India Steamship Co. Ltd. v. Joint CIT & Ors. ()

INCOME TAX

--Reassessment----CHANGE OF OPINIONSame set of facts existed for all assessment years--The petitioner was engaged in the business of carriage of goods by ship. The ships were dry docked for carrying out periodical repairs. Said repairs were also mandatory for seaworthiness of the ship. The petitioner, as the assessee, had been claiming deduction for the expenditure on such repairs spread over four years in all its assessments for several assessment years and the said claim was all along being allowed by the AO while framing assessments for all years that too under section 143(3) except for one year. For assessment year 1998-99, instead of claiming expenditure as deferred revenue expenses, the assessee claimed the entire expenditure as revenue in nature. The AO treated the same as capital expenditure and disallowed. However, the Tribunal allowed the expenses as revenue expenditure. Meanwhile notices under section 148 were issued by the AO on 30-3-2001, in respect of assessment years 1990-91 to 1996-97 on the ground that the repairing expenditures were capital in nature and, therefore, wrongly allowed as deferred revenue expenses. Held: From the recorded reasons, it was evident that on account of changed view of the AO in the assessment year 1998-99, the assessment proceedings had been sought to be reopened. Thus, it is evident from the recorded reasons that the basic condition namely of any alleged escapement on account of omission or failure to disclose the material facts by the assessee did not exist in the instant case. Therefore, all the notices quashed.

Income Tax Act, 1961 s.147;

Income Tax Act, 1961, s.148

India Steamship Co. Ltd. v. Joint CIT & Ors.

In the Calcutta High Court Pranab Kumar Chattopadhyay, J.

Writ Petn. No. 994 of 2001 11 February 2005

Income Tax Act, 1961, sections 147 & 148; Constitution of India, Art. 226

In favour of: Assessee; Assessment years 1990-91 to 1996-97

Counsel : R.M. Bajoria with J.P. Khaitan, for the Assessee D.K. Shome & Md. Nizamuddin, for the Revenue

JUDGMENT

Pranab Kumar Chattopadhyay, J

The petitioner herein has challenged the validity and/or legality of the notices all dated 31-3-2001 issued under section 148 of the Income Tax Act, 1961 for the assessment years 1990-91 to 1996-97, the relevant financial years being the years ended on 31-3-1990 to 31-3-1996. It has been submitted on behalf of the petitioners that all the notices and the proceedings initiated thereunder are without jurisdiction and illegal since none of the conditions precedent for assumption of the jurisdiction under section 147 of the Income Tax Act have been satisfied.

2. The petitioner is engaged in the business of carriage of goods by ship. The ships are dry docked for carrying out periodical repairs. The said repairs are also mandatory for seaworthiness of the ship.

The petitioner, as the assessee, had been claiming deduction for the expenditure on such repairs spread over in four years in all its assessments for several assessment years under the Income Tax Act and the said claim was all along allowed by the respondents.

3. The learned counsel of the petitioner submits that the petitioner duly filed its return of incomes with the appropriate assessing authority having jurisdiction over petitioner's assessments and all the assessments for the aforesaid assessment years excepting the assessment year 1994-95 were duly completed under section 143(3) of the Income Tax Act. It has been urged on behalf of the petitioner that in course of the assessment proceedings for all the aforesaid six assessment years and also in the returns filed in all the said assessment years, the petitioner herein had duly and properly disclosed all the materials and relevant facts necessary for the purpose of assessment and according to the petitioner, there was no omission or failure of any nature whatsoever.

The assessment for the assessment year 1994-95 was made under section 143(1)(a) by issuing an intimation.

In its assessment for the assessment year 1998-99, the-relevant accounting year being the year ended on 31-3-1998, which is not the subject-matter of the instant writ proceedings, the petitioner claimed that the said expenses on repairs should be allowed fully in the year in which they were incurred instead of being spread over in four years. The assessing officer in the assessment made under section 143(3) of the Act disallowed the entire claim on the ground that the said expenditure was capital expenditure and not allowable. On the petitioner's appeal for the said assessment year 1998-99 the Tribunal by its order dated 2-7-2004, held that the entire expenditure was allowable as a revenue expenditure in the year in which it was incurred.

