1990 (12) TMI 28 - HC - Income Tax

Summary

Issues Involved:
1. Justification of reopening the assessment under section 147(b) of the Income-tax Act, 1961, on the ground of mere change of opinion.
2. Satisfaction of conditions for reopening the assessment under section 147(b) of the said Act.
3. Confirmation of the order of the Commissioner of Income-tax (Appeals) canceling the assessment framed under section 143(3)/148 of the said Act.

Issue-wise Detailed Analysis:

1. Justification of Reopening the Assessment under Section 147(b) on the Ground of Mere Change of Opinion:

The Tribunal held that the Income-tax Officer reopened the assessment based on a mere change of opinion. The original assessment was completed under section 143(3) on October 3, 1981, where the cash subsidy of Rs. 15,62,293 was treated as non-taxable, and weighted deduction under section 35B was allowed based on previous orders and directions. The successor Income-tax Officer reopened the assessment under section 147(b) on March 23, 1985, asserting that the cash subsidy received was taxable and that weighted deduction under section 35B was not admissible on certain items. The Tribunal concluded that reopening the assessment on these grounds constituted a mere change of opinion and was not valid.

2. Satisfaction of Conditions for Reopening the Assessment under Section 147(b):

The Tribunal found that the conditions for reopening the assessment under section 147(b) were not satisfied. The Commissioner of Income-tax (Appeals) concluded that the reopening was done without any change in circumstances, either in law or on facts, and was based on a mere change of opinion by the successor Income-tax Officer. The Tribunal supported this view, stating that the Income-tax Officer had not ascertained the true nature of the cash subsidy or the terms and conditions under which it was received. The Tribunal emphasized that the decision of the Calcutta High Court in Jeewanlal (1929) Ltd. [1983] 142 ITR 448 could not justify the belief that income had escaped assessment without proper factual ascertainment.

3. Confirmation of the Order of the Commissioner of Income-tax (Appeals) Canceling the Assessment Framed under Section 143(3)/148:

The Tribunal confirmed the order of the Commissioner of Income-tax (Appeals), which canceled the assessment framed under section 143(3)/148. The Tribunal noted that the reopening of the assessment was based on the same set of materials without any new information. The Tribunal held that the Income-tax Officer's belief that income had escaped assessment was not based on any fresh information but was a result of a change of view. The Tribunal also highlighted that the cash subsidy was received from a non-governmental organization, and there was no established nexus or connection with the assessee's business activity.

High Court's Judgment:

The High Court disagreed with the Tribunal's conclusions, stating that the Tribunal misdirected itself in law. The High Court emphasized that the jurisdiction of the Income-tax Officer to reassess income arises if he has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment. The High Court noted that the information leading to the reopening of the assessment, such as the Special Bench decision of the Tribunal and the decision in Jeewanlal (1929) Ltd. [1983] 142 ITR 448, constituted sufficient grounds for the Income-tax Officer to believe that income had escaped assessment. The High Court concluded that the conditions for reopening the assessment under section 147(b) were satisfied and answered all the questions in favor of the Revenue. There was no order as to costs.