WP(C) 3643/2008 BEFORE HON’BLE MR JUSTICE AMITAVA ROY JUDGMENT AND ORDER( CAV) By the challenge laid in the instant proceeding, the petitioner seeks to abrogate the process of reassessment sought to be initiated by the impugned not ice dated 13.9.2007 issued by the Deputy Commissioner of Income Tax, Circle ,Jor hat under Section 148 of the Income Tax Act,1961 and the steps consequential the reto. By order dated 29.8.2008 this Court while issuing notice had , in the inte rim, interdicted the exercise proposed. 2. I have heard Mr GN Sahewalla, Senior Advocate assisted by Mr D.Senapat i, Advocate for the petitioner and Mr U.Bhuyan, learned counsel for the Revenue . 3. The relevant facts providing the background as well as the rival plea dings have tobe essentially noted to better comprehend the arguments advanced. The petitioner has presented itself to be a Private Limited Company registered under the provisions of the Companies Act, 1956 with its registered office at Pu rana Titabar in the district of Jorhat, Assam. It is engaged in the business of manufacture and sale of cement and is an existing assessee under the Act. On 1.1 1.2004 ,it submitted its return of income for the assessment year 2004-2005 corr esponding to the financial year 2003-2004 and deposited an amount of Rs.8,81,560 .00 as tax under Section 140A of the Act. Along with its return, the audited acc ount i.e. profit and loss account as well as the balance-sheet ending on 31.3.20 04 were also filed. According to the petitioner, it had ,during the relevant yea r received an amount of Rs.1,44,99,462.00 and Rs.1,70,133.00 as transport subsid y and insurance subsidy respectively and the said amounts were duly accounted f or and credited in the profit and loss account. It has insisted that the afor ementioned subsidies had been received by it for actual conduct of the business of its industrial undertaking and thus it was entitled to necessary deductions under Section 80IC of the Act. The return submitted by it was accordingly proc essed by the concerned revenue authorities under Section 143(1) of the Act and on acceptance thereof, a further amount of Rs. 1,20,318.00 was determined to be payable by the petitioner which, accordingly was paid by it. 4. The Assistant Commissioner of Income Tax, Circle Jorhat subsequent thereto, issued a notice dated 29.4.2005 under Section 143(2) of the Act followe d by a letter dated 6.7.2005 requiring the petitioner to furnish informations a nd particulars as referred to therein. Thereby the petitioner was inter alia ask ed to furnish the basis with evidence for claiming the deductions under Sectio n 80IC of the Act. By letter dated 22.8.2005 the same authority also solicited the clarifications from the petitioner regarding its claim for the aforesaid d eductions. As sought for, the petitioner furnished the essential clarifications endorsing its claim for deductions under Section 80IC of the Act, whereafter the assessment order dated 17.1.2006 was passed by the Assistant Commissioner o f Income Tax , Circle Jorhat thereby allowing the petitioner’s claim for deduct ions under the aforementioned provision of law in respect of the transport subs idy and insurance subsidy only. 5. While the matter rested at that, the petitioner was served with the notice dated 13.9.07(Annexure-8 to the writ petition ) issued by the Deputy Com missioner of Income Tax, Jorhat Circle under Section 148 of the Act thereby prop osing to reassess its income for the assessment year 2004-2005 on the ground tha t its income chargeable to tax had escaped assessment within the meaning of Sect ion 147 of the Act. By its reply dated 26.9.07 the petitioner while requested for the reasons for the reassessment notice, intimated the authority concerned that its return for the assessment year 2004-2005 submitted on 1.11.2004 may be treated to be one offered in compliance of the said notice. The Assistant Comm issioner of Income Tax, Circle Jorhat thereafter on 3.3.2008 furnished the reas ons in support of the notice under Section 148 of the Act and also required the petitioner to offer its explanation as to why the transport subsidy of Rs.1,44, 99,462/- and the insurance subsidy of Rs.1,70,133/- would not be treated as inci dental to the business of the assessee and thus ineligible for deductions under Section 80IC. The petitioner accordingly on 12.5.2008 submitted its detailed rep ly with a request to drop the reassessment proceeding in the facts and circumsta nces of the case. The Assistant Commissioner, Income Tax, Circle Jorhat ,howeve r, vide his communication No.ARIT/147/Pancharatna/04-05/AABCP/9172 G dated 9.7.0 8 provided pointwise reply to the petitioner’s explanation. By the impugned com munication dated 9.7.2008, the said authority intimated the petitioner that fur ther informations on certain points relating to its return pertaining to the ass essment year 2004-2005 submitted on 1.11.2004 were required to be furnished and thereby directed production of document , accounts and evidence in support of the said return. The extra ordinary jurisdiction of this Court has been invoked at this stage. 