4. The only point raised by the petitioner in its assessment for the assessment year 1998-99, was that the expenditure instead of being spread over in four years as was being done in the past years should be allowed in the very year in which it is incurred. The assessing authorities never in the past raised any dispute about the nature of the said expenditure being revenue in nature and allowed the same in all the assessments upto the assessment year 1997-98 spread over in four years as claimed by the petitioner in those assessment years. Only for the first time in the assessment year 1998-99, when the petitioner claimed that the entire expenditure should be allowed in the very year in which it was incurred, the assessing officer took the stand that it was a capital expenditure and not allowable at all. The said view of the assessing officer has been reversed by the Tribunal which has held that the expenditure was revenue in nature and allowable in its entirety in the year in which it was incurred.

5. On 30-3-2001, petitioner herein received the notices for the assessment years 1990-91 to 1996-97 alleging that the income of the petitioner for 'the said assessment years had escaped the assessment. In respect of the notices for the assessment years 1990-91 to 1995-96 it was further alleged that the said notices were being issued after obtaining the necessary satisfaction of the CIT, West Bengal-I.

The reasons for reopening of the assessments for all the aforesaid seven years are identical.

However, the petitioner has denied and disputed that any income for any of the aforesaid assessment years 1990-91 to 1996-97, have escaped assessment as alleged in the aforesaid notices issued by the respondent authorities under section 148 of the Income Tax Act.

6. Mr. R.N. Bajoria, learned senior counsel appearing on behalf of the petitioner, submits that the respondent No. 1 had no reason to believe that any income of the petitioner for any of the assessment years had escaped assessment. According to Mr. Bajoria, there is no material or ground whatsoever for the formation of any belief as mentioned in the aforesaid notices issued by the respondent authorities under section 148 of the Income Tax Act.

7. Section 147 of the Act confers Jurisdiction on the assessing officer to reopen a completed assessment subject to the conditions laid down therein. The relevant provisions of section 147 of the Act are as under :

'147. If the assessing officer has reason to believe that any 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 and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).

Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for the assessment year.'

8. Section 148 of the Act provides that before making any reassessment under section 147, the assessing officer has to serve a notice thereunder and before issuing any notice under the said section he has to record reasons for doing so. The relevant provision of section 148 are as under :

'148. Before making the assessment, reassessment or recomputation under section 147, the assessing officer shall serve on the assessee a notice requiring him to furnish within such period as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. The assessing officer shall, before issuing any notice under this section, record his reasons for doing so.'

9. Section 151 of the Act enjoins that no notice under section 148 is to be issued by the assessing officer unless on the reasons recorded by such assessing officer the CIT of Chief CIT or the Jt. CIT is satisfied that it is a fit case for issue of such notice. The relevant provisions of section 151 are as under :

'151. (1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an assessing officer, who is below the rank of Assistant Commissioner or Dy. CIT, unless the A. CIT is satisfied on the reasons recorded by such assessing officer that is a fit case for the issue of such notice.

Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the assessing officer aforesaid, that it is a fit case for the issue of such notice.'

(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an assessing officer, who is below the rank of Jt. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Jt. CIT is satisfied, on the reasons recorded by such assessing officer, that it is a fit case for the issue of such notice.'

10. Thus, before initiation of any proceeding under section 147 of the Act for reassessment, the assessing officer is required to record his reasons in writing under section 148 and get necessary sanction of the CIT in terms of section 151(1) and thereafter issue notice under section 148 of the Act. Such proceedings for reassessment can only be initiated where any income chargeable to tax has escaped assessment and in terms of the proviso where such proceedings are after expiry of four years from the end of the relevant assessment year where an assessment under section 143(3) is made if there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year.

11. Referring to various decisions of the Hon'ble Supreme Court and different High Courts, Mr. Bajoria submits that an assessment cannot be reopened on a mere change of opinion of the assessing authority on the same facts. Mr. Bajoria further submits that the assessing officer does not have the power to review or reconsider the assessment made. In terms of section 147 of the Act the jurisdiction of the assessing officer to reopen the assessment is dependent upon fulfilment of two basic conditions and if any one of those conditions do not exist, then the proceedings for reassessment are liable to be struck down as being without jurisdiction. The said two conditions are (a) that the income should have escaped assessment., (b) such alleged escapement must be on account of any omission or failure on the part of the assessee to disclose fully and truly the material facts necessary for the assessment in the course of the assessment proceedings.

