Gujarat H.C : When no opinion had been expressed in assessment order and no details or explanation in relation to claim of depreciation had been called for by Assessing Officer, reopening of assessment was valid

High Court Of Gujarat

Aquagel Chemicals (P.) Ltd. vs. ACIT

Assessment Year : 2006-07

Section : 32, 147

Ms. Harsha Devani And H.B. Antani, JJ.

Special Civil Application No. 10889 Of 2010

January 31, 2011

JUDGMENT

Ms. Harsha Devani, J. – The petitioner, a private limited company, has, in this petition under article 226 of the Constitution of India, challenged the notice dated June 28, 2010, issued by the respondent under section 148 of the Income-tax Act, 1961 (“the Act”), seeking to reopen the petitioner’s assessment for the assessment year 2006-07.

2. The facts of the case, as stated in the petition, are that the petitioner filed its original return of income for the year under consideration on November 1, 2006, declaring a total income of Rs. 6,60,50,459 together with the computation of income, tax audit report in Form No. 3CB and Form No. 3CD and notes attached to the return of income, copy of the annual accounts, copy of grouping of balance-sheet and profit and loss account for the year ended on March 31, 2006. The return was selected for scrutiny assessment and during the course of assessment proceedings, on more than one occasion in general and, vide a show-cause notice dated October 3, 2008, in particular, the respondent called for various explanations/details from the petitioner in respect of several issues including details of additions made to fixed assets. The petitioner’s authorised representative clarified all issues and, vide letter dated October 24, 2009, submitted a detailed explanation regarding capital expenditure incurred on coal fire boiler with asset-wise breakup at pages 8 to 10 of annexure 14. The Assessing Officer, after scrutinising various details furnished during the course of assessment, disallowed an amount of Rs. 1,63,847 under section 14A of the Act by passing regular assessment order under section 143(3) of the Act on December 15, 2008. Subsequently, the impugned notice dated June 28, 2010, came to be issued reopening the assessment for the assessment year 2006-07. In response to the notice under section 148 of the Act, the petitioner, vide letter dated June 28, 2010, submitted that the original return of income filed on November 1, 2006, may be treated as filed under protest in compliance with the said notice and also requested the respondent to provide a copy of reasons recorded prior to the issue of reassessment notice under section 148 of the Act. Upon receipt of the reasons recorded, the petitioner raised various objections, vide letter dated July 27, 2010, on the merits and requested the respondent to drop the reassessment proceedings. Vide letter dated August 4, 2010, the respondent disposed of the objections holding that the objections raised by the petitioner are not acceptable and rejected the same. Being aggrieved, the petitioner has approached this court by way of the present petition.

3. Assailing the initiation of proceedings under section 147 of the Act by issuance of the impugned notice under section 148 of the Act Mr. S. N. Soparkar, learned senior advocate appearing on behalf of the petitioner, submitted that the very initiation of proceedings under section 147 of the Act is without jurisdiction. It was submitted that notice can be issued under section 148 of the Act “if and only if” an Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment. The reason to believe must be that of an honest and reasonable person based upon reasonable ground but not a mere change of opinion, suspicion, gossip or rumour. The belief must lead to a conclusion that income has escaped assessment. It was submitted that, in the present case, there is simply a change of opinion, which is not sufficient ground to reopen the assessment proceedings. It was submitted that issues giving rise to the reopening have already been gone into at the time of original assessment proceedings. The then Assessing Officer, while framing the original assessment, had examined the issue in respect of which the assessment is sought to be reopened and had consciously taken a particular decision and now, with a change of the incumbent, it is not permissible to reopen the assessment on a mere change of opinion based on the same set of facts.