6. The Assistant Commissioner of Income Tax, Circle Jorhat , Respondent No.4 , in his affidavit while endorsing the impugned notices to be valid, has d ismissed the petitioner’s claim for deductions under Section 80IC of the Act f or the transport subsidy and the insurance subsidy as referred to its return for the assessment year 2004-2005 as the same were merely grants receipt from the g overnment and not construable as profit and loss out of the conduct of business as envisaged in the legal provision involved. The answering respondent asser ted that the amounts of these two subsidies though constituted income chargeab le to tax under the Act , the same had escaped assessment for which the reass essment proceeding had been validly initiated by the Revenue. The impugned notic e dated 13.9.2007 under Section 148 of the Act has been ratified being backed by reasons to believe that income chargeable to tax pertaining to such subsidies had escaped assessment. The answering respondent dismissed the plea made in the writ petition that the impugned notice had been issued following a change i n opinion on the existing materials and/or facts to review the earlier order by making a fishing and roving enquiry. The impugned notice has been sought to be justified also with reference to clause( c) (iii) of Explanation 2 of Section 14 7 of the Act. Pleading that in the earlier assessment, the petitioner’s income had b een made the subject of excessive relief under the Act, the respondents have ma intained that by the impugned notice under Section 148 , no final conclusion ha d been conveyed on the issue and that it was open to the petitioner to satisfy the department that no tax chargeable to tax had escaped assessment. The petitio ner’s contention that the subsidies in question are capital receipts and thus n ot liable to be tax, has been refuted by the respondents contending that it(peti tioner) had included the said subsidies under the Head Misc Income and had cre dited the same in its profit and loss account as revenue receipt. While reiterat ing that subsidies cannot qualify for deductions under Section 80IC of the Ac t, the respondents have contended that no view or opinion had been expressed by the Assessing Officer regarding the eligibility or otherwise of the deductions of the aforementioned subsidies under Section 80IC of the Act earlier and that t herefore , the question of change in opinion by taking a different view of the m atter on the subsisting facts did not arise. They also questioned the challenge in the instant proceeding tobe pre matured and thus not maintainable in law. 7. Mr Sahewalla has empathically urged that the impugned notices are paten tly illegal and without jurisdiction and are thus liable to be adjudged null an d void. According to the learned Senior Counsel, the subsidy schemes under whic h the transport subsidy and the insurance subsidy had been sanctioned to the pe titioner presupposes its business activities relatable thereto as an essential pre condition therefor and in that view of the matter, it being obviously elig ible for the benefit of deductions under Section 80IC in connection therewith, t he impugned notices are manifestly illegal and are liable to be annulled. He e mphasized that the transport subsidy has a direct nexus with the business activi ty of the petitioner contributing to its profit derived therefrom and thus it w as rightly accorded the benefit of deductions in the assessment order dated 1 7.1.2006. Mr Sahewalla contended that the assessment so made , was on a correct appreciation of facts and law involved and that the initiation of the process of reassessment by the impugned notices being by way of a review based on the s ame facts is palpably untenable in law rendering the impugned notice dated 13.9. 