Mr. Bajoria specifically urged before this court that if any of the aforesaid two conditions do not exist, then the proceedings for reassessment would be without jurisdiction. According to the learned senior counsel of the petitioner, the obligation of the assessee is only to disclose relevant facts and it is for the assessing officer to draw his inferences and conclusion therefrom.

Mr. Bajoria, learned senior counsel representing the petitioner further submits that drawing of conclusions and/or inferences are in the exclusive domain of the assessing officer being the adjudicating authority and the assessee has no duty and/or authority to instruct the assessing officer in this regard in any manner whatsoever. The learned senior counsel of the petitioner specifically urged before this court that it is for the assessing officer to decide whether any amount is assessable as income or not or whether any particular expenditure is allowable or not.

Mr. Bajoria referred to and relied upon the decision of the Bench of five learned Judges of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO (1961) 41 ITR 191 (SC) in support of his arguments. Mr. Bajoria also referred to and relied upon the subsequent decisions of the Hon'ble Supreme Court wherein the law laid down by the Hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. (supra) has been followed :

(1) Gemini Leather Stores v. ITO (1975) 100 ITR 1 (SC).

(2) Parashuram Pottery Works Co. Ltd. v. ITO (1977) 106 ITR 1 (SC).

(3) Ganga Saran & Sons (P) Ltd. v. ITO & Ors. (1981) 130 ITR 1 (SC).

(4) Indian Oil Corporation v. ITO & Ors. (1986) 159 ITR 956 (SC).

Mr. Bajoria also submits that the aforesaid principles laid down by the Hon'ble Supreme Court have been applied by this Hon'ble court in ' the under-noted decisions and the proceedings where there has been no omission or failure on the part of the assessee to disclose the facts and therefore, reassessment proceedings were quashed. The said decisions are noted hereunder

Mr. Bajoria also referred upon the decision of the,Full Bench of the Delhi High Court in the case of CIT v. Kalvinator of India Ltd. (2002) 256 ITR 1 (Del)(FB), after reviewing the provisions of the earlier Act of 1922 and also considering the various amendments made subsequently in the said Act.

12. Affidavit- in- opposition has been filed on behalf of the respondents wherein the reasons for reopening of the assessment under section 147 of the Income Tax Act has been disclosed by annexing a document with the said affidavit-in-opposition. The reasons recorded in the said document annexed with the affidavit-in-opposition are quoted hereunder :

'It is seen that the assessee has incurred expenditure under the head 'special survey' and has claimed the expenditure as a deferred revenue expenditure by charging the same to the profit and loss account over a period of four years. The expenditure is required for getting a ship declared seaworthy by the competent authority every fifth year. The ship cannot take the voyage without such certificate. Since the expenditure gives the assessee the benefit of an enduring nature, the same was held as a capital expenditure in the assessment year 1998-99. It was also held that there is no concept of deferred, revenue expenditure under the Income Tax Act barring specific provisions like 35AB, 35D, etc. The expenditure in question does not fall under any of the above specific provisions. The income of the assessee suffered under assessment under section 147 due to the treatment of this expenditure as a deferred revenue expenditure. The assessment is, therefore, to be reopened under section 147.

Send proposal to the CIT, West Bengal-I, Calcutta under section 151.'

13. It would be seen from the above recorded reasons that there is no allegation whatsoever of any nature of any fact not being disclosed by the assessee in any of the assessments. From the said recorded reasons, it is evident. that on account of change view of the assessing officer in the assessment year 1998-99, the said proceedings have been sought to be reopened. Thus it is evident from the recorded reasons that the basic condition namely of any alleged escapement on account of omission or failure to disclose the material facts by the assessee does not exist in the instant case.

14. In the case of Calcutta Discount Co. Ltd. (supra), the Apex Court held as hereunder :

'To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income Tax Officer must have reason to believe that income, profits and gains chargeable to income-tax have been underassessed. The second is that he must have also reason to believe that such 'underassessment' has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income Tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years but within the period of eight years, from the end of the year in question.'

(Emphasis, here italicied in print, supplied).

At p. 201 of the reports it was held as under :

'Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. 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.' (Emphasis, here italicized in print, supplied).

