HRY WAREHOUSING CORPORATION, vs. JOINT COMMISSIONER OF IT

209 IN THE HIGH COURT OF PUNJAB AND HARYANA

AT CHANDIGARH

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Date of Decision: 20.11.2025

Haryana Warehousing Corporation, Panchkula

...Appellant Versus

Joint Commissioner of Income Tax, Special Range, Panchkula

...Respondent

Haryana Warehousing Corporation, Panchkula

...Appellant Versus

Joint Commissioner of Income Tax, Special Range, Panchkula

...Respondent

CORAM:- HON'BLE MR. JUSTICE JAGMOHAN BANSAL HON'BLE MR. JUSTICE AMARINDER SINGH GREWAL

Present:- Mr. Rajesh Garg, Senior Advocate with

Mr. Mandeep Singh, Advocate and

Ms. Neha Matharoo, Advocate for the appellant.

Mr. Saurabh Kapoor, Senior Standing Counsel (Through V.C.) and Mr. Rana Gurtej Singh, Junior Standing Counsel for the respondent-Income Tax Department.

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JAGMOHAN BANSAL, J. (ORAL)

As common issues are involved in the captioned petitions, with the consent of both sides, the same are hereby disposed of by this common order. For the sake of brevity and convenience, facts are borrowed from ITA-526-2005. 2.

The appellant through instant appeal under Section 260A of Income Tax Act, 1961 (for short ‘1961 Act) is seeking setting aside of PRINCE CHAWLA 2025.11.26 16:56 I attest to the accuracy and integrity of this document

ITA-526-2005 and ITA-527-2005

-2- order dated 17.05.2005 passed by Income Tax Appellate Tribunal, Chandigarh (for short ‘ITAT’) for the assessment year 1987-1988. 3.

The appellant for the assessment year 1987-88 filed its return under Section 139 claiming its entire income exempt under Section 10(29) of 1961 Act. The Revenue processed appellant’s return under Section 143 of 1961 Act and accordingly assessment was made of nil income. 4.

The appellant was exempted from tax under Section 10(29) for the different Assessment Years including 1991-1992 on the basis of judgment of this Court in the case of appellant itself. The Assessing Officer while framing assessment under Section 143 of the assessment year 1987-1988 exempted income from all sources. 5.

The Assessing Officer relying upon judgment of Rajasthan High Court in Commissioner of Income Tax Versus Rajasthan State Warehousing Corporation, 1994 (210) ITR 906 reopened assessment under Section 147 of 1961 Act by recording reasons on 17.06.1997. The appellant filed return in response to notice under Section 148. The appellant objected reopening of assessment on the ground that assessment cannot be reopened on the basis of conflicting judgments of non- jurisdictional High Courts. The Assessing Authority framed assessment under Sections 143(3) and 147. The appellant unsuccessfully preferred appeal before Commissioner of Income Tax (Appeals). It further unsuccessfully filed appeal before ITAT. 6.

Learned counsel representing the appellant submits that appellant filed returns for the assessment year 1987-1988 and 1988-1989. The returns were filed under Section 139 and processed under Section PRINCE CHAWLA 2025.11.26 16:56 I attest to the accuracy and integrity of this document

ITA-526-2005 and ITA-527-2005

-3- 143 of 1961 Act. The respondent up to assessment year 1991-1992 continued to accept assessment proposed by appellant. The appellant did not pay tax on income other than rental income. Tax was not paid in view of judgment of Allahabad High Court in U.P. State Warehousing Corporation Versus Income Tax Officer, A-Ward, Circle II, Lucknow and Another as well as judgment of this Court in Commissioner of Income Tax Versus Haryana Warehousing Corporation, (1978) 112 ITR 374. The respondent on the basis of judgment of Rajasthan High Court in Rajasthan State Warehousing Corporation (supra) formed an opinion that appellant’s income even other than rental is chargeable to tax. It was case of change of opinion which was based upon judgment of Rajasthan High Court in Rajasthan State Warehousing Corporation (supra). The said judgment was delivered on 01.12.1993. The respondent on the basis of judgment delivered in December’ 1993 could not reopen assessment of 1987-1988 and 1988-1989. 7.

Per contra, learned counsel for the respondent-Income Tax Department submits that no assessment under Section 143(3) of 1961 Act was framed by Assessing Authority. The appellant filed income tax returns which were merely processed. There was no assessment order on the part of Assessing Officer, thus, Assessing Officer in view of judgment of Rajasthan High Court in Rajasthan State Warehousing Corporation (supra) was quite competent to reopen assessment in terms of Section 147 of 1961 Act. 8.

I have heard learned counsel for the parties and perused the record with their able assistance. 9.