07 inoperative and invalid. As a mere change in opinion cannot be a valid groun d for reopening an assessment already made , on an objective evaluation of th e return and the supporting materials thereof, the impugned reassessment procee ding is vitiated by want of jurisdiction , he contended. The learned Senior Cou nsel dismissed the reasons furnished by the revenue authority as the basis for initiating reassessment proceeding to be frivolous and unworthy of generating a belief for validly initiating a reassessment proceeding as contemplated in Section 147 of the Act .The learned Senior Counsel has urged that as the transp ort and insurance subsidies have been sanctioned by way of reimbursement of t he expenses of the petitioner towards the related enterprises involved in its business , the gross amounts thereof can by no means be treated as income and therefore, the very premise of the commencement of the reassessment proceedin g being factually non existent , the impugned notices are obviously unsustainab le in law and are liable to be set aside. According to Mr Sahewalla, the reply i ssued by the concerned revenue authority to the explanation furnished by the pet itioner to the notice under Section 148 of the Act demonstrates a final adjudi cation in the matter against it and therefore, the instant writ petition is not prematured . In support of his arguments, the learned Senior counsel has place d reliance on the following authorities :- 1) 257 ITR 60, Centre for Women’s Development Studies vs. Deputy Director of Income Tax. 2) 237 ITR 579, Commissioner of Income Tax, Karnataka vs. Sterling Foods, M angalore. 3) (1997) 7 SCC 764, Sahney Steel and Press Works Ltd, Hyderabad etc. etc. Vs. Commissioner of Income Tax, Andhra Pradesh-1,Hyderabad. 4) (2005) 13 SCC 102 , Ponni Sugars (Erode) Ltd. Vs. Deputy Commercial Tax Officer. 5) 238 ITR 354, Sarda Plywood Industries Ltd. Vs. Commissioner of Income Ta x. 6) 191 ITR 518, Kesoram Industries and Cotton Mills Ltd. Vs. Commissioner o f Income Tax. 7) (1995) 3 GLR 249 Padamram Payeng(Gare) @ Basanta Gare vs. State of Assa m. 8) 300 ITR 6, Commissioner of Income Tax vs. Eltek SGS(P) Ltd. 9) (208) 3 DTR 94 Commissioner of Income Tax vs. Arvind Construction Co Ltd . 10) (2008) 14 DTR (Kol) (Trib) 462 Assistant Commissioner of Income Tax vs. Maithan Smelters Ltd. 8. Mr Bhuyan, per contra, has contended that having regard to the stage of the proceeding before the revenue authorities , the instant petition is clear ly pre matured and on that count alone, it is liable to be rejected. As the pet itioner has an ample opportunity of presenting its case on all counts in the pro ceeding pending before the Assistant Commissioner of Income Tax, Circle Jorhat, on merits, this Court would not entertain the instant petition, he urged. While contending that a transport subsidy is a legally recognized taxable receipt liab le to be assessed, the learned Standing Counsel has maintained that in the asses sment order dated 17.1.2006 the transport subsidy and the insurance subsidy were not taxed due to mistake of law and hence, in the above premise, the impugned notice under Section 148 of the Act is valid. Drawing the attention of the Court to clause (c ) (iii) of Explanation 2 to Section 147 of the Act, Mr Bhuyan has insisted that the impugned notices are unassailable in law and therefore, the ch allenge projected in the instant petition is liable to be negated. Maintaining w ith all emphasis at his command that the impugned notice is not an yield , of a mere change in opinion of the authority concerned, but a statutory imperative to desist escapement of income assessable to tax, Mr Bhuyan has contended that a s the impugned notices are neither malafide , nor influenced by any jurisdicti onal error, no interference therewith is warranted. The learned Standing Counse l sought to sustain his contentions based on the following decisions : 1) 257 ITR 60, Centre for Women’s Development Studies vs. Deputy Director of Income Tax; 2) 242 ITR 204, Commissioner of Income Tax vs. Andaman Timber Industries Lt d. 3) 259 ITR 19, GKN Drineshafts (India) Ltd. Vs. Income Tax Officer 4) 275 ITR 609 , Assam Co. Ltd vs. Union of India(UoI) and Ors. 9. The pleadings of the parties and the arguments advanced delineate the issues seeking adjudication. The facts leading to the instant petition bei ng matters of record are not in dispute. Noticeably, the Revenue has not questio ned the eligibility of the petitioner as an industrial unit to avail the benefi t of the transport subsidy as well as insurance subsidy under the relevant sch emes or disputed that in fact, for the assessment year involved it had availed the same. Whereas, the petitioner’s claim that such subsidies have contribute d to the profit and gains in its business of manufacture and sale of cement , t he Revenue seeks to construe the same to be an income incidental thereto and t herefore, not qualified for deduction under Section 80IC of the Act. Significant ly, the Assessing Officer i.e. Assistant Commissioner of Income Tax, Circle Jorh at, by his assessment order dated 17.1.2006 completed under Section 143(3) of t he Act had allowed deduction of the above amounts from the taxable income of th e petitioner. The present litigation as has been alluded hereinabove is activis ed by a notice under Section 148 of the Act seeking to conduct a reassessment on the plea that the amounts of these subsidies had due to error of law been deducted from the taxable income of the petitioner by a purported application of Section 80 IC thereby occasioning escapement of income within the meaning of Section 147 of the Act. As the Revenue amongst others has questioned the mainta inability of the instant petition on the ground of it being pre-matured, the proceeding under Section 1 48 of the Act being pending before the Assistant Commissioner of Income Tax, Cir cle Jorhat, it would be expedient to deal with this aspect at the threshold. 