Pinaki Chandra Ghose, J.:— The writ petitioner in this application has challenged six notices all dated July 29, 1994, issued by the respondent-Department under section 148 of the Income-tax Act, 1961 (hereinafter referred to as “the said Act”), for reopening the assessments under section 147 of the said Act, 1961, for the assessment years 1984–85 to 1989–90. The petitioner has also challenged approvals and/or satisfactions of respondent No. 2, the Commissioner of Income-tax, West Bengal, Range-VIII, Calcutta, under section 151(1) of the said Act in respect of all the said assessment years. The petitioner has challenged the said notices under section 148 of the said Act on the ground that the conditions precedent for the assessment under section 147 of the said Act read with section 148 of the said Act have not been satisfied and the requirements of law have not been fulfilled.

2. The contentions of learned counsel appearing on behalf of the petitioner are as follows:

The assessments for the assessment years were all completed under section 143(3) of the said Act and the petitioner disclosed fully and truly all material facts necessary for the said assessments. The said assessments have become final after the disposal of the said appeals by the final appellate authority under the said Act.

3. He further contended that there is no omission or failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessments and therefore all the impugned, notices under section 148 of the said Act are illegal, invalid and without jurisdiction. It is further contended that it is the case of the respondents that in the original orders of assessment for the said assessment years reliefs, inter alia, under section 32A as claimed, were allowed in full for the assessment years up to 1987–88 and under section 32AB for the assessment years 1988–89 and 1989–90. The petitioner's claim for relief under section 80HH and 80HHB was also allowed in the assessment order for the assessment year 1984–85 but the claim for reliefs under section 80HHB for the assessment years 1985–86, 1987–88, 1988–89 and 1989–90 were not allowed in the assessments but the same were allowed in appeals by the appellate authority.

4. He further stated that nowhere in the affidavit it was alleged that there was omission on the part of the petitioner to disclose fully and truly all material facts relating to section 32A/32AB of the said Act. It is further the case that the respondents in their affidavit have escaped assessment in respect of the assessment years from 1984–85 to 1989–90 on account of the allowance of wrong claim made under section 32A/32AB of the said Act and under section 80HHB and as such the total sum of Rs. 3,22,46,298 has escaped assessment. The said escaped assessment income is prejudicial and it is fit case for reopening under section 147 of the said Act.

5. Learned senior counsel appearing on behalf of the petitioner further contended that the escapement of income on the reason of prejudicial to the interests of the Revenue is not the valid material as it was not the condition for reopening of the assessment under section 147 of the said Act. Therefore, the respondent has failed to disclose any material on the basis of which respondent No. 1 has reason to believe that income chargeable to tax has escaped assessment for the said assessment years and accordingly the petitioner has failed to disclose fully and truly all material facts relating to the said income.

6. He further contended that the petitioner claimed for deduction under section 32A and section 32AB of the said Act and also under section 80HH and section 80HHB of the said Act. The respondent authorities, after verification of the said claims under section 32A and section 32AB of the said Act, allowed them for the said assessment years, but in respect of the claims made under sections 80HH and 80HHB of the said Act they were disallowed. Accordingly, he submitted that the Assessing Officer duly applied his mind in the matter and came to the conclusion. Furthermore, the petitioner preferred appeals before the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal and the appellate authority allowed the claims made under sections 80HH and 80HHB of the said Act and considered the grounds raised in the said appeals and, therefore, the assessments have become final as the claims for deduction are concerned.

7. He further contended that the respondents have relied upon a judgment reported in CIT v. N.C Budharaja and Company, [1993] 204 ITR 412 (SC), in their affidavits. The said judgment has no application, according to him, in view of the fact that the Supreme Court delivered the said judgment on September 7, 1993, after completion of the assessment of the petitioners for the said assessment years. He further relied upon the judgments reported in Calcutta Discount Co. Ltd. v. ITO, [1961] 41 ITR 191 (SC) and Indra Co. Ltd. v. ITO, [1971] 80 ITR 559 (Cal), and contended that once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for the assessing authority to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn and in the case of Calcutta Discount Co. Ltd., [1961] 41 ITR 191 (SC). The Supreme Court held that the condition precedent to the exercise of jurisdiction did not exist.

8. He further contended that respondent No. 1 has acted on a mere change of opinion in view of the judgment of the Supreme Court in the case of N.C Budharaja and Co., [1993] 204 ITR 412. He further contended that the sanction was granted by respondent No. 2 mechanically and not in accordance with law. He further relied upon a judgment reported in ITO v. Lakhmani Mewal Das, [1976] 103 ITR 437 (SC) and contended that the reasons are not for the reopening of assessment as the reasons have no rational connection or relevant bearing on the formation of the belief. Rational connection postulated that there shall be direct nexus or live link between the material coming to the notice of the Income-tax Officer and formation of belief that there must be escapement of income in a particular year because of his failure to disclose fully and truly all material facts. He further contended that the materials which were not in existence on the date of completion of assessment cannot be considered material for formation of reason to believe that the income has escaped by reason of failure on the part of the assessee to disclose fully and truly all material facts at the time of making the assessment. He further relied upon another judgment reported in Panchanan Hati v. Commissioner Of Income-Tax, West Bengal-I, Calcutta, [1978] 115 ITR 336 (Cal). He further contended that all the assessments were completed before the judgment delivered by the Supreme Court in the case of N.C Budharaja and Co., [1993] 204 ITR 412.

