TaxTMI 
TaxTMI 
2007 (9) TMI 303
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....nce 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 'business income' by the appellant. That the Commissioner of Income-tax (Appe....
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.... 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 of interest under section 234B and in confirming the withdrawal of interest under section 244A of the Act." Assessment year 1999-2000 : "1. That the Commissioner of Income-tax (Appeals) erred on facts and in la....
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....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 eligible profits for computing deduction under section 80HHC of the Act. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the exclusion of 90 per cent. of the following receipts for computing 'profits of the business' in terms of clause (baa) of the Explanation to section 80HHC of the Ac....
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....ee 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 original assessment order at Rs. 13,01,77,391 and in such manner the Assessing Officer after considering various aspects had restricted the claim of the assessee under section 80HHC to a sum of Rs.13,01,77,391 against claim of Rs. 15,87,06,123. While considering the claim of the assessee under section 80HHC the observations of the Assessing Officer in the original assessment order as per ....
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.... 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 under section 80HHC allowable to the asses see shall be as per working given in annexure to this order." Annexure "A" vide which deduction under section 80HHC allowable to the assessee has been computed at Rs. 13,01,77,391 is as under : Annexure "A" Deduction under section 80HHC 1. Name of the assessee MMTC Ltd. 2. Assessment year 1998-99 (Rs.) 3. Total turnover of the busine....
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.... (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 view of the provisions of section 80AB no deduction under section 80HHC is allowable. The reasons recorded for reopening of the assessment are as under : Reasons recorded for reopening the assessment of M/s. MMTC Ltd. for the assessment year 1998-99 under section 147 of the Income-tax Act, 1961. "1. The assessee offered, inter alia, the following incomes in its return of income for taxation as profits and gains of business and profession. The details are as under : Descriptions Amounts Interest income 22,18,23,913 Dividends from investment 6,56,18,564 Miscellaneous receipts 3,09,28,014 Staff quarters rent 10,86,567 Gain on exchange 2,99,59,498 Grant-in-aid (NRF) 80....
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....ted 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 income". Thus it was pointed out that deduction under section 80HHC has not been allowed on the net interest and dividend income aggregating to Rs. 9,18,55,327 (2,62,36,763 net interest + 6,56,18,564 dividend). 7. It was further pointed out that other receipts namely, miscellaneous receipts, staff quarters rent, gains on exchange and grant in aid were also excluded from "profits of the business" of the assessee in terms of Explanation (baa) to section 80HHC of the Act and that such income was also not considered eligible for deduction under section 80HHC. Thus it was pointed out that allegation contained in the reasons recorded that deduction under section 80HHC of the Act has been wrongly allowed on the entire receipts of Rs. 35.74 crores is not factually correct. It was pointed out that substantial part of such....
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....sessee 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 interest paid and invited your honour's predecessor's attention to the fact that for claiming deduction under section 80HHC of the Act interest income has been adjusted against interest expenditure (copy enclosed as "Annexure C"). In the above letters, the assessee also referred to its earlier letter dated August 11, 2000, wherein on page 4 the assessee justified its claim for deduction under section 80HHC of the Act (copy enclosed as "Annexure D"). (ii) The claim for deduction under section 80HHC of the Act on the aforesaid basis was supported by the certificate of the chartered accountant in Form 10CCAC enclosed along with the return of income as also the past assessment orders. (iii) Your honour's predecessor, after duly considering the aforesaid detailed replies of the assessee, agreed with some of the contentions of the as....
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..... 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 of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year." 11. To contend that assessment can be reopened beyond the period of four years from the end of the relevant assessment year only in a case if there is a failure on the part of the assessee either to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Reference was made to various decisions to plead that in a case where there is....
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....it 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 allowability of deduction under section 80HHC in such a scenario was never raised in the assessment proceedings. The applicability of section 80AB was never considered by the Assessing Officer nor was confronted by the Assessing Officer to the assessee during the assessment proceedings. The judgment of the hon'ble Supreme Court in the case of IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 was delivered on March 11, 2004, and the assessment order in this case was passed on February 23, 2001. So, the Assessing Officer did not have the order of the hon'ble Supreme Court with him at the time of passing of the order. The judgments of the hon'ble Bombay High Court in the case of Rohan Dyes and Intermediates P. Ltd. v. CIT [2004] 270 ITR 350 and the judgment of the Kerala High Court in the case of CIT v. A. M. Moosa, Bharat Sea Foods [2005] 272 ITR 29 and the decision of the Special Bench of the Income-tax Appellate Tribunal, Mumbai, in the cas....