3.1 Referring to the reasons recorded for reopening the assessment it was submitted that one of the grounds for reopening the assessment is that the petitioner has claimed depreciation at the rate of 80 per cent. on the coal fired boiler building. The attention of the court was drawn to the communication dated October 24, 2008, addressed by the petitioner to the Assessing Officer and more particularly to item No. 16 thereof which refers to details of investment in fixed assets as well as to the statement of capital expenditure incurred on fixed assets enclosed therewith. Referring to the items under coal fired boiler, it was submitted that the coal fired boiler building was specifically referred to therein and that the details of capital expenditure of Rs. 15,99,46,392 including the coal fired boiler amounting to Rs. 5,15,27,926 were provided to the Assessing Officer during the course of assessment proceedings. According to the learned counsel for functioning of the coal fire boiler, the petitioner had constructed a special type of structure without which it was impossible for the coal fire boiler to function. The particular type of foundation and structure is an essential and integral part of the coal fire boiler which could not be separated from the special type of foundation and building and boiler could not be worked without such special construction. It was pointed out that the petitioner in support of the above contention which was raised before the Assessing Officer had provided technical engineer’s certificate along with photographs to substantiate its claim that the entire coal fire boiler was installed on special beams and structure and not in building as is ordinarily understood. Reliance was placed upon the decision of the Supreme Court in the case of CIT v. Karnataka Power Corpn. [2001] 247 ITR 268/[2000] 112 Taxman 629 wherein it has been held that where it is found as a fact that a building so planned and constructed as to serve an assessee’s special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance, to submit that even otherwise the issue stands concluded in favour of the petitioner by the said decision. It was submitted that all the relevant facts were before the Assessing Officer at the time of original assessment and as such the reassessment proceedings initiated by the respondent are based on a mere change of opinion. It was contended that the respondent had passed the assessment order after considering and scrutinising all the details and after proper application of mind and as such, in the light of the decision of the Supreme Court in the case of CIT v. Kelvinder of India Ltd. [2010] 320 ITR 561/187 Taxman 312, the respondent has no power to review his own order. It was further submitted that the petitioner has no control over the way an assessment order is drafted. If the respondent, after applying his mind to the material available before him, did not express any view on a specific issue, the petitioner should not be made to suffer the consequences of that lapse. It was submitted that on the material which was placed before the Assessing Officer, the Assessing Officer had taken a conscious view and that there was no obligation on the part of the Assessing Officer while passing the assessment order to deal with an issue in favour of the assessee. It was contended that in law, if it is not the obligation of the Assessing Officer to give finding on the issue accepted by him, then not giving any finding on an issue is not incorrect. It was further submitted that if the Assessing Officer has raised an issue in respect of which the assessee has given an answer, the presumption is that the Assessing Officer has applied his mind. In the circumstances, once he has applied his mind to the issue, on the same set of facts, he cannot have a re-look into the matter as it would amount to review. It was further submitted that the words “reason to believe” does not confer any unfettered power on the respondent to initiate reassessment proceedings which were originally completed under section 143(3) of the Act and that the respondent was trying to exercise power of review without there being any tangible material on record.

3.2 Inviting attention to the second ground for reopening assessment, viz., as per appeal effect order dated September 25, 2008, for the assessment year 2005-06, the unabsorbed depreciation allowed to be carried forward was Rs. 2,55,70,854 which resulted in excess set off of absorbed depreciation of Rs. 24,21,082 thereby leading to underassessment of the income and short levy of tax ; it was submitted that the same can be a subject-matter of rectification and not a ground for reopening of assessment. It was submitted that reopening of assessment has serious consequences and that in no case revenue reopens assessment to give effect to carry forward unabsorbed depreciation and, hence, the second ground for reopening of assessment is also not a valid ground. Reliance was placed upon the decision of the Bombay High Court in the case of Hindustan Unilever Ltd. v. Dy. CIT [2010] 325 ITR 102/191 Taxman 119 for the proposition that reopening of an assessment has serious ramifications as once an assessment is validly reopened in exercise of powers conferred by section 147, the Assessing Officer is empowered to reassess the income in respect of any other issue which comes to his notice in the course of the proceedings, though such reasons have not been set out in the notice. Where the power to rectify an order of assessment under section 154(1) of the Act is adequate to meet a mistake or error in the order of assessment, the Assessing Officer must take recourse to that power as opposed to the wider power to reopen the assessment. It was further submitted that the respondent was not correct in adjusting the correct amount of past unabsorbed depreciation loss. The respondent should have considered the rectification application of the petitioner and should have increased opening stock of the assessment year 2005-06 by an amount of Rs. 24,10,503 and thereby depreciation loss of Rs. 2,79,81,357 is allowed to be set off against income of the assessment year 2006-07. In conclusion it was submitted that the respondent has no valid reason for initiating the reassessment proceedings and as such, the impugned notice is required to be quashed and set aside.

