1. This order shall also dispose of Misc. Petition No. 308 of 1979 (Kamalchand v. Income-tax Officer, Dhar) and Misc. Petition No. 310 of 1979 (Kamalchand v. Income-tax Officer, Dhar).
2. These are petitions under acts. 226 and 227 of the Constitution of India. The facts giving rise to these petitions briefly stated are as follows: The petitioner is a registered partnership firm and has been assessed to income-tax as such by respondent No. 1. The assessment years involved in these petitions are 1975-76, 1976-77 and 1977-78. The petitioner's assessment was made by the predecessor-in-office of respondent No. 1 who allowed deductions under Sections 80HH and 80J of the I.T. Act, 1961 (hereinafter referred to as 'the Act'). The petitioner received notices dated July 17, 1978, under Section 148 of the Act for the aforesaid three years for reassessment under Section 147(b) of the Act. A copy of the notice is filed by the petitioner as annex. C to the petitions. The petitioner filed returns under protest. Thereafter, the ITO served on the petitioner a notice dated September 28, 1979, whereby the petitioner was asked to produce documentary evidence on the following points:
'(1) For the assessment year 1975-76, you are required to prove that the deduction under Section 80J and 80HH was available to you and you satisfied the requirements of law in this behalf.
(2) For the assessment years 1976-77 and 1977-78, you are required to prove whether the deductions under Sections 80HH and 80J and initial depreciation under Section 32(1)(vi) of the I.T. Act, 1961, was available to you and you fulfil all the requirements of law in this behalf.'
3. A copy of this notice is filed by the petitioner as annex. E. According to the petitioner on October 10, 1979, Kamalchand, the partner of the firm, attended the office of respondent No. 1 and asked respondent No. 1 for the reasons for the reopening of the assessment. Respondent No. 1 asked the petitioner to copy out the reasons recorded by him on July 17, 1978. The petitioner's partner, Kamalchand, along with his counsel, copied down the reasons which are reproduced by the petitioner as annex. F to the petitions. These facts are not in dispute. The petitioner has filed these petitions challenging the notice under Section 148 of the Act on the ground that respondent No. 1 had no jurisdiction to reopen the assessment under Section 147(b) of the Act. As all the petitions involved a common question of law they were heard together and are being disposed of by this common order.
4. Having heard learned counsel for the parties we have come to the conclusion that these petitions deserve to be allowed. The reasons given by respondent No. 1 for the reopening of the assessment for the year 1975-76 are as follows:
'In this case the original assessment order was passed under Section 143(3) dated March 17, 1976, at the total income of Rs. 24,910. While passing the assessment order my predecessor allowed deduction under Section 80HH at Rs. 9,755 and deduction under Section 80J at Rs. 7,130. The scrutiny of records by me reveals that the assessee-firm has taken over the business of Atul Ginning Factory which has been considered as an industrial undertaking within the meaning of Sections 80HH and 80J, by the predecessor at the time of assessment from the HUF, M/s. Kamalchand Nanalal, Dhar, during the year under consideration. Therefore, the industrial undertaking does not fulfil the condition as laid down in Sub-section (2) of Section 80HH and Sub-section (4) of Section 80J. Under these circumstances the assessee-firm was not entitled to deduction under Sections 80HH and 80J. Apart from it the assessee-firm did not file the audit report as required under Sub-section (5) of Section 80HH in the prescribed form along with the return. All these documents do not include the audit report as mentioned above. At the time of assessment my predecessor did not take this fact into consideration before allowing the deduction under Sections 80HH and 80J and, therefore, he arrived at a wrong conclusion and allowed deduction under Section 80HH at Rs. 9,755 and Section 80J at Rs. 7,130. Had my predecessor considered the provision of Sections 80HH and 80J in their entirety, he would have not allowed the aforesaid deduction. Under these circumstances I have reason to believe that due to inadvertence or error in the application of the correct provisions of Sections 80HH and 80J committed by my predecessor, at the time of the original assessment, the income to the extent of Rs. 16,885 has escaped assessment for the year 1975-76 and, therefore, the assessment is reopened under Section 147(b) of the I.T. Act, 1961.'
5. Similar reasons were recorded by the respondent for reopening the assessment for the years 1976-77 and 1977-78. From the reasons given by respondent No. 1 to reopen the assessments it is clear that all the materials were on record on the basis of which the predecessor-in-office of respondent No. 1 originally allowed deductions under Sections 80HH and 80J of the Act. No new information appears to have come into the possession of respondent No. 1 which had led him to believe that income chargeable to tax had escaped assessment for the assessment years in question and it was merely a change of opinion which prompted respondent No. 1 to issue the notice for reassessment to the petitioner.
6. In Indian and Eastern Newspaper Society v. CIT : 119ITR996(SC) the Supreme Court has held as follows (p. 1004):
'Now, in the case before us, the ITO had, when he made the original assessment, considered the provisions of Sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The revenue contends that it is open to him to do so, and on that basis, to reopen the assessment under Section 147(b). Reliance is placed on Kalyanji Mavji & Co. v. CIT : 102ITR287(SC) , where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the 'oversight, inadvertence or mistake' of the ITO must fall within Section 34(1)(b) of the Indian I.T. Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT : 35ITR1(SC) , CIT v. A. Raman and Co. : 67ITR11(SC) and Bankipur Club Ltd. v. CIT : 82ITR831(SC) and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji & Co. v. CIT : 102ITR287(SC) suggesting the contrary do not, we say with respect, lay down the correct law.'
7. In the present case also it is clear that in the opinion of respondent No. 1 the predecessor-in-office had committed an error in allowing deduction on the basis of the material on record inconsequence of which income had escaped assessment and no fresh information came into the possession of respondent No. 1 and, therefore, it meant that respondent No. 1 had different opinion in the matter on the material already considered by his predecessor-in-office and in the circumstances it was not open to him to reopen the assessment. In view of the clear pronouncement of the Supreme Court in the case referred to above, we are of the opinion that respondent No. 1 had no jurisdiction to reopen the assessment and to issue notice under Section 148 of the Act to the assessee for reopening the assessment of the three years referred to above, and to proceed with the 'reassessment, and the notice issued by him and the reassessment proceedings deserve to be quashed.
8. As a result of the discussion aforesaid, these petitions are allowed. The notice dated July 17, 1978, issued by respondent No. 1 under Section 148 of the Act for reopening the assessment of the assessment years 1975-76, 1976-77 and 1977-78 and the reassessment proceedings pending before respondent No. 1 in respect of the said three years are quashed. In the circumstances of the case, the parties shall bear their own costs of these petitions. The outstanding amount of security deposit shall be refunded to the petitioner after verification.