Hynoup Food & Oil Industries Ltd. V. Assistant Commissioner of Income Tax

SCA/7335/1998

AI Insights

The case involves Hynoup Food & Oil Industries Ltd., which challenged the notices issued by the Assistant Commissioner of Income Tax for reopening of assessments for several years under Section 148 of the Income Tax Act, 1961. The primary issues were whether the notices were issued within the permissible time frame and whether there was a valid reason to believe that income had escaped assessment. The court examined the reasons recorded by the Assessing Officer and found that they were based on a change of opinion rather than new material facts, and thus, the reopening of assessments was not justified.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 804705 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 17-07-2008
• Assessment Year: misc
• Other Referred Cases: ICICI Bank Ltd. vs. K. J. Rao & Anr., Hindustan Lever Ltd. vs. R. B. Wadkar, Assistant Commissioner of Income Tax & Ors., Commissioner of Income-Tax & Anr. vs. Foramer France, Commissioner of Income-Tax vs. ELGI Finance Ltd., Commissioner of Income-Tax vs. Elgi Ultra Industries Ltd., Commissioner of Income-Tax, Delhi, Ajmer, Rajasthan and Madhya Bharat vs. Nagri Mills Co. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MANISH R BHATT
• Assessee Lawyers: J P SHAH; S N DIVETIA
• Keywords: Deduction under sections 80HH and 80I; Excess depreciation allowance; Manufacturing Concern; Reopening of assessment
• Section: 147; 148; 143(3); 80HH; 32A; 80I

Judgement Text

"SCA/7336/1998 1/28 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 7336 OF 1998 With SPECIAL CIVIL APPLICATION NO. 7335 OF 1998 With SPECIAL CIVIL APPLICATION NO. 5234 OF 1997 With SPECIAL CIVIL APPLICATION NO. 12910 OF 2000 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ HONOURABLE MR.JUSTICE R.H.SHUKLA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the Civil Judge ? ====================================== HYNOUP FOOD & OIL INDUSTRIES LTD. ­ Petitioner(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX ­ Respondent(s) ====================================== Appearance : Mr. J. P. Shah and Mr. S. N. Divetia for Petitioner(s). Mr. Manish R. Bhatt for Respondent(s). ====================================== CORAM : HONOURABLE MR.JUSTICE K.A.PUJ and HONOURABLE MR.JUSTICE R.H.SHUKLA SCA/7336/1998 2/28 JUDGMENT Date : 17/07/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE K.A.PUJ) Since all these petitions are filed by the same Assessee, i.e. Hynoup Food & Oil Industries Limited, and since the common issue regarding reopening of assessment under Section 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) is involved and since all these matters are heard together, they are being disposed of by this common judgement and order. 2. The assessment years involved are assessment years 1990­ 91, 1991­92, 1992­93 and 1994­95. 2.1 For the Assessment Year 1990­91, the petitioner filed its return of income on 31.12.1990. The revised return was filed on 31.12.1991. The original assessment order under Section 143(3) was passed by the Assessing Officer, wherein the claim of deduction under Sections 32A , 80HH and 80I was allowed, stating that the Assessee is treated as manufacturing concern in view of C.I.T. (Appeals)'s decision given in Assessment Years 1987­88 and 1989­90 and no second appeal is filed against the order of the C.I.T. (Appeals) by the revenue before the Income Tax Appellate Tribunal. The notice under Section 148 for SCA/7336/1998 3/28 JUDGMENT 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 1990­91, 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. 2.2 For Assessment Year 1991­92, 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 Assessing Officer on 28.03.1994, wherein the claim for deductions under Sections 80HH and 80I was allowed. The notice of reopening under Section 148 was issued on 29.07.1998, which is beyond a period of four years from the end of Assessment Year 1991­92, i.e. 31.03.1992. On receipt of the reasons recorded from the Assessing Officer, the present petition was filed before this Court praying for quashing and setting aside the notice of reopening issued under Section 148 of the Act. The petition was admitted on 23.09.1998 and interim relief was granted in terms of paragraph 12(C) of the petition, whereby SCA/7336/1998 4/28 JUDGMENT the order of status quo was passed and it was ordered to be maintained during pendency and final disposal of the petition. 