TaxTMI 
TaxTMI 
2007 (9) TMI 303
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....06, is illegal, bad in law and is liable to be quashed since the initiation of the reassessment proceedings was based on a mere change of opinion. That the Commissioner of Income-tax (Appeals) erred on the facts and in law in not holding that the impugned order dated February 28, 2006, is illegal, bad in law and is liable to be quashed since the proceedings under section 147 of the Act were initiated without there being reason to believe that income of the appellant had escaped assessment, which is sine qua non for assumption of valid jurisdiction. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not holding that there being no failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment, the reassessment proceedings initiated after 4 years from the end of the relevant assessment year were illegal and bad in law. That the Commissioner of Income-tax (Appeals) erred on facts and in law in confirming the action of the Assessing Officer in assessing the gross interest income amounting to Rs. 22,18,23,913 as 'income from other sources' against the same being declared as 'busi....
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....on of 90 per cent. of the following receipts for computing "profits of the business" in terms of clause (baa) of Explanation to section 80HHC of the Act : Amount Miscellaneous receipts 3,09,28,014 Staff quarters rent 10,86,567 Gain on exchange 2,99,59,498 Grant-in-aid (NRF) 80,000 Total 6,99,74,079 That the Commissioner of Income-tax (Appeals) and the Assessing Officer failed to appreciate that the appellant's eligibility is to be computed with reference to clause (c) of sub-section (3) of section 80HHC of the Act (applicable to manufacturer-cum-trader exporter) and not clause (a) (applicable to an exclusive manufacturer exporter). That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding that deduction allowable under section 80HHC of the Act has to be restricted to business income included in the gross total income and since business income was loss/negative, no deduction was allowable to the appellant under that section by wrongly invoking the provisions of section 80AB of the Act. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the imposition....
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....g declared as 'business income' by the appellant. That the Commissioner of Income-tax (Appeals) erred on facts and in law in confirming the action of the Assessing Officer in denying deduction of Rs. 14,67,44,405 allowed to the appellant under section 80HHC of the Act in the original assessment order dated March 28, 2003. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the action of the Assessing Officer in excluding the following out of business income while computing deduction under section 80HHC of the Act : (Rs.) (a) Gross interest 34,01,92,899 (b) Dividend income 6,56,18,564 That the Commissioner of Income-tax (Appeals) erred on facts and in law in alternatively holding that 90 per cent. of following gross incomes/receipts is, in any case, excludible for computing deduction under that section : (Rs.) (a) Gross interest 34,01,92,899 (b) Dividend income 6,56,18,564 That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding that the gross interest and not the net interest is excludible from the....
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....rder dated February 23, 2001, passed under section 143(3) of the Income-tax Act. The return of income was filed at Rs.82,58,101 under section 115JA on November 13, 1998. Firstly processing was done under section 143(1)(a) vide order dated May 25, 1999. Later on assessment was completed vide abovementioned order dated February 23, 2001, at an income of Rs. 12,93,09,770. Originally the assessee computed gross total income at Rs. 19,15,13,221 which was later on revised at Rs. 13,70,00,572 and deduction under section 80HHC was claimed thereon at Rs. 15,87,06,123. While examining such claim the Assessing Officer in the original assessment order observed that deduction under section 80HHC cannot exceed profit from business in view of section 80AB. Thus, he observed that the assessee could not claim deduction under section 80HHC for a sum of Rs. 15,87,06,123 against gross total income of Rs.13,70,00,572. He examined the details of profit and loss account, audit report under section 80HHC and details furnished by the assessee and observed that there were some mistakes in the computation of deduction under section 80HHC. He calculated deduction under section 80HHC as per annexure "A" of the....
