JUDGMENT R.K. Agrawal, J.
1. By means of the present writ petition filed under Article 226 of the Constitution of India, the petitioner, M/s Universal Subscription Agency Private Limited, seeks the following reliefs:
(i) issue a writ, order or direction in the nature of certiorari quashing the notices dated 25.10.2000 and 4.9.2000 (Annexure - IV, V, VI & IX) issued under Section 147/148 of the Act for the assessment years 1992-93, 1993-94, 1994-95 & 1997-98.
(ii) to issue a writ, order or direction in the nature of mandamus restraining the respondent not to proceed further in pursuance of the impugned notices dated 25.10.2000 and 4.9.2000 (Annexure IV, V, VI & IX) issued under Section 147/148 of the Act for the assessment years 1992-93, 1993-94, 1994-95 & 1997-98.
(iii) issue any other suitable writ, order or direction as this Hon'ble Court may deem fit and proper.
(iv) Award cost of the petitioner to the petitioner.
2. Briefly stated, the facts giving rise to the present petition are as follow:
According to the petitioner, it has been incorporated as a private limited company under the provisions of the Companies Act, 1956. It is engaged in the business as a subscription agent of foreign technical and scientific journals and other information products. It mainly deals in the subscription business and does not store various foreign magazines and periodicals etc. It merely receives commission through subscription of various types of magazines and journals. The petitioner filed its return of income for the assessment years 1992-93, 1993-94, 1994-95 & 1997-98 showing the income of Rs. 13,12,740/-, Rs. 12,35,820/-, Rs. 25,52,747/- and Rs. 56,71,174/- respectively. The Deputy Commissioner of Income Tax, Special Range II, Kanpur who was the Assessing Authority of the petitioner, passed assessment orders for the assessment years 1992-93, 1993-94 and 1994-95 on 28.10.1993, 8.3.1994 and 16.12.1994 respectively determining the total income at Rs. 9,24,590/-, Rs. 15,26,020/- and Rs. 27,54,194/- respectively. The Assessing Authority considered the claim made by the petitioner under Section 80-O of the Income Tax Act (hereinafter referred to as "the Act") and while passing the assessment order, allowed a sum of Rs. 4,97,808/-, Rs. 5,26,698/- and Rs. 3,15,543/- respectively. In the assessment order passed for the assessment year 1992-93, the Assessing Authority while allowing the claim has observed as follows:
Viewed with reference to the above provisions of law, the assessee is found to have satisfied and fulfilled the following conditions entitling it to a deduction allowable under Section 80-O of the Act:
(a) The assessee company has received commission from foreign enterprises for services rendered outside India.
(b) Database with the help of advance computers concerning various research products, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients.
(c) Commission has been received in convertible foreign exchange which is U.S. Dollar and Great Britain Pound.
3. According to the petitioner, while passing the assessment order for the assessment year 1992-93, the Assessing Authority had worked out the net commission earning from the services rendered to foreign enterprises at Rs. 9,95,616/- and relief under Section 80-O of the Act was allowed at 50% amounting to Rs. 4,97,808/-. So far as the assessment year 1997-98 is concerned, according to the petitioner, it had not received any notice under Section 143(2) of the Act. However, an intimation under Section 143(1)(a) of the Act was received.
4. The Joint Commissioner of Income Tax, Special Range, Kanpur, the sole respondent, issued notices dated 25.10.2000 under Section 147/148 of the Act for the assessment years 1992-93, 1993-94 and 1994-95 proposing to assess the escaped income. In respect of the assessment year 1997-98, notice under Section 147/148 had been issued on 4.9.2000. The respondent had also supplied the reasons recorded by him for forming the belief that the income has escaped income during the aforesaid assessment years. According to the respondent, the petitioner was not entitled to get deduction under Section 80-O of the Act and the wrongful claim has resulted into an escaped assessment to the extent of relief allowed in each of the assessment years. All the notices are under challenge in the present writ petition on the ground that the jurisdictional foundation for initiating the proceedings under Section 147 which deals with the income escaping assessment, is totally absent. In the present case, it is merely a change of opinion by the subsequent Assessing Authority, which is not permissible under Section 147 of the Act. The petitioner had disclosed all the primary facts which have direct bearing on the liability of income earned by him, which is the subject matter of tax and the Assessing Officer came to the conclusion that it was entitled for the benefit of Section 80-O of the Act and had allowed deduction accordingly and mere use of the phrase "reason to believe" would not be a sufficient ground to initiate proceeding under Section 147 of the Act. No new material has come on record and, therefore, it is only a fresh application of mind by the Assessing Authority on the same set of fact and law which were in existence when the original assessment orders were passed. The application of Section 147 and issuance of notices under Section 148 is nothing but abuse of process of law. It is not the case of the Department that in the original assessment the income liable to tax has escaped assessment due to oversight or inadvertent mistake committed by the Assessing Officer but it has been reopened only on the ground that the opinion formed earlier by his predecessor was not correct. There is no power of review and the proceedings which have been initiated, are palpably arbitrary and the entire exercise is void. The notices issued under Section 147/148 of the Act are barred by limitation and, in any event, the petitioner is entitled for deduction under Section 80-O of the Act which has rightly been allowed.
