Gujarat High Court
Ranjit Hosiery Mills vs Assistant Commissioner Of Income-Tax ... on 7 April, 1995
Equivalent citations: [1995]215ITR867(GUJ)
JUDGMENT Rajesh Balia, J.
1. This petition is directed against the initiation of the proceedings under section 147 of the Income-tax Act, 1961, by issuing notices under section 148 of the Income-tax Act, 1961 ("the Act", for short). For reopening the assessment of the assessment years 1980-81 to 1985-86, notices were issued on March 28, 1989. In response to the objections raised by the assessee and requiring the Income-tax Officer ("the ITO", for short), to furnish reasons for initiating the proceedings for reassessment, the concerned authority informed that, for the aforesaid assessment years, during the assessment proceedings, the assessee has incorrectly claimed depreciation on buildings which has been rented and no business has been carried on by the assessee in the buildings on which the depreciation has been claimed. The reasoning reads as under :
"During the proceedings for the assessment year 1986-87, it was discovered that you have been incorrectly claiming depreciation on buildings which have been simply rented and no business has ever been carried on by you in the buildings on which depreciation has been claimed.
Depreciation has incorrectly been allowed in the original assessments for the assessment years 1980-81 to 1985-86, because it is presumed, on the basis of incorrect and incomplete information supplied by you to that effect, that the buildings under consideration were being used by you for your own business.
I had reason to believe that, due to failure on your part to disclose fully and truly all material facts in respect of the correct use of house properties owned by you, depreciation was wrongly claimed by you which was incorrectly allowed resulting in equal amount of income chargeable to tax escaping assessment. The case is considered covered by the Explanation 1(c) of section 147 of the Income-tax Act also."
2. Thus, notices were issued because the Income-tax Officer had reason to believe that the income of the assessee had escaped assessment on account of incorrectly allowing depreciation as a result of omission and failure on the part of the assessee to disclose true and full material facts necessary for the assessment. The information on which the Income-tax Officer purports to have satisfied a belief about the escapement of the income by omission and failure on the part of the assessee is the information which came in his possession during the proceedings for the assessment year 1986-87 that the buildings in question were rented out and that no business had been carried on.
3. No return has been filed. However, the Revenue has supported the order in question on the basis of the reasons disclosed by the concerned authority in his letter dated April 11, 1989, annexed to the petition.
4. Learned counsel appearing for the assessee has contended that he has made a true and complete disclosure about all the material and primary facts necessary for his assessment. He has disclosed in the statement of income that his business is of using the trade mark and letting out the factory premises. He has, in his note appended to the statement of income which is a part of his return, clearly disclosed that the nature of the business of the assessee-firm is to exploit the trade mark "Ranjit" and other related marks by assigning and/or licensing the same, permitting others to use the said name on the stipulated terms and conditions and to let out a portion of the factory building for carrying on the business. Not only that, the assessee has claimed in each statement of income relevant to the concerned assessment under the head "Business" income from licensing of trade mark "Ranjit" and letting out of the factory premises for business. Even in the order, it is noticed that the nature of the business of the assessee-firm is to exploit the trade mark and other related marks by assigning and/or licensing the same, permitting others to use the same on the stipulated terms and conditions and to let out a portion of the factory buildings for carrying on the business. The fact of letting out of the factory buildings has also been noticed in the assessment orders of the subsequent years. Therefore, the very fact which has been made the foundation for holding a reasonable belief about the escapement of assessment and which has been stated to be not disclosed is non-existent. In fact, it has not only been disclosed but been noticed by the assessing authority during the assessment proceedings. Therefore, it is not a case in which condition precedent for invoking the jurisdiction under section 147(a) of the Act as to the failure on the part of the assessee to disclose truly and fully the primary facts has been satisfied.
5. In the facts of the present case, it is clear that the assessing authority has not come into possession of any information subsequent to the completion of the assessment which could give jurisdiction for initiation of such proceedings under section 147 of the Act.
6. We are, therefore, of the opinion that the proceedings, having been initiated by the authority for the assessment years 1980-81 to 1985-86 without there being any existing condition precedent for invoking such jurisdiction are void and deserve to be quashed. Accordingly, this petition succeeds. Notices under section 147 of the Income-tax Act for the assessment years 1980-81 to 1985-86 dated March 28, 1989, are quashed. Rule is made absolute to the extant indicated hereinabove with no order as to costs.