TaxTMI 
TaxTMI 
2008 (7) TMI 192
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....ions 32A , 80HH and 80-I was allowed, stating that the Assessee is treated as manufacturing concern in view of Commissioner of Income-tax (Appeals)'s decision given in Assessment Years 1987-88 and 1989-90 and no second appeal is filed against the order of the Commissioner of Income-tax (Appeals) by the revenue before the Income Tax Appellate Tribunal. The notice under Section 148 for reopening of assessment was issued by the respondent on 29.07.1998, i.e. beyond a period of four years from the end of the Assessment Year 1990-91, that is, on 31.03.1991. On receipt of the reasons recorded by the Assessing Officer for reopening of the assessment, the petitioner has filed the present petition, praying for quashing and setting aside the notice of reopening. The petition was admitted by this Court on 23.09.1998 and interim relief was granted in terms of paragraph 12(C) of the petition, whereby status quo was ordered to be maintained during pendency and final disposal of the petition. 4. For Assessment Year 1991-92, the return of income was filed by the petitioner on 31.12.1991. The revised return was filed on 29.05.1992. The original assessment under Section 143(3) was completed by the....
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....r 1992-93 on 26.03.1997. The regular assessment under Section 143(3) of the Act was completed on 31.03.1997 wherein depreciation at a higher rate was allowed by the Assessing Officer. The notice under Section 148 of the Act for the Assessment Years 1990-91 and 1991-92 was issued on 29.07.1998. The petitioner filed special civil applications challenging the notice issued under Section 148 of the Act for the Assessment Years 1990-91 and 1991-92 on 05.09.1998. The Assessing Officer issued notice under Section 148 for the Assessment Year 1994-95 on 06.10.2000, i.e. beyond period of four years from the end of the Assessment Year 1994-95 i.e. 31.03.1995. On receipt of the reasons recorded by the Assessing Officer, the petitioner filed the present petition before this Court challenging the notice of reassessment issued under Section 148 of the Act. The petition was admitted by this Court on 20th December, 2000 and the impugned notice dated 6th October, 2000 was stayed till pendency and final disposal of the petition. 7. So far as Special Civil Application Nos.7336 of 1998, 7335 of 1998 and 5234 of 1997 for the Assessment Years 1990-91, 1991-92, 1992-93 are concerned, Mr. J. P. Shah, lear....
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....nd that the assessee was allowed deduction under Sections 80HH and 80-I on trading income of soap stock. The assessee was not entitled to deduction under Sections 80HH and 80-I. The Assessing Officer had reason to believe that the deduction was wrongly granted in the earlier Assessment Years and hence, the assessments are required to be reopened. Over and above this, it was also observed by the Assessing Officer that as per the rule prescribed in Appendix-I to Rule 5, the motor buses and motor lorries not used in the business of running them on hire are included in block of machinery and plant on which depreciation under Section 32 of the Act is admissible at the rate of 25% from Assessment Year 1988-89 onwards. The assessee has claimed depreciation at 40% on transportation vehicles used in its own business and not in the business of running them on hire. This has resulted in excess depreciation allowance. On these facts, he had reason to believe that income chargeable to tax has escaped assessment within the meaning of provisions of Section 147 as excessive/inadmissible deduction and allowance have been allowed. On these facts, the notices were issued for Assessment Years 1990-91,....
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....ner has earned hiring charges which were shown as business income and also taxed as business income not only in the Assessment Year 1992-93, but also, up to the Assessment Year 1994-95. Simply because one Assessing Officer takes a different view than the view of the Assessing Officer, who made the assessment under Section 143(3) of the Act, the assessment cannot be reopened under Section 148 of the Act and that too, beyond a period of four years. He has further submitted that this issue is merely an academic issue because whether at 40% or 25%, no assessee gets depreciation of more than 100% and by now, even at 20%, 100% depreciation would have been exhausted and the Department does not get a rupee more by way of tax nor does the petitioner save a rupee more by way of tax. 12. He has, therefore, submitted that on none of the counts, the notices issued by the Assessing Officer for reopening of assessments are held to be legal or valid. Even for Assessment Year 1992-93, for which the notice of reopening was issued within a period of four years, he has submitted that even if it is assumed that notice of reopening is valid, looking to the peculiar facts of the present case, the Court....
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....further submitted that the respondent had reopened the assessment for Assessment Year 1992-93 by issuance of notice under Section 148 on 26.03.1997 and for Assessment Years 1990-91 and 1991-92, on 29.07.1998. The reasons for reopening, inter alia, refer to the higher rate of depreciation on truck. He has, therefore, submitted that these facts were well within the knowledge of the Assessing Officer at the time of framing of the assessment for the Assessment Year 1994-95. There is another reason to show that the respondent was fully aware and had applied his mind to the allowability of depreciation at a higher rate. It is clear from the copy of the reasons recorded for reopening of assessment for the Assessment Year 1992-93 that the point relating to higher depreciation, which is the subject matter for the impugned notice and reassessment, was under consideration before the respondent and further that the said reasons were recorded by the Assessing Officer on 26.03.1997, whereas the present assessment for the Assessment Year 1994-95 has been completed by the same Assessing Officer on 31.03.1997. Thus, it can hardly be said that there was any omission or failure on the part of the pet....
