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2004 (5) TMI 54 - HC - Income TaxReopening of assessment u/s 147 - Time limit for notice u/s 148 and 149 - Deduction u/s 80HHC -Change of method of accounting - Disclosure of material facts - mining and export of iron ore and construction and repairs of marine crafts - HELD THAT - It is clear to us that the only ground on which the Assessing Officer believed that the income of the assessee had escaped assessment was on the basis of erroneous computation of deduction u/s 80HHC of the Act based on the interpretation of the manner of computation of export profits made by the Division Bench of this court in CIT v. K. K. Doshi 2000 (8) TMI 74 - BOMBAY HIGH COURT . It is not the case that the assessee had not disclosed truly and fully all material facts that were necessary. With the help of learned counsel for the parties we have perused the copies of the return of income filed by the assessee and the annexures thereto including the audit report u/s 144AB of the Income-tax Act. We have also perused the copy of the assessment order dated March 22 1994 made u/s 143(3) of the Income-tax Act. We are satisfied that the assessee had truly and fully disclosed all material facts necessary for the purpose of assessment. The assessee had clearly disclosed that its income consisted of income from (i) sale of ores (ii) sale of vessels (iii) services and other proceeds and (iv) miscellaneous income. Figures for all four heads of income were separately given in the return along with the necessary details. The assessee had claimed a deduction of Rs. 7, 74, 92, 451 as a deduction u/s 80HHC of the Act. The Assessing Officer did not accept this claim of deduction claimed by the assessee on the ipse dixit of the assessee but made a recomputation in accordance with formulae u/s 80HHC and came to the conclusion that deduction u/s 80HHC would be Rs. 8, 25, 24, 247. This increase in the deduction of section 80HHC was allowed by the Assessing Officer as he had recomputed the income at Rs. 10, 16, 56, 940 instead of Rs. 9, 05, 00, 237 as computed by the assessee in its return of income. Not only true and material facts were disclosed by the assessee truly and fully but they were carefully scrutinised and figures of income as well as deductions were reworked carefully by the Assessing Officer. Reasons for such recomputation were also recorded by the Assessing Officer in his assessment order. Thus this is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income; but this is a case wherein the assessment is sought to be reopened on account of change of opinion of the Assessing Officer about the manner of computation of the deduction u/s 80HHC in the light of a subsequent decision of the Division Bench of this court in CIT v. K. K. Doshi and Co. In the present case the petitioner by his letter dated June 28 2001 did request respondent No.1 to inform him the reasons recorded u/s 148(2). Despite this request the reasons were not furnished but on the other hand notice u/s 142 was issued on July 24 2001. Though the writ petition was filed as early as August 31 2001 reasons were disclosed for the first time on February 17 2004 by annexing a copy of the reasons to the affidavit in reply sworn in by N. N. Murthy Naik. On account of the non-disclosure of the reasons despite demand there was no occasion for the petitioner to make a representation to the Assessing Officer and object to those reasons. Rule was issued by this court on the writ petition on October 16 2001 and it would not be proper for us to dismiss the writ petition at this stage after a lapse of more than two and a half years on the ground that the petitioner after the reasons are disclosed after two and a half years should now object to the reasons by filing objections before the Assessing Officer. Furthermore we have held that the Assessing Officer had sought to reopen the assessment not on the ground of non-disclosure of the facts truly and fully but on the ground of change of opinion based upon the decision of this court in the case of CIT v. K. K. Doshi and Co. As we have held earlier that change of opinion based upon a subsequent decision of a court is no ground of reopening of an assessment u/s 147 of the Act after the expiry of a period of four years. Thus in the present case there is inherent lack of jurisdiction in the respondents to reopen the assessment. The notice relates to the assessment year 1991-92 ending March 31 1991. The notice has been issued on May 31 2001 and was received by the petitioner on June 1 2001. The notice was issued after the expiry of 10 years from the end of the relevant assessment year. Thus we allow the writ petition and make the rule absolute in terms of prayer clauses (a) (b) and (c).
Issues Involved:
1. Validity of the notice issued u/s 148 of the Income-tax Act, 1961. 2. Jurisdiction of the Assessing Officer to issue the notice after the expiry of four years. 3. Obligation of the assessee to disclose all material facts. Summary: 1. Validity of the notice issued u/s 148 of the Income-tax Act, 1961: The petitioner challenged the notice dated May 31, 2001, issued by respondent No. 1 u/s 148 of the Income-tax Act, 1961, for the assessment year 1991-92. The notice did not disclose the reasons recorded by respondent No. 1 u/s 148(2) of the Act. The petitioner argued that all primary facts necessary for assessment were fully and truly disclosed, and the notice was issued based on a change of opinion due to subsequent court decisions, which is not a valid ground for reopening the assessment after four years. 2. Jurisdiction of the Assessing Officer to issue the notice after the expiry of four years: The court examined sections 147, 148, and 149 of the Act, noting that the power to reopen an assessment is subject to the proviso that no action shall be taken after four years unless there is a failure by the assessee to disclose fully and truly all material facts. The court emphasized that the "reason to believe" must be held in good faith and not merely as a pretence. The court found that the reasons recorded by the Assessing Officer did not indicate any failure by the assessee to disclose material facts but were based on a change of opinion due to subsequent judicial decisions. 3. Obligation of the assessee to disclose all material facts: The court held that the assessee had fully and truly disclosed all material facts necessary for the assessment. The assessment order dated March 22, 1994, was made after scrutinizing all facts and materials. The court reiterated that it is not the duty of the assessee to point out legal inferences from disclosed facts, which is the responsibility of the Assessing Officer. The court cited several judgments supporting this view, including ITO v. Lakhmani Mewal Das and decisions from the Gujarat, Calcutta, and Madras High Courts. Conclusion: The court concluded that the notice issued u/s 148 was based on a change of opinion and not on the failure of the assessee to disclose material facts. Therefore, it lacked jurisdiction and was invalid. The writ petition was allowed, making the rule absolute in terms of prayer clauses (a), (b), and (c).
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