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....annot 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. CIT [1973] 92 ITR 474 (Mad) and Smt. Nirmala Birla v. WTO [1976] 105 ITR 483 (Cal). Mere silence on a matter or absence of discussion in the original order does not imply that the Assessing Officer adjudicated upon the same one way or the other, as was held in CIT v. H. P. Sharma [1980] 122 ITR 675 (Delhi). But this depends upon as to how the material facts were placed during the course of original assessment. In Gruh Finance Ltd. v. Joint CIT (Assessment) [2000] 243 ITR 482 (Guj), it was held that if certain aspect was not consciously considered at the time of the first assessment, notice issued under section 148 on that ground is valid in law. The words 'reason to believe' are stronger than the words 'is satisfied'. The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable, or in other words, it must be based on reasons which are relevant and material (Ganga Saran and Sons P. Ltd. v. ITO [1991] 130 ITR 1 (SC)). These words suggest that ....
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....g on fresh information. Since the belief is that of the Assessing Officer, the sufficiency of reasons for forming the belief, is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at a bona fide one or was based on vague, irrelevant and non-specific information, also applied in Aditya Mills Ltd. v. Union of India [1995] 214 ITR 669 (Raj). Where deduction for interest paid on moneys borrowed for purposes of business was allowed against interest income assessed under other sources, and proceedings for reassessment were initiated on basis of a High Court decision which came to the notice of the Assessing Officer subsequent-vide U. P. State Brassware Corporation Ltd. v. CIT [2004] 277 ITR 40 (All) ; [2005] 5 MTC 193 (All). In Asst. CIT v. Nitin Steel Centre [2002] 75 TTJ (Pune) 318, it was held that a perusal of Explanation 2(b) to section 147 clearly shows that two conditions must be satisfied before its application, namely : (1) the return of income must have been furnished by the assessee, and (2) it is shown that in the return so furnished, the asses see has either understated the income or has c....
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....(a) The assessee had not filed any revised return with this letter. But it had filed a revised computation citing the judgment of the hon'ble Supreme Court in the case of Bharat Earth Movers v. CIT [2000] 245 ITR 428 and reducing the provision for leave encashment amounting to Rs. 3,92,92,190 also the fact that the provision for productivity linked incentive amounting to Rs. 1,87,20,459 pertaining to earlier year which has been credited to the profit and loss account of the assessment year 1998-99 but was not allowed as expense in the immediately preceding year. (b) This revised computation was considered by the Assessing Officer at the time of passing of assessment order but relief was not granted by him. (c) The hon'ble Supreme Court in the case of CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297 while elaborating on the scope of reassessment decreed as follows : (i) Claims which have been disallowed in the original assessment proceeding cannot be permitted to be reagitated and a matter not agitated and concluded in assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the items sought to be taxed a....
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....nbsp; (-) 2,79,55,314 Add : Income from other sources 1. Interest income 2. Dividend income 22,18,23,913 6,56,18,564 28,74,42,477 14. As it can be seen from above the net effect of reassessment is that deduction under section 80HHC which was earlier granted has been completely withdrawn by holding that interest income and dividend income is assessable as income from other sources and if these are assessed as income from other sources then the assessee has negative business income on which deduction under section 80HHC could not be allowed. It is against such reassessment order the assessee is aggrieved hence in appeal. 15. In ground No. 1 the validity of reassessment proceedings has been challenged. To contest the validity of reassessment proceedings following broad propositions were laid by learned counsel for the assessee Shri Ajay Vohra. (a) The impugned reassessment proceedings were initiated on a mere change of opinion, which is not permissible in law ; (b) The impugned reassessment proceedings were initiated without forming a reasonable belief that income of the appellant had escaped assessment, which is a pre-requisite condition for valid....