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....t (i) the provisions added back to income (ii)expenses which are part of direct expenses shall be included in indirect cost and 'indirect cost' relating to export of trading goods shall be computed on a proportionate basis as per definition given to 'indirect cost' in clause (e) of the Explanation given just before section 80HHC(3A). (iii) From the audit report under section 80HHC, it is noticed that there was some export of manufactured goods also and profit from same as per procedure laid down in section 80HHC is negative in nature which has been ignored by the assessee. This is not a correct stand because section 80HHC prescribes a package of method of computing deduction and so other methods are involved in computation and negative figure arrived upon at some intermediate stage cannot be ignored. This view is supported by the Income-tax Appel late Tribunal in Prestige Foods Ltd. v. Deputy CIT [1997] 61 ITD 390 (Indore) and Yarn Syndicate Ltd. v. Deputy CIT [2001] 114 Taxman 123 (Cal). The learned Commissioner of Income-tax (Appeals)-XXII, New Delhi, has also confirmed this stand in other cases assessed to tax in this range. (iv) The deduction u....
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....the assessee from export of goods or merchandise to which section 80HHC applies, computed and read with sub-section (3) of section 80HHC 39,79,68,176 31,93,38,328 15. Export turnover, deduction in respect of which will be claimed by a supporting manufacturer in accordance with the proviso to sub-section (1) of section 80HHC 5,51,97,10,815 16. Profit from the export turnover mentioned in item 15 above, calculated in accordance with the proviso to sub-section (1) of section 80HHC 32,79,68,126 x 5,51,97,10,815 9,57,01,09,608 18,91,60,931 17. Deduction under section 80HHC to which the assessee is entitled (14 minus 16) (31,93,48,043 - 18,91,60,934) 13,01,77,391 5. After completion of the original assessment, the reassessment proceedings were initiated under section 147 and notice under section 148 was issued on February 23, 2005. The case of the assessee was reopened on the ground that if income from other sources and profits of business not derived from export are excluded, there is a net loss under the head "Profit of export business" as per Explanation (baa) to section 80HHC of the Act and consequently in vie....
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....91." 6. The assessee submitted reply to the reasons on November 21, 2005, a copy of which is placed at pages 56 to 77 of the paper book. It was mentioned in the reply that after detailed investigation and due application of mind deduction under section 80HHC was allowed at Rs. 13,01,77,391 in the original assessment order. It was submitted that it has wrongly been mentioned in the reasons recorded that deduction under section 80HHC was wrongly allowed on the entire interest and dividend income. It was pointed out that the said allegation is not factually correct. Reference was made to the original assessment order to contend that net interest income of the assessee amounting to Rs. 2,62,36,763 (Rs. 20,18,23,913 19,55,87,150) was assessed as "income from other sources". Referring to Annexure "A" it was pointed out that "profits of the business" was taken to be the profits as computed in the main assessment order (i.e. after excluding the aforesaid net interest income of Rs. 2.62 crores). It was pointed out that dividend income of Rs. 6,56,18,564 in its entirety was held to be assessable as "income from other sources" and thus the same has not been made part of the "business incom....
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.... to question Nos. 10 to 12 of the questionnaire wherein all the aforesaid issues were raised by your honour's predecessor (copy enclosed as "Annexure A"). In response to the aforesaid questionnaire, the assessee, vide letter dated January 16, 2001, rendered detailed and point-wise replies/explanation to the various queries posed by your honour's predecessor. Your honour's kind attention is specifically invited to paragraph Nos. 9 to 10 on pages 5 to 7 of the said reply. On perusal of the same, it will be appreciated that the assessee gave the details of the other income of Rs. 14.03 crores, which included all the aforesaid receipts (except interest income) (refer paragraph 9). The assessee also rendered detailed explanation justifying its claim for deduction under section 80HHC of the Act. In paragraph No. 12, the assessee specifically dealt with the issue of netting of interest income with interest expenditure (copy enclosed as "Annexure B"). In continuation of the aforesaid letter dated January 16, 2001, the assessee, vide letter dated February 2, 2001, supplemented its reply. In the said letter the assessee furnished details of interest income and i....
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....o a conscious decision to assess only net interest income of Rs. 2.62 crores as "income from other sources". Your honour's predecessor agreed with the contention of the assessee that interest income must be adjusted against interest expenditure, and only the net interest income should be assessed under the head "income from other sources". It cannot, thus, be disputed that your honour's predecessor consciously arrived at the conclusion that interest income must be adjusted against interest expenditure and only the net interest income of Rs. 2.62 crores is assessable as "income from other sources". It is not, therefore, open to your honour to initiate fresh proceedings to now assess gross interest income as "income from other sources", differing/disagreeing with the opinion of your honour's predecessor. Nothing new has come on record to adopt a different approach. 10. Reference was also made to proviso to section 147 which read as under : "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end ....