4. The petition was opposed by Mr. M. R. Bhatt, learned senior advocate appearing on behalf of the respondent. Inviting attention to the communication dated October 24, 2008, of the petitioner in response to the notice issued under section 142(1) of the Act, it was pointed out that item No. 16 therein on which reliance has been placed by the petitioner is not related to calculation of depreciation and merely refers to details of investment in fixed assets. It was submitted that the Assessing Officer has not raised any query as regards calculation of depreciation, hence there is no question of application of mind on this aspect by the Assessing Officer. It was submitted that the present case relates to the assessment year 2006-07 which is after 2004, that is, after amendment to section 43 of the Act. Referring to the definition of plant under sub-section (3) of section 43 which defines “plant”, it was pointed out that the same specifically excludes buildings or furniture and fittings. It was submitted that, in the circumstances, the petitioner was not entitled to depreciation on the coal fire boiler building at the rate applicable to plants and as such, the Assessing Officer had reason to believe that income has escaped assessment. As regards the decision of the Supreme Court in the case of Karnataka Power Corpn. (supra) on which reliance has been placed on behalf of the petitioner, it was submitted that it was on an analysis of the facts as to whether the building fits into the definition of plant that it was held that the building in question could be treated as a plant for the purpose of investment allowance. It was submitted that, in the facts of the present case, there is no application of mind on the part of the Assessing Officer as to whether, in the facts of the present case, the coal fire boiler building fits into the definition of plant. It was further submitted that the said decision was rendered prior to 2004 and that the post 2004 sub-section (3) of section 43 has been amended whereby buildings or furniture and fittings have been specifically excluded from the definition of plant. It was submitted that, in the circumstances, the said decision would have no relevance to the facts of the present case. Referring to the assessment order, it was pointed out that the only ground which has been discussed in the assessment order is as regards the disallowance under section 14A of the Act and that there is no reference to the issue involved in the present case. It was submitted that, in the circumstances, the Assessing Officer not having formed any opinion, there is no question of any change of opinion.

5. As regards the second issue, it was submitted that there is clearly an aspect of escapement which has not been denied by the petitioner. It is also not the case of the petitioner that the said ground is based on a mere change of opinion. It was contended that merely because there is power under section 154 of the Act, exercise of powers under section 147 of the Act is not ruled out. In support of his submission, the learned counsel placed reliance on the decision of this High Court in the case of Inductotherm (India) (P.) Ltd. v. James Kurian, Asstt. CIT [2007] 294 ITR 341/[2008] 169 Taxman 240 for the proposition that there is no bar under the provisions of the Act for parallel proceedings in consequence of notice under section 148 and under section 263 of the Act.

6. In rejoinder, on behalf of the petitioner, Mr. Soparkar submitted that the contentions as regards the amended definition of “plant” under section 43(3) of the Act have for the first time been mentioned in the order disposing of the objections and thereafter find place in the affidavit-in-reply filed in response to the petition and in the submissions advanced by the learned counsel for the respondent. It was submitted that no such ground has been stated in the reasons recorded. It was submitted that for the purpose of examining the validity of the proceedings under section 147 of the Act, it is the reasons and the reasons alone which can be looked into for the purpose of ascertaining as to whether there was any material on the basis of which the Assessing Officer could have formed the belief that income has escaped assessment. It was urged that while examining the validity of the proceedings under section 147 of the Act, it is not permissible for the court to consider any additional material brought in to supplement the reasons recorded by way of the order rejecting the objections, the affidavit-in-reply filed by the respondent or by way of submissions of the counsel for the respondent. Reliance was placed upon the decision of this court in the case of Gujarat Flurochemicals Ltd. v. Dy. CIT [2009] 319 ITR 282 (Guj.) for the proposition that it is the statutory duty of the Assessing Officer to record reasons for issuing notice under section 148 of the Act and reasons recorded cannot further be supplemented or explained by a subsequent order so as to give an entirely different complexion to the case.