5. In the counter affidavit filed by Santosh Kumar Dixit, Income Tax Inspector in the office of the respondent, it has been stated that the petitioner was only an agent of foreign publishers and distributors of their journals for which work it got commission from the foreign publishers, which, by any stretch of imagination, cannot be regarded as royalty commission or fee or any other payment for the activities or services referred to under Section 80-O of the Act. Even though in the assessment order for the assessment year 1992-93 the Assessing Authority had discussed the allowability of the claim under Section 80-O of the Act, no such discussion has been made in the assessment order passed for the assessment years 1993-94 and 1994-95. The claim has been allowed without verifying the fact and further, it was not made at the time of filing of the return but the claim was made during the course of the assessment proceedings by filing a letter. The Assessing Authority had not made enquiries and had simply accepted the claim. For the assessment year 1992-93, the claim was made for the first time on 7.10.1993 and the assessment was made on 28.10.1993. It has further been stated that the source of income of the petitioner was commission from the foreign publishers. Deduction under Section 80-O of the Act was admissible in respect of any income by way of royalty and commission etc. received by the assessee from the Government of a foreign State or a foreign enterprises for the services rendered or agreed to be rendered outside India even if it is rendered from India. The petitioner has not furnished full details segregating the services rendered or agreed to be rendered outside India and within India. The claim having been wrongly allowed, the proceeding under Section 147 of the Act have been initiated as the respondent had formed the reasonable belief that the deduction had been wrongly allowed and to that extent, the income had escaped assessment. The plea that the notices are barred by limitation has been denied taking recourse to the provisions of Section 149/151 of the Act.
6. So far the assessment year 1997-98 is concerned, it has been stated that the return of the income filed by the petitioner on 27.11.1997 has been processed on 17.3.1998 under the provisions of Section 143(1)(a) of the Act. The claim of deduction under Section 80-O of the Act has not been examined as the assessment was not made under Section 143(3) of the Act. The proviso to Section 147 is not applicable. The audit party has also raised an objection that the petitioner had wrongly been allowed deduction under Section 80-O of the Act. The notices issued under Section 148 of the Act as also the proceeding initiated under Section 147 of the Act for all the assessment years have been justified.
7. In the rejoinder affidavit filed by Ashok Kumar Chawla on behalf of the petitioner, the averments made in the counter affidavit which are contrary to the averments made in the writ petition, have not been admitted and all the averments and contentions made in the writ petition have been reiterated.
8. We have heard Sri V.B. Singh, learned senior counsel, assisted by Sri Shakeel Ahmad, Advocate, on behalf of the petitioner, and Sri A.N.Mahajan, learned Standing Counsel appearing for the respondent.
9. Sri V.B. Singh, learned senior counsel, submitted that even though the claim for deduction under Section 80-O of the Act was not made by the petitioner at the time of filing of the return for the assessment years 1992-93 but by means of a letter the claim was made before the Assessing Authority, which was entertained and after full scrutiny the claim was allowed. A detailed discussion has been made by the Assessing Authority in the assessment order passed for the assessment year 1992-93. In respect of the assessment years 1993-94 and 1994-95, the Assessing Authority had allowed the claim by following the order of the earlier year. Thus, the present proceedings initiated under Section 147/148 are wholly illegal and without jurisdiction and appears to have been initiated only on a mere change of opinion which is also otherwise not permissible under law. He further submitted that the claim made by the petitioner under Section 80-O of the Act had rightly been allowed by the Assessing Authority. The action of the respondent in seeking to disallow the claim is on an erroneous interpretation of the said provision: In support of his various pleas, he has relied upon the following decisions:
(i) Jindal Photo Films Ltd. v. Deputy Commissioner of Income Tax and Anr. (Delhi);
(ii) Commissioner of Income Tax v. Kelvinator of India Ltd.(2002) 256 ITR 1 (F.B.,Delhi);
(iii) Commissioner of Income Tax and Anr. v. Foramer France; and
(iv) Parikh Petrol Chemical Agencies P. Ltd. v. Assistant Commissioner of Income Tax and Ors..