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....ness income computed as per the legal provisions of the Income-tax Act is a negative figure and as per the provision of section 80AB and the decision of the Supreme Court in IPCA Laboratory v. Deputy CIT [2004] 266 ITR 521 deduction under section 80HHC will not be allowable, if the business profit is a negative/loss figure. A copy of the reasons recorded was also enclosed for the assessee's perusal. 3. The assessee filed its detailed reply including the legal objections to the issuance of notice under section 148 vide its letter dated November 17, 2005, and requested to treat the return filed vide its letter dated February 2, 2001, as return of income filed under section 147/148 of the Income-tax Act. 4. The assessee has raised objections to the reasons recorded vide its letter dated November 17, 2005, which are briefly as follows : (i) It is a case of mere change of opinion. (ii) The time limit has expired for reopening of the case. 5. The different objections of the assessee are rejected on the following grounds : Change of opinion The facts of the case are that this issue of negative business income and allowabil....
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....ng Officer can reopen the proceeding under section 147. In Praful Chunilal Patel v. M. J. Makwana, Asst. CIT [1999] 236 ITR 832 (Guj) it was held that even where full disclosure was made and yet an income chargeable to tax had escaped from being included in the final assessment order in which taxable income was worked out, the Assessing Officer has, as a matter of fact, a duty to exercise juris diction under section 147 read with section 148. In IPCA Laboratories Ltd. v. Gajanand Meena, Deputy CIT (No. 3) [2001] 251 ITR 420 (Bom), there was a loss from export of trading goods and resultant amount was a net loss and since resultant amount was a loss, the assessee was not entitled to claim relief under section 80HHC(1). Therefore, notice under section 148 was validly issued by the Assessing Officer to disallow deduction under section 80HHC(1) which was wrongly allowed while passing assessment order under section 143(3). Where the Assessing Officer had no opportunity to consider a matter, it cannot be said that when he subsequently considers it, that would amount to change of opinion.-Vide S. Srinivasan v. CIT [1975] 101 ITR 94 (Mad), Vairavan Chettiar (VE. A.) v. CI....
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....er section 147 read with sec tion 148. In Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456, the Supreme Court has held that an Assessing Officer acquires jurisdiction to reopen an assessment only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons-which he must record-to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but one of acting on fresh information. Since the belief is that of the Assessing Officer, the sufficiency of reasons for forming the bel....
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....e-tax Act, the Commissioner of Income tax's prior approval was obtained on February 22, 2005, before issuance of notice under section 148. 2. Thus, it cannot be said that the notice is invalid on account of time limit. 3. The notice under section 148 was validly issued within the period of 6 years from the end of the assessment year after taking approval of the Commissioner of Income-tax. As the notice was sent on February 23, 2005, i.e., within March 31, 2005, the assessee's objection that limitation has expired in this case is without any merit and substance. 4. The assessee has failed to disclose primary facts regarding the nature of different incomes while claiming deduction under section 80HHC. 5. Thus, the assessee had failed to disclose truly and fully all material facts necessary for its assessments. The objections raised by the assessee stand rejected accordingly. The assessee has requested to treat the return filed on February 2, 2001, to be treated as return filed in response to notice issued under section 148. This request of the assessee is rejected on the following grounds : (a) The assessee had no....
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....st income of Rs. 22,18,23,913 to be considered separately as income from other sources as discussed above 22,18,23,913 2. Dividend income of Rs. 6,56,18,564 to be considered separately as income from other sources as discussed above 6,56,18,564 28,74,42,477 (-) 9,24,29,256 Add : Disallowance made in the order passed under section 143(3) dated February 23, 2001 (i) Productivity linked bonus dis-allowed under section 43B 13,62,417 (ii) Sales tax liability disallowed under section 43B 3,39,137 (iii) Provision for DWA risk 1,99,74,498 (iv) Capital receipt from National Renewal Fund 80,00,000 (v) Prior period expenses disallowed 1,51,89,372 (vi) Deferred expenditure of MITCO disallowed 1,01,37,518 (vii) Capital expenditure on renovation of jewellery display centre 11,06,000 (viii) Abnormal shortage not allowed 1,43,90,000 7,04,98,942 Gross business income (-) 2,19,30,314 Less : Deduction under section 35 50,00,000 (-) 2,69,30,314 Less : Deducti....
