the 2nd respondent for issuance of notice under Section 148 of the Act for reopening the assessment in respect of the assessment year....
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.... spent on replacement of machinery and conversion of materials as revenue expenditure, it amounts to failure to make a true and full disclosure of the income, he contended. In my considered opinion, whether there was true disclosure or not on the part of the petitioner during the relevant assessment years cannot be gone into in these writ petitions for, it is the subjective belief of the assessing officer who wants to reopen which alone confers jurisdiction on him to issue notice under Section 148 of the Act. The failure on the part of the 2nd respondent to record the reasons in the impugned proceedings to the effect that he has reasons to believe that the escapement was due to failure of the petitioner to make true and full disclosure of the income itself is sufficient to quash the proceedings in respect of the assessment years 1991-92 and 1992-93, in view of the judgements which I have cited earlier. 22. That apart, it is not open for the respondents to raise a contention before this Court for the first time that there was such a failure on the part of the assessee. From out of the materials available on record, I am of the view that the 2nd respondent ought to have exa....
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....in respect of the year 1993-94:- "The sum of Rs.75,77,340/- was spent towards addition of machinery. The above sum was shown in the fixed assets schedule and depreciation on them was claimed as per company's Act. In the income computation statement, the above sum was claimed as revenue expenditure. This is not correct. Only depreciation is to be allowed. The expenditure is of capital expenditure. The excess relief given is to be withdrawn. Hence, I have reason to believe that income escaped assessment. Please issue notice under Section 148 of the Act." 26. A perusal of the above reasons recorded by the 2nd respondent, in my considered opinion, would satisfy the first legal requirement as laid down by the Hon'ble Supreme Court and the same would fall within the ambit of main provision of Section 147 of the Act for which, the period of limitation is four years. Since the impugned notice has been issued within four years, the same cannot be stated to be beyond the period of limitation. 27. But, the contention of the learned counsel appearing for the petitioner is that the notice is without jurisdiction as the so called reasons for the belief recorded do n....
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....rds "reasons to believe" failing which, we are afraid , section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual different between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "Change of opinion" as in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen , provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief" 29. A reading of the above judgement would go to really show that an assessment already completed cannot be reopened for the purpose of reassessment merely on the basis of the cha....