M.L. Pendse, J.
1. By this petition filed under Article 226 of the Constitution of India, the petitioners are challenging the legality and jurisdiction of the ITO to issue notice under Section 148 of the I.T. Act, 196-1.
2. The facts giving rise to this petition briefly are as follows :
3. The petitioner-company purchased on January 17, 1953, an open plot with some buildings constructed thereon. The buildings standing on the plot were used for running a factory of cotton textiles. On purchase, the petitioners made alterations in the standing structures to make it fit for being used as a factory for the production of pharmaceutical products. In March, 1953, the petitioners let out a portion of the land along with the structures thereon in favour of M/s. Geoffrey Manners and Company for a period of five years at the agreed rent of Rs. 8,600 per month. The petitioners were assessed for the first time in the assessment year 1954-55, and the petitioners in their return showed the income from rent received from M/s. Geoffrey Manners and Company as an income from business. The ITO completed the assessment holding that the rent received by the petitioners was from 'Other sources' as contemplated by Section 56 of the I.T. Act, 1961.
4. Between the years 1959--1961 the petitioners made further constructions on the plot of land, and on June 16, 1961, a fresh lease in respect of the earlier construction and the new construction was executed in favour of M/s. Geoffrey Manners and Company. The lease was to remain in existence up to October 30, 1970, and the agreed rent was Rs. 26,000 permonth. In the year 1967-68, the petitioners added a new wing to the existing structures, and the licence was executed in respect of this additional new wing in favour of the lessee, M/s. Geoffrey Manners and Company. The licence was to remain in existence till October 31, 1970, and the agreed compensation was Rs. 24,855 per month. On the expiry of the lease period and the licence period the petitioners executed a fresh licence for the entire construction on August 12, 1971, and the agreed compensation was Rs. 84,585 per month. Between the years 1971 and 1973, the petitioners constructed GEL unit on the plot, and that unit was also handed over to M/s. Geoffrey Manners and Company under an agreement of leave and licence dated November 1, 1972. The total amount of compensation determined was Rs. 1,01,253 per month.
5. The petitioners filed their returns before the ITO from time to time, and the assessments for the assessment years 1973-74 to 1976-77 were completed by September 8, 1976. In respect of these assessment years, the income received by the petitioner-company towards the rent or the compensation was treated as an income from 'Other sources' by the ITO. The ITO thereafter on March 18, 1978, served a notice under Section 148 of the I.T. Act, 1961, on the petitioner-company and proposed to reopen the assessment for the years 1973-74 to 1976-77. The notice, inter alia, mentioned that the IAC had reason to believe that the income chargeable to tax for the relevant years had escaped assessment within the meaning of Section 147 of the I.T. Act. The petitioners have approached this court to challenge the legality of this notice.
6. Shri Dastur, the learned counsel appearing in support of the petition, submits that the entire relevant material was made available to the ITO for the relevant years and the ITO, having completed the assessment after perusing the material, cannot reopen it under Section 148 of the I.T. Act, 1961. The submission of the learned counsel is correct. It is now well settled that a mere change of opinion was not sufficient to warrant the exercise of jurisdiction under Section 148 of the said Act. It is not in dispute that the petitioners had disclosed all the relevant material in respect of the amount of rent and the compensation received from M/s. Geoffrey Manners and Company for the relevant years. The correspondence which passed between the petitioners and the ITO suggests that the ITO was under an impression that the assessment of the petitioners in respect of the rent or compensation received as income from 'Other sources' was not correct, because what was let out were only buildings and not other paraphernalia which went with it. Shri Dastur is right in his submission that this is nothing short of a change of opinion, and that does not entitle the ITO to reopen the assessment. The respondents have not filed any return in answer to the petition, but Shri Pradhan, for the department, veryfairly stated that it seems that the ITO has proceeded to exercise the jurisdiction under Section 148 of the said Act ^because of an audit objection raised in respect of the petitioners' assessment. It is now well settled by the decision of the Supreme Court in Indian and Eastern Newspaper Society v. CIT : 119ITR996(SC) , that it is not open to exercise jurisdiction under Section 148 because of an audit objection. The ITO must conclude the assessment on the material produced before him, and he cannot fall back upon some objection to reopen the assessment. A somewhat identical question came for consideration before a Division Bench of this court in CIT v. Killick Industries Ltd. : 126ITR147(Bom) , and the Division Bench took the view that the ground that the income had not been assessed under the correct heading was a case of mere change of opinion, and that did not entitle the ITO to initiate proceedings for reopening the assessment. In view of the decision of the Supreme Court and of this court, the exercise of the jurisdiction by the Assistant Commissioner of Income-tax was totally irregular and the impugned notice dated March 18, 1978, is required to be struck down.
7. Accordingly, the petition succeeds and the rule is made absolute in terms of prayer (a) of the petition. In the circumstances of the case, there will be no order as to costs.