10. In response to the notice dated 13.9.2007 under Section 148 of the Act intimating the petitioner of the proposal to reassess its income for the assessment year 2004-2005, it(petitioner) offered its return originally submitte d. It ,however, requested the concerned revenue authority to furnish it with the reasons for the proposed reassessment. By letter dated 3.3.2008 the Assistant Commissioner of Income Tax, Circle Jorhat sought for an explanation from the pe titioner as to why the transport subsidy and the insurance subsidy amounts as ab ove, would not be treated as incidental to its business and therefore, not elig ible for deduction under Section 80IC. Along with the said communication, the su pporting reasons were also forwarded. As the same would disclose the Assessing O fficer entertained the view that the profit and gains which are derived from a n industrial undertaking are only eligible for deduction and that any income whi ch is merely incidental to its business is not so. The Revenue authority relying on the decision of the Calcutta High Court in CIT vs. Andaman Timber Industri es Ltd, 242 ITR 204 therefore concluded that the petitioner’s income of Rs. 1,46 ,69,595(transport subsidy of Rs. 1,44,99,462/- + Insurance subsidy of Rs.1,70,13 3/-) though chargeable to tax had escaped assessment within the meaning of sub clause(i) of clause (c ) of Explanation 2 to Section 147 of the Act. 11. The petitioner submitted a detailed reply to the notice and the r easons so cited, reiterating its claim for deduction of the aforementioned sum s towards the subsidies under Section 80 IC of the Act asserting that those were within the purview of profit and gains within the meaning of Section 80IC an d that the initiation of the reassessment proceeding under Section 148 of the Ac t was patently illegal and without jurisdiction. The petitioner also questione d the validity of the impugned notice on the ground that the same was induced b y a mere change of opinion on the same set of facts and materials and contended that thereby a roving and fishing enquiry was endeavored to be undertaken thou gh impermissible in law. The Assistant Commissioner of Income Tax, Jorhat Circle by his letter dated 9.7.2008(Annexure-XII) forwarded his response to the points of objection taken by the petitioner. While refuting the assailment of want of jurisdiction , the revenue authority asserted that the initiation did not involve any change o f opinion and that for valid reasons an unconsidered area of previous scrutiny h ad been selected for the enquiry there being reason to believe that income ex igible to tax had escaped assessment as contemplated under Section 147 of the A ct. It was inter alia clarified that the process proposed to ascertain whether the amounts by way of subsidies had been derived from the industrial undertakin g or not, the same being the condition precedent for eligibility to avail dedu ction under Section 80 IC. It was sought to be avowed further that in the ear lier assessment, the transport subsidy and the revenue subsidy had been catalog ued under the Head miscellaneous income by the assessee and the same were no t regarded as reimbursement of certain expenses of the undertaking. The lett er in clear terms stated that thereby the objection taken by the petitioner to t he initiation of the proceeding under Section 148 of the Act stood disposed. 12. A plain reading of the reply of the revenue authority to the peti tioner’s challenge to the initiation of the reassessment proceeding demonstrat es a final decision thereon. In other words, this reply does not in the opinion of this Court leave any scope to contemplate that the petitioner would be left with any meaningful scope to pursue its objection with regard to the maintain ability of the process initiated by the impugned notice dated 13.9.2007. The decision of the Apex Court in GKN Driveshafts(India) Ltd. (Supra), relied upon by the respondents to mount its impeachment on the maintainability of the writ petition has no application in the facts of the instant case in as much as , th erein their Lordships were seized with a situation where the revenue authorit y had not disposed of the objection filed by the assessee to the notice under S ection 148 of the Act. The challenge to the maintainability of the instant pr oceeding therefore fails. 