From the perusal of record, it is evident that appellant filed PRINCE CHAWLA 2025.11.26 16:56 I attest to the accuracy and integrity of this document

ITA-526-2005 and ITA-527-2005

-4- returns up to assessment year 1991-1992 disclosing nil income. The appellant was of the opinion that tax is not payable even on income other than rental. The appellant is a public sector undertaking owned and controlled by State Government. Thus, there was no question of mala fide intention on the part of appellant. The respondent without objection accepted appellant’s return up to assessment year 1991-1992. During the course of hearing, the respondent relied upon judgment of Madhya Pradesh High Court in M.P. Warehousing Corporation (supra). The said judgment was delivered on 28.01.1981. Despite judgment of Madhya Pradesh High Court dated 28.01.1981, the respondent accepted appellant’s return till 1991-1992. As per impugned orders, the re- assessment was made on the basis of judgment of Rajasthan High Court in Rajasthan State Warehousing Corporation (supra) which was delivered on 01.12.1993. It means respondent till the judgment of Rajasthan High Court in Rajasthan State Warehousing Corporation (supra) was of the opinion that income of appellant even other than rental is exempt from tax. The respondent in the light of judgment of Rajasthan High Court in Rajasthan State Warehousing Corporation (supra) changed its opinion and reopened assessment. The reasons recorded for re-assessment by Assessing Authority read as:

"In this case the assessee filed its return of income declaring NIL taxable income claiming that whole of its income was exempt u/s 10(29) and was processed u/s 143(1). In view of decision of the Hon'ble High Court in the case of Rajasthan Warehousing Corpn. Income other than rental income from ware housing is not entitled to exemption u/s 10(29) during the relevant previous year the assessee corporation had earned the following income other than income from ware housing:- PRINCE CHAWLA 2025.11.26 16:56 I attest to the accuracy and integrity of this document

ITA-526-2005 and ITA-527-2005

-5-

Surplus on trading of wheat

: Rs.31295908 Interest on advance

: 26394 Supervision charges

: 563699 Other income

: 566495 Income pertaining to earlier years : 1336409

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Total:

3378897

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I have reasons to believe that income of RS. 33788897/-chargeable to tax for the Asstt. year 1987-88 had escaped assessment, so proceeding u/s 147 are initiated for the above asstt. year.

Issue notice u/s 148 for the A.Y. 87-88."

10.

A Division Bench of this Court in Commissioner of Income Tax Versus ITW India Limited, 2015 SCC OnLine P&H 12123 has clearly held that re-assessment cannot be framed on the basis of change of opinion on account of subsequent judgment of the Supreme Court. Subsequent judgment of the Supreme Court cannot be ground to re-open assessment under Section 147 of 1961 Act. The aforesaid judgment of this Court is based upon judgment of Supreme Court in Commissioner of Income Tax Versus Kelvinator of India Limited, (2010) 320 ITR 561 (SC). Relevant extracts of the judgment read as:

“10. The Commissioner of Income-tax and the Appellate Tribunal have noticed the detailed facts and recorded the finding as noticed above that the reassessment was on the basis of the subsequent judgment of the hon'ble apex court. Thus, apparently on the change of the opinion and in view of the principles of law laid down by the hon'ble apex court in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) wherein it has been held that jurisdiction could not be conferred on the basis of PRINCE CHAWLA 2025.11.26 16:56 I attest to the accuracy and integrity of this document

ITA-526-2005 and ITA-527-2005

-6- mere change of opinion and it could not be a reason per se to reopen assessments which had been finalised and change of opinion was not relevant ground for reason to believe for issuance of notice under section 147. The relevant observations read as under (page 564): "On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment but in section 147 of the Act, with effect from April 1, 1989), they are given a goby and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-April 1, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after April 1, 1989, the Assessing Officer has power to reopen, provided there is 'tangible PRINCE CHAWLA 2025.11.26 16:56 I attest to the accuracy and integrity of this document

ITA-526-2005 and ITA-527-2005

-7- material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words 'reason to believe', Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549, dated October 31, 1989, which reads as follows (see (1990) 182 ITR (St.) 1, 29): '7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression "reason to believe" in section 147.—A number of representations were received against the omission of the words "reason to believe" from section 147 and their substitution by the "opinion" of the Assessing Officer. It was pointed out that the meaning of the expression, "reason to believe" had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression "has reason to believe" in place of the words "for reasons to be recorded by him in writing, is of the opinion". Other provisions of the new section 147, however, remain the same.' 5. For the aforestated reasons, we see no merit in these civil appeals filed by the Department, PRINCE CHAWLA 2025.11.26 16:56 I attest to the accuracy and integrity of this document

ITA-526-2005 and ITA-527-2005

-8- (hence, dismissed with no order as to costs."

11.

Case of appellant is squarely covered by judgment of Supreme Court in Kelvinator of India Limited (supra) as well judgment of this Court in ITW India Limited (supra) because respondent made assessment under Section 147 on the basis of subsequent judgment of Rajasthan High Court. 12.

In the wake of above discussion and findings, instant appeals deserve to be allowed and accordingly allowed. The order dated 17.05.2005 passed by Income Tax Tribunal, Chandigarh is hereby set aside.

(JAGMOHAN BANSAL)

JUDGE

(AMARINDER SINGH GREWAL)

JUDGE

20.11.2025 Prince Chawla

Whether Speaking/reasoned Yes/No Whether Reportable Yes/No

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