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TMI Blog2011 (12) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the reasoning of the second respondent and as without logic or reason. There cannot be two parallel proceedings on the self same issue as one based on the view that there were materials available on record which warranted exercise of jurisdiction under Section 154 and the other initiated under Section 147 that there was escapement of income from tax on account of the failure of the assessee from disclosing the full and correct particulars - Notice u/s 148 quashed. Regarding AY 2002-2003 and 2004-2005 - notice u/s 148 - held that:- the notices do not even touch on the primary materials disclosing the causal link to believe that there was escapement of income from assessment on account of the failure of the assessee from disclosing the true and full facts. Thus apart from the above, going by the period of limitation provided for under Section 147 proviso, in the absence of any materials to support the assumption of jurisdiction within the four year limitation period prescribed therein, the proceedings initiated after the expiry of four years from the assessment year, suffer from lack of jurisdiction on the part of the first respondent in proceeding further in this matter. Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed deduction under Section 80 IB of the Income Tax Act in the return filed for the assessment year 2000-01. Thus in respect of Chinchpada Unit, deduction under Section 80 IB was claimed from the assessment year 1999-2000, it being the first year of commencement of commercial production and in respect of Rakholi Unit, the claim was made only from 2000-01. Accordingly, in respect of the claim for the assessment year 2002-03, the petitioner is said to have enclosed Form 10CCB and attached the calculation of book profit under Minimum Alternate tax as per Section 115 JB and claimed an aggregate deduction of Rs. 325,72,69,199/- under Chapter VIA, out of which, the claim for deduction under Section 80 IB in respect of the eligible Units at Chinchpada Unit and Rakholi Unit, was to the tune of Rs. 310,96,28,749/-. As regards the assessment year 2003-04, on the total aggregate claim on deduction under Chapter VIA of Rs. 417,67,25,823/-, the deduction under Section 80 IB was to the tune of Rs.404,42,59,243/-. For the assessment year 2004-05, on the total aggregate claim on deduction under Chapter VIA of Rs. 186,65,45,794/-, the deduction under Section 80 IB was to the tune of Rs. 16,05,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectification under Section 154, proceedings under Section 147 was initiated. 6. It is seen from the documents placed before this Court that the first respondent herein issued notice under Section 148 on 19.03.2009 to reopen the assessment in respect of the assessment years 2002-03, 2003-04 and 2004-05. It was alleged by the Assessing Officer that he had reasons to believe that the income chargeable to the above assessment years had escaped assessment within the meaning of Section 147 of the Act and that he proposed to reassess the income for the said years and required the petitioner to file a return of income within 30 days from the date of receipt of the notice. The assessee filed its reply objecting to the noting and stated that the returns originally filed under Section 139 of the Income Tax Act might be treated as a return filed pursuant to the notice issued under Section 148 of the Income Tax Act. On the reasons sought for by the assessee, the first respondent herein intimated the same vide letter dated 11.5.2009. The reasons given in the notice issued under Section 147 of the Income Tax Act in respect of the assessment year 2003-04 and under Section 154 proceedings origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us income allowed as eligible for deduction u/s.80IB. " 7. As far as the assessment year 2002-03 is concerned, the reasons given for the notice issued under Section 148 of the Income Tax Act stated that, taking the date of commencement of operation as 07.06.1996, the deduction in respect of Chinchpada Unit was wrongly granted at 100%. The claim being in the sixth year, the petitioner assessee was entitled to 30% deduction only. 8. The notice issued also referred to the other income credited in the Profit and Loss Account, viz., for Chinchpada Unit; that the assessee had credited interest income of Rs. 3,26,64,158/-, which was not derived from manufacturing activity. Since these incomes did not form part of the income from the manufacturing unit, these were viewed as not eligible for deduction under Section 80IB of the Act. 9. Thus for the assessment year 2004-05, under notice dated 19.3.2009, the deduction given in respect of Rakholi Unit at 100% was sought to be withdrawn as in the case of Chinchpada Unit. The notice also referred to the other income being included in the deduction granted under Section 80 IB. Thus, except for the alleged wrong claim under Section 80 HHC and Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of commencing of commercial production - 1st April, 1998 being the date of commercial production for the Chinchpada Unit and for the Rakholi Unit, from 22nd February 1999. Thus taking note of the materials produced, when the original assessment rightly considered the claim and thus was found fully satisfied, the question of withdrawal of the benefit did not arise. 