10. Sri A.N. Mahajan, learned Standing Counsel, on the other hand, submitted that the petitioner had not claimed the deduction under Section 80-O of the Act in the return of the income which it had filed for the assessment years 1992-93, 1993-94 and 1994-95. It was made only by means of a letter filed before the Assessing Authority during the course of the assessment proceeding. Such a claim could not have been entertained at all in view of the decision of the Apex Court in the case of Goetze (India) Ltd. v. Commissioner of Income Tax (2006) 284 ITR 323. According to him, if the claim itself was not admissible, the Assessing Authority had wrongly entertained and allowed it. On merits also, he submitted that if a deduction has been wrongly allowed or excessive deduction has been allowed then in view of Clause (c) of Explanation II to Section 147 of the Act, it would be treated that the income chargeable to tax has escaped assessment and the proceedings under Section 147 of the Act can be taken. According to him, in the original assessment proceedings, the claim had not been fully examined and, in any event, the petitioner was not entitled for deduction under Section 80-O of the Act as it was not rendering the services outside India to foreign enterprises. Thus, the respondent had reasons to believe on relevant material to come to the conclusion that the deduction has been wrongly allowed which has resulted in the income escaping assessment and the proceeding are, therefore, wholly in accordance with law and within jurisdiction. He has relied upon a decision of the Apex Court in the case of Phool Chand Bajrang Lal and Anr. v. Income Tax Officer and Anr..
11. So far as the assessment year 1997-98 is concerned, he submitted that the claim of Section 80-O of the Act has not been examined at all and only an intimation under Section 143(1)(a) has been sent. The audit party had also raised an objection regarding allowance of the claim and, therefore, the respondent has rightly formed the belief that the income has escaped assessment.
12. We have given our anxious consideration to the various pleas raised by the learned Counsel for the parties.
13. At the out set it may be mentioned here that the learned Counsel for the petitioner did not make any submission regarding the notice being barred by limitation and, therefore, we are not called upon to go into that question.
14. From what has been stated above, it emerges that the petitioner is engaged in the business of subscription agent of foreign technical and scientific journals and other information products. It receives commission through subscription of various types of magazines and journals. In the return of income filed by it for the assessment year 1992-93, claim for deduction under Section 80-O of the Act was not made either in the return or alongwith the return. It was made for the first time during the course of the assessment proceeding by means of the letter dated 7.10.1993, relevant portion of which is reproduced below:
The assessee is also extending its services to several customers outside India earning commission from foreign publishers in convertible foreign exchange for extending services to customers outside India. The assessee qualified for deduction Under Section 80-O of the I.T.Act, 1981 in respect of commission earned Rs. 9,95,618.85 from foreign publishers for extending services to customers outside India. However, at the time of filing of return of income for assessment year 92-93 inadvertently, the assessee forgot to claim the said deduction. It is now being claimed on the basis of Certificate of Chartered Accountant attached.
We request you to very kindly consider the claim of deduction of Rs. 4,97,808/- (50% of Rs. 9,95,616.85) Under Section 80-O and allow the same in accordance with the provision of law. In case your goodself feel that we should file revised return for claim of deduction Under Section 80-O we may be advised accordingly.
15. The Assessing Authority referred to Section 80-O of the Act and dealt with the claim in the following words:
7.1 Section 80-O as it exists for this relevant assessment. year was inserted by Finance (No. 2) Act, 1991 with effect from 1.4.1992. In the assessee's context the relevant portion of Section 80-O would read as under:
Where the gross total income of an assessee being an Indian company... includes any income by way of royalty commission ... received by the assessee from the Government of foreign State or a foreign enterprise in consideration for the use outside India of any information concerning industrial commercial or scientific knowledge ... made available or provided to such Government or enterprises by the assessee and such income is received in convertible foreign exchange in India ... there shall be allowed ... a deduction of an amount equal to fifty per cent of the income so received in or brought into India in computing the total income of the assessee.
Viewed with reference to the above provisions of law, the assessee. is found to have satisfied and fulfilled the following conditions entitling it to a deduction allowable Under Section 80-O of the Act:
(a) The assessee company has received commission from foreign enterprises for services rendered outside India.
(b) Eligible services include providing technical and scientific information. The assessee company has specialized in marketing scientific and technical knowledge. It has developed several database with the help of advance computers concerning various research projects, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients.
(c) Commission has been received in convertible foreign exchange which is U.S. Dollar and Great Britain Pound.