2.3 For the Assessment Year 1992­93, the petitioner filed its return of income on 31.12.1992. The assessment under Section 143(3) of the Act was completed on 28.12.1994. The petitioner sent a letter dated 22.02.1996 to the Assessing Officer, clarifying the sale of soap stock in the Assessment Year 1992­93. The Assessing Officer passed the assessment order for the Assessment Year 1993­94 on 13.03.1996 allowing deductions under Section 80HH and depreciation, as claimed by the petitioner. The petitioner sent a detailed letter dated 17.02.1997, in reply to the query raised by the Assessing Officer for the Assessment Year 1992­93 relating to manufacturing activity. The petitioner sent a further letter on 21.02.1997 in relation to the claim under Section 80HH of the Act. The Assessing Officer thereafter issued a notice under Section 148 of the Act for reopening of the assessment on 26.03.1997, i.e. within a period of four years from the end of the Assessment Year 1992­93, i.e. on 31.03.1993. On receipt of the reasons recorded from the Assessing Officer, the present petition is filed by the petitioner challenging the notice of reopening issued under Section 148 of the Act. The petition was admitted by this Court on 03.12.1997 and interim relief was granted in terms of paragraph 12(C) of the petition, whereby the order of status SCA/7336/1998 5/28 JUDGMENT quo was passed and directed to be maintained during pendency and final disposal of the petition. 2.4 For the Assessment Year 1994­95, the petitioner filed its return of income on 30.11.1994. The revised return was filed on 28.01.1997. The notice under Section 148 was issued by the Assessing Officer for the Assessment Year 1992­93 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 1990­91 and 1991­92 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 1990­91 and 1991­92 on 05.09.1998. The Assessing Officer issued notice under Section 148 for the Assessment Year 1994­95 on 06.10.2000, i.e. beyond period of four years from the end of the Assessment Year 1994­95 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. SCA/7336/1998 6/28 JUDGMENT 3. So far as Special Civil Application Nos.7336 of 1998, 7335 of 1998 and 5234 of 1997 for the Assessment Years 1990­91, 1991­92, 1992­93 are concerned, Mr. J. P. Shah, learned Counsel appears on behalf of the Assessee, and Mr. M. R. Bhatt, learned Senior Standing Counsel appears for the Revenue. So far as Special Civil Application No.12910 of 2000 for the Assessment Year 1994­95 is concerned, Mr. Sameer N. Divetia, learned Counsel appears for the Assessee, and Mr. M. R. Bhatt, learned Senior Standing Counsel appears for the Revenue. 4. The core issue involved in all these four petitions is in respect of validity of the notices issued by the Assessing Officer under Section 148, read with Section 147 of the Act. While perusing the reasons recorded by the Assessing Officer for reopening of the assessment, it appears that they are same for Assessment Years 1990­91, 1991­92 and 1992­93. It is observed by the Assessing Officer, while recording the reasons for these three years that the assessee is engaged in the business of refining of cotton seed oil, groundnut oil, sunflower oil and rap seed oil. The assessee purchased the raw oil and the same was refined and sold in the market. The assessee was granted deduction as per these orders available after appeal effect and rectification at Rs.47,40,583 and Rs.47,40,583/­ under Sections 80HH and 80I SCA/7336/1998 7/28 JUDGMENT respectively. In course of the assessment proceedings for the Assessment Year 1994­95, the issue regarding the eligibility of deduction under Sections 80HH and 80I was examined and it was seen on appraisal of the activities carried out by the assessee, i.e. refining of various oil that the same does not amount to manufacture or production of article as per the requirement of provisions of Sections 80HH and 80I of the Act. These business activities carried out by the assessee merely amount to processing as no new article was being manufactured or produced by the assessee and there was no change in the identity or form of the ultimate product in the processing of refining of the oil as the cotton seed oil or groundnut oil remained the same even after the process of refining the only difference being the earlier oil being not refined and the subsequent oil being known as refined oil. The Assessing Officer has also considered certain judicial pronouncements and quoted in the reasons recorded. It was further observed by the Assessing Officer that on examination of records for the Assessment Year 1992­93 in connection with ongoing assessment proceedings for the Assessment Year 1994­95, it was found that the assessee was allowed deduction under Sections 80HH and 80I on trading income of soap stock. The assessee was not entitled to deduction under Sections 80HH and 80I. 