Gujarat High Court
Gruh Finance Ltd. vs Joint Cit on 2 February, 2000
Equivalent citations: [2002]123TAXMAN196(GUJ)
JUDGMENT J.N. Bhatt, J.
In this group of three petitions, at the stage of show-cause notice, the petitioners-assessees, have invoked the extraordinary, plenary, equitable and discretionary jurisdictions of the High Court under article 226 of the Constitution of India. A common question has surfaced for our consideration and adjudication, i.e., whether the exercise of powers by the respondent authority, for reassessment and resultant notices under section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') to the petitioners, at this stage, prima facie could be said to be based on 'change of opinion' or on new opinion on finding out mistake upon the existing material or could it be said that there is total lack of jurisdiction ?
2. The case of the petitioner in each petition is that the impugned notice is without jurisdiction, as reassessment cannot be made on the basis of 'change of opinion' since all the relevant facts and entire material had been considered by the assessing officer, at the relevant time, whereas, the revenue has contended that the assessee has claimed depreciation as deduction on non-existent machinery and a bogus claim was found and depreciation, thereon, claimed was not, consciously, considered. Therefore, there is no question of bar of the jurisdiction.
3. We have heard extensively, the rival submissions made on behalf of the parties and materials emerging from record in the light of the relevant proposition of law.
4. It is true that even after the amendment in the provisions of section 147 of the Act, a mere change of opinion, ipso facto, would not confer or empower the assessing officer to embark upon a reassessment exercise. Notwithstanding that, power to make assessment or reassessment within four years of the end of the relevant assessment year, would be attracted even in cases where there has been complete disclosure of all relevant facts upon which the assessment might have been based at the first instance, but for or in case of a mistake, as per amended provisions of section 147.
5. The assessment of the return for the relevant years has been done under section 143(3) of the Act. The record of these petitions indicates the order dated 24-11-1999, placed along with the affidavit-in-reply. It is the order showing reasons for issuance of notice under section 148 of the Income Tax Act, which reads as under :
"As per the information received from the DDI (Investigation) Unit-II, Kanpur, under No. F. No. G-18/DD-II/KNP/2(35)/1998-99, dated 19-6-1999, it is seen that the assessee during the financial year 1995-96 corresponding to the assessment year 1996-97 purchased and leased the machinery (Shelting Line Tube Mill) amounting to Rs. 1,47,81,250 to Rajendra Group of Companies and claimed depreciation as deduction against its income in respect of machinery that either did not exist or the real worth of these machinery was only 10 per cent to 20 per cent of the value recorded in the books. In this way, the assessee has claimed bogus depreciation on non-existent machinery. Since the above amount of income appears to be escaped from taxable income for the assessment year 1996-97, it is mandatory to issue notice under section 148 of the Income Tax Act to cover the above income and tax the same. Accordingly, a notice under section 148 is, therefore, issued to the assessee for this purpose."
6. It could very well be seen from the aforesaid reasons that depreciation was claimed on the machinery which was non-existent, as per the information received by the department, whereas, in the scrutiny assessment, depreciation under section 32, read with section 43(6) of the Act had been claimed and accepted. Thus, it was noticed that there was a bogus claim and mistake was discovered.
7. The expression 'reason to believe' employed in section 147 would mean some cause or justification if the competent authority has a cause or ground or some justification that some income has escaped assessment or that there was a mistake in making assessment. In the peculiar facts and special circumstances emerging from the record, we are extremely unable to uphold the contention raised on behalf of the petitioner that the respondent authority has no jurisdiction to issue the impugned notices under section 148, as it involved only a mere 'change of opinion'.
8. This court, in Praful Chunilal Patel v. M.J. Makwana, Asstt. CIT (1999) 236 ITR 832 has observed in this behalf while interpreting the provisions of section 147 that the expression 'reason to believe' which are relied on behalf of the respondents, are also material for reinforcing the view which we are taking in this group of petitions.
