Ropar District Co-operative Milk Producers Union Ltd. vs Commissioner of Income Tax-II

Ajay Kumar Mittal, J.—In this appeal by the assessee u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") order dated 12-12-2005 of the Income Tax Appellate Tribunal, Chandigarh Bench-A, Chandigarh (hereinafter referred to as "the Tribunal") passed in ITA No. 154/Chandi./ 2003 relating to the assessment year 1994-95 has been challenged. The assessee has claimed that the following substantial questions of law arise for consideration of this Court:

Whether on the facts and circumstances of the case, the orders dated 12-12-2005 (P-l) and dated 3-11-2000 (P-4) are legally sustainable?

Whether the assessing officer has validly assumed jurisdiction u/s 147 of the Act?

Whether the Tribunal is correct in law in holding that the notice issued u/s 148 of the Act for reopening the assessment already completed does not amount to change of opinion?

Whether in the facts and circumstances of the case the order disallowing the deduction u/s 80-I is legally sustainable, the same being based on mere presumptions and surmises and mere difference of opinion which cannot form the basis of adjudication?

A perusal of the aforesaid questions of law would show that there is inter-linking and over-lapping of substantial questions of law which have been claimed by the assessee. The primary point which would arise for consideration in this appeal is as to whether the assumption of jurisdiction u/s 147 of the Act by the assessing officer is valid or not.

Briefly, the facts are that the appellant filed its return on 31-10-1994 for the assessment year 1994-95 declaring income at Rs. 40,83,687 and claimed deduction at Rs. 10,20,921 u/s 80-1 of the Act. Thereafter, the appellant filed a revised return declaring net taxable income at Rs. 37,69,485 on 27-10-1995. The assessment was made u/s 143(3) of the Act vide order dated 28-12-1995. The assessing officer in para 3 of the assessment order recorded as under:

The claim of the assessee u/s 80-I of the Income Tax Act has been made for the first time this year since this is the sixth year of the assessee after commencing production and prior to this there has been no income.

The assessment was made for assessment year 1995-96 and claim u/s 80-I of the Act was disallowed and the assessing officer issued notice u/s 148 of the Act to the assessee for the assessment year 1994-95, in response to which the assessee filed return declaring income at Rs. 37,69,485 on 5-3-1999. The assessing officer made the assessment u/s 143(3) read with Section 147 of the Act at Rs. 47,11,857. The assessee-appellant feeling aggrieved against the action of the assessing officer filed appeal before the Commissioner (Appeals), who vide its order dated 30-12-2002 held the reassessment proceedings illegal and ordered to delete the addition made by the assessing officer on account of disallowing the deduction u/s 80-I of the Act. The revenue took the matter in appeal before the Tribunal and the Tribunal vide its order dated 12-12-2005 set aside the order of Commissioner (Appeals) and restored the appeal to his file for recording decision on merits after giving reasonable opportunity of being heard to the assessee and, if necessary, to the assessing officer also.

Learned Counsel for the assessee submitted that the revenue has sought to take recourse to reassessment proceedings on the ground that the deduction claimed by the assessee u/s 80-I of the Act amounting to Rs. 10,20,921 has been wrongly allowed. According to the learned Counsel the assessing officer while framing an assessment u/s 143(3) of the Act after considering the material filed by the assessee had allowed the aforesaid deduction u/s 80-I of the Act and the notice issued for reassessment u/s 148 of the Act is based on mere change of opinion and, therefore, assumption of jurisdiction is bad.

We have heard learned Counsel for the assessee and perused the record.

Section 147 of the Act defines the power and jurisdiction of the assessing officer for making an assessment or reassessment of escaped income. Section 148 of the Act, on the other hand, provides for initiation of the reassessment proceedings with issuance of a notice on the assessee concerned. Section 147 empowers the assessing officer to assess or reassess income chargeable to tax if he has reasons to believe that the income for any assessment year has escaped assessment. The power conferred under this section is very wide, but at the same time it cannot be stated to be a plenary power. The assessing officer can assume jurisdiction under the said provision provided there is sufficient material before him. He cannot act on the basis of mere whim and fancy, and the existence of material must be real. Further, it is settled law that on discovery of new and important matter or knowledge of fresh facts which were not present at the time of original assessment would constitute "reason to believe that any income chargeable to tax has escaped assessment" within the meaning of Section 147 of the Act and the same cannot be said to be mere change of opinion.

The Tribunal while restoring the matter to the file of Commissioner (Appeals) decided the issue on merits regarding the entitlement of deduction u/s 80-I of the Act to the assessee for the assessment year in question and had observed that the reopening of the assessment was not based on mere change of opinion but on the basis of facts which were collected after investigation during the course of assessment proceedings for the assessment year 1995-96. Still further, the assessing officer during the course of assessment proceedings for the assessment year 1995-96 had discovered on investigation that the milk plant reflected by the assessee in the balance sheet situated at Mohali was actually constructed by Punjab Dairy Development Corporation Ltd. prior to financial year 1983-84 whereas the assessee claimed deduction u/s 80-I of the Act in assessment year under consideration as if the plant had been constructed by the assessee and the said deduction was allowed by the assessing officer without any investigation. The Tribunal further noted that some facts had come to the notice of the assessing officer subsequent to the framing of the assessment. Prima facie belief of the assessing officer that the income of the assessee had escaped assessment was justified. In the light of the aforesaid finding, the initiation of reassessment proceedings cannot be said to be based on mere change of opinion as claimed by the assessee.

In view of the above, no question of law much less a substantial question of law arises for consideration of this Court. Finding no merit in this appeal, the same is hereby dismissed.