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High Court Of Delhi
JINDAL PHOTO FILMS LIMITED - Appellant
Versus
DEPUTY COMMISSIONER OF INCOME TAX - Respondent
Civil Writ 2901 of 1997
Decided On : 05/28/1998
Held:
It is well settled that while submitting to the jurisdiction of an assessing officer, it is the duty of the Assesses to disclose all the primary facts (in contra-distinction with in-ferendal facts) which have a bearing on the liability of the income earned by the Assesses being subjected to tax. It is for the assessing officer to draw inferences from the facts and apply the law determining the liability of the Assesses. The law does not require the Assesses to state the conclusions that can reasonably be drawn from the primary facts. Once that is done and assessment order framed, the assessing officer cannot at a later point of time merely on forming an opinion, by giving a second thought to the primary facts disclosed by the Assesses, arrive at a finding that he had committed an error in computing the taxable income of the Assesses and reopen the assessment by resort to Section 147 of the Act. Discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment would constitute a reason to believe the income having escaped assessment within the meaning of Section 147. Here also such facts which could have been discovered by the assessing authority but were not so discovered at the time of original assessment may not constitute a new information. (Pr. 14)
Where the ITO ( very often successor officer) attempts to reopen the assessment because the opinion formed earlier by himself ( or more often, by a predecessor ITO), was in his opinion incorrect, judicial decisions have consistently held that this could not be done. (Pr.15)
The power to re-open an assessment was conferred by the legislature but not with the intention to enable the ITO 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 dependingon their changing moods. (Pr.16)
If an expenditure or a deduction was wrongly allowed while computing the taxable income of the Assesses, the same could not be brought to tax by reopening the assessment merely on account of subsequently the assessing officer forming an opinion that earlier he had erred in allowing the expenditure or the deduction; (Pr. 18)
If a notice under S. 148 has been issued without the jurisdictional foundation under Section 147 being available to the assessing officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this Court. If reason to believe be available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the assessing officer to initiate the proceedings under Section 147/148 of the Act. (para 20).
Head Note:
INCOME TAX
Reassessment — BASIS FOR REOPENING — Change of opinion — Deduction wrongly allowed during original assessment proceedings. Where an expenditure or a deduction was wrongly allowed while computing the taxable income of the Assesses, same could not be brought to tax by re-opening the assessment merely on account of the assessing officer subsequently forming an opinion that earlier he had erred in allowing expenditure or deduction.
Held : It is clear from reasons placed by the assessing officer on record as also from the statement made in the counter affidavit that all what the assessing officer has said is that he was not right in allowing deduction under section 80-I because he had allowed the deduction wrongly and thereforee, 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 orders of assessment sought to be re-opened and the date of forming of opinion by the assessing officer nothing new has happened. There was no change of law. No new material has come on record. No information has been received. It was merely a fresh application of mind by the same assessing officer to the same set of facts. While passing the original orders of assessment the order passed by Commissioner (Appeals) was before the assessing officer. That order stands till today. What the assessing officer has said about the order of Commissioner (Appeals) while recording reasons under section 147 he could have said even in the original orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the assessing officer to initiate proceedings under section 147 of the Act. Where a notice under section 148 has been issued without the jurisdictional foundation under section 147 being available to the assessing officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of the court. If `reason to believe be available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the assessing officer to initiate the proceedings under section 147/148 of the Act.
Income Tax Act 1961 s.147
Income Tax Act 1961 s.148
( 1 ). This common order shall govern the disposal of three writ petitions between the same parties and arising out of a common set of facts and events.
( 2 ). The petitioner is a public limited company engaged in the business of manufacturing of photo sensitive film and is a regular income tax assessee since long. It commenced several industrial units, one of which is located at an industrially backward area of Bhimtal in Nanital District of the State of U. P. The unit was engaged in manufacturing of colour roll films.
2. 1 Prior to the assessment year 1991-92 the asessee had claimed investment allowance under Section 32a of the Income-tax Act, 1961 on the machines installed for production of colour film rolls for the period relevant to the assessment year 1990-91. This claim of the petitioner was disallowed by the assessing officer on the ground that manufacture of colour film rolls was not entitled to investment allowance because such an article was included in the prohibited list mentioned in the Eleventh Schedule of the Income-tax Act, 1961. In the said list, at Sl No. 10 the articles mentioned are : "photographic apparatus and goods". The cinematographic films were also included in this list at Sl No. 9. Vide Finance Act, 1988, the Government decided to withdraw cinematographic films from this Schedule because these films were used for manufacturing educational and tourism documentaries. However, photographic apparatus and goods which included photographic films were not excluded and remained in this list. Hence the assessing officer disallowed the claim of the petitioner on investment allowance under Section 32a of the Act for the assessment year 1991-92. The return of income-tax for 1991-92 was filed on 31. 12. 1991. In this return the petitioner did not claim any deduction under Section 80-I of the Act.
2. 2 Similarly for the assessment years 1992-93 and 1993-94 in the original return the petitioner had not claimed any deduction under Section 80i of the Act.
( 3 ). CIT (Appeals) while dealing with the appeal relevant to the assessment year 1990-91 in his order dated 28. 2. 1994 made an observation that after exclusion of the term cinematographic films from entry No. 9, there was no justification for holding that the colour film rolls were included in the Eleventh Schedule. CIT (Appeals) held:-
"after the exclusion of the term Cinematographic film from entry No. 9 colour film which is normally used in an important sector of tourism there does not appear to be any justification in holding that view that colour roll film is included in 11th Schedule. All film whether cinematographic and colour roll film must be taken in one category and since the legislature has excluded the term cinematographic film from entry No. 9 of Eleventh Schedule, the assessing officer was not justified in holding the view that the machineries purchased by the appellant relating to manufacturing of colour roll films where machineries covered by the provision of Eleventh Schedule of the I. T. Act. However, are detailed discussion I have held that the appellant is not entitled to investment allowance during the current year and appellant shall be free to claim investment allowance in the next assessment year because whether the appellant is allowed investment allowance in this year or next assessment year does not make any difference to the revenue as the appellant has got a gross total income of Rs. 47727307. 00 even in assessment year 1991-92 after deduction of depreciation claimed as per calculation given by the appellant. "
( 4 ). After passing of the abovesaid order by CIT (Appeals) the petitioner staked this claim for deduction under Section 80-I vide letter dated 15. 3. 94. No revised return was filed.
( 5 ). Vide order dated 16. 3. 1994 for the assessment year 1991-92, vide order dated 31. 3. 1994 for the assessment year 1992-93, and vide order of assessment dated 21. 10. 1994 for the assessment year 1993-94 the petitioner s
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