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 SCA/7336/1998 8/28 JUDGMENT reopened. Over and above this, it was also observed by the Assessing Officer that as per the rule prescribed in Appendix­I 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 1988­89 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 1990­91, 1991­92 and 1992­93. 5. While recording the reasons for the Assessment Year 1994­ 95, on 6th October, 2000, the Assessing Officer has observed that in this case, the assessment has been finalised on 143(3) on 31.03.1997 determining total income/loss at Rs.2,82,60,150/­. On further verification of the records, it was found that the assessee had claimed depreciation at 40% on Rs.18,73,318/­ and at 20% on Rs.19,64,023/­ on transport vehicles, which were used in its own oil business, not in the business of running them on hire. The depreciation allowable under SCA/7336/1998 9/28 JUDGMENT these circumstances is at 25% for the vehicles used for the period exceeding six months and 12.5% for the period less than six months. The depreciation allowed in the assessment order under Section 143(3) resulted in excess allowance of depreciation by Rs.4,28,298/­ resulting in short levy of tax amounting to Rs.4,23,586/­, including interest under Section 234B of Rs.1,77,315/­. 6. Mr. J. P. Shah, learned Advocate appearing for the petitioner, has submitted that reliefs under Sections 80HH and 80I were granted to the petitioner right from the Assessment Year 1986­87 down to Assessment Year 1993­94, except in the Assessment Year 1987­88, when the issue came to be decided in appeal by the C.I.T. (Appeals) and thereafter, by the Tribunal on an additional ground taken at the time of hearing in February­1998. He has, therefore, submitted that in respect of this issue, the assessment sought to be reopened by the revenue is nothing but mere change of opinion, which is not even permissible within a period of four years. He has further submitted that the petitioner is producing refined oil, edible oil, being a totally new commercial commodity out of wash oil, which is not an edible item and it is also known as a different commercial commodity from refined oil and on that basis, the petitioner was rightly granted the reliefs under Sections 80HH and 80I for all the Assessment Years from 1986­87 to SCA/7336/1998 10/28 JUDGMENT 1993­94. He has, therefore, submitted that the issue is squarely covered in favour of the assessee even on merits and hence, there is no justification for issuance of notice under Section 148 of the Act. 6.1 He has further submitted that so far as depreciation on trucks at the rate of 40% claimed by the assessee is concerned, the trucks were utilised by the petitioner on hire and in respect of which the petitioner has earned hiring charges which were shown as business income and also taxed as business income not only in the Assessment Year 1992­93, but also, upto the Assessment Year 1994­95. 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. 6.2 He has, therefore, submitted that on none of the counts, the notices issued by the Assessing Officer for reopening of assessments are SCA/7336/1998 11/28 JUDGMENT held to be legal or valid. Even for Assessment Year 1992­93, 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 should not uphold the said notice in view of the decision of the Bombay High Court reported at 33 ITR 681. 7. So far as Assessment Year 1994­95 is concerned, Mr. S. N. Divetia, learned Counsel appearing for the petitioner, has submitted that there is no reason to form a belief that the petitioner's income for the Assessment Year 1994­95 has escaped assessment, much less on account of failure or omission on the part of the petitioner to disclose fully and truly all material facts for the purpose of assessment. He has further submitted that there is nothing on record of the Assessing Officer to hold a belief that depreciation on the transport vehicle was wrongly allowed at 40% on Rs.18,73,318/­ and 20% on Rs.19,64,023/­. There is no new fact or any information which has come to the notice of the Assessing Officer. It is merely a change of opinion on the part of the Assessing Officer which cannot justify reopening of the assessment by issuance of the impugned notice. He has further submitted that the assessment of the petitioner has been completed in sub­section 3 of Section 143 of the SCA/7336/1998 12/28 JUDGMENT Act on 31.03.1997 and the impugned notice having been issued after a period of four years from the end of the Assessment Year, i.e. after 31.03.1995, the conditions laid down under the proviso to Section 147 for issuance of the impugned notice are not satisfied. 