9. Learned senior counsel appearing on behalf of the respondents contended that the reasons for reopening the said assessments for the assessment years 1984–85 to 1989–90 will appear from paragraphs 3(d) and (e) of the affidavit-in-opposition and he drew my attention to the said reasons. He further contended that the reliefs under sections 32A 32AB, 80HH and 80HHB were allowed to the writ petitioner either in the assessments or on the appeals thereon as under:

Assessment year Date of assessment Quantum of relief allowed Under section 32A/32AB Under section 80HH Under section 80HHB 1984–85 2-3-1987 27,76,398 25,74,379 X 2,22,019 1985–86 30-3-1988 49,69,502 45,82,268 X 3,87,234 1986–87 31-3-1989 21,82,596 21,82,596 X X 1987–88 30-3-1990 82,50,619 56,36,741 24,03,678 2,10,200 1988–89 27-03-1991 64,74,797 43,24,017 17,76,472 3,94,308 1989–90 30-3-1992 75,52,386 41,37,597 32,60,170 1,54,619

10. He further drew my attention to the judgment of the apex court in the case of N.C Budharaja and Co., [1993] 204 ITR 412, where the Supreme Court has held that an “article” or “things” used in sections 32A, 32AB and 80HH refers only to movable assets and the words “manufacture or construction of an article” cannot be extended to construction of road, building, dam or bridge, etc. Since the petitioner was engaged in civil construction works on contract basis, there was no activity of the nature of production or manufacture of any article or thing within the meaning of either section 32A, 32AB or 80HH of the said Act. He further contended that the said ratio was also reaffirmed by the apex court in the case of Builders Associations of India v. Union of India, [1994] 209 ITR 877. According to him, the benefit of deduction granted to the writ petitioner under the said sections was not legally admissible and was allowed erroneously. Accordingly, respondent No. 1 formed a reasonable belief that income to the extent of the said reliefs under the said provisions of the Act has escaped assessment and duly recorded his reasons for initiating the proceedings under section 147 of the Act and necessary approval has been obtained from the Commissioner of Income-tax, West Bengal-VIII, Calcutta.

11. He further contended that the interpretation put forward by the Supreme Court in N.C Budharaja's case, [1993] 204 ITR 412 in respect of the said provisions of the said Act is the law which has always been and must always be understood to have been. In that view of the matter, reliefs under the provisions of the said Act allowed earlier to the writ petitioner at the time of original assessment or on appeal were clearly wrong and erroneous, inasmuch as, the writ petitioner is/was not engaged in the manufacture or production of “article” or “thing” within the meaning of section 32A/32AB of the said Act and thus not entitled to any reliefs under the said provisions of the said Act and therefore reopening of the assessment in respect of the said assessment years in question, is fully justified in view of the fact that income has escaped assessment, inasmuch as excessive relief and allowance under this Act has been granted within the meaning of Explanation 1 to section 147 of the said Act. In view of the above, there was escapement of income chargeable to tax. Accordingly, the action taken by the Assessing Officer under section 147 of the said Act by issuing notices under section 148 of the Act in respect of the said assessment years is justified, legal, bona fide and within the scope of the relevant provisions of the said Act.

12. He further contended that in view of the legal position settled by the Supreme Court, assumption of jurisdiction under section 147 of the said Act read with section 148 of the Act by the Assessing Officer was valid and legal inasmuch as the condition precedent for assumption of jurisdiction under section 147 of the Act has been satisfied.

13. He also contended that the reasons for reopening of the said assessments in respect of the said assessment years are more or less similar, inasmuch as, it was found that income has escaped assessment on account of wrong claim made by the writ petitioner under sections 32AB, 80HH and 80HHB which would be evident from the reasons recorded by the Assessing Officer before invoking jurisdiction under the said provision of section 147 read with section 148 of the said Act, which, inter alia, are as follows:

“After the Supreme Court's decision in the case of CIT v. N.C Budharaja and Co., [1993] 204 ITR 412, which has become law and the Supreme Court has also reversed the decision of the Bombay High Court in the case of CIT v. Pressure Piling Co. (India) P. Ltd., [1980] 126 ITR 333. The above mentioned Supreme Court decision is fairly applicable in this case also and, therefore, it is held that the job undertaken by the assessee-company cannot be termed as that done by an industrial undertaking as it is not manufacturing any article or thing. Once it is not an industrial undertaking it is not eligible for deductions under the above mentioned section. He also drew my attention to the reasons recorded and which were enclosed.

