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TMI Blog2017 (12) TMI 1594X X X X Extracts X X X X X X X X Extracts X X X X ..... did not accept the revised statement. As per the ld. Assessing Officer without a revised return being filed such claim for enhanced depreciation could not be considered. For taking this view he relied on the judgment of Apex Court in the case of Geotze India Ltd vs. CIT, 284 ITR 323. 3. Thereafter a notice u/s.148 of the Act was issued to the assessee on 27.03.2013. As per the ld. Assessing Officer in the notes to accounts, attached to the final accounts statement, it was mentioned by the assessee that advance of A1,05,93,698/- received was not credited in the profit and loss account but credited in an account called Software Expenditure account. As per the ld. Assessing Officer software development income was not offered by the assessee on accrual basis, and there was reason to believe that income had escaped assessment. Thereafter, the reassessment was completed through an order u/s.143(3) r.w.s.147 of the Act with the following observations: ''4. Vide letter dated 25.02.2014, the assessee company stated that Health Q Software Product was a Joint Venture between the assessee and the parties who have contributed towards software development expenditure. Further- they stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, was that there was a distinction between sale of software products and investments made for software development. Investments made for software development, as per the assessee could not be treated as part of its income. 5. However, the ld. Commissioner of Income Tax (Appeals) was not impressed by the above arguments. According to him, ld. Assessing Officer had reopened the assessment since advance of A1,05,93,698/- received against software development was not credited in the profit and loss account. As per the ld. Commissioner of Income Tax (Appeals), the reopening done was justified on facts. He also dismissed the grounds challenging the merits. 6. Now before us, ld. Authorised Representative strongly assailing the reopening done for the impugned assessment year, submitted that assessee through its letter dated 12.11.2010 filed before the ld. Assessing Officer, during the course of original assessment proceedings, had given full details on the project cost relating to development of what is called as Health Q Software products on which the advance was received. As per the ld. Authorised Representative, assessee had claimed depreciation at 60% on such software pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led a letter dated 12.11.2010 which stated as under:- Date: 12/11/2010 To The Assistant Commissioner of Income Tax Company Circle VI(I), Chennai - 34 Sub:IT Assessment - AY 08-09 Ref Notice u/s.143(2) dated 12.08.2009 Dear Sir, Further to our appearance before your goodself on 27.10.10 we are furnishing the details' called for: 1. Total Project Cost (Semi Finished) Health Q Software Products a. Project Cost Incurred Rs:3,46,43,785.04 Details already furnished b. Less Recovery Rs:1,05;93,698.00 Please See Annexure -1 c. Balance Rs:2,40,50,087.04 d. One-third of c above Rs: 80,16,696.00 Written off in the Books 2. We are eligible to claim deprecations at 60% for full year On software products which works out to Rs. 1,44,30,052.22,since software at semi finished stage is also available for sales. This semi finished stage is reached before September 30th 2007. 3. We should have claimed Rs:l,44,30,052.22 as depreciation instead of writing off Rs. 80,16,696.00 4. Therefore kindly allow us Rs: 1,44,30,052.22 in the place of Rs:80,16,696.00 5. We are enclosing sales invoice and Sales Details for having sold the product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the assessing authority he requires no further assistance by way of disclosure. It was observed by the apex court that (page 201) : "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." As regards the scheme of the Act, the apex court held (page 207) : "The scheme of the law clearly is that where the Income-tax Officer has reason to believe that an underassessment has resulted from nondisclosure he shall have jurisdiction to start proceedings for reassessment within a period of eight years ; and where he has reason to believe that an underassessment has resulted from other causes he shall have jurisdiction to start proceedings for reassessment within four years. Both the conditions, (i) the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 further held by the Bench that (page 178) : "Reverting back to the case at hand, it is clear from the reasons placed by the Assessing Officer on record as also from the statement made in the counter affidavit that all that the Income-tax Officer has said is that he was not right in allowing deduction under section 80-I because he had allowed the deductions wrongly and, therefore, he was of the opinion that the income had escaped assessment. Though he has used the phrase 'reason to believe' in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax Officer nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, it will obviously amount to mere change of opinion, and hence the notice under section 147/148 would be illegal." We may also notice that a Division Bench of the Gujarat High Court in Garden Silk Mills Pvt. Ltd. [1999] 237 ITR 668, while expressing similar views observed (page 674) : "The reasons recorded by the Assessing Officer which led to the belief about the escapement of assessment disclose that the present case is nothing but mere change of