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Issues involved: Assessment of deductions under section 80J of the Income Tax Act, 1961 and validity of notices issued u/s 148 for reopening completed assessments.
Assessment of deductions under section 80J: The petitioner, a private limited company engaged in fabrication of chemical equipments, claimed deductions under s. 80J of the Act for certain assessment years. Initially, deductions were not granted by the Income Tax Officer (ITO) for the assessment year 1974-75 due to liabilities exceeding assets. However, after appeals, the Tribunal directed the ITO to allow the deductions based on capital without deducting liabilities. Subsequently, deductions were allowed for the assessment years 1975-76 and 1976-77 as well. The ITO later issued notices for reopening assessments, alleging that income had escaped assessment. The petitioner challenged these notices, arguing that the ITO did not provide reasons as required u/s 148. The court held that the power to issue notice under s. 148 cannot be exercised without proper satisfaction that income has escaped assessment due to the assessee's failure to disclose material facts. As the ITO failed to provide reasons or file an affidavit, the notices were deemed invalid. Validity of notices issued u/s 148 for reopening assessments: The ITO decided to exercise powers under s. 148 after finding that relief under s. 80J was wrongly allowed based on inaccurate particulars provided by the assessee. However, it was revealed that the decision to issue notices was merely due to a change of opinion, which is not a valid reason for invoking s. 148. The court emphasized that mere change of opinion does not empower the ITO to reopen assessments u/s 148. As the initiation of proceedings by the ITO was found to be without jurisdiction, the notices were quashed. The court ruled in favor of the petitioner, making the rule absolute and no costs were awarded in the matter.
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