S.H Kapadia, J.:— Both the above writ petitions involve the same question of law. Both the petitions involve the same parties. Hence, they are heard together.
2. By the above two writ petitions, the petitioner which is an Export House seeks to challenge a notice under section 148 of the Income-tax Act, 1961.
3. For the sake of brevity, the facts in Writ Petition No. 436 of 2001 are reproduced hereinbelow:
Facts:
(a) The petitioner is a company registered under the Companies Act, 1956. It is engaged in the manufacture of bulk drugs and formulations. The petitioner is an Export House. The petitioner exports self-manufactured goods. The petitioner also buys goods manufactured by supporting manufacturers and it exports the same as trading goods. The petitioner has also issued a disclaimer certificate in favour of the supporting manufacturers.
The petitioner filed its return of income for the assessment year 1992-93 on December 30, 1992. In its return of income, the petitioner claimed deduction of Rs. 1.46 crores (approx.) under section 80HHC by filing its return of income along with the form prescribed for disclaimer of tax concession in respect of export of trading goods. The said certificates were in favour of the supporting manufacturers. A questionnaire was submitted by the Department on September 2, 1994, to the assessee. On March 31, 1995, respondent No. 1 completed the assessment of the petitioner for the assessment year 1992-93 under section 143(3) of the Act. The first-respondent partly disallowed the petitioner's claim under section 80HHC and as against the petitioner's claim for deduction under that section for Rs. 1.46 crores (approx.), the deduction was reduced to Rs. 1.19 crores (approx.).
(b) Being aggrieved by the order of the Assessing Officer, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). The appeal was partly allowed.
(c) By the impugned notice dated March 30, 1999, respondent No. 1 has alleged that he had reason to believe that the petitioner's income had escaped assessment and, accordingly, he has called upon the petitioner to file a return of income within 35 days.
(d) By letter dated April 6, 1999, the chartered accountants of the petitioner requested the Assessing Officer to furnish reasons recorded by respondent No. 1 prior to issuance of the notice under section 148.
(e) On April 20, 1999, the petitioner filed a return of income for the assessment year 1992-93 showing the same income declared by it in its original return of income filed on December 30, 1992. The returns were filed without prejudice to the rights of the petitioner to challenge the impugned notice. In the computation, the petitioner once again claimed the deduction at Rs. 1.46 crores (approx.), under section 80HHC.
(f) Being aggrieved by the notice, the present petition has been filed.
Arguments:
4. Mr. Trivedi, learned senior counsel appearing on behalf of the assessee, submitted that the original assessment was made on March 31, 1995. It was for the assessment year 1992-93. It was made under section 143(3). He contended that under, the, proviso to section 147 of the Act, no action can be taken for reopening such assessment after the expiry of four years from the end of the assessment year 1992-93 on March 31, 1997, unless respondent No. 1 has reason to believe that the assessee's income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It was urged that, in the present case, an affidavit-in-reply has been filed on behalf of the Department which clearly indicates that the reopening of the assessment by the Department was based on change of opinion. It was, therefore, contended that the reopening of the assessment was bad in law as the pre-condition for issue of a valid notice and for valid initiation of reassessment proceedings had not been fulfilled.
5. In reply, it was urged on behalf of the Department that under Explanation 2 to section 147, it is clearly laid down that for the purposes of section 147, certain cases of escapement of income as mentioned in the Explanation shall be deemed to be cases where income chargeable to tax has escaped assessment. In this connection, reliance was placed by the Department on clause (c) of Explanation 2 to section 147. It was argued that, in the present case, although an assessment was made under section 143(3) earlier, the income has been made the subject of excessive relief and, therefore, the deeming provision of Explanation 2 would apply. It was also urged that under section 149 assessment can be reopened even after four years if the income escaping assessment is of a specified amount. In this connection, reliance was placed on section 149(1)(a)(ii).
Findings:
6. We find merit in this petition. We are confining this judgment to the facts of the case. In the present case, the period of four years came to an end on March 31, 1997. In the present case, an affidavit has been filed on behalf of the Department. In the present case, it is the case of the Department in the affidavit that the predecessor of respondent No. 1 had passed an order of assessment under section 143(3) on March 31, 1995, computing the total income of the assessee at Rs. 2.86 crores (approx.). That, subsequently, another predecessor in office of respondent No. 1 formed an opinion that the income chargeable to tax had escaped assessment. This was on March 16, 1999. We have gone through the reasons. The position of law after April 1, 1989, is not in dispute. By virtue of a proviso to section 147, no action can be taken for reopening after four years unless the Assessing Officer has reason to believe that income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the present case, the affidavit and the reasons disclosed indicate that the Department has purported to reopen the assessment only on the basis of change of opinion. This position is, in fact, conceded vide para. 3 of the affidavit-in-reply dated March 13, 2001. The reasons also do not spell out failure on the part of the assessee to disclose fully and truly all material facts. In the circumstances, the deeming provision in Explanation 2 to section 147 has no application to the facts of the present case. Section 149 only prescribes the time limit for giving notice. We are required in this case to look into the facts in order to ascertain whether the pre-condition for the issue of a valid notice under section 148 has been fulfilled or not. We are satisfied on the facts of the present case that reopening is sought on the basis of change of opinion. Further, even in the reasons, there is nothing to indicate that reopening is sought on the ground of the failure on the part of the petitioner to disclose fully and truly all material facts.
Conclusion:
7. In the circumstances, the impugned notice is set aside. Both the above writ petitions are made absolute in terms of prayer (b) with no order as to costs.
8. C.C expedited.