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....r assessed the dividend income of Rs. 6,56,18,564 as income from other sources against the same being declared as business income. Further the Assessing Officer has also considered the net interest income of Rs. 2,62,36,763 (22,18,23,913 gross interest 19,55,87,150 interest paid) as income from "other sources". Further in the original assessment order, the Assessing Officer while computing deduction under section 80HHC treated the amount of Rs. 19,55,87,150 (interest paid) as "indirect cost". The Assessing Officer also reduced 90 per cent. of the following receipts for the purpose of computing adjusted profits of the business in terms of clause (baa) of Explanation 2 to section 80HHC. Amount Gross interest income 22,18,23,913 Miscellaneous receipts 3,09,28,014 Staff quarters rent 10,86,567 Grant-in-aid (NRF) 80,00,000 Others 5,00,000 Total 26,70,89,407 90% of above 24,03,80,466 17. Learned counsel pleaded that in the original assessment after detailed investigations and due application of mind deduction of Rs. 13,01,77,391 under section 80HHC of the Act was allowed to the assessee which was computed as under : (....
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....ble as "income from other sources" and thus did not form part of the business income ; (c) while computing deduction in respect of traded goods, the Assessing Officer considered the entire interest paid amounting to Rs.19,55,87,150 as "indirect cost" and while computing "adjusted profits of the business" the Assessing Officer excluded 90 per cent. of the gross interest amounting to Rs. 22,18,23,913. Consequently, entire interest income of Rs. 22,18,23,913 was not at all considered for allowing deduction under section 80HHC of the Act ; 21. Thus he pleaded that in original assessment deduction under section 80HHC of the Act was not at all allowed on all the receipts mentioned above. 22. Learned counsel further pleaded that in fact the only variance in the original assessment order and the reasons recorded is that the Assessing Officer assessed the entire gross interest income of Rs. 22.18 crores as "income from other sources" as against net interest income of Rs.2,62,36,763 (Rs. 22,18,23,913 minus Rs. 19,55,87,150) assessed in the original assessment, which was a conscious decision of the Assessing Officer. 23. Further referring to the letter of the Assessing Offic....
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....3] 264 ITR 566 (SC) ; CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) ; KLM Royal Dutch Airlines v. Asst. Director of Income-tax [2007] 292 ITR 49 (Delhi) ; CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi) ; Jindal Photo Films Ltd. v. Deputy CIT [1998] 234 ITR 170 (Delhi) ; Berger Paints India Ltd. v. Joint CIT [2000] 245 ITR 645 (Cal) ; Mercury Travels Ltd. v. Deputy CIT [2002] 258 ITR 533 (Cal) ; Ranchi Handloom Emporium v. CIT [1999] 235 ITR 604 (Patna) ; CIT v. Hardware Trading Co. [2001] 248 ITR 673 (Karn) ; CIT v. Rajasthan Patrika Ltd. [2002] 258 ITR 300 (Raj) ; Marudhar Hotels P. Ltd. v. Deputy CIT [2003] 259 ITR 509 (Raj) ; Oil and Natural Gas Corpn. Ltd. v. Deputy CIT [2003] 262 ITR 648 (Uttaranchal) ; Simplex Concrete Piles (India) Ltd. v. Deputy CIT [2003] 262 ITR 605 (Cal) ; Biswanath Tea Co. Ltd. v. Deputy CIT [2004] 267 ITR 687 (Cal) ; J. P. Bajpai, HUF v. CIT [2004] 269 ITR 40 (All) ; Duli Chand Singhania v. Asst. CIT [2004] 269 ITR 192 (P&H) ; Zuari Estate Development and Investment Co. P. Ltd. v. J. R. Kanekar, Deput....