14. He further relied upon the judgments reported in the case of Raymond Woollen Mills Limited v. ITO, [1999] 236 ITR 34 (SC) and the case of Mahanagar Telephone Nigam Limited v. Chairman, CBDT, [2000] 246 ITR 173 (Delhi), and contended that the scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the earlier provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied. Firstly, the Assessing Officer must have reason to believe that income, profits or gains chargeable to income-tax have escaped assessment and; secondly, he must also have reasons to believe that such has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions are conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147, existence of only the first condition suffices. In other words, if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. It is, however to be noticed that both the conditions must be fulfilled, if the case falls within the ambit of the proviso to section 147.

15. He further drew my attention to the judgment reported in Mahanagar Telephone Nigam Limited's case, [2000] 246 ITR 173 (Delhi), at page 186 which is reproduced hereunder:

“While deciding the validity of a notice under section 148, the permissible limit of consideration is the existence of reasons and, as indicated above not sufficiency thereof.”

16. He further contended that as regards the contentions of the writ petitioner that on the same set of facts the Assessing Officer by the orders under section 154 of the Act both dated January 20, 1999, in respect of the assessment years 1988–89 and 1989–90 while withdrawing the reliefs granted under section 32A of the Act made an observation that no order under section 148 of the Act on the said relief under section 32A would be passed, it is submitted that the said order of rectification relates only to the relief as regards under section 32A of the Act and only in respect of the assessment years 1988–89 and 1989–90 and does not cover the issue as regards the relief under sections 32A, 80HH and 80HHB in respect of all the said assessment years. In that view of the matter, it is submitted that all the notices impugned in the said writ petition are valid proper and in accordance with the law laid down by the Supreme Court in the case of N.C Budharaja and Co., [1993] 204 ITR 412 and in the case of Builders Associations of India, [1994] 209 ITR 877 (SC). He further contended that the writ petition has got no merit and is liable to be dismissed and the Department may be allowed to proceed to reassess the income which has escaped assessment in terms of and/or in pursuance of the said notices impugned in the writ petition.

17. After considering the facts and circumstances of this case, in my opinion, I do not have any hesitation to accept the contention of learned counsel appearing on behalf of the Revenue and, in my opinion, the respondent-authorities have taken steps in accordance with the provisions laid down in the said Act. In my opinion, the Commissioner has duly applied his mind and after becoming satisfied the said sanction order was issued by him. If further appears that the Supreme Court has expressed its views in the case of N.C Budharaja and Co., [1993] 204 ITR 412 and reaffirmed the said view in the case of Builders Associations of India, [1994] 209 ITR 877 (SC). I do not have any hesitation to hold that the respondent-authorities have power to reconsider the order passed by them and the deduction granted to the writ petitioners under sections 32A, 32AB, 80HH and 80HHB which were not legally admissible and allowed and in fact allowed erroneously by the Department on the basis of the representation made by the petitioners. Therefore, there is no lacuna on the part of the respondent-authorities to take steps in the matter in view of the fact that the reasons have also been disclosed by the Department before this court. Furthermore, at the time of issuance of the notices under section 148 of the said Act it is not necessary to come to the conclusion that whether the commencement of reassessment is valid. It is only necessary to find out whether there is any prima facie reasons are on record, on the basis the Department could reopen the case. I do not have any hesitation also to endorse the opinion expressed by the Delhi High Court in the case of Mahanagar Telephone Nigam Limited, [2000] 246 ITR 173 and I come to the conclusion that if the Assessing Officer for whatever reasons has reason to believe that the income has escaped assessment, it confers jurisdiction to him to reopen the assessment. The only question is thcit both the conditions must be fulfilled and in my opinion in the instant case which have been fulfilled by the authorities. Accordingly, in my opinion, there is no lacuna on the part of the respondents to issue such notices under the said sections and in my opinion no relief can be granted to the petitioner on the facts and circumstances of this case and accordingly this application must fail. However, it appears that on the date of moving of this application on September 26, 1994, before His Lordship Ruma Pal J., His Lordship was pleased to pass an interim order directing that, the Income-tax Officer will be at liberty to proceed with the hearing of the notice under section 148 of the Income-tax Act, 1961, and shall pass a final order, but the same shall not be given effect to or communicated to the petitioner till January 15, 1995, or until further orders of this court whichever is earlier. In view of the said order, in my opinion, it would be proper for me at this stage to direct the authorities to take steps in the matter and to pass a final order in the matter, if not already made, after giving a hearing to the petitioner within a period of eight weeks from the date and shall communicate the same within two weeks and thereafter they will not take any further steps in the matter until two weeks from the date of communication of this order to the petitioner.

18. For the reasons stated hereinabove, this application is disposed of accordingly.