At p. 206 of the reports it was held as under :

'We are, therefore, bound to hold that the conditions precedent to the exercise of jurisdiction under section 34 of the Income Tax Act did not exist and the Income Tax Officer had therefore, no jurisdiction to issue the impugned notices under section 34 in respect of the years 1942-43, 1943-44 and 1944-45 after the expiry of four years.

Mr. Sastri argued that the question whether the Income Tax Officer had reason to believe that underassessment had occurred 'by reason of non-disclosure of material facts' should not be investigated by the courts in an application under Article 226. Learned counsel seems to suggest that as soon as the Income Tax Officer has reason to believe that there has been underassessment in any year he has jurisdiction to start proceedings under section 34 by issuing a notice provided 8 years have not elapsed from the end of the year in question, but whether the notices should have been issued within a period of 4 years or not is only a question of limitation which could and should properly be raised in the assessment proceedings. It is wholly incorrect however to suppose that this is a question of limitation only not touching the question of jurisdiction. The scheme of the law clearly is that where the Income Tax Officer has reason to believe that an underassessment has resulted from non-disclosure he shall have jurisdiction to start proceedings for reassessment within a period of 8 years. ' (Emphasis, here italicized in print, supplied).

In the aforesaid decision, the Supreme Court has considered the provisions of section 34(1)(a) of the Indian Income Tax Act, 1922 which is similar to the provisions of section 147 of the Income Tax Act, 1961.

15. In the case of Simplex Concrete Piles (India) Ltd. (supra), the Division Bench of our High Court at p. 612 held as under :

'Now, so far as the amended provision is concerned, on a comparison between these two provisions, it does not appear that there has been any substantial change in the principle or the scheme envisaged either under the 1922 Act or the 1961 Act before 1-4-1989, and thereafter under the amended provision. The power to reopen is prescribed under section 147 with effect from 1-4-1989, in a little different manner from the earlier provisions. It has provided that reopening can be done in case where the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for the relevant assessment year. He can reassess after reopening the case and proceed to recompute the same. But this power is subject to the proviso provided therein. The proviso prescribes certain restrictions with regard to the power of reopening limiting it to the period of four years from the end of the relevant assessment year, unless the escapement of the taxable of the income is due to the reason of failure on the part of the assessee (i) to submit a return under section 139, or (ii) to respond to notices issued under section 142(1), or (iii) to respond to notices issued under section 148, or (iv) to disclose fully and truly all material facts necessary for the assessment of that assessment year.' (Emphasis, here italicized in print, supplied).

16. The Full Bench of Delhi High Court in the case of CIT v. Kalvinator of India Ltd. (supra) after reviewing the provisions of the earlier Act of 1922 and also considebing the various amendments made in the Act held as hereunder :

'From a bare perusal of the provisions contained in section 147 of the said Act, as it stood upto 31-3-1989, it is evident that to confer jurisdiction under section 147(a) of the Act two conditions were required to be satisfied, viz., (1) the assessing officer must have reason to believe that income chargeable to tax has escaped assessment., and (2) he must also have a reason to believe that such escapement occurred by reason of either; (a) omission or failure on the part of the assessee to make a return of his income under section 139 or (b) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. The aforementioned requirements of law must be held to be conditions precedent for involdrig jurisdiction of the assessing officer to reopen the assessment under section 147 of the said Act. It is trite that both the conditions aforementioned are cumulative. It is also a well-settled principle of law that, in the event it is found that any of the said two conditions is not fulfilled, the notice issued by the assessing officer would be wholly without jurisdiction.'

(Emphasis, here italicized in print, supplied).

At p. 13 of the said reports it was held as under :

'In Jindal Photo Films Ltd. (1998) 234 ITR 170 (Del), R.C. Lahoti, J. (as His Lordship then was), observed (headnote) :

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.' (Emphasis, here italicized in print, supplied).

At p. 18 of the said reports it was held as under :

'It is, therefore, evident that even according to the CBDT, a mere change of opinion cannot form the basis for reopening a completed assessment.'

At p. 19 of the said reports it was held as under :

'In the event it is held that by reason of section 147 if the ITO 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.' (Emphasis, here italicized in print, supplied).