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....Section 147, inasmuch as clauses (a) and (b) had been deleted and under the proviso thereto, notice for reassessment would be illegal if issued more than four years after the end of the assessment year, if the original assessments were made under Section 143(3) and that, the notices were bad as they were only on the basis of a change of opinion and the law that an assessment could not be reopened on a change of opinion was the same before and after amendment by the Direct Tax Laws (Amendment) Act, 1987, of Section 147. 18. Mr. Divetia further relied on the decision of the Madras High Court in the case of C.I.T. v. ELGI Finance Ltd., [2006] 286 ITR 674, wherein it is held that when the factual finding was that the assessee -company had fully and truly disclosed all material facts necessary for computing the depreciation allowance in the course of the original assessments completed under Section 143(3) itself, the period of limitation applicable to the reopening for these two years would be a period of four years prescribed in the proviso to Section 147. The reassessments for the assessment years 1992-93 and 1993-94 were clearly barred by limitation. 19. Mr. Divetia has also reli....
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....ppendix-I to Rule 5, motor buses and motor lorries not used in the business of running them on hire, are included in the group of machinery and plant on which depreciation under Section 32 of the Act is admissible at the rate of 25% from Assessment Years 1988-89 onwards. The assessee has claimed depreciation at 40% on transportation vehicles used in its own business and not in the business of running them on hire. This has resulted in excess depreciation allowance of Rs.3,73,892. These facts were noticed by the Assessing Officer while finalising the assessment for the Assessment Year 1994-95 and hence, the notice under Section 148 was issued to the assessee on 26.03.1997 as income chargeable to tax has escaped assessment within the meaning of proviso to Section 147 of the Act. Mr. Bhatt has further submitted that when the issue was not examined, it cannot be said that the Assessing Officer has formed any opinion on the same issue. 22. Mr. Bhatt has further submitted that by virtue of the proviso to Section 147 of the Act, the Assessing Officer has every right to issue notice under Section 148 of the Act, especially, when there was omission or failure on the part of the assessee t....
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....ssessee had omitted to disclose fully and truly all material facts and that in consequence of such non-disclosure income had escaped assessment. The Income Tax Officer had, therefore, jurisdiction to issue the notices under Section 34(1)(a). 25. Mr. Bhatt further relied on the decision of the Honourable Supreme Court in the case of Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638, wherein it is held that in proceedings under Article 226 of the Constitution of India, challenging the jurisdiction of the Income Tax Officer to issue a notice under Section 34(1)(a), the High Court is only concerned to decide whether the conditions which invested the Income Tax Officer with power to reopen the assessment did exist. It is not within the province of the High Court to record a final decision about the failure to disclose fully or truly all material facts bearing on the assessment and consequent escapement of income from assessment of tax. 26. Based on the above factual and legal position, Mr. Bhatt has submitted that whether the notices are issued beyond four years from the end of the relevant assessment years or not, it would not make any difference so far as the....
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.... observed that the aforesaid exercise is necessitated in light of the opening portion of Section 147 of the Act which stipulates that action may be initiated if Assessing Officer "has reason to believe" that any income chargeable to tax has escaped assessment for any Assessment Year. When this provision is read in conjunction with section 148(2) of the Act which mandates that the Assessing Officer shall, before issuing any notice under Section 148 of the Act, record his reasons for issuing the notice. It is, therefore, clear that the Officer recording the reasons under Section 148(2) and the Officer issuing notice under Section 148(1) has to be the same person. The form of the notice itself indicates that the authority has to record "whereas I have reason to believe that ... income liable to tax for the assessment year ... has escaped assessment within the meaning of Section 147 of the Income-Tax Act, 1961." The Court was, therefore, of the prima facie view that a successor officer cannot issue notice under Section 148 of the Act on the basis of the satisfaction recorded by the predecessor officer because the reason to believe has to be of the officer concerned, viz. the officer is....
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....or Assessment Year 1992-93 and 21st January, 1998 for Assessment Years 1990-91 and 1991-92. Despite these facts, the claim of the assessee was allowed by the Assessing Officer while framing the assessment for the Assessment Year 1994-95 on 31.03.1997. It, therefore, becomes clear that there was no omission or failure on the part of the assessee to disclose all material facts fully and truly. At the most, it is merely a change of opinion which cannot empower the Assessing Officer to issue the notice of reopening under Section 148 of the Act beyond the period of four years. 29. Even with regard to depreciation, the reasons recorded by the Assessing Officer for the Assessment Years 1990-91 and 1991-92 contained factual errors as the assessee has not claimed depreciation at the rate of 40%. The assessee has claimed the depreciation at the rate of 33.33% , which is the relevant rate prescribed under the first schedule. The decisions of the Honourable Supreme Court relied upon by Mr. Bhatt would not render any assistance to the Revenue in view of the fact that the assessment year involved in the case before the Honourable Supreme Court was the Assessment Years 1955-56 to 1962-63. The pr....