7. Since the reasons recorded for reopening assessment as required under section 148(2) of the Act form the foundation for exercise of powers under section 147 of the Act, before adverting to the facts of the case, it may be pertinent to refer to the reasons recorded by the Assessing Officer for the purpose of reopening the assessment for the assessment year 2006-07. As per the reasons recorded the Assessing Officer upon a perusal of the submissions made by the assessee during the course of assessment proceedings for the assessment year 2006-07, found that the assessee had capitalised Rs. 5,15,27,926 on account of coal fire boiler and claimed depreciation of Rs. 4,12,22,341 on it at the rate of 80 per cent. applicable to energy saving devices. The assessee had given a detailed statement of capital expenditure incurred on the coal fire boiler in the relevant financial year (with asset-wise break-up) on page 8 (of 10) to 10 (of 10) of annexure 10 of the submissions during the course of assessment proceedings for the assessment year 2006-07 part of which is reproduced in the said order. According to the Assessing Officer, from the table it is evident that the assessee had clubbed the expenditure on building (equal to Rs. 1,71,89,066) under the head of coal fire boiler and claimed depreciation of 80 per cent. on the building as well (which is meant only for the boiler). As building falls under a separate category of assets, depreciation was eligible at 10 per cent. The rate of 80 per cent. was applicable only for the plant and machinery. Thus, the assessee has claimed excess depreciation of Rs. 1,20,32,347 as shown below :

Rs.

Depreciation claimed at of 80 per cent. on Rs. 1,71,89,066                         13,75,153

Depreciation claimed at 10 per cent. on Rs. 1,71,89,066                             17,18,906

Excess depreciation claimed                                                                    1,20,32,347

8. The excess claim of depreciation resulted in underassessment of income at Rs. 1,20,32,347 and short levy of tax for the assessment year 2006-07.

9. Further, during the year, the assessee had adjusted unabsorbed depreciation of Rs. 2,79,91,937 pertaining to the assessment year 2003-04 against the profits and gains of the business for the assessment year 2006-07. However, as per the appeal effect order dated September 25, 2008 (giving effect to the order No. CIT(A)-XX/162/07-08, dated July 25, 2008) for the assessment year 2005-06, the unabsorbed depreciation allowed to be carried forward was Rs. 2,55,70,854. This resulted in excess set-off of unabsorbed depreciation of Rs. 24,21,082 and thereby led to underassessment of the income and short levy of tax.

10. Thus, the reasons recorded reflect two grounds for reopening the assessment. Firstly, that income has escaped assessment in view of the fact that whereas buildings fall under a separate category of assets in respect of which the depreciation could be availed of at the rate of 10 per cent., the petitioner had claimed excess depreciation in respect of the coal fire boiler building at the rate of 80 per cent. which was applicable only to plant and machinery. The other ground is that the petitioner had adjusted unabsorbed depreciation of Rs. 2,79,91,937 pertaining to the assessment year 2003-04 against profits and gains of the business for the assessment year 2006-07. Pursuant to the order dated July 25, 2008, of the Commissioner of Income-tax (Appeals) appeal effect order dated September 25, 2008, came to be passed in relation to the assessment year 2005-06 whereby the unabsorbed depreciation allowed to be carried forward was Rs. 2,55,70,854 which resulted into excess set-off of unabsorbed depreciation of Rs. 24,21,082 leading to under-assessment of income and short levy of tax.

11. In so far as the first ground is concerned, the reopening is assailed mainly on the ground that all relevant materials were placed before the Assessing Officer and that the fact that the claim has been allowed indicates that the Assessing Officer has applied his mind to the same. It is the case of the petitioner that merely because there is no discussion in respect of the claim of depreciation in respect of coal fire boiler building in the assessment order, it does not mean that the Assessing Officer has not formed an opinion in respect thereto. In this regard it may be pertinent to refer to certain facts.

