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TMI Blog2006 (2) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... may be mentioned that two issues arise for our consideration in this writ petition. The first issue relates to the maintainability of the writ petition for quashing a notice under section 148 of the Act and/or a speaking order disposing of the objections filed thereto. It is the contention of the petitioners that if the initiation of proceedings under section 147, by issuance of a notice under section 148, is itself without jurisdiction then, they are entitled to challenge the same by way of a writ petition both at the stage of the issuance of the notice under section 148 as well as at the stage after the speaking order is passed disposing of the assessee's objections to such notice and the assessee need not wait for the completion of the reassessment and challenge the order of reassessment by way of an appeal. On the other hand, it was contended on behalf of the Revenue that a writ petition would not be maintainable in view of the fact that the assessee would have the remedy of appeal available to it once the reassessment order is passed and in such appeal the assessee can take all the grounds of challenge as have been taken in the present writ petition. The second issue is on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The undertaking of the assessee engaged in the business of development and export of computer software is in a "software technology park" (STP) and is eligible for deduction under section 10A of the Act. In respect of the assessment year 2001-02, the assessee filed a return of income under section 139(1) of the said Act on October 25, 2001, declaring a loss of Rs. 3,31,301. The return was processed under section 143(1) and an intimation dated June 28, 2002, under section 143(1)(a) of the said Act was issued accepting the returned loss. Thereafter the return was selected for regular assessment under section 143(3) of the said Act and during the course of these proceedings, a show-cause notice dated March 9, 2004, was issued to the assessee regarding allocation of common expenses between the STP unit (software technology) and non-STP unit (human resource development). In the said show-cause notice dated March 9, 2004, it was specifically observed that the assessee was declaring income/receipts from two sources, namely, (1) software development and (2) human resources development. The assessee was required to show cause as to why the expenses not be allocated between the two divisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a speaking order. It is in this background that the speaking order dated August 17, 2005, which is also impugned herein came to be passed. The objections of the assessee were rejected and it was directed that the assessment proceedings pursuant to section 148 notice be continued. The reason for rejecting the objections disclosed in the speaking order was as under: "The assessee-company was not maintaining any separate books of account from the very beginning of its business and for the period relevant to the assessment year under consideration. In subsequent assessment years the assessee-company itself has computed the income/expenses on pro rata basis." Aggrieved by the notice dated February 10, 2005, as well as the order dated August 17, 2005, and the continuation of the reassessment proceedings, the petitioners have approached this court by way of this writ petition. I, now take up the issue with regard to the maintainability of a petition under article 226 of the Constitution seeking issuance of a writ of certiorari quashing a notice under section 148 and the speaking order passed by the Assessing Officer pursuant to the objections filed by the assessee. The leading case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pelled the argument that a writ petition would not lie inasmuch as the question whether the Income-tax Officer had reason to believe that underassessment had resulted from non-disclosure of material facts could be agitated before the Income-tax Officer in the assessment proceedings and, if unsuccessful there, before the Appellate Officer or the Appellate Tribunal. This decision which was rendered as far back as in 1961 holds good even today inasmuch as no contrary decision of a larger Bench has been brought to our notice. On the contrary, there is affirmation by the Supreme Court in the case of Whirlpool Corporation v. Registrar of Trade Marks [1998] 8 SCC 1, wherein with reference to, inter alia, the Constitution Bench decision in Calcutta Discount Co. Ltd. [1961] 41 ITR 191, the Supreme Court held: "20. Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution Bench of the apex court in Calcutta Discount Co. Ltd. case [1961] 41 ITR 191 but to require the assessee first to lodge preliminary objection before the Assessing Officer who is bound to decide the preliminary objections to issuance of the reassessment notice by passing a speaking order and, therefore, if such order on the preliminary objections is still against the assessee, the assessee will get an opportunity to challenge the same by filing a writ petition so that he does not have to wait till completion of the reassessment proceedings which would have entailed the liability to pay tax and interest on reassessment and also to go through the gamut of appeal, the second appeal before the Income-tax Appellate Tribunal and then reference/tax appeal to the High Court. Viewed in this light, it appears to me that the rigour of availing of the alternative remedy before the Assessing Officer for objecting to the reassessment notice under section 148 has been considerably softened by the apex court in GKN case [2003] 259 ITR 19 in the year 2003. In my view, therefore, the GKN case [2003] 259 ITR 19 (SC) does not run counter to the Calcutta Discount Co. Ltd. case [1961] 41 ITR 191 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where. The court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision could not be adopted. In Harbanslal Sahnia v. Indian Oil Corporation Ltd. [2003] 2 SCC 107, the hon'ble Supreme Court held that the rule of exclusion of writ jurisdiction by availability of alternative remedy is a rule of discretion and not one of compulsion and the court must consider the pros and cons of the case and then may interfere if it comes to the conclusion that the petitioner seeks enforcement of any of the fundamental rights; where there is