17. The undisputed facts in the instant case are that in the balance sheets which were filed along with the returns, all the facts relating to the said expenses incurred on repair were fully disclosed in several assessment years for more than a decade and the assessing officer after considering such facts had allowed the deduction for the expenditure as a revenue expenditure on a spread over basis. The balance sheet which is statutorily required to be filed along with the return is a part of the return itself and the facts disclosed therein amount to fun and true disclosure on the part of the assessee. In the case of Union Carbide (India) Ltd. v. ITO & Ors. (1973) 87 ITR 529 (Cal) at p. 537 of the reports, it was held by this Hon'ble court as under :

'learned counsel for the revenue contended that as mere production of books of account would not satisfy the requirements of full disclosure, mere filing of the directors' report and the profit and loss account of the petitioner- company would not amount to a full disclosure. As mentioned hereinbefore the company's balance sheet and the profit and loss account are parts of the return. They are not evidence or books of accounts in respect of the return. These balance sheets are statutorily required to be filed along with the return. In the case of Calcutta Chromotype (P) Ltd. v. ITO (Matter No. 53 of 1967), T.K. Basu, J. held that where facts had been disclosed in the balance sheet filed along with the return it could not be contended that there was no full disclosure of the said facts. I am in respectful agreement with the views expressed by T.K Basu, J. In view of the aforesaid judgment and in view of the facts it is clear to me that I have to presume that facts stated in the directors' report and the profit and loss account of the National Carbon Company for the two relevant years were fully disclosed.'

(Emphasis, here italicized in print, supplied).

18. It is well settled that as required by section 148(2) of the Act, the assessing officer is required to record his reasons for initiating the reassessment proceedings. Only the reasons so recorded are to be considered for judging the validity of the proceedings when challenged. In the case of N.D. Bhatt, IAC & Anr. v. IBM World Trade Corporation (1995) 216 ITR 811 (Bom), the Bombay High Court at p. 823 of the reports held as under :

'It is also well-settled that the reasons for reopening are required to be recorded by the assessing authority before issuing any notice under section 148 by virtue of the provisions of section 148(2) at the relevant time. Only the reasons so recorded can be looked at for sustaining or setting aside a notice issued under section 148. In the case of Equitable Investment Co. (P) Ltd. v. ITO (1988) 174 ITR 714 (Cal), a Division Bench of the Calcutta High Court has held that where a notice issued under section 148 of the Income Tax Act, 1961, after obtaining the sanction of the CIT is challenged, the only document to be looked inito for determining the validity of the notice is the report on the basis of which the sanction of the CIT has been obtained. The Income Tax Department cannot rely on any other material apart from the report. In the case before it, the Calcutta High Court refused to take into consideration the affidavit filed by the Income Tax Department giving some additional reasons.' (Emphasis, here italicized in print, supplied).

19. Scrutinising the recorded reasons, it is clearly evident that the basic conditions, namely, alleged escapement on account of the omission or failure to disclose the material facts by the assessee does not exist in the instant case and accordingly, the proceedings initiated are wholly without jurisdiction. The assessing officer has no power to initiate any proceeding on mere change of opinion on the same set of facts.

Furthermore, in the recorded reasons, it is stated that 'there is no concept of deferred revenue expenditure under the Income Tax Act.' This view also is clearly unsustainable in view of the law laid down by the Supreme Court approving the decision of this court on the point in the case of Madras Industrial Investment Corporation Ltd. v. CIT (1997) 225 ITR 802 (SC). At p. 813 of the said reports, the Supreme Court held as under :

'Ordinarily, revenue expenditure which is incurred wholly and exclusively or the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year. Thus in the case of Hindustan Aluminium Corporation Ltd. v. CIT (1983) 144 ITR 474 (Cal), the Calcutta High Court upheld the claim of the assessee to spread out a lumpsum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question.' (Emphasis, here italicized in print, supplied).

It is thus evident that even in the year 1983 this Hon'ble court had approved the concept of revenue expenditure being spread over and the view of this Hon'ble court had also been accepted in the aforesaid decision by the Hon'ble Supreme Court. Further whether an expenditure is a revenue expenditure or capital expenditure is a matter of conclusion on the facts disclosed. It is an inference to be drawn from the facts. Such inference is not to be disclosed by the assessee as held by the Apex Court in its several decisions. Different views can be taken on such issues by drawing inferences from basic facts.