opinion on the facts which were already before the Assessing Officer while making the first assessment to which conscious application of mind is reflected from the proceedings, and allowed in the computation and which has not been disputed by the Revenue." Although the referring Bench had prima facie agreed with the decision of this court in Jindal Photo Films' case [1998] 234 ITR 170, but a doubt was sought to be raised by the Revenue in view of a decision of the Gujarat High Court in Praful Chunilal Patel's case [1999] 236 ITR 832 . Therefore, let us now consider the decision of the Division Bench of the Gujarat High Court in the said case, wherein it was held (page 839) : "It will thus be seen that in the proceedings taken und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is now trite that where two interpretations are possible, that which fulfils the purpose and object of the Act should be preferred. It is a well settled principle of interpretation of statute that the entire statute should be read as a whole and the same has to be considered thereafter chapter by chapter and then section by section and ultimately word by word. It is not in dispute that the Assessing Officer does not have any jurisdiction to review his own order. His jurisdiction is confined only to rectification of mistakes as contained in section 154 of the Act. The power of rectification of mistake conferred upon the Income-tax Officer is circumscribed by the provisions of section 154 of the Act. The said power can be exercised when the mistake is apparent. Even a mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Income-tax Appellate Tribunal has limited jurisdiction under section 254(2) of the Act. Thus when the Assessing Officer or Tribunal has considered the matter in detail and the view taken is a possible view the order cannot be changed by way of exercising the jurisdiction of rectification of mistake. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income chargeable to tax has escaped assessment, or that it has been underassessed or assessed at too low a rate or has been made the subject of excessive relief. After April 1, 1989, the position is somewhat different. Section 147 with effect from April 1, 1989, provides that where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the provisions of sections 148 to 153. He may assess or reassess the income which has escaped assessment. It is to be noted that section 147 as it stands with effect from April 1, 1989, not only merges clauses (a) and (b) of the pre-amended section 147 but also brings about a significant change in the preliminary requirement of certain conditions mandatory in character before reassessment proceedings should be initiated in the pre-amended section. The conditions precedent for initiation of action under section 147(a) or 147(b) of the pre-amended situation, is highlighted above. The amended provisions are contextually different and the cumulative conditions spelt out in clause (a) or (b) of section 147 prior to its amendment, are not present in the amended provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on every income-tax authorities. Therefore, the press release relied upon by Shri Ramamurti, not being a circular issued under section 119 of the Act, will not be of any assistance to the respondents in support of their contentions." It further observed that (page 16) : "The learned Solicitor General has pointed out that by virtue of the power vested in the Board under section 119(2)(a) of the Act, the Board has issued circulars by Notification No. F. No. 400/234/95-IT(B), dated May 23, 1996. As per this circular, it has empowered that the Chief Commissioner of Income-tax and Director-General of Income-tax may waive or reduce interest charged under sections 234A, 234B and 234C of the Act in the class of cases or class of incomes specified in paragraph 2 of the said order for the period and on conditions which are enumerated therein. He submitted that in view of the said circular, the same authority can be exercised by the Commission since the said circular would amount to relaxation of the rigour of sections 234A, 234B and 234C of the Act. We are in unison with this submission of the learned Solicitor General. This court in a catena of cases has held that the circulars of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the apex court was not concerned with the statutory powers of a statutory authority to issue binding circulars. Another aspect of the matter also cannot be lost sight of. A statute conferring an arbitrary power may be held to be ultra vires article 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality, it is trite, should be favoured. In the event it is held that by reason of section 147 if the Income-tax Officer exercises his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional. We are therefore of the opinion that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. We, however, may hasten to add that if "reason to believe" of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147 read with section 148 of the Act. We are unable to agree with the submission of Mr. Joll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961 (for short, " the Act" ). Prior to the Direct Tax Laws (Amendment) Act, 1987, section 147 reads as under : " 147. Income escaping assessment.-If- (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year)." 4. After the enactment of the Direct Tax Laws (Amendment) Act, 1987, i.e., prior to 1st Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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