13. As observed hereinabove, the petitioner’s entitlement to the subsid ies in question under the relevant schemes has remained unquestioned by the rev enue. These subsidies as the schemes produced in course of the arguments reveal , are by way of incentive to the eligible industrial unit in the selected are as referred to therein with a view to promote the growth of industries thereat. The selected area (A) as mentioned in the transport subsidy scheme includes i nter alia the North Eastern Region comprised amongst others of the State of Assa m. The scheme sets out the details of the subsidy to be awarded to the industri al unit transporting raw material as well as finished products to be brought in to and taken out respectively of the selected areas and the stipulations governi ng such grant. It is also not in dispute that the petitioner during the assessm ent year 2004-2005 had received an amount of Rs.1,44,99,462.00 and Rs. 1,70,133. 00 by way of transport and insurance subsidies respectively under the schemes s ubsisting then. Significantly, it is not the stand of the revenue that these rec eipts by the petitioner if construable as profit and gains and derived from its business would not qualify for deduction under Section 80-IC being impermissibl e thereunder on any other count. In other words, the Revenue’s cavil is not base d on any non observation of or nonconformity with any other prescription of Sect ion 80 IC to disentitle the petitioner of the benefit of deduction as contempla ted thereunder. Section 80-IC appearing under Chapter VIA provides for special p rovisions in respect of certain undertakings or enterprises in certain special c ategory States. The legislative intendment to grant the benefit of deduction as envisaged therein subject to the compliance of the ordainment thereof is t hus obvious and hence, interpretation to actualize it ought to be the desider atum. Clause (1) of Section 80-IC presenting itself as the hub of the debate thu s deserves extraction for immediate reference - 80-IC.(1) Where the gross total income of an assessee includes any prof its and gains derived by an undertaking or an enterprise from any business refe rred to in sub-section (2), there shall, inn accordance with and subject to the provisions of this section, be allowed, in computing the total income of the a ssessee, a deduction from such profits and gains , as specified in sub-section(3 ). The conundrum that seeks resolution in the instant case is that whether the amo unts of subsidies received by the petitioner can be regarded as profits and gra ins derived by it from its business referred to in sub-section(2). As observed h ereinabove, the parties are not at issue on the nature of the business or any as pect relatable thereto as is outlined in sub-section(2). To revert to the peti tioner’s contention , these receipts are profits and gains contributing to it s income from the business for the assessment year involved and the revenue to t he contrary asserts it only to be incidental thereto(business ) and therefore, not eligible for the deduction. It is profitable at this stage to mark that the word ’income’ as defined in Section 2(24) of the Act includes inter alia prof its and gains. Profits and gains therefore are an integral and inseparable segme nts of income as is contemplated by the Act. 14. The Apex Court in Sahney Steel & Press Works Ltd (Supra), was seiz ed with the situation as to whether the subsides in the form of certain facilit ies and incentives which included subsidy on power accorded by the Government of Andhra Pradesh to new industrial undertakings that had commenced production on or after 1.1.69 was a capital or revenue receipt. The assessee company, appel lant had contended that subsidies so received by it for the accounting year r elating to the assessment year 1974-75 were of a capital nature. 15. Placing reliance on the decision rendered in Pontypridd and Rhondda Joint Water Board vs. Osime, (1946) All ER 668, it was held that the subsidies w hether by way of refund of sales tax or relief or electricity charges or water c harges could not be treated as aid to set up the industry of the assessee and t herefore, those were operational subsidies and not capital subsidies . Their Lo rdships however, enunciated that if any subsidy is given, the character thereof in the hands of the recipient - whether revenue or capital would have