The main legal point established in the judgment is that the Assessing Officer must have a valid reason to believe that income has escaped assessment and there must be new material to change the earlier opinion when re-opening assessments under section 147 and 148 of the Income Tax Act, 1961.

JUDGMENT :

Sanjay Karol, J.

The following common substantial questions of law, on which these appeals were admitted, are involved in these appeals, hence they are being disposed of by a common judgment:--

1. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) and thereby wrongly concurring with the action of the A.O. in confirming the issuance of notice u/s 148 of the Income Tax Act, 1961 to a duly completed assessment u/s 143(1) of the Income Tax Act, 1961 wherein no notice u/s 143(2) having been issued within the statutory period of twelve months and the assessment having attained finality especially when the order was without any cogent reason to believe and without any new material on record and thus a change of opinion which is illegal and arbitrary there being no new material brought on record by the A.O.

2. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) on the basis of audit objection which is illegal and arbitrary and thereby wrongly concurring with the action of the A.O. in confirming the issuance of notice u/s 148 of the Income Tax Act, 1961 to a duly completed assessment u/s 143(1) of the Income Tax Act, 1961.

These appeals pertain to the returns filed by the appellant for the years 1997-98, 1998-99 and 2000-2001. Questions of law are same. Except for difference in dates facts being almost identical/similar, for the purpose of adjudication of these appeals, facts pertaining to the year 1997-98 are being referred to.

Facts of I.T.A. No. 14 of 2007

2. Appellant is a partnership firm having an industrial undertaking, an oil mill unit in Damtal, within the State of Himachal Pradesh. It also has other businesses of petrol pumps, carriage contacts of Indian Oil Corporation, Kerosene oil and trading outlets in other parts of this State and also in the neighbouring State i.e. Punjab at Pathankot. Appellant is assessed to income tax. Appellant is maintaining separate books of accounts in respect of industrial undertaking i.e. oil mill unit, Damtal and all other respective business carried out at different places within and outside the State of Himachal Pradesh.

3. The appellant filed return of income tax for the year 1997-98 annexing the requisite financial statement, computation of income from various units/branches as part of the return of the income for the oil manufacturing unit. Common expenses incurred by the assessee were fully disclosed as part of profit and loss account (consolidated along with branches). Out of the profit derived from the oil mill unit, Damtal, (H.P.) assessee claimed deduction @ 25% u/s 80-IA of the Income Tax Act, 1961 (for short, the Act). After aggregating the profits of all its units, assessee deducted expenses of Rs. 24,25,489/- to arrive at its profit for the said unit. Return of income filed by the assessee on 27.10.1997 was accepted by the revenue as no notice u/s 143(2) of the Act was ever issued. However, subsequently Assessing Officer re-opened the assessment u/s 147 of the Act by issuing notice dated 5.9.2002 (Annexure A/9, Pg. 124) u/s 148 of the Act. On request reasons for reopening were supplied (Annexure A/8, Pg. 122). Assessments were reopened on the ground that common expenses pertaining to the head office of the assessee firm had been deducted by the assessee after aggregating profits of all its unit to arrive at the net profit of the unit entitled to the subsidy under the provisions of Section 80-IA of the Act. Thus net expenses amounting to Rs. 24,25,489/- pertaining to all the units of the firm including the unit eligible for deduction were claimed. According to the Assessing Officer, for the purpose of claiming deduction u/s 80-IA of the Act, proportionate expenses out of total expenses incurred