7.2 A certificate of a Chartered Accountant dated 30.09.92 has been filed before me showing net commission earnings as under:
(i) Payment received in foreign currency, i.e. Dollars and Pound from 1.4.91 to 31.3.92 ... Rs. 52,13,376/-
(ii) Remittances made to Foreign publishers from 1.4.91 to 31.3.92 in various countries...Rs. 42,17,759/-
Net commission earnings Rs. 9,95,616/-
On the facts of the case and the evidence produced and placed on record net commission earnings as shown above at Rs. 9,95,616/- are being accepted and the assessee gets a deduction of Rs. 4,97,808/- (@50% of Rs. 9,95,616/-) Under Section 80-O of the Act.
16. In respect of the assessment years 1993-94 and 1994-95, the Assessing Authority while passing the assessment orders under Section 143(3) of the Act had allowed the claim in the light of C.A. certificate.
17. It is not clear from the record of the writ petition or from the counter affidavit or the rejoinder affidavit as to whether the claim under Section 80-O of the Act in respect of the assessment years 1993-94 and 1994-95 was made by the petitioner in the return of income filed for those years or by means of subsequent letter. However, as the return of income for those years had been filed by the petitioner after it had claimed deduction under Section 80-O of the Act by means of the letter dated 7.10.1993 in the course of assessment proceeding for the assessment year 1992-93, we are proceeding on the premise that the claim must have been made in the return.
18. In respect of the assessment year 1997-98, no assessment has been made under Section 143(3) of the Act and only an intimation has been sent under Section 143(1)(a) of the Act. The respondent had recorded reasons for forming his belief that the claim of the petitioner under Section 80-O of the Act was not admissible and the wrongful claim has resulted into an escaped assessment. The reasons recorded for the assessment year 1992-93 is reproduced below:
Assessment year 1992-93
1. The assessee company is a subscription agent of foreign technical and scientific journals and information products. The assessee Co. is mainly dealing in the subscription business of foreign magazines/periodicals and it does not have its own stock of magazines/periodicals. The return of income of the assessment year 1992-93 was filed on 30.11.1993 declaring total income of Rs. 13,12,740/. The return was processed Under Section 143(1)(a) of the I.T.Act, on 28.01.1993 on Rs. 13,12,740/-. The asstt. was completed us/143(3) on 28.10.1993 at Rs. 9,24,590/-.
2. Perusal of case records reveals that the assessee Co. was engaged in sale of foreign and periodicals and got its earning from commission on sale of these periodicals and claim deduction Under Section 80-O of the I.T.Act for Rs. 4,97,808/-.
3. Under the provisions of the Section 80-O of the I.T.Act, the deduction Under Section 80-O is admissible on the Gross Total income of the assessee being an Indian Co. who is resident in India, includes any income by way of royalty, commission, fee or any similar payment received by the assessee from the Government of the foreign State or a foreign enterprise on consideration for the use outside India any patent, invention, model, design secret formula process or scientific knowledge, experience or skill made available to such Govt. or foreign enterprise and such income is received in India in convertible foreign exchange within 6 months.
4. Since the assessee Co. was not engaged in the above mentioned activities as provided in Section 80-O of the I.T.Act, hence the assessee Co. was not entitled to get deduction Under Section 80-O of the I.T.Act thus the wrongful claim of the assessee Co. resulted into an escaped assessment to the extent of Rs. 4,97,808/-.
5. Accordingly the assessee Co. was not entitled for deduction Under Section 80-O of the I.T.Act, I therefore, have reason to believe that the assessment of the assessee Co. is an escaped assessment by Rs. 4,97,808/-.
Issue notice Under Section 148 r/w 147 of the I.T.Act, 1961.
19. Except for the figures and dates, the reasons for the other years are also the same.
20. The question is as to whether on these facts proceedings under Section 147(a) have rightly been initiated or not.
21. For ready reference, Section 147 of the Act is reproduced below:
147. Income escaping assessment. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year):
Provided that where an assessment under Sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
Explanation 1.- Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 2.- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;
(c) where an assessment has been made, but -
(i) income chargeable to tax has been under-assessed; or
(ii) such income has been assessed at too low a rate; or
(iii) such income has been made the subject of excessive relief under this Act; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.