7.1 Mr. Divetia has further submitted that the point relating to depreciation on transport vehicles at higher percentage on account of running them on hire was specifically considered by the Assessing Officer during the assessment proceedings for the Assessment Year 1994­95. In support of this submission, he invited our attention to the contents of paragraph 7 of the affidavit in reply filed by the respondent in Special Civil Application No.5234 of 1997 wherein it is stated that “it is however, noticed further during proceedings for A.Y.1994­95, that vehicles purchased by the assessee during A.Y. 1992­93 are being used for in the assessee's own business and that not on running them on hire as required for claiming 50% depreciation. ....” In view of this factual position pointed out by the respondent in his affidavit, it cannot be said that the respondent had not applied his mind during the course of assessment proceedings for the Assessment Year 1994­95. He has further submitted that the respondent had reopened the assessment for Assessment Year 1992­93 by issuance of notice under Section 148 on 26.03.1997 and for Assessment Years 1990­91 and 1991­92, on 29.07.1998. The reasons for reopening, inter alia, refer to the higher rate SCA/7336/1998 13/28 JUDGMENT 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 1994­95. 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 1992­93 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 1994­95 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 petitioner to disclose these facts and that the Assessing Officer was not aware about it. 7.2 Mr. Divetia has further submitted that the trucks in respect of which the higher depreciation was claimed and allowed are the trucks which are running on hire and in respect of which the petitioner has earned hire charges which have been shown as business income and also taxed as business income. He has also adopted the arguments of Mr. Shah and submitted that the issue regarding higher rate of depreciation SCA/7336/1998 14/28 JUDGMENT is academic in nature, in the sense that whether the depreciation is allowed at 40% or at any other rate, the assessee does not get depreciation more than actual costs and by now full depreciation would have been exhausted and thus, the department does not get anything more by way of tax over a period of time. He has, therefore, submitted that the reassessment would result in avoidable arithmetic exercise and paper work for all the years involved. Since the impugned notice is absolutely without jurisdiction and patently bad in law, the same deserves to be quashed. 7.3 In support of his submission that the notice for reopening is bad, he relied on the decision of the Bombay High Court in the case of ICICI Bank Ltd. vs. K. J. Rao & Anr., [268 ITR 203 (Bombay)] and in the case of Hindustan Lever Ltd. vs. R. B. Wadkar, Assistant Commissioner of Income Tax & Ors. [268 ITR 332 (Bombay)]. In both these cases, the Bombay High Court has taken the view that the notice of reopening was clearly beyond the period of four years. The reasons recorded by the Assessing Officer nowhere stated that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the relevant assessment year. The Assessing Officer had, therefore, no jurisdiction to reopen the assessment proceedings. Since the notice of reopening was not valid, it was liable to SCA/7336/1998 15/28 JUDGMENT be quashed. 7.4 Mr. Divetia has also relied on the decision of the Honourable Apex Court in the case of Commissioner of Income­Tax & Anr. vs. Foramer France, [264 ITR 566], wherein, while dismissing the civil appeals, the Court had not seen any reason to interfere with the decision of the Allahabad High Court in the case of Foramer vs. C.I.T. [247 ITR 436 (All)]. The High Court, inter alia, held that Section 147 substituted in the Income Tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987, had made a radical departure from the original 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. 7.5 Mr. Divetia further relied on the decision of the Madras High Court in the case of Commissioner of Income­Tax vs. ELGI Finance Ltd., [286 ITR 874 (Madras)], wherein it is held that when the factual SCA/7336/1998 16/28 JUDGMENT 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 1992­93 and 1993­94 were clearly barred by limitation. 7.6 Mr. Divetia has also relied on the decision of the Madras High Court in the case of Commissioner of Income­Tax vs. Elgi Ultra Industries Ltd., [296 ITR 573], wherein while dismissing the appeal, the Court held that there was no finding that there was failure on the part of the assessee to disclose fully and truly all material facts. Further, all the material facts were available at the time of making the original assessment. The Tribunal applying the right principles had come to the correct conclusion. There was no error or legal infirmity in the order of the Tribunal so as to warrant interference. 