JUDGMENT V.C. Daga, J.
1. This petition is directed against the two notices dated February 20, 1990 (exhibits E and E-l) and notice dated June 3, 1991 (exhibit G), whereby the power to reopen the completed assessment has been invoked.
The facts:
2. The petitioner after the receipt of the above notices requested the Assistant Commissioner of Income-tax, Circle 24(2), Piramal Chambers, Bombay, to provide or disclose reasons recorded by him prior to issuance of the notices for reopening the assessment. No reasons were disclosed or supplied by the Assistant Commissioner of Income-tax in spite of request letter dated June 8, 1991. Consequently, the petitioner was left with no option but to invoke the writ jurisdiction of this Court under Article 226 of the Constitution of India to challenge the action of reopening and the notices issued by the respondent-Income-tax Department to the petitioner-assessee.
3. This Court was pleased to issue rule in the above petition on July 15, 1991 with interim relief in terms of prayer Clause (d).
4. On being noticed, the respondents appeared and filed their counter affidavit on February 4, 1998 and disclosed the reasons recorded by the Assistant Commissioner of Income-tax, Circle 24(2), City-X, Mumbai, for reopening the completed assessments, the reasons read as under:
Assessment year-1983-84 The then 11th ITO, BSD(S), Bombay, vide his order dated March 27,1986 in the case of M/s. Shah & Associates has assessed income of Rs. 3,61,961 on protective basis holding that the income in question is assessable in the hands of the assessee.
Assessment year-1984-85 The then 11th ITO, BSD(S), Bombay, vide his order in the case of M/s. Shah & Associates has assessed income of Rs. 8,33,800 on protective basis holding that the income in question is assessable in the hands of the assessee.
Submissions:
5. The petitioner has also challenged the legality of the reasons recorded. With the aforesaid material on record, the parties to the petition were heard.
6. Mr. Andhyarujina, learned senior counsel appearing for the petitioner-assessee, submits that the reasons recorded do not disclose any material to show that the income has escaped assessment. No material is available on record to justify the formation of belief; no allegations alleging failure on the part of the petitioner to disclose any particular material resulting in escapement of income is to be found in the reasons recorded. Mr. Andhyarujina further submits that the power to reopen has been exercised after a period of four years from the end of the assessment year. That, if the power to reopen is to be exercised by the Assessing Officer after the period of four years from the end of the assessment year, then it is incumbant on the part of the Department to allege failure on the part of the assessee to disclose material resulting in escapement of income. He further submits that no reopening is permissible on the basis of a change of opinion.
7. Mr. Andhyarujina, in order to substantiate his submissions advanced, placed reliance on a number of judgments of this Court including that of Hindustan Lever Ltd. v. R.B. Wadkar, Asst. CIT (No. 1) and pressed into service the observations of this Court quoted here-inbelow (page 337):
The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced.
8. Mr. Andhyarujina, also relied upon another judgment of this Court in the case of Caprihans India Ltd, v. Tarun Seem, Deputy CIT . He also relied upon another judgment of this Court in the case of ICICI Bank Ltd. v. K.J. Rao , and placed reliance particularly on para. 12 of this judgment which reads as under (page 210):
Under Section 147 of the Income-tax Act, concluded assessments can be reopened beyond a period of 4 years from the end of the relevant assessment years only if there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment. Having furnished all material facts even if an assessee erroneously claims higher depreciation, it will not be a case of failure to disclose fully and truly all material facts. At what rate the depreciation is to be claimed is a matter of legal inference to be drawn from the material facts. If the legal inference drawn from the material facts is erroneous it cannot be said that there is failure on the part of the assessee to disclose material facts. In the present case, on the material facts disclosed, the assessee had claimed depreciation at 40 per cent, and the same was allowed by the Assessing Officer. It is not the case of the Revenue that the facts disclosed by the assessee were incorrect or that there were any other facts which were material for the assessment which have not been disclosed by the assessee. Under the circumstances, if there is no failure to disclose material facts, then, even if there is excess relief granted, the assessments cannot be reopened beyond the period of 4 years from the end of the relevant assessment years. This court in the case of IPCA Laboratories Ltd. [2001] 251 ITR 416 and in the case of Bhor Industries Ltd. has held that notice for reopening of the assessment cannot be issued after a period of 4 years unless the escapement of income is on account of failure on the part of the assessee to disclose fully and truly all material facts. It has been further held that the Explanation to Section 147 of the Income-tax Act has to be read with Section 148 of the Income-tax Act in its entirety. In the light of the aforesaid decisions, in the present case, there being no failure on the part of the assessee to disclose fully and truly all material facts, the impugned notices issued beyond the period of years from the end of the relevant assessment years are liable to be held to have been issued in contravention of the provision of the Income-tax Act.
(emphasis supplied)
9. Mr. Andhyarujina, thus, prayed for setting aside the notices with all consequential reliefs prayed for in this petition.
10. Per contra, learned Counsel appearing for the respondent - Income-tax Department urged that the writ petition at the instance of the petitioner is not maintainable as alternate remedy is available to the petitioner. Relying upon the decision of the apex court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19, it was submitted that the assessee must agitate the issue before the Assessing Officer and not before this Court. He also tried to support the action of the Department, however, he could not take his submission to its logical end.
Consideration:
11. We have heard the rival parties. When asked how the alternate remedy could have been resorted to by the assessee without knowing the reasons recorded for reopening, learned Counsel for the Revenue conceded that in the absence of communication of the reasons, the assessee could not have resorted to the alternate remedy. He thus agreed that in the facts and circumstances of the case it was open for the petitioner to invoke the writ jurisdiction of this Court.
12. So far as the power invoked by the Assessing Officer to reopen assessment beyond the period of four years as urged by the petitioner is concerned, learned Counsel for the Revenue could not justify the reopening based on the material available on record. He fairly conceded that reopening is beyond the period of four years from the end of the assessment year and no circumstances justifying such reopening beyond four years is available on record. Since the reopening is beyond the period of four years, in the absence of any material to show that there is failure on the part of the assessee to disclose fully and truly all material facts, the reopening of the assessment cannot be sustained. The reasons recorded for reopening the assessment do not state that there is any failure on the part of the assessee to disclose fully and truly any material facts. The mere fact that a protective assessment has been made in the case of some other assessee on the ground that the income of that assessee is assessable in the hands of the assessee herein cannot be a ground to reopen the concluded assessment of the assessee. Since the conditions required for reopening the assessment beyond the period of four years are not satisfied, in the facts of the present case, in our considered view, the notices issued are without jurisdiction and the same are liable to be quashed and set aside on this short ground. Since we are setting aside the notices on this ground alone, it is not necessary for us to go into other number of points which Mr. Andhyarjuna has raised.
Conclusion:
13. In the result, the petition is allowed. Impugned notices are quashed and set aside. Rule is made absolute in terms of prayer Clauses (a), (b) and (c) of the petition with no order as to costs.