22. From a reading of the aforesaid provisions, we find that for taking proceeding under Section 147 of the Act the Assessing Authority should have reasons to believe that any income chargeable to tax has escaped assessment for any assessment year. He can assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under Section 147. He can also recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the relevant assessment year. Explanation II provides for a deeming fiction in treating the income chargeable to tax has escaped assessment under various circumstances. Sub-clause (a) provides that if no return of income has been furnished by the assessee although his total income in respect of which he is assessable under the Act during the previous year, exceeded the maximum amount which is not chargeable to income-tax shall be deemed to be a case where the income chargeable to tax has escaped assessment. Clause (b) provides that where a return of income has been furnished by the assessee but no assessment has been made or where it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, then such cases have also to be deemed where the income chargeable to tax has escaped assessment. Under Clause (c) where an assessment has been made but income chargeable to tax has been under-assessed or it has been assessed at too low a rate or it has been made the subject of excessive relief under the Act or excessive loss or depreciation allowance or any other allowance under the Act has been computed, such cases have been deemed where the income chargeable to tax has escaped assessment. The present case is one where excessive allowance has been computed in the assessment. Thus, if an allowance which was not admissible under the Act, has been allowed, it would be deemed to be a case where the income chargeable to tax has escaped assessment.
23. In the case of Jindal Photo Films Ltd.(supra) the Delhi High Court has held that if an expenditure or deduction was wrongly allowed while computing the income of the assessee chargeable to tax, the same could not be brought to tax by reopening the assessment merely on account of the Assessing Officer subsequently forming an opinion that earlier he had erred in allowing the expenditure or the deduction. The Delhi High Court was considering a case of deduction allowed under Section 80-I of the Act. The reasons recorded by the Assessing Authority in that case was as under:
The assessee-company manufactures photofilms which is an article placed under the Eleventh Schedule to the Income-tax Act. By virtue of its placement in the Eleventh Schedule manufacturers of photofilms are not entitled to claim deduction under Section 80-I. In the case of the assessee-company deduction under Section 80-I amounting to Rs. 1,59,91,442 has been allowed wrongly. Therefore, I have reason to believe that income to the tune of Rs. 1,59,91,442 has escaped assessment.
The Delhi High Court has held as followed:
Reverting back to the case at hand, it is clear from the reasons placed by the Assessing. Officer on record as also from the statement made in the counter affidavit that all that the Income-tax Officer has said is that he was not right in allowing deduction under Section 80-I because he had allowed the deductions wrongly and, therefore, he was of the opinion that the income had escaped assessment. Though he has used the phrase "reason to believe" in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax Officer nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing Officer to the same set of facts. While passing the original orders of assessment the order dated February 28, 1994, passed by the Commissioner of Income-tax (Appeals) was before the Assessing Officer. That order stands till today. What the Assessing Officer has said about the order of the Commissioner of Income-tax (Appeals) while recording reasons under Section 147 he could have said even in the original orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the Assessing Officer to initiate proceedings under Section 147 of the Act.
24. In the case of Kelvinator of India (supra) the Full Bench of the Delhi High Court has held that Section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon a mere change of opinion.
25. In the case of Foramer France(supra) the Apex Court has dismissed the civil appeals filed by the Commissioner of Income Tax against the judgment and order in the case of Foramer France v. Commissioner of Income Tax wherein this Court has held that the assessment could not be reopened under Section 147 of the Act on a mere change of opinion and this position remains the same even after the amendment of Section 147 by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1.4.1989.
26. In the case of Parikh Petrol Chemical Agencies P. Ltd.(supra) the Bombay High Court was considering reopening of the assessment under Section 147/148 of the Act in respect of the assessment year 1994-95. In that connection, the Bombay High Court has held that the original assessment order for the assessment year 1994-95 has been passed under Section 143(3) of the Act on 23.3.1997, the notice under Section 148 was issued after four years from the end of the assessment year 1994-95. Under Section 147 of the Act, the assessment for the assessment year 1994-95 could be reopened after four years with the approval of the Chief Commissioner of Income Tax or the Commissioner of Income Tax only if there was failure on the part of the assessee to disclose fully and truly all material facts at the time of original assessment although. It has further held that under Explanation II to Section 147 of the Act, grant of excessive relief could be a ground for reopening the assessment. However, in the case in hand unless the grant of excess relief is on account of failure on the part of the assessee to disclose fully and truly all material facts, concluded assessment cannot be reopened. As it was not a case where the grant of excess relief was on account of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the notices issued after four years from the end of the assessment year, were held to be invalid and without jurisdiction.
27. In the case of Goetze (India) Ltd.(supra) the Apex Court has not laid down as a matter of law that there is no bar for the Assessing Authority to entertain the claim for deduction otherwise than by filing a revised return, as canvassed by Sri Mahajan.