7.7 Based on the aforesaid factual as well as legal position, Mr. Divetia strenuously urged that the impugned notice for reopening of assessment for the Assessment Year 1994­95, deserves to be quashed and the petition, therefore, be accordingly allowed. SCA/7336/1998 17/28 JUDGMENT 8. Mr. M. R. Bhatt, learned Senior Standing Counsel appearing for the Revenue, in all these four petitions, on the other hand, has strenuously defended issuance of notices under Section 148 of the Act for reopening of assessment for the respective years, i.e. 1990­91, 1991­ 92, 1992­93 and 1994­95. On behalf of the Revenue, a detailed affidavit in reply is filed only in Special Civil Application No.5234 of 1997. Basing his arguments on this affidavit­in­reply, which are equally applicable to other assessment years, Mr. Bhatt submitted that in the assessment order dated 28th December, 1994 passed by the Assessing Officer, there was no discussion as to whether the assessee is manufacturer of any article or thing and whether it is eligible for deductions under Sections 80HH and 80I of the Act. The Assessing Officer had allowed deductions to the assessee without analysing the facts of the case and ratios of similar cases decided by various High Courts and Supreme Court. The Assessing Officer has allowed deductions to the assessee mechanically and not a single line was written in the assessment order about the eligibility of the claim. Similarly, the Assessing Officer has allowed deductions under Sections 80HH and 80I to the assessee in the Assessment Year 1992­93 on trading income from soap stock. The assessee is not entitled to the deductions under Sections 80HH and 80I and yet the Assessing Officer allowed the same without verifying the claim. He has further submitted SCA/7336/1998 18/28 JUDGMENT that in the Assessment Year 1992­93, it is seen that as per the rules prescribed in Appendix­I 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 1988­89 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 1994­95 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. 8.1 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 to disclose fully and truly all material facts necessary for his assessment, for the relevant assessment year. He has further submitted that by virtue of Explanation 1, SCA/7336/1998 19/28 JUDGMENT production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the provisions of Section 147. He has further submitted that Clause (c) of Explanation 2 to Section 147 makes it clear that for the purposes of Section 147, where an assessment has been made, but, (i) income chargeable to tax has been undercharged; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed, shall also be deemed to be cases where income chargeable to tax has escaped assessment. So, since the assessee has claimed the reliefs under Sections 80HH and 80I and has also claimed depreciation at a higher rate, the income chargeable to tax has escaped assessment within the meaning of Clause (c) of Explanation 2 to Section 147 of the Act and hence, the notice of reopening was rightly issued by the Assessing Officer. 8.2 In support of his submissions, he relied on the decision of the Honourable Apex Court in the case of Indo­Aden Salt Mfg. & Trading Co. P. Ltd. vs. Commissioner of Income­Tax, Bombay, [159 ITR 624], wherein it is held that since excess depreciation had been allowed on the entirety of the assets on the basis that they consisted of SCA/7336/1998 20/28 JUDGMENT masonry working, the Income­tax Officer could reasonably be said to have material to form the belief that there was under­assessment owing to the failure or omission on the part of the appellant to disclose fully and truly all material facts. It was further held that the Income Tax Officer could have in the original assessment proceedings found out the correct position by further probing did not exonerate the appellant from the duty to make a full and true disclosure of material facts. 8.3 Mr. Bhatt further relied on the decision of the Honourable Supreme Court in the case of Sowdagar Ahmed Khan (Deceased) vs. Income­Tax Officer, Nellore, [70 ITR 79], wherein it is held that there was some material before the Income Tax Officer on which he formed prima facie belief that the assessee had omitted to disclose fully and truly all material facts and that in consequence of such non­disclosure income had escaped assessment. The Income Tax Officer had, therefore, jurisdiction to issue the notices under Section 34(1)(a). 