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....as already been reproduced in the above part of this order in paragraph 4 pleaded that it can be appreciated that the following issues were considered by the Assessing Officer while partly allowing the claim of the assessee. (i) As deduction under section 80HHC could not exceed the profit from business in view of section 80AB, the claim of the assessee under section 80HHC at Rs. 15,87,06,123 against gross total income of Rs.13,70,00,572 was not correct ; (ii) The assessee had wrongly included all income under the head "Profit from business". Dividend income of Rs. 6,56,18,564 and net interest received of Rs. 2,62,36,763, have necessarily to be assessed under the head "Income from other sources" as provided in section 56 ; (iii) Deduction under section 80HHC has to be computed on the basis of profit/income which does not include "income from other sources" amounting to Rs. 6,56,18,564 plus Rs. 2,62,36,763 (9,18,55,327) and thus, deduction under section 80HHC has to be restricted to profit under the head "Profit from business", in view of section 80AB of the Act ; (iv) It was noticed from audit report under section 80HHC, that there was some export....
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....rt of its claim that the income from interest has to be netted, therefore, personally feel that the claim of the appellant is justified." (emphasis supplied) 31. Referring to these facts learned counsel pleaded that it is clearly established that the assessment of net interest income of Rs. 2.62 crores (and not gross interest income) as "income from other sources" cannot even be regarded as an oversight. On the contrary he pleaded that the said assessment was a result of a conscious decision arrived at by the Assessing Officer based on indepth investigation and due application of mind. He pleaded that in the aforesaid background facts, it was not open to the Assessing Officer to initiate fresh proceedings merely to assess gross interest income as "income from other sources", deferring/disagreeing with the option of his predecessor. 32. Further learned counsel pleaded that allegation of the Assessing Officer that the applicability of section 80AB was not examined in the original assessment order is also factually incorrect as this aspect was also considered by the Assessing Officer as it can be seen from the observations of the Assessing Officer in the original assessment orde....
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....section 147 places fetters on the power of the Assessing Officer to initiate reassessment proceedings beyond the period of four years from the end of relevant assessment year, where the assessment has been completed under section 143(3) of the Act unless the income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. For raising such proposition he relied on the following decisions : CIT v. Foramer France [2003] 264 ITR 566 (SC) ; Orient Beverages Ltd. v. ITO [1994] 208 ITR 509 (Cal) ; Peico Electronics and Electricals Ltd. v. Deputy CIT [1994] 210 ITR 991 (Cal) ; Kaira District Co-operative Milk Producers Union Ltd. v. Asst. CIT [1995] 216 ITR 371 (Guj) ; Garden Silk Mills Ltd. v. Deputy CIT (Assessment) (No. 1) [1996] 222 ITR 27 (Guj) ; Pala Marketing Co-operative Society Ltd. v. State of Kerala [1999] 236 ITR 604 (Ker) ; Avani Corpn. v. ITO [1999] 238 ITR 407 (Guj) ; Vareli Weaves P. Ltd. v. Deputy CIT [2004] 240 ITR 77 (Guj) ; Fenner (India) Ltd. v. Deputy CIT [2000] 241 ITR 672 (Mad) ; Shre....
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....nd truly disclose all material facts. Explaining the expression "material facts" as contained in section 34(1)(a), the court observed that it refers only to the primary facts and the duty of the assessee is to disclose such primary facts. The court further observed that there is no duty cast on the assessee to indicate or draw the attention of the Income-tax Officer to what factual or legal or other inferences can be drawn from the primary facts disclosed. There is not a word in the order of assessment if the respondent-assessee omitted to disclose any material fact." 38. He contended that similar proposition has been laid out in the case of Oriental Carpet Manufacturers (India) Ltd. v. ITO [1987] 168 ITR 296 (P&H). 39. Referring to the decision of the Bombay High Court in the case of Hindustan Lever Ltd. v. R. B. Wadkar, Asst. CIT (No. 2) [2004] 268 ITR 339 the learned authorised representative pleaded that it has been categorically observed in the said decision that the reasons recorded by the Assessing Officer should satisfy the failure on the part of the assessee to disclose the necessary facts. Their Lordships observed that it is for the Assessing Officer to reach conclu....