20. As is evident in the instant case itself, in all the past years, view was taken that the expenditure was a revenue expenditure to be spread over and only in the assessment year 1998-99 the assessing officer took the view that it was a capital expenditure, which view of the assessing officer has also not been upheld by the Tribunal in the said assessment year ultimately. It is thus evident that it is not a case of any omission or failure on the part of the assessee to disclose any material fact relating to the said expenditure. It is merely a case of a change of opinion on the same facts. The condition precedent for assumption of jurisdiction therefore, does not exist.

21. Although in the assessment year 1994-95, no assessment under section 143(3) of the Act was made and the notice for the assessment year 1996-97 was issued just before the expiry of four years from the end of the assessment year but the proceedings for reassessment cannot be justified even for those years since the recorded reasons for all the assessment years are same and for all the assessment years the facts are identical. Such expenditure has been allowed over a decade and also for the assessment years 1990-91 to 1996-97 involved in the present writ proceedings. As held by the Delhi High Court in the case of Kalvinator of India Ltd. (supra), no proceedings on a mere change of opinion can be initiated even within the period of four years.

22. On behalf of the respondents, it has been contended by relying on the decision of the Supreme Court in the case of GKM Driveshafts (India) Ltd. v. ITO & Ors. (2003) 259 ITR 19 (SC) that the assessee should have approached the assessing officer instead of approaching this Hon'ble court.

I am unable to accept the aforesaid submissions made on behalf of the respondents as the aforesaid decision of the Supreme Court of a Bench of two learned Judges does not in any way affect the jurisdiction of this Hon'ble court to grant relief under Art. 226 of the Constitution when on the admitted facts the proceedings are without jurisdiction. The said decision has to be confined to the facts,of that case. The said decision of the two learned Judges cannot prevail over the decision in the case of Calcutta Discount Co. Ltd, (supra) of a Bench of five learned Judges and the various other decisions referred to hereinbefore. The law on the point is also settled by the Supreme Court itself in the case of CIT v. Trilok Nath Mehrotra & Ors. (1998) 231 ITR 278 (SC) wherein at p. 280 it was held as under :

'Therefore, even assuming that there was a conflict between that decision and the decision rendered in CIT v. R.M. Chidambaram Pillai (1977) 106 ITR 292 (SC), which was rendered by a Bench of two Judges, the decision of the larger Bench will prevail.'

23. In the present case, the respondents have disclosed the reasons and the grounds for reopening of the assessment by filing affidavit-in-opposition.

Scrutinising the said recorded reasons, I am satisfied that the initiation of the proceedings by the respondent authorities in the present case cannot be allowed as the reasons recorded do not satisfy the requirements of law to invoke the authority and/or jurisdiction of the assessing officer under section 147 of the Income Tax Act.

24. The identical view has been expressed by this Hon'ble court in the case of Mercury Travels Ltd. (supra)

'In my view, this is one of the exceptional cases where this court should exercise its power under Art. 226 of the Constitution of India for quashing the said notice as I am of the opinion that on the face of the recorded reasons palpably the initiation of the proceedings are wholly unwarranted and the reasons recorded do not satisfy the requirements of the law to invoke the jurisdiction of the assessing officer under section 147. The entire course of reassessment proceedings will be an exercise in futility. It has been observed by the Apex Court in Calcutta Discount Co. Ltd.'s case (1961) 41 ITR 191 (SC), that the High Courts have ample powers under Art. 226 of the Constitution of India, and are in duty bound thereunder, to issue such appropriate orders or directions as are necessary in order to prevent persons from being subjected to lengthy proceedings and unnecessary harassment by an executive authority acting without jurisdiction. The alternative remedies that are provided by the Income Tax Act, 1961, cannot always be a sufficient reason for refusing quick relief in a fit and proper case. ' (Emphasis, here italicized in print, supplied).

25. Mr. Shome, learned counsel of the respondents, placed reliance on the following decisions in order to justify the reopening of the assessment in the present case.

In my view, none of the aforesaid decisions support the contention of the revenue and on the other hand, from the said decisions it would be apparent that those were not the cases of mere change of opinion on the same materials but cases where fresh materials were found in the subsequent assessment year and on the basis of such fresh materials, reopening of the earlier year was sought to be justified.