8.4 Mr. Bhatt further relied on the decision of the Honourable Supreme Court in the case of Kantamani Venkata Narayana & Sons vs. First Additional Income Tax Officer, Rajahmundry, [63 ITR 639], wherein it is held that in proceedings under Article 226 of the Constitution of India, challenging the jurisdiction of the Income Tax SCA/7336/1998 21/28 JUDGMENT 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. 8.5 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 validity of such notice is concerned. There is an escapement of income within the meaning of Section 147 read with proviso as well as Explanation of the Act and hence, the notices were rightly issued by the Assessing Officer. Even otherwise, there is an alternative efficacious remedy available with the assessee and on this ground also, the Court should not interfere in the matter and all the four petitions are required to be dismissed. 9. Having heard the learned Advocates appearing for the assessee and the learned Senior Standing Counsel appearing for the Revenue and having perused the reasons recorded for each of the SCA/7336/1998 22/28 JUDGMENT Assessment Years and the assessment orders passed under Section 143(3) of the Act and having considered the relevant statutory provisions as well as the authorities cited before the Court, we are of the view that the core issue that is to be decided by us is as to whether there is any omission or failure on the part of the assessee to disclose all material facts fully and truly for the relevant assessment years. We are also called upon to decide as to whether the reasons recorded by the Assessing Officers empower them to assume the jurisdiction for issuance of the notices to frame the reassessment orders for the relevant years under Section 143(3), read with Section 147 of the Act. Before we decide these issues, it is relevant to note here that this Court has passed an order on 3rd July, 2008 in Special Civil Application No.7335 of 1998. After perusing the reasons recorded by the Assessing Officer on 21st January, 1998, which are produced before the Court along with the affidavit dated 3rd July, 2008, the Court observed that on going through the reasons recorded it is noticed that the reasons have been recorded and signature appended by one Mr. R.P. Meena, Assistant Commissioner of Income Tax, Central Circle­1(2), Ahmedabad while the impugned notice (Exh.I) dated 29.07.1998 has been issued by one Mr. Ramesh Chander. The Court, therefore, asked the learned Standing Counsel to verify the records of the respondent­Department and state whether the officer, who has issued the notice under Section 148 of the Act, has SCA/7336/1998 23/28 JUDGMENT recorded his satisfaction as to escapement of income, or whether there is any noting to suggest that the successor officer has agreed with the reasons recorded by the predecessor officer. While issuing such directions, the Court 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 issuing the notice under Section 148 of the Act. Nothing has come on the record to indicate that the officer, who has issued the notice under SCA/7336/1998 24/28 JUDGMENT Section 148 of the Act, has recorded his satisfaction as to escapement of income. We are, therefore, of the view that so far as Assessment Years 1990­91 and 1991­92 are concerned, the Officer, who has issued the notice under Section 148 of the Act, is different than the officer, who has recorded the reasons, and hence, the notices for both these years are held to be invalid and deserve to be quashed on this solitary ground. 10. The notices of reopening for Assessment Years 1990­91, 1991­92 and 1994­95 were issued beyond the period of four years from the end of the relevant assessment years. The proviso to Section 147 is very clear, which says that where an assessment under Sub­section (3) of Section 143 has been made for the relevant assessment year, no action shall be taken under Section 147 of the Act after the expiry of four years from the end of the relevant assessment year, unless the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully or truly all material facts, necessary for his assessment for that assessment year. From the facts found on record, it can hardly be believed that there was failure on the part of the assessee to disclose fully or truly all material facts. As far as the claim under Sections 80I and 80HH of the Act is concerned, it has come on record that at the time of framing of the original assessment orders under Section 143 (3) of the Act, that claim of SCA/7336/1998 25/28 JUDGMENT deductions under Sections 