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.... of the hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191, the learned authorised representative pleaded that it is held in no uncertain terms that proper legal inferences have to be drawn by the Assessing Officer which would obviously include applying the available judicial precedent and the said proposition of law was subsequently applied in the decision of Associated Stone Industries (Kotah) Ltd. v. CIT [1997] 224 ITR 560. 43. The learned authorised representative further relied on the following decisions : CWT v. C. M. Ghosh Trust [2005] 279 ITR 346 (All) : Duty of the assessee is only to disclose primary facts. The Assessing Officer having failed to apply decision of the High Court, it cannot be said that the asses see failed to furnish primary facts. Denish Industries Ltd. v. ITO [2004] 271 ITR 340 (Guj) : Held that for deciding the question of jurisdiction, the law applicable on the date of filing of return has to be considered. A retrospective amendment made after the filing of return would not result in holding that the assessee had failed to disclose fully and truly all material facts. CIT v. A. R. E....
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....hile framing original assessment. Thus he pleaded that there was no failure on the part of the assessee to disclose the primary facts regarding the nature of different incomes while claiming deduction under section 80HHC of the Act and that no new particulars/facts were furnished by the assessee during the present proceedings which fact clearly shows that no fresh facts/particulars were indeed required by the Assessing Officer. Thus he pleaded that initiation of reassessment proceedings was illegal and, therefore, bad in law. 47. On the other hand, the learned Departmental representative contended that according to Explanation 1 of section 147 mere production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Thus he pleaded that according to Explanation 1 of the proviso to section 147, the assessee cannot contend that there was a full disclosure in terms of the proviso to section 147. The learned Departmental representative then referred to the detailed order passed by the Assessin....
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....f Income-tax (Inv.). The Tribunal took the view that the Assessing Officer had not made any enquiry or investigation on his own to form a belief that income of the assessee had escaped assessment. It was concluded that there was nothing to show in what capacity Shri Sanjay Rastogi had made his statement and, therefore, the information obtained by the Assessing Officer is vague, hearsay and indefinite having no direct nexus with the formation of belief regarding escapement of income. Thus it was held that the initiation of proceedings was invalid. After referring to various case laws their Lordships have upheld initiation of proceedings under section 147/148. 49. The learned Departmental representative further relied on the decision in the case of Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC). In this case it was held that disclosure of loans which was subsequently discovered to be false, reassessment was validly initiated. This case law was relied upon to contend that since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to be judged but it is open to an assessee to establish that, in fact there existed no....
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....uded the assessment proceedings vide order dated September 27, 2000, under section 143(3) of the Act. Later on more than four years a notice under section 148 was received from the Assessing Officer stating therein that the income of the assessee had escaped assessment for the said assessment year and a return was required to be filed. The assessee filed the very same return as was originally filed. Initiation of reassessment proceedings were challenged before the Assessing Officer on the ground of "mere change of opinion". The objection of the assessee was rejected by way of an order dated October 21, 2005, observing therein that the assessee had failed to disclose fully and truly all material facts necessary for the assessment which had resulted in escapement of income. Relying on the decision of the hon'ble Supreme Court it was held by the Assessing Officer that mere production of evidence by the petitioner before the Income-tax Officer was not enough. The assessee was duty bound to bring to the notice of the Assessing Officer all material and relevant facts which may lie embedded in the evidence produced by the assessee no matter that the Assessing Officer could have uncove....
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....and taken a conscious decision on a particular matter in issue and it will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment. It was further observed that what is important is that whether the Assessing Officer has based on the material available to him taken a view and when he had not done so the proposed reopening could not be assailed on the ground that the same is based only on a change of opinion. 54. Thus it was pleaded by the learned Departmental representative that the learned Commissioner of Income-tax (Appeals) was right in holding that reassessment proceedings were validly initiated. 55. In rejoinder learned counsel appearing on behalf of the assessee pleaded that the case law relied upon by the learned Departmental representative is not applicable to the facts of the present case. He contended that in the case of Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC) the loans which were treated to be genuine in the original assessment proceedings were subsequently discovered to be false and, therefore, it was held by the hon'ble Supreme Court that reassessment proceedings wer....