12. A perusal of the assessment order framed under section 143(3) of the Act indicates that the Assessing Officer had issued a detailed questionnaire on October 3, 2008, which came to be served on the petitioner on October 6, 2008. However, the same has not been produced on the record by the petitioner. It appears that in response to the said questionnaire the petitioner filed its reply, vide communication dated October 24, 2008 (annexure B to the petition), providing details in respect of about 25 items. Item No. 16 thereof pertains to “Details of investment in fixed assets”. Below the said heading, it is stated that the statement of investment in fixed assets is enclosed in annexure 14 containing the details of description of fixed assets, date of purchase, put to use, etc. Along with the said communication, a statement of capital expenditure incurred for fixed assets has been annexed. In the said statement, fixed assets are classified in the following groups, (i) building, (ii) plant and machinery, (iii) computers, (iv) office equipment, (v) furniture and fixture, and (vi) coal fire boiler. Each group is then subdivided under the heading “location”. In the coal fire boiler group there are two sub-headings under the column “location”: (i) boiler house, and (ii) coal fire boiler. Under the sub-heading coal fire boiler, approximately 73 items are enumerated, the last item whereof reads “building-coal fired boiler”.

13. On a perusal of the aforesaid reply filed by the petitioner it appears that in the detailed questionnaire called for, vide notice issued under section 142(1) of the Act, the Assessing Officer had called for details of investment in fixed assets and not calculation as regards depreciation claimed by the petitioner. The reply filed by the petitioner also contains details of expenditure incurred on fixed assets and none of the 25 items listed thereunder pertain to the depreciation claimed in respect of the fixed assets. Thus, there is nothing on record to indicate that the Assessing Officer had called for details as regards depreciation claimed by the petitioner in respect of the fixed assets in general and the coal fire boiler building in particular or having raised any query in that regard. Thus, from the material on record it cannot be said that the Assessing Officer had specifically called for information in relation to the issue in question. It is an undisputed position that there is no reference to the claim of depreciation in the assessment order. The only issue discussed therein pertains to disallowance under section 14A of the Act. In the circumstances, in so far as the assessment order is concerned, it does not reflect any application of mind by the Assessing Officer to the claim of depreciation on coal fire boiler building while framing the assessment. However, according to the petitioner, in the light of the questionnaire issued by the Assessing Officer and the reply filed by it along with the statement of fixed assets all the relevant facts were before the Assessing Officer, which leads to the conclusion that he has applied his mind to the same. In this regard, it may be pertinent to refer to certain decisions of the apex court.

13.1 In Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), the court held that the duty of disclosing all the primary facts relevant to the decision in question before the assessing authority lies on the assessee. The court held that the omission of the assessee to bring to the assessing authority’s attention those particular items in the account books, or to particular portions of the documents which are relevant, will amount to “omission to disclose fully and truly all material facts necessary for his assessment”. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The court further held that so far as the primary facts are concerned, it is the assessee’s duty to disclose all of them-including particular entries in account books, particular portions of documents, and documents and other evidence which could have been discovered by the assessing authority, from the documents and other evidence disclosed.

13.2 In the case of Kantamani Venkata Narayana & Sons v. First Addl. ITO [1967] 63 ITR 638 (SC), the Supreme Court in the context of section 34 of the 1922 Act held that from mere production of the books of account it cannot be inferred that there had been full disclosure of the material facts necessary for the purpose of assessment. It is clearly implicit in the terms of section 23 and section 34 of the Income-tax Act that the assessee is under a duty to disclose fully and truly material facts necessary for the assessment of the year, and that the duty is not discharged merely by the production of the books of account or other evidence. It is the duty of the assessee to bring to the notice of the Income-tax Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that from the books produced, the Income-tax Officer, if he had been circumspect, could have found out the truth, the Income-tax Officer may not on that account be precluded from exercising the power to assess income which had escaped assessment.