28. In the case of Phool Chand Bajrang Lal (supra) the Apex Court has held that the judgment in Burlop Dealers' case (1971) 79 ITR 609 (SC) cannot be understood as laying down any such proposition that even where the Income-tax Officer gets some fresh information which was not available at the time of the original assessment, subsequent to the conclusion of the original assessment proceedings, which enables him to form a reasonable belief that the income of the assessee had escaped assessment because of the omission or failure of the assessee to disclose true and full facts during the assessment proceedings, he cannot reopen the assessment. The observations in Burlop's case , noticed above, were made in the peculiar fact-situation of that case and cannot be construed to be of universal application irrespective of the facts and circumstances of the particular case. It had further held that from a combined review of the judgments of this Court, it follows that an Income-tax Officer-acquires jurisdiction to reopen an assessment under Section 147(a) read with Section 148 of the Act, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information.
29. In the case of VXL India Ltd. v. Assistant Commissioner of Income Tax , the Gujarat High Court has held as follows:
The essential requirement for initiating proceedings under Section 148 of the Act is that the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Explanation 2 to Section 147 of the Act as appended to newly substituted Section 147 makes certain provisions where, in certain circumstances, the income is deemed to have escaped assessment giving jurisdiction to the Assessing Officer to act under the said provision. Another requirement which is necessary for assuming jurisdiction is that the Assessing Officer shall record his reasons for issuing notice. This requirement necessarily postulates that before the Assessing Officer is satisfied to act under the aforesaid provisions, he must put in writing as to why in his opinion or why he holds the belief that income has escaped assessment. "Why" for holding such belief must be reflected from the record of reasons made by the Assessing Officer. In a case where the Assessing Officer holds the opinion that because of excessive loss or depreciation allowance the income has escaped assessment, the reasons recorded by the Assessing Officer must disclose by what process of reasoning he holds such belief that excessive loss or depreciation allowance has been computed in the original assessment. Merely saying that excessive loss or depreciation allowance has been computed without disclosing reasons which led the assessing authority to hold such belief, in our opinion, does not confer jurisdiction on the Assessing Officer to take action under Sections 147 and 148 of the Act. We are also of the opinion that, howsoever wide the scope of taking action under Section 148 of the Act, it does not confer jurisdiction on change of opinion on the interpretation of a particular provision earlier adopted by the assessing authority. For coming to the conclusion whether there has been excessive loss or depreciation allowance or there has been underassessment or assessment at a lower rate or for applying other provisions of Explanation 2, it must be material and it should have nexus for holding such opinion contrary to what has been expressed earlier. The scope of Section 147 of the Act is not for reviewing its earlier order suo motu irrespective of there being any material to come to a different conclusion apart from just having second thoughts about the inferences drawn earlier.
30. The aforesaid decision was followed subsequently by the Gujarat High Court in the case of Birla VXL India Ltd. v. Assistant Commissioner of Income Tax.
31. In the case of Rakesh Aggarwal v. Assistant Commissioner of Income Tax(1997) 225 ITR 496, the Delhi High Court has held as follows:
The section provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment. The new section not only merges Clauses (a) and (b) of the pre-amended Section 147 but also brings about a significant change in the preliminary requirement of certain mandatory conditions before reassessment proceedings could be initiated under the old section. Under the old Section 147(a), the Assessing Officer could initiate reassessment proceedings if he had reason to believe that income chargeable to tax had escaped assessment by reason of : (a) omission or failure on the part of an assessee to make a return under Section 139 for any assessment year, or (b) to disclose fully and truly all material facts necessary for his assessment for that year. As is evident from the amended section, in contradistinction to the original unamended section, requiring fulfilment of twin conditions spelt out in Clause (a) of Section 147 or in Clause (b) of the said section, as conditions precedent for issuing notice under Section 148 of the Income-tax Act, it is not so in the amended section and the only condition for action now is that the Assessing Officer should have reason to believe that income has escaped assessment which belief can be reached in any manner, and is not qualified by the precondition of full and true disclosure of material facts by an assessee, as contemplated under the old Section 147(a) of the Income-tax Act. An Assessing Officer can now legitimately reopen the assessment in respect of an income which has escaped assessment. Undoubtedly, under the new section, power to reopen assessment is much wider and can be exercised even if an assessee had disclosed fully and truly all material facts.
32. In the case of Stock Exchange v. Assistant Commissioner of Income Tax, the Gujarat High Court has held as follows:
We may note here that in a case where a reasoned order is passed while making an assessment, in subsequent proceedings of issuing reassessment notices it is easier to ascertain whether there was mere change of opinion than in a case where the returns are accepted as they are filed and the Assessing Officer does not express his views explicitly. Thus, if the Assessing Officer had considered as to whether Section 11 exemption could be claimed or whether exemption under Section 10(23A) could be granted, and made a speaking order or expressed his opinion while passing the assessment order, then one could have at this point of time perhaps contended that there was a mere change of opinion. But in the instant case, the returns were accepted as they were on an assumption that the assessees' claim for exemption was correct and now the Assessing Officer has recorded, cogent reasons for issuing notices, because it transpires that exemptions under Section 10(23A) or 10(23C)(iv) were not admissible and as has been recorded in the notice In respect of the assessment years for which exemption under Section 11 is claimed, even the application for registration was not found.