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....ection 80HHC 13,01,77,391 18. Reading the reasons recorded by the Assessing Officer for initiating reassessment proceedings, learned counsel pleaded that according to the Assessing Officer following incomes which were declared to be "business income" and consequently on which deduction under section 80HHC was claimed by the assessee should have been offered for taxation as follows : Description Amount Nature of income Interest income 22,18,23,913 Income from other sources Dividends 6,56,18,564 -do- Misc. receipts 3,09,28,014 Business income not derived from export activity Staff quarters rent 10,86,567 -do- Gain on exchange 2,99,59,498 -do- Grant-in-aid 80,00,000 -do- Total 35,74,16,556 19. Learned counsel pleaded that it is further mentioned in the reasons that once aforesaid incomes are properly taxed in the manner indicated by the Assessing Officer, the assessee would not be eligible for claiming any deduction under section 80HHC of the Act and the assessee has been wrongly allowed deduction of Rs. 13,01,77,391 and thus the income of the assessee has escaped from assessment on account of failure on the part of the assessee to disclose truly and ....
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....he original proceedings ; (b) The applicability of section 80AB of the Act was not considered in the original assessment ; (c) The decision of the Supreme Court in IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 and subsequent decisions thereto were not available at the time of original assessment and were, therefore, not considered. (d) Certain decisions of the Supreme Court, which though available at the time of original assessment, were not in the knowledge and thus not considered in original assessment. 24. Referring to the objections of the Assessing Officer on the issue of change of opinion learned counsel pleaded that section 147 of the Act authorises and permits an Assessing Officer to assess or reassess income chargeable to tax, if he has reasons to believe that such income for any assessment year has escaped assessment. He pleaded that section 148 does not confer jurisdiction to reopen a completed assessment on change of opinion on the interpretation of a particular provision earlier adopted by the Assessing Officer. The scope of the said section does not extend to reviewing its earlier order suo motu irrespective of there being any material to come to a diff....
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....al assessment under section 143(3) of the Act was completed after due application of mind on the claims made by the assessee in the return and/or during the assessment proceedings. It was not a case where the income had allegedly escaped assessment either due to non-furnishing of all material facts by the assessee and/or ignorance/ non-consideration of any of the aforesaid claims of the appellant by the Assessing Officer in the original assessment. 28. He further pleaded that on the contrary the following facts will sufficiently demonstrate that the Assessing Officer, before completing the original assessment, sought all relevant information/ clarifications/material from the appellant, applied his mind to the claims of the assessee and thereafter came to a conscious decision to either agree or disagree with the claims of the appellant : On the issue-whether gross interest of Rs. 22.18 crores or net interest of Rs. 2.62 crores was assessable as "income from other sources" which, as stated above, can only be considered to be the sole basis of initiating the present reassessment proceedings, the following information were sought and duly replied to by the appellant during the origina....
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....me to conscious decision to assess only net interest income of Rs. 2.62 crores as income from other sources in the original assessment order. Subsequent incumbent of the Assessing Officer, after perusal of the assessee's record also agreed with the conclusion of the Assessing Officer who completed the original assessment order in the case of the assessee as it is evident from the fact that in the remand report submitted vide letter dated January 16, 2002, before the Commissioner of Income-tax (Appeals) the said officer specifically stated that he agrees with the aforesaid conclusion. He pointed out to the following observations of subsequent incumbent the Assessing Officer in the remand report (page 49 of the paper book) which is as under : "As regards interest, the appellant explains that during the year under consideration, the appellant earned interest of Rs. 22.18 crores and paid an amount of Rs. 19.56 crores. As a result thereof there has been a surplus and it has to be treated as business income and not as income from other sources. The appellant further claims that the earning of interest income related to the deposits with the bank earned from customers against credit....
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....from the computation of deduction made in the original assessment order. 33. Referring to reason (d), learned counsel pleaded that the concept of "derived from" as enunciated in the decision of the Supreme Court in the case of Sterling Foods [1999] 237 ITR 579 could not be applied in the reassessment proceedings. He contended that as explained above, in the original assessment no deduction was allowed at various incomes referred in the reasons recorded and thus he pleaded that the concept of "derived from" was not at all relevant for reopening. He pleaded that in the original reasons clauses (c) and (d) do not find any mention. Thus even otherwise, reopening cannot be supported on the basis of such further reasons, namely, (c) and (d). 34. Learned counsel further pleaded that it is a settled law that the validity of initiation of reassessment proceedings must be tested on the basis of reasons recorded by the Assessing Officer prior to initiation of reassessment proceedings and nothing more. He pleaded that it has consistently been held in the various decisions that the reasons recorded cannot be supplemented by fresh/further reasoning to justify the initiation of reassessment pro....