13.3 In the case of Malegaon Electricity Co. (P.) Ltd. v. CIT [1970] 78 ITR 466 the Supreme Court held thus (page 471) :

“In our judgment, the Tribunal erred in declining to decide the question whether any portion of the sale price came within the scope of section 10(2)(vii). That question should have been examined at the very outset for the purpose of considering whether the assessee had placed before the Income-tax Officer truly and fully all material facts necessary for the purpose of its assessment. If it is found that any portion of that sale price are profits then, in our opinion, the High Court was right in holding that the assessee had failed to place before the Income-tax Officer during the original assessment truly and fully all material facts necessary for the purpose of assessment. Admittedly, the price realised at the sale in excess of the written down value of the assets sold, had not been included as profits in the return submitted by the assessee. It had also not shown the same in section “D” of Part I of the return. It may also be noted that the assessee had not shown either in its return or in any of the documents submitted to the Income-tax Officer, the written down value of the assets sold. Hence, not only the Income-tax Officer was not told that the assessee had earned any profits under section 10(2)(vii) nor even the essential fact, viz., the written down value of the assets sold was supplied to him so as to enable him to find out the price in excess of the written down value realised by the assessee. It is true that if the Income-tax Officer had made some investigation, particularly if he had looked into the previous assessment records, he would have been able to find out what the written down value of the assets sold was and consequently he would have been able to find out the price in excess of their written down value realised by the assessee. It can be said that the Income-tax Officer if he had been diligent could have got all the necessary information from his records. But that is not the same thing as saying that the assessee had placed before the Income-tax Officer truly and fully all material facts necessary for the purpose of assessment. The law casts a duty on the assessee to ‘disclose fully and truly all material facts necessary for his assessment for that year’. Further, the Explanation to section 34(1) says :

‘Production before the Income-tax Officer of account books or other evidence from which material facts could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section.’

If the assessee had disclosed to the Income-tax Officer, the surplus price realised by it over and above the written down value of the assets sold in the alternative if it had informed the Income-tax Officer the price realised as well as the written down value of the assets sold, then it could have been said that the assessee had done its duty and it was for the Income-tax Officer to draw any inference on the facts placed before him. But the failure of the assessee to disclose to the Income-tax Officer the fact that the price realised by it by sale of its assets was more than the written down value of those assets or at least the written down value of those assets amounts, in our opinion, to a failure on its part to disclose fully and truly the material facts necessary for its assessment. From the cryptic statement of the Income-tax Officer in the original assessment order that ‘no adjustment is necessary’ the Tribunal was not justified in drawing the inference that the Income-tax Officer had considered all the relevant facts.”

14. In the present case, since the reopening is within a period of four years from the end of the relevant assessment year, the requirement of the proviso to section 147 of the Act, viz., failure on the part of the assessee to disclose fully and truly all material facts for its assessment is not required to be fulfilled. However, while dealing with the contention that all material facts were before the Assessing Officer when he framed the original assessment, one can take a cue from the said decisions. From the aforesaid decisions, it is apparent that the omission of the assessee to bring to the assessing authority’s attention those particular items in the account books, or to particular portions of the documents which are relevant, will amount to “omission to disclose fully and truly all material facts necessary for his assessment. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. In Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT [1986] 159 ITR 624/25 Taxman 356 (SC) on which reliance has been placed by the learned counsel for the respondent, the Supreme Court held that mere production of evidence before the Income-tax Officer is not enough. There may be a failure to make a true and full disclosure, if some material for the assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then, it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts-the assessing authority might not. Testing the facts of the present case in the light of the aforesaid principles, as noted hereinabove, the Assessing Officer in the assessment order has not discussed the issue as regards the claim of depreciation in respect of coal fire boiler building. The Assessing Officer, while recording reasons has formed a belief that the coal fire boiler building being in the nature of building, the petitioner was entitled to depreciation at the rate of 10 per cent. and not at the rate of 80 per cent. applicable to energy saving devices. A perusal of the material on record does not indicate that the petitioner had drawn the attention of the Assessing Officer to the fact that the petitioner had claimed that the coal fired boiler building was a plant and not a building. According to the learned counsel for the petitioner, it was not necessary for the petitioner to point out the aforesaid fact to the Assessing Officer and that the petitioner was entitled to claim depreciation on the building as a plant since, the building was a special structure specifically designed in such a manner that it held the entire coal fire boiler. That the said special structure cannot be excluded from the definition of plant as provided under section 43(3) of the Act. None the less, the coal fire boiler is a building, and even if the petitioner was claiming depreciation thereon on the basis that the same would fall within the category of plant and not a building, it was for the petitioner to draw the attention of the Assessing Officer to the said fact. Merely because in the statement of fixed assets, the petitioner had included coal fire boiler building in the items enumerated under the heading coal fire boiler, would not amount to disclosure of all primary facts by the assessee. In the absence of disclosure of all primary facts, it cannot be said that all relevant material and facts were before the Assessing Officer.