33. In the case of Praful Chunilal Patel v. M.J. Makwana/Assistant Commissioner of Income Tax , the Gujarat High Court has held as follows:
Under Section 147 of the said Act, within four years from the end of the relevant assessment year, the Assessing Officer, where he had reason to believe that any income chargeable to tax has escaped assessment for any assessment year, may assess or reassess such income. However, after four years, the proviso would be attracted and no action can be taken under this section unless such income has escaped assessment by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice under Section 142(1) or Section 148 of the said Act, to disclose fully and truly all material facts for his assessment for that assessment year. Therefore, it is only when the case falls under the proviso that the question of non-disclosure of materials facts would become relevant. In such cases, if the assessee has made full disclosure on record, then even if such income has escaped assessment, no action can be initiated by the Assessing Officer under the section. Where, however, the said period of four years has not expired, the conduct of the assessee regarding disclosure of material facts need not be the basis for initiating the proceedings and they can be commenced if the Assessing Officer has reason to believe that the income has escaped assessment notwithstanding that there was full disclosure of material facts on record. The assessee in such cases cannot defend the initiation of action on the ground that the facts were already placed on record and that the Assessing Officer must have or ought to have considered them. Explanation 1 to Section 147 of the said Act has a bearing on the disclosure aspect and it applies to the proviso to the extent it allows initiation of the proceedings under Section 147 on account of nondisclosure of material facts by the assessee.
Explanation 2 applies. to the entire section and it enumerates deemed cases where income has escaped assessment. Clause (a) thereof covers a case where no return is filed though the income had exceeded the maximum amount which is not chargeable to income-tax. In such cases, in order to put it beyond the pale of doubt or controversy, the provision is made that they will be deemed to be cases of escaped assessment so as to warrant the proceedings even beyond the said period of four years, since in that, event, the case would fall in the enabling part of the proviso. Clause (b). deals with cases where no assessment is made and the Assessing Officer notices that the income is understated or excessive loss, deduction, allowance or relief is claimed in the return. These would be cases where the return is accepted without scrutiny and no formal assessment is made. Clause (c) would cover cases where in the assessment already made, income was under-assessed or assessed too low or excessive relief is given or excessive loss or depreciation allowance or other allowance under the Act has been computed. In the aforesaid deemed cases of escapement of income, the Assessing Officer can initiate the proceedings on finding or discovering such cases and no debate whether they constitute cases of escapement of income, would be permissible.
34. In the case of Pradeep Kumar Har Saran Lal v. Assessing Officer , this Court has considered the question whether the failure of the Assessing Officer in having issued the notice under Section 143(2) of the Act precluded the Assessing Officer from issuing the notice under Section 148 after the proceedings under Section 143(1)(a) have been completed. This Court referred to the following reasons given by the Calcutta High Court in the case of Jorawar Singh Baid v. Commissioner of Income Tax :
Simply because the return of the assessee has been accepted without scrutiny and in good faith the Assessing Officer is not precluded from initiating a proceeding satisfying the conditions therefor where the income has escaped assessment. There is nothing either in Section 143 or in Section 147 that can support such a view. The provisions of a tax statute should be interpreted in a manner leading to the result that everybody pays his due tax.... In our view, a return after its acceptance, whether in a summary manner or after scrutiny, may itself lead to reassessment proceedings provided the conditions for reassessment under Section 147 exist.... It is not the summary acceptance of the return under Section 143(1)(a) that can operate as a bar against reassessment. It is, rather, the further disclosure made by the assessee in the course of proceedings under Section 143(3) whereby the assessee may take out his case from the mischief of Section 147. Therefore, the scope for initiating reassessment proceedings in an assessment made under Section 143(1)(a) is far wider than in an assessment under Section 143(2) read with Section 143(3). In our view, the power that can be exercised under Section 143(2) to correct the assessment made under Section 143(1) does not exclude the power of the Assessing Officer to reopen the assessment under Section 147 if the ingredients of Section 147 are satisfied. It is open to the Assessing Officer to invoke the jurisdiction under Section 147, notwithstanding the fact that there are other remedies open to him under the Act. It cannot, therefore, be accepted that the reassessment under Section 147 is vitiated because the Assessing Officer failed to invoke his power to correct the assessment already completed under Section 143(1) by issuing a notice under Section 143(2) of the Act.
and agreed with it and has held that so long as the ingredients of Section 147 of the Act are fulfilled, the Assessing Officer is free to initiate the reassessment proceedings and failure to take steps under Section 143(2) of the Act will not render the Assessing Officer powerless to initiate the reassessment proceeding.