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....en passed on due application of mind. Reference was also made to section 114(e) of the Indian Evidence Act for drawing a presumption to the effect that judicial acts and official acts are performed in a regular manner. The Full Bench was of the view that if it be held (page 19) : '. . . that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assess ing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong.' 13. Before the Full Bench, a decision of the Gujarat High Court, namely, Praful Chunilal Patel v. M. J. Makwana Asst. CIT [1999] 236 ITR 832, was relied upon by learned counsel for the Revenue and the Full Bench clearly stated that it was with respect, unable to accept the view propounded in that judgment. Notwithstanding this, in Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394, the Division Bench found itself in respectful agreement with the view of the Gujarat High Court. 14. Subsequently, a similar issue came up before ano....
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....er, while passing the original assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made. Since the facts were before the Assessing Officer at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion. This cannot form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. 18. In sum and substance, this was the decision rendered by the Tribunal and we do not find any fault in the view taken. Consequently, we are of the view that since the case is one of a mere change of opinion, that does not justify the Assessing Officer's reopening the assessment of the assessee. 19. No substantial question of law arises. The appeal is, therefore, dismissed." 57. Thus he contended that the decision relied upon by the learned Departmental representative in the case of Consolidated Photo and Fin....
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....ceipts, staff quarters rent, gain on exchange and grant-in-aid (NRF) should have been offered for taxation as "business income not derived from export activity". It was further observed in the reasons that once the aforesaid income is properly taxed in the manner thus indicated, the assessee would not be eligible for claiming deduction under section 80HHC of the Act as the income derived from export will be negative. Thus it is recorded in the reasons that deduction under section 80HHC of a sum of Rs. 13,01,77,391 has wrongly been allowed and thus income of the assessee has escaped assessment on account of failure, on the part of assessee to disclose truly and fully all material facts necessary for assessment. 61. As against above reasons the case of the assessee is that deduction on interest income in its entirety was not considered for deduction under section 80HHC. It is the case of the assessee that other receipts namely, miscellaneous receipts, staff quarters rent, gain on exchange and grant-inaid were not considered for allowing deduction under section 80HHC by the Assessing Officer in the original assessment order. It is also the case of the assessee that dividend income ....
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....e inferences drawn earlier. The relevant portion of original assessment order wherein the Assessing Officer has discussed various aspects regarding grant of deduction has already been reproduced in the above part of this order in paragraph No. 4. Similarly computation of deduction under section 80HHC in the original assessment order has also been reproduced in the said paragraph. It can be seen from paragraph 6(i) of the original assessment order that the Assessing Officer has observed that deduction under section 80HHC cannot exceed profit from business in view of section 80AB and, therefore, the claim of the assessee under section 80HHC at a sum of Rs. 15,87,06,123 against gross total income of Rs.13,70,00,572 is not correct. It has further been mentioned in paragraph 6(iii) that he has carefully examined details of the profit and loss account, audit report under section 80HHC and other details furnished by the assessee and after careful examination he has pointed out the mistakes which according to him were committed by the assessee while computing deduction under section 80HHC. In paragraphs 6 and 6(i) the Assessing Officer in the original assessment has considered the applicab....
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....n be held invalid on the grounds taken by the assessee. 65. So as it relates to the issue of change of opinion, it has already been found that in the present case it cannot be said that the Assessing Officer had not formed any opinion during the course of original assessment proceedings regarding the issues on the basis of which reassessment proceedings are initiated by the Revenue. The fact of having formed an opinion is apparent and findings in this regard are well recorded in the original assessment order itself. The learned Departmental representative has placed reliance in the case of CIT v. Highgain Finvest P. Ltd. [2007] 304 ITR 325. In the said case return was processed under section 143(1)(a) of the Act and it was found as a matter of fact that the credit of Rs. 5 lakhs given by M/s. Mehram Exports Pvt. Ltd. to the assessee was a bogus transaction on the basis of which reassessment proceedings were initiated and thus the reasons recorded for reassessment proceedings were supported by material which came into the possession of the Assessing Officer after framing of the assessment. This decision was relied upon by the learned Departmental representative contending that su....