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....st. CIT [2004] 266 ITR 196 (Bom) ; ICICI Bank Ltd. v. K. J. Rao [2004] 268 ITR 203 (Bom) ; Hindustan Lever Ltd. v. R. B. Wadkar, Asst. CIT (No. 2) [2004] 268 ITR 339 (Bom) ; Girdhar Gopal Gulati v. Union of India [2004] 269 ITR 45 (All) ; Mahavir Spinning Mills Ltd. v. CIT [2004] 270 ITR 290 (P&H) ; Parikh Petrol Chemical Agencies P. Ltd. v. Asst. CIT [2004] 266 ITR 196 (Bom) ; Duli Chand Singhania v. Asst. CIT [2004] 269 ITR 192 (P&H) ; CIT v. Nedungadi Bank Ltd. [2003] 264 ITR 545 (Ker) ; Oil and Natural Gas Corpn. Ltd. v. Deputy CIT [2003] 262 ITR 648 (Uttaranchal) ; Chandan Metal Products P. Ltd. v. Deputy CIT [2002] 81 ITD 366 (Pune) ; and Chem Crown Exports Ltd. v. ITO [2005] 93 TTJ (Cal) 710. 37. The learned authorised representative contended that expression "material facts" has been explained in the decision of the hon'ble Rajasthan High Court in the case of CIT v. A. R. Enterprises P. Ltd. [2002] 255 ITR 121 and he invited our attention towards the following observations of their Lordships (page 125) : "The expression 'material facts' refers only to the primary facts. There is no duty cast on the assessee to indicate or draw the attentio....
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....ed authorised representative pleaded that the Assessing Officer has clearly failed to justify initiation of impugned reassessment proceedings in the terms of the proviso to section 147 of the Act. There is nothing on record to establish any failure on the part of the assessee to disclose any material fact necessary for the assessment of the assessee. Thus he pleaded that reassessment proceedings are initiated without jurisdiction and thus are bad in law and void ab initio. 41. Referring to the order of the Assessing Officer dated November 21/22, 2005, he pleaded that reassessment proceedings have been initiated just to consider certain judicial precedents. He pleaded that non-consideration of judicial precedents which was available at the time of original assessment cannot be the basis for reopening of concluded proceeding as the assessee is not at all required to bring to the notice of the Assessing Officer the judicial precedents relevant for making the assessment. He pleaded that on the contrary, it is the duty of the Assessing Officer to frame the assessment on the basis of judicial precedent available at the time of framing of the assessment. He pleaded that merely on account....
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.... of the Assessing Officer, which were not available at the time of original assessment. He contended that the decisions relied upon by the Assessing Officer have been elaborately distinguished by the assessee vide letter dated November 29, 2005, and he in this regard referred to pages 84 to 94 of the paper book where copy of such letter is furnished. 45. Referring to the facts of the present case he contended that no fresh facts were considered in the present reassessment proceedings and on the contrary the reassessment was done by the Assessing Officer only for taking into consideration certain decisions. The learned authorised representative pleaded that the consideration/non-consideration of a judicial precedent cannot be considered to be fresh facts coming to the notice subsequent to the conclusion of the original assessment proceedings. He pleaded that a clear distinction exists between fresh facts coming to the knowledge of the Assessing Officer and a judicial precedent. 46. Finally concluding his arguments on this issue the learned authorised representative pleaded that the allegation of the Assessing Officer that the assessee has failed to disclose the primary facts regar....
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....), New Delhi, giving information that the assessee was involved in giving and taking bogus entries/transactions during the financial year 1996-97. A survey was conducted in the office premises of one Shri Sanjay Rastogi, chartered accountant and in his deposition said Shri Sanjay Rastogi stated that a credit of Rs. 5 lakhs was given by M/s. Mehram Exports Pvt. Ltd. to the assessee and that the same was a bogus transaction. Consequently a notice under section 148 was issued. The assessee contested reopening of the assessment before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) held that the assessee had merely disclosed the fact that he had received share application money and what the assessee did not disclose was true source and nature of the receipt and to this extent the assessee did not make the full and true disclosure of facts. Since the assessee did not fully and truly disclose all material facts necessary for assessment, the Assessing Officer could reopen the assessment even though four years had gone by from the end of the relevant assessment year. Before the Income-tax Appellate Tribunal it was contended on behalf of the assessee that ....