35. From the aforesaid decisions, the following principles emerge:
(i) the proceeding under Section 147 of the Act can be initiated only when the Assessing Officer has reasons to believe that the income chargeable to tax has escaped assessment;
(ii) the belief must be an opinion based on relevant materials and the reasons for reopening the assessments have to be reduced in writing;
(iii) even after the amendment made under Section 147 by Direct Tax Laws (Amendment) Act, 1987, with effect from 1.4.1989, the proceeding for reassessment cannot be initiated on mere change of opinion, even in cases where the deeming provision of Explanation II applies;
(iv) where assessment has been made under Section 143(3) of the Act, reassessment can be initiated after four years from the end of the assessment year only where any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year and shall also apply in cases which are covered and treated to be deemed escaped assessment under the various clauses of Explanation II to Section 147 of the Act; and
(v) proceeding for reassessment can be initiated even where assessment has been made under Section 143(1)(a) of the Act provided pre-conditions mentioned in Section 147 are fulfilled.
36. Applying the aforesaid principles to the facts of the present case, we find that in respect of the assessment years 1992-93, 1993-94 and 1994-95 the notices under Section 148 of the Act have been issued on 25.10.2001, i.e., much after the expiry of the period of four years from the end of the relevant assessment year. It can be justified only if there has been failure on the part of the petitioner to disclose fully and truly all material facts necessary for that assessment year. It is not in dispute that the petitioner had in its letter dated 7.10.1993 filed during the course of the assessment proceedings for the assessment year 1992-93, had made a claim under Section 80-O of the Act by stating that it is also extending its service to several customers outside India and earning commission from foreign publishers in convertible foreign exchange for such service. The Assessing Authority apart from finding that the petitioner had received commission from foreign enterprises for services rendered outside India, had also found that it had specialised in marketing scientific and technical knowledge and has developed several database with the help of advance computers concerning various research projects, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients and has received commission in convertible foreign exchange in U.S.Dollars and U.K. Pounds. The claim was accepted and the deduction under Section 80-O of the Act was accordingly allowed. In respect of the assessment years 1993-94 and 1994-95, the Assessing Authority did not dwell in the matter in detail but mentioned that the claim is in respect of commission earned for the services rendered outside India as in the past. Thus, it cannot be said that the petitioner had not made full and true disclosure of all material facts in the assessment years 1992-93, 1993-94 and 1994-95. In the reasons recorded by the respondent for forming the belief that the petitioner was not entitled to get deduction, the respondent has not found that the basis on which the deduction has been allowed, viz. specialising in marketing scientific and technical knowledge and developing several database with the help of advance computers concerning various research projects, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients was false. In this view of the matter, the principles laid down by the Bombay High Court in the case of Parikh Petrol Chemical Agencies P. Ltd.(supra) is squarely applicable and, therefore, the notices dated 25.10.2006 issued under Section 148 in respect of the assessment year 1992-93 to 1994-95 appear to have been issued only on the basis of mere change of opinion and are wholly illegal and without jurisdiction.
37. The principles laid down by the Apex Court in the case of Phool Chand Bajrang Lal (supra) would, therefore, not apply in the present case as there is no information on record to show that the claim made by the petitioner was false.
38. So far as the notice dated 4.9.2000 issued under Section 148 of the Act for the assessment year 1997-98 is concerned, it is within four years from the end of the relevant assessment year. In this case, the assessment has not been made under Section 143(3) of the Act and only an intimation under Section 143(1)(a) of the Act has been sent to the petitioner. The claim of deduction under Section 80-O of the Act had only been processed without there being any application of mind. The reasons recorded by the respondent, in so far as the assessment year 1997-98 is concerned, cannot be said to be based on mere change of opinion. The principles laid down by this Court in the case of Pradeep Kumar Har Saran Lal (supra) is squarely applicable in the present case. They are based on relevant consideration and, therefore, it cannot be said that the notice 4.9.2000 is without jurisdiction.
39. In view of the foregoing discussions, the writ petition succeeds and is allowed in part. The notices dated 25.10.2000 issued under Section 148 of the Act and consequential proceedings taken in pursuance thereof respect of the assessment years 1992-93 to 1994-95 are hereby quashed. However, the notice dated 4.9.2000 issued for the assessment year 1997-98 is upheld. However, in the facts and circumstances of the case, the parties are left to bear their own costs.