failure of principle of natural justice or where the orders of proceedings are wholly without jurisdiction or the vires of an Act is challenged. As held by the apex court in the case of Calcutta Discount Co. Ltd. [1961] 41 ITR 191 and Madhya Pradesh Industries Ltd. [1965] 57 ITR 637; [1970] 77 ITR 268 (SC) this court under article 226 is entitled to go into the relevancy of the reasons as also to scrutinize as to whether there was reasonable belief or not. Thus, the writ petition under article 226 is maintainable. In view of the foreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for issuance of a notice under section 148 of the Act merely disclosed that there was a change in opinion. It is clear from the decision of this court in Jindal Photo Films Ltd. v. Deputy CIT [1998] 234 ITR 170 that "where the Income-tax Officer attempts to reopen an assessment because the opinion formed earlier by him was in his opinion incorrect, the reopening could not be done." This court clearly held that "the power to reopen an assessment was conferred by the Legislature not with the intention to enable the Income-tax Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods." It was also held that "if an expenditure or deduction was wrongly allowed while computing the taxable income of the assessee, the same could not be brought to tax by reopening the assessment merely on account of the Assessing Officer subsequently forming an opinion that earlier he had erred in allowing the expenditure or the deduction." Again in Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 9, 2004, itself. It is evident that no new material came to light and on the same set of facts, the subsequent Assessing Officer merely had a change of opinion with regard to the deduction under section 10A allowed to the assessee. In this view of the matter, the reopening of the assessment would not be justified and would be without jurisdiction. Accordingly, the reopening of the assessment by issuance of the notice under section 148 as well as the speaking order dated August 17, 2005, and proceedings pursuant thereto are liable to be quashed. It must also be pointed out that the argument raised by the assessee in his objections with regard to the amendment of sub-section (4) to section 10A was not at all taken into account by the Assessing Officer in the impugned speaking order dated August 17, 2005. The specific argument raised by the assessee in the objections was as under: "4. The relevant provisions of section 10A (as applicable for the assessment year 2001-02) read as follows: (1) Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial undertaking to which this section applies shall not be included in the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." The relevant extracts of the Central Board of Direct Taxes Circular No. 14 [2001] 252 ITR (St.) 65, explaining the amendments made by the Finance Act, 2001, is as follows: "21. Rationalization of provisions related to undertakings in Free Trade Zone, Export Processing Zones, Special Economic Zones and Export Oriented Units. 21.1 Under section 10A of the Income-tax Act, newly established undertakings in free trade zones are entitled to a tax holiday for a ten year period. Similarly, section 10B of the Income-tax Act provides for a ten year tax holiday in respect of newly established hundred per cent, export oriented undertakings. The Finance Act, 2000, substituted sections 10A and 10B of the Income-tax Act. The newly substituted provisions of sections 10A and 10B provide for deduction of profits and gains of business derived by an undertaking from export of products or articles or things or computer software for a period of ten consecutive assessment years in a manner that the deductions are gradually phased out over the subsequent period. The definition of 'export turnover' has been amended to clarify that the working of the proportionate deduction on export profits are meant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the order proposed by my esteemed Brother, Badar Durrez Ahmed J. I agree with the conclusion drawn by his Lordship that the writ petition deserves to be allowed and the impugned notice under section 148 of the Income-tax Act, quashed. I would, however, add a few lines of my own on two distinct aspects that arise for consideration and that have been dealt with in the draft judgment authored by my noble Brother. The power of the High Court to issue prerogative writs under article 226, is untrammelled by any ordinary piece of legislation, whether enacted by Parliament or a State Legislature. The Income-tax Act, 1961, is one such piece of legislation which does not and cannot in the constitutional scheme of things affect the power of the superior courts in the country to issue appropriate writs in appropriate cases. Having said that, we need to remember that the writ jurisdiction is not only discretinary but equitable in nature. A court need not interfere, just because it is lawful to do so. The courts have, therefore, evolved certain self-imposed restrictions for the exercise of their power under article 226. A writ court would not interfere where the petitioner is not acting bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not address itself to a given aspect sought to be examined in the reassessment proceedings. There may be cases where the material is available with the Assessing Officer but the same is either ignored or escapes his attention while making the assessment. There can be no legal impediment in the reopening of assessment in such cases, nor can it be said that the reassessment is based only on a change of opinion. A Division Bench of this court of which I was a member had in Consolidated Photo and Finvest Ltd. v. Asst. CIT disposed of on January 17, 2006 [2006] 281 ITR 394, an occasion to deal with a somewhat similar situation. Relying upon the decisions of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191; Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638; Malegaon Electricity Co. P. Ltd. v. CIT [1970] 78 ITR 466 and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and the decisions of the High Court of Gujarat in Praful Chunilal Patel v. M.J. Makwana, Asst. CIT [1999] 236 ITR 832 and Gruh Finance Ltd. v. Joint CIT (Assessment) [2000] 243 ITR 482, this court observed: "The Assessing Officer has in the reasoned order passed by him indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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