80HH and 80I was allowed, stating that the assessee was treated as a manufacturing concern in view of the CIT (A)'s decision given in the Assessment Years 1987­88 and 1989­90 and no second appeal was filed against the order of the CIT (A) by the Department before the Income Tax Appellate Tribunal. Even otherwise, from the reasons recorded, it appears that during the course of assessment proceedings for the Assessment Year 1994­95, the Assessing Officer had come to knowledge that the assessee is not entitled to the relief under Sections 80I and 80HH and that the Assessee has claimed depreciation at a higher rate and therefore, the reasons were recorded on 26th March, 1997 for Assessment Year 1992­93 and 21st January, 1998 for Assessment Years 1990­91 and 1991­92. Despite these facts, the claim of the assessee was allowed by the Assessing Officer while framing the assessment for the Assessment Year 1994­95 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. 11. Even with regard to depreciation, the reasons recorded by the Assessing Officer for the Assessment Years 1990­91 and 1991­92 SCA/7336/1998 26/28 JUDGMENT 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 1955­56 to 1962­63. The provisions with regard to depreciation are different and the assessee was supposed to disclose the relevant details. However, there was a change in the provisions in the subsequent years and in the subsequent years, there was no obligation on the assessee to give such details along with the return of income. We are, therefore, of the view that looking to the statutory provisions and well settled position in law, there is no case for the revenue to issue the notices under Section 148 of the Act for the Assessment Years 1990­91, 1991­92 and 1994­95 as they are, admittedly, beyond the period of four years. These notices are, therefore, quashed. 12. So far as the Assessment Year 1992­93 is concerned, it is true that the notice is issued within a period of four years. However, the Assessing Officer has applied his mind at the time of framing of the original assessment and considering the earlier decisions of the C.I.T. SCA/7336/1998 27/28 JUDGMENT (Appeals), the claim regarding Sections 80HH and 80I was allowed by him. He took different view only because of the fact that another Assessing Officer during the course of the Assessment Year 1994­95 made an inquiry and took a different view that the Assessee is not entitled to the relief under Sections 80HH and 80I. This would amount to a change of opinion on the same facts, which were available before the Assessing Officer. Such a change of opinion would not confer jurisdiction on the Assessing Officer to issue the notice under Section 148 of the Act. Even otherwise, there is some force in the argument of Mr. Shah that ultimately, the assessee is entitled to claim depreciation equivalent to the costs of the article, where in a given year, the rate applicable is 25% or 40%. However, in the subsequent years, the depreciation could be allowed and in no case, more than 100% depreciation will be allowed to the assessee. It is, therefore, clear that only for the limited purpose, if the notices are issued under Section 148 of the Act, its validity cannot be upheld. The Court derives support from the observations made by the Bombay High Court in the case of Commissioner of Income­Tax, Delhi, Ajmer, Rajasthan and Madhya Bharat vs. Nagri Mills Co. Ltd., [33 ITR 681], wherein it is observed that “we have often wondered why the Income Tax Authorities, in a matter such as this, where the deduction is obviously a permissible deduction under the Income Tax Act, raise disputes as to the year in SCA/7336/1998 28/28 JUDGMENT which deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different, but, in the case of income of a company, tax is attracted at a uniform rate and whether the deduction in respect of bonus was granted in the assessment year 1952­ 53 or in the assessment years corresponding to the accounting year 1952, that is in the assessment year 1953­54, should be a matter of no consequence to the Department and one should have thought that the Department could not fritter away its energies in fighting matters of this kind”. These observations are equally applicable to the claim regarding depreciation. We are, therefore, of the view that the notice of reopening issued for the Assessment Year 1992­93 is also not held to be valid. 13. As a result, all the four petitions are, accordingly, allowed. Rule is made absolute without any order as to costs. 14. The Registry is directed to place copy of this judgement and order in each of these petitions. [K. A. Puj, J.] [R. H. Shukla, J.] kamlesh* "