12. The petitioner pointed out that the relief under Section 80 IB of 100% was granted by the Officer after fully satisfying himself as to the date of commencement of commercial production. Thus the petitioner pointed out that the view of the first respondent that the relief had to be granted from the date of the licence i.e., from 18.03.1998 in respect of the Rakholi Unit and from 07.06.1996 in the case of Chinchpada Unit, is contrary to the provisions of Section 80 IB of the Act. The petitioner further pointed out that the entire reassessment proceedings, in fact, rested on the view taken by the Assessing Officer that deduction should be made only from the date when the experimental production was started and not when the commercial production had started. Thus, except for the audit objection, there are no m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of alleging failure on the part of the assessee from disclosing true and full facts, did not arise. Therefore, the question of granting relief of more than what had been laid down, did not arise. 15. In the reply filed for the assessment year 2003-04, the petitioner specifically pointed out to Section 154 proceedings that on the admitted fact that the proceedings were on account of the alleged mistake on the face of the record, the proceedings taken under Section 147, read with Section 148, alleging that there was failure on the part of the assessee to disclose any material facts truly and fully, fails. Thus there could be no simultaneous assumption of jurisdiction under Sections 148 and 154 on the self same issues. The petitioner further pointed out that on an application made under the Right to Information Act, 2005, the petitioner was supplied with all the details as regards the view of the audit party on the relief granted to the petitioner under Section 80 IB of the Act. In the circumstances, the petitioner contends that the reopening of assessment based on audit objection suffers from legal infirmity and hence, the proceedings are liable to be quashed. 16. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the four years' time limit given in the substantive part of Section 147 of the Act. Given the fact that the notice discloses absolutely no materials to provide the link to the assumption of jurisdiction that there had been escapement of income from assessment, the scope of Explanation (1) to Section 147 is no different from what one would have to apply in understanding the scope of Section 147 sub section (1). Learned senior counsel submitted that the reasons disclosed does not disclose any material to come to a conclusion that there existed facts necessary to confer jurisdiction on the Officer to proceed under Section 147 of the Act. He further pointed out that even in the backdrop of the Explanation to Section 147(1), one cannot find any material having a bearing on the question of under-assessment, warranting a re-assessment in this case. Making particular submission that the deduction under Section 80 IB is with reference to the date of commercial production, learned senior counsel relied on the decisions reported in CIT v. Elgi Finance Ltd. [2006] 286 ITR 674/155 Taxman 124 (Mad.), CIT v. Hindustan Antibiotics Ltd. [1974] 93 ITR 548 (Bom.), CIT v. Nestor Pharmaceuticals L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings under Section 154 of the Act could not be pursued further, as is evident from the communication received by the petitioner, on account of certain inherent difficulties in proceeding further in processing the said application. Hence, it could not be presumed that the first respondent could not proceed further with the issuance of notice under Section 154, or the same would oust the jurisdiction under Section 147 of the Act. 19. In support of his contention, he relied on the decision reported in CIT v. P.V.S. Beedies (P.) Ltd. [1999] 237 ITR 13/103 Taxman 294 (SC), referred to in the unreported decision of the Delhi High Court dated 26.9.2011 in Dalmia (P.) Ltd. v. CIT [2011] 202 Taxman 372/14 taxmann.com 106, which also dealt with the scope of Explanation (1) to Section 147 of the Act in the context of the various decisions of the Apex Court on the scope of Section 147 of the Act. 20. Reiterating the stand taken in the counter affidavit, particularly with reference to Section 80 IB of the Act, learned Senior Standing Counsel appearing for the Revenue pointed out that the claim is not sustainable in law. As regards the miscellaneous income, particularly when there a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to reopen the assessment was given only to bring the relief granted to be in tune with the date of commencement of operation and hence, the relief granted was in excess of what was available to the assessee. 25. Section 80IB(14)(c)(iii) defines "initial assessment year" as follows: "(c) "initial assessment year" - ** ** ** (iii) in the case of an undertaking engaged in the business of commercial production or refining of mineral oil referred to in sub-section (9), means the assessment year relevant to the previous year in which the undertaking commences the commercial production or refining of mineral oil;" 26. Going by the above definition that the criteria for determining the period of deduction and the percentage of deduction is based on the industrial undertaking beginning to manufacture or produce things, I do not find any legal basis in the contention of the Revenue that the relief has to be worked out from the date of the licence. It may be noted that getting a licence to set up an industrial undertaking is a stage anterior to the commencement of production and hence, the date of licence and the date of commercial production cannot be a simultaneous happening. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n off to be disallowed, being capital in nature. 29. A reading of the notice under Section 154 of the Act and the reassessment notice dated 11th May 2009 shows that there is absolutely no material difference on the issues sought to be considered under these notices, except the fact that while in the proceedings under Section 154, the notice is based on the view that there was a mistake apparent on the face of the record warranting a rectification, the proceedings under Section 147 alleged that by reason of the untrue and incorrect particulars given by the assessee, there had been an escapement of tax. Given the fact that the area of operation of both these provisions are on totally different fields, the simultaneous assumption of jurisdiction under Sections 154 and 147 on the self same issue, plainly shows the contradiction in the reasoning of the second respondent and as without logic or reason. 30. As rightly pointed out by the learned senior counsel appearing for the petitioner placing reliance on the decision reported in Premier Automobiles Ltd. (supra), when once the assessment order has been the subject matter of rectification under Section 154, the self same issue cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the decision of the Apex Court reported in Calcutta Discount Co. Ltd. (supra), followed by CIT v. Eicher Ltd. [2007] 294 ITR 310/163 Taxman 259 (Delhi) and the decision reported in Kelvinator of India Ltd. (supra), even to fall back on Explanation (1) to Section 147, the Revenue must have materials to form a prima facie view that there had been non-disclosure of material facts. Thus when all the facts relating to the various claims were placed before the Assessing Officer in the questionnaire sent and the petitioner had participated in the enquiry, there could be no assumption of jurisdiction by the Assessing Officer under Section 147 of the Act. 33. The case of the Revenue is that even if the assessee had placed the materials before the Assessing Officer at the time of original assessment, Explanation (1) to Section 147 gives the necessary jurisdiction required for reopening the assessment, for, under the Explanation, the production of Books of Accounts and other material will not necessarily amount to "disclosure" within the meaning of the Section if the Assessing Officer does not draw the right inferences, which he should have otherwise drawn. Quite apart, he also placed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition therefore is that if there were in fact some reasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have a material bearing on the question of "under-assessment" that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notices under section 34. (Emphasis supplied) The Apex Court further held as follows: "Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. 12. If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfilment of certain pre-conditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 154 proceedings already taken up, there cannot be an assumption of jurisdiction under the self same facts under Section 147 of the Act. 44. As far as the assessment years 2002-03 and 2004-05 are concerned, the notices do not even touch on the primary materials disclosing the causal link to believe that there was escapement of income from assessment on account of the failure of the assessee from disclosing the true and full facts. Thus apart from the above, going by the period of limitation provided for under Section 147 proviso, in the absence of any materials to support the assumption of jurisdiction within the four year limitation period prescribed therein, the proceedings initiated after the expiry of four years from the assessment year, suffer from lack of jurisdiction on the part of the first respondent in proceeding further in this matter. 45. As rightly pointed out by the petitioner, a reading of the assessment orders for the above-said years shows that the deduction claimed under Chapter VI A was examined with reference to the certificates of the Chartered Accountant and the submission made in that regard. So too the claim under Section 115JB. As far as the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Champa Properties Ltd. [2009] 14 SCC 451 as well as Whirlpool Corpn. v. Registrar of Trade Marks [1998] 8 SCC 1 and held that the rule of exclusion of writ jurisdiction by availability of an alternative remedy, is a rule of discretion and not one of compulsion and there could be contingencies wherein the High Court exercised its jurisdiction in spite of availability of an alternative remedy. 49. I agree with the submission of the learned senior counsel appearing for the petitioner that the existence of an alternative remedy by way of appeal, would not stand in the way of this Court granting the relief under Article 226, particularly on the admitted fact as regards the date of commercial production taken up for consideration for the purpose of granting 100% relief in the first year of assessment namely, 1999-2000 and 2000-2001 in respect of Chinchpada Unit and Rakholi Unit respectively. As already pointed out, as far the assessment year 2003-2004 is concerned, there cannot be a parallel proceedings under Section 147 and Section 154 on the self same issues. As far as assessment years 2002-2003 and 2004-2005 are concerned, apart from the reasons given on the claim under Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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