26. The other decision relied upon on behalf of the revenue is that of the Gujarat High Court reported in Piaful Chunilal Patel (supra). The said decision seeks to lay down that in a case which is within four years from the end of the relevant assessment year, the reassessment proceedings can be initiated on a mere change of opinion. In the instant case, only the assessment proceedings for assessment year 1996-97 is within the period of four years from the end of the assessment year. However, the said decision also clearly lays down that no such reassessment proceedings can be sustained where it has been initiated after a period of four years and there is no omission or failure. The relevant extracts from the said decision at p. 838 of the reports is as under :

'There is no dispute about the fact that the impugned notice under section 148 of the Act, has been issued within four years from the end of the relevant assessment year 1991-92. Under section 147 of the said Act, within four years from the end of the relevant assessment year, the assessing officer, where he had reason to believe that any income chargeable to tax has escaped assessment for any assessment year, may assess or reassess such income. However, after four years, the proviso would be attracted and no action can be taken under this section unless such income has escaped assessment by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice under section 142(1) or section 148 of the said Act, to disclose fully and truly all material facts for his assessment for that assessment year. Therefore, it is only when the case falls under the proviso that the question of non-disclosure of material facts would become relevant. In such cases, if the assessee had made fun disclosure on record, then even if such income hai escaped assessment, no action can be initiated by the assessing officer under the section. Where, however, the said period of four years has not expired, the conduct of the assessee regarding disclosure of material facts need not be the basis for initiating the proceedings and they can be commenced if the assessing officer has reason to believe that the income has escaped assessment notwithstanding that there was full disclosure of material facts on record. The assessee in such cases cannot defend the initiation of action on the ground that the facts were already placed on record and that the assessing officer must have or ought to have considered them.' (Emphasis, here italicized in print, supplied).

In any event, the aforesaid decision in so far as it lays down that within a period of four years reassessment proceedings can be initiated on a mere change of opinion does not lay down the correct law. The above decision of the Gujarat High Court was considered by the Full Bench of the Delhi High Court in the case of Kalvinator of India Ltd. (supra). The Full Bench of the Delhi High Court dissented from this decision.

27. While dissenting with the decision of the Gujarat High Court in the case of Praftil Chunilal Patel (supra), the Full Bench of the Delhi High Court at p. 15 of the reports observed as under :

'We are, with respect, unable to subscribe to the aforementioned view. If the contention of the revenue is accepted the same, in our opinion, would confer an arbitrary power upon the assessing officer. The assessing officer who had passed the order of assessment or even his successor officer only on the slightest pretext or otherwise would be entitled to reopen the proceeding. Assessment proceedings may be furthermore reopened more than once. 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 law that what cannot be done directly cannot be done indirectly. If the Income Tax Officer does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment or by way of rectification of mistake.'

At p. 18 of the said reports the Full Bench of Delhi High Court considering the circular of the Board held as under

'The Board in exercise of its jurisdiction under the cJorementioned provisions had issued the circular on 31-10-1989. The said circular admittedly is binding on the revenue. The authority, therefore, could not have taken a view, which would run counter to the mandate of the said circular. Clause 7.2 as referred to hereinbefore is important.

From a perusal of clause 7.2 of the said circular, it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out, i.e., only with a view to allay fears that the omission of the expression 'reason to believe' from section 147 would give arbitrary powers to the assessing officer to reopen past assessments on mere change of opinion.

It is, therefore, evident that even according to the CWT, a mere change of opinion cannot form the basis for reopening a completed assessment.'

(Emphasis, here italicized in print, supplied).

The decision of the Gujarat High Court did not at all consider the effect of the said circular nor the fact that the section would be liable to challenge as arbitrary and unconstitutional if on mere change of opinion a completed assessment can be reopened.

28. For the aforementioned reasons, the proceedings for all the seven assessment years, six of which are beyond four years, cannot be sustained as they have been initiated on a mere change of opinion on the same set of facts.

29. In the aforesaid circumstances, the notices dated 30-3-2001 issued under section 148 of the Income Tax Act, 1961 and all the proceedings initiated thereunder or the assessment years 1990-91 to 1996-97 stand quashed.

30. This writ petition thus stands allowed. There will be, however, no order as to costs.

31. After pronouncement of the judgment, learned counsel of the respondents prays for stay of the operation of the judgment and order. I find no reason to grant such stay. Accordingly, the prayer for stay is refused.

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