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....ect law. It will be relevant to reproduce the following observations of their Lordships from the said decision (page 315 of 294 ITR) : "14. Subsequently, a similar issue came up before another Divi sion Bench of this court in KLM Royal Dutch Airlines case [2007] 292 ITR 49. The Division Bench noted the conflict between the decision of the Full Bench and the Division Bench of this court and quite natu rally concluded that since the view expressed by the Division Bench cannot be reconciled with the view of the Full Bench, it must be held that the Division Bench did not lay down the correct law. Following the view expressed in KLM Royal Dutch Airlines case [2007] 292 ITR 49 (Delhi), we are of the view that it would not be correct on our part to overlook the decision of the Full Bench in Kelvinator of India Ltd. case [2002] 256 ITR 1 (Delhi) and rely upon the decision of the Divi sion Bench in Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394. That would be subversive of judicial discipline." 68. Thus no help can be derived by the learned Departmental representative from the said decision. 69. It has already been mentioned that all the aspects were cons....
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.... assessee in its letter dated November 8, 1995. If the Assessing Officer, while passing the original assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made. Since the facts were before the Assessing Officer at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion. This cannot form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. 18. In sum and substance, this was the decision rendered by the Tribunal and we do not find any fault in the view taken. Consequently, we are of the view that since the case is one of a mere change of opinion, that does not justify the Assessing Officer's reopening the assessment of the assessee." (emphasis ours) 70. The facts of the present case are rather on strong footings as in the abovementioned case of CIT v. Eicher Ltd. [2007] 294 ITR 310 (Del....
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....oks or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the fore going proviso." 72. The words used in the proviso "the failure on the part of the assessee ... to disclose fully and truly all material facts necessary for his assessment for that assessment year" postulate a duty on every assessee to disclose fully and truly all material facts for his assessment. At the same time, an assessee cannot delve into the mind of the Assessing Officer and try to fathom it and predicate what are material facts in the view of the officer. The facts must be such that if taken into account, that would have an adverse effect on the assessee by passing of a greater assessment than the one actually made. At the same time, the rule of full disclosure of material and necessary facts should not be so fastidiously construed as would enable the Department to say that non-disclosure of a fact which may have a remote bearing on the assessment attracts the section, as the Assessing Officer would have material use of it to charge the assessee more than what he did. The Assessi....
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....aken under consideration by the Assessing Officer in the original assessment order as it can be seen from paragraph 6(i). Though the relevant portion in the assessment order has already been reproduced in paragraph 4 of this order but to demonstrate that these aspects were considered and taken into consideration by the Assessing Officer in the original assessment order, the relevant observations are again reproduced below : "(i) As mentioned above, deduction under section 80HHC cannot exceed the profit as computed under the head "Profit from business" in view of section 80AB. In fact the assessee has wrongly included all income under the head 'Profit from business'. There is dividend income of Rs. 6,56,18,564 and net interest received of Rs. 2,62,36,763 which as provided in section 56 has necessarily to be assessed under the head "Income from other sources". The decision of the Kerala High Court Nanji Topanbhai and Co. v. Asst. CIT [1999] 243 ITR 192 on this issue is in favour of the Revenue. The Kerala High Court has held that interest income should be taxed under 'Income from other sources' and should be reduced from profits of business for computing dedu....
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.... to negative figure, therefore, no deduction should have been claimed and thus there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The well-settled law does not support such contention of the Revenue as according to law an assessee cannot delve into the mind of the Assessing Officer and try to fathom it and predicate what are the material facts in view of the officer. The rule of full disclosure of material and necessary facts should not be so fastidiously construed as it would enable the Department to say that non-disclosure of a fact which may have a remote bearing on the assessment attracts the section, as the Assessing Officer would have material use of it to charge the assessee more than what he did. The Assessing Officer cannot certainly fall back on the one to make good his deficiency in the first completed assessment, nor is he at liberty to take hold of any and every circumstance, call it non-disclosure of material facts and set machinery of reassessment in motion. 77. In the reasons recorded as well as in the reassessment order, there was no fresh material with the Assessing Officer which was not made ....