9. Whereas, learned counsel for the assessee has placed reliance on the observations made by this court in the decision in Garden Silk Mills (P) Ltd. v. Dy. CIT (1999) 237 ITR 668. He placed reliance on relevant observations which reads as under :
"'Even the decision of this court in Garden Silk Mills Ltd. v. Dy. CIT (Asstt.) (No. 1) (1996) 222 ITR 27 cannot assist the petitioner because in that case it was held that the assessing officer was aware about the investment and fluctuations in the exchange rate and depreciation had been allowed after considering the material on record and further that the notice was issued after four years and there was no failure on the part of the assessee to disclose material facts necessary for assessment.' Reliance placed on the case of that very assessee, reported in the same volume at page 68Garden Silk Mills Ltd. v. Dy. CIT (No. 2) (1996) 222 ITR 68 (Guj), also cannot help the petitioner, because in that case the court found that in the first assessment the assessing officer had applied his mind in the computation of income and that there cannot be a mere change of opinion. When, at the first assessment all the relevant aspects are considered and there is proper application of mind for ascertainment of the amount of taxable income and of the tax payable thereon, then in the absence of any error or mistake being discovered or found, the assessing officer later on cannot merely for the sake of giving a different opinion, change the earlier opinion. However, in cases where an error or mistake is detected, it can never be said that there is only a mere change of opinion. The mistake or error which is detected and which constituted a valid decision or cause to form a belief in the first assessment as a result of which the income has escaped assessment, would constitute a reason to believe that the income had escaped assessment and such cases where mistakes and errors are detected and which constitute a valid justification or cause to form a belief sought to be corrected; cannot be said to be cases of mere change of opinion'.
We are in respectful agreement with the aforesaid enunciation of distinction between change of opinion and finding erroneous nature of earlier assessment on detection of mistake on an issue which was not earlier considered by the assessing officer. The present case may be examined in the light of the principles noticed above. No return has been filed. However, the reasons recorded by the assessing officer have been placed on record which are identical in all the three cases except for the amount and the name of the assessee.' (page 673)
10. We have also, seriously, considered the entire case law from which aforesaid paragraphs are relied on. Insofar as the expressions 'reason to believe' and 'exchange of opinion' are concerned, we are of the view that though the material was available on record, at the time of first assessment, when no conscious consideration of the material is made and a mistake has been committed, it would not, in any case, create an embargo or a ban on the competent officer to exercise powers under the amended section 147, as prima facie, there could not be 'change of opinion' in that factual scenario. It has also not been shown to us on behalf of an assessee. If conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making assessment and again a different or divergent view is sought, it would tantamount to 'change of opinion', whereas, in the case of existing material, no conscious attempt has been made, it would tantamount to mistake in not considering the relevant point or proposition and it would not be a 'change of opinion'. As in the present case, prima facie upon information, the department noticed that depreciation was claimed and approved in respect of a machinery which was not at all in existence and that aspect was not consciously considered, at the time of first assessment, as otherwise there was no question of granting depreciation, thereon, claimed by the assessee.
11. In our prima facie view, therefore, this group is also covered by the observations and the ultimate view taken by this court in Praful Chunilal Patel's case (supra). We need not to divulge ourselves further in meticulous discussion. Otherwise also, there is no fit case for exercise of extraordinary jurisdiction under article 226 of the Constitution, in the absence of any jurisdictional issue. The authority has jurisdiction.
12. The learned counsel Mr. Shah, at this stage, submitted that since again the competent authority is required to examine the merits after giving an opportunity of hearing to the assessee, and material, it may be observed that the observations made, hereinbefore, may not come in the way of the point/issue being decided on the merits as ours is a prima facie view in the absence of material. In fact, this requires no clarification, as such. However, this court has dealt with the point prima facie, at the interim stage, i.e., at the stage of issuance of notice under section 148, where the party has to appear and show cause, the decision on the merits will be upon the material that may be placed/submitted. So, the observations made, at this stage, obviously, would not and should not influence and colour the vision of the competent authority while making the final decision upon the merits after hearing and considering the materials.
13. In the result, these petitions are dismissed. Notice in each petition shall stand discharged. Obviously, interim relief, if any, would not assume any survival value. No order as to costs.