15. As regards the contention that the reopening is based on a mere change of opinion, as noticed earlier, the claim of depreciation on coal fire boiler building does not find a mention in the assessment order nor is there any discussion in respect of the said claim. Thus, the Assessing Officer, while framing the assessment under section 143(3) of the Act does not appear to have formed any opinion in this regard. Merely by dint of the fact that in the statement of capital expenditure incurred for fixed assets under the heading coal fire boiler, the petitioner has also included building-coal fired boiler, does not mean that the Assessing Officer has applied his mind to the same. The coal fire boiler building being in the nature of building, it was for the petitioner to bring to the notice of the Assessing Officer that it was claiming depreciation in respect thereof as under the heading “plant and machinery” and not as building. The petitioner having failed to do so cannot now contend that the assessment is sought to be reopened on a mere change of opinion. When no opinion has been expressed in the assessment order and no details or explanation in relation to the claim of depreciation in respect of coal fire building has been called for by the Assessing Officer, it is not possible to accept the contention of the petitioner that the Assessing Officer has applied his mind to the said aspect.

16. As regards the contention, that in the light of the decision of the Supreme Court in the case of Karnataka Power Corpn. (supra) the issue stands concluded in favour of the petitioner is concerned, as pointed out by the learned counsel for the respondent subsequent to the said decision sub-section (3) of section 43 of the Act which defines “plant” has been amended. Thus, the issue is a debatable one. Besides, it is by now well settled that the Assessing Officer would be acting without jurisdiction if the reason for his belief that the condition precedent for exercise of powers under section 147 of the Act does not exist or is not material or relevant to the belief required under the section. It is open to the assessee to challenge the existence of the belief but not the sufficiency of the reasons for the belief. Thus, the court while considering a challenge to the reopening of assessment can always examine the existence of the belief but the sufficiency of the reasons for the belief cannot be investigated by the court. On the facts emerging from the record, the court is of the view that there is sufficient material on record for the Assessing Officer to form a belief as regards escapement of income from assessment in the year under consideration in relation to the claim of depreciation in respect of building of coal fire boiler.

17. In so far as the second issue on which reopening is sought to be reopened, according to the learned counsel for the petitioner, the same can be a matter for rectification and not for reopening of the assessment. However, in the light of the fact that on the first issue, the court has upheld the reopening of assessment, it is not necessary to go into the merits of the second issue. Besides, it is well settled legal position that if the reopening is sustainable on one issue, even if on the other issue the exercise of power under section 147 of the Act is not justified, it would not make render the assumption of jurisdiction under section 147 of the Act invalid.

18. In the light of the aforesaid discussion, this court is of the view that in the light of the reasons recorded by him, there was sufficient material for the Assessing Officer to form the requisite belief that income has escaped assessment for the assessment year under consideration. The assumption of jurisdiction under section 147 by issuance of notice under section 148 of the Act is valid and legal and as such no case is made out for intervention by this court. The petition, therefore, fails and is accordingly dismissed. Notice is discharged.

[Citation : 353 ITR 131]

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