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....ction of reopening of assessment is based on change of opinion and, therefore, the same cannot be said to be incompetent or otherwise improper. On the basis of that decision it was contended by the learned Departmental representative that the principle of change of opinion is applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. 51. In the said case the assessee was engaged in the business activity of acting as import agent. The return was filed at a loss of Rs. 2,96,44,790. The assessee had received interest free advances/trade deposits from its principals to pay the import bills against letter of credit opened by the assessee at its own cost. These interest-free funds, according to the assessee, could be used for any gainful activity till such time the same were utilized to meet the demand under the import bills. Thus the assessee claims to have utilised these funds in making short time advance by way of intercorporate deposits and had earned interest income on the same which according to the assessee was incidental to its business. Further it was pleaded on behalf of the assessee that durin....
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....in the order of assessment to show that the Assessing Officer had critically examined the same claim or material. It was pleaded that it is also not the case of the assessee that the material furnished by him to the Assessing Officer before the conclusion of assessment had been examined and analysed by passing the order of assessment. Thus it was contended that it cannot be said to be a case of change of opinion and it was pleaded that in fact the Assessing Officer had recorded no opinion whatsoever on admissibility of deductions claimed by the assessee. Reference was made to clause (c) of Explanation 2 to section 147 to contend that it is abundantly clear that cases in which the taxable income had been made the subject of excessive relief under the Act or cases in which excessive loss or depreciation allowance or any other allowance under the Act had been computed to constitute the cases of escaped assessment within the meaning of section 147 of the Act. 53. Considering these submissions it was held by the hon'ble High Court that in view of Explanation 1 to the proviso to section 147 the action initiated by the Revenue does not suffer from any error of jurisdiction to warrant....
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....f the hon'ble Delhi High Court in the case of Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394 he pleaded that this case was later on considered by the hon'ble Delhi High Court in the case of CIT v. Eicher Ltd. [2007] 294 ITR 310 (ITA No. 309/2006 order dated May 22, 2007), (a copy of this order is placed at pages 457 to 460 of the paper book). He contended that their Lordships have observed as under (page 314 of 294 ITR) : "11. Learned counsel for the Revenue relied upon Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394, wherein a Division Bench of this court considered the case law and came to the conclusion that in principle a mere change of opinion would be applicable only to a situation where the Assessing Officer had taken a conscious decision on the matter in issue. It was held that it would have no application where the assessment order does not record a finding on the aspect which formed the basis for reopening the assessment. 12. In response, learned counsel for the assessee drew our attention to CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 wherein the Full Bench of this court had taken a completely contrary view and it....
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....t observed that an asses see has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. We agree. 16. Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. 17. In so far as the present appeal is concerned, w....
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....ly in the circumstances where there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The following facts are not in dispute : (i) The assessee filed its return of income on a sum of Rs. 3,02,82,098 on November 30, 1998 ; (ii) The assessment under section 143(3) of the Act was completed vide order dated February 23, 2001, assessing the income of the assessee at a sum of Rs. 12,93,09,770 ; (iii) In the original assessment the Assessing Officer, inter alia, recomputed deduction allowable to the assessee under section 80HHC at a sum of Rs. 13,01,77,391 against the claim of the assessee at a sum of Rs.15,87,06,123 ; (iv) A notice dated February 23, 2005, was issued by the Assessing Officer under section 148 initiating reassessment proceedings for the year under consideration. (v) The reassessment was completed vide order dated February 28, 2006, in which deduction under section 80HHC granted earlier was withdrawn. 59. The main reasons recorded by the Assessing Officer to initiate reassessment proceedings are as follows. 60. That interest and dividend income should have been offered for taxation under the hea....
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....sed in the original assessment which was a conscious decision of the Assessing Officer in the original assessment order. 62. Further according to the letter of the Assessing Officer dated November 21/22, 2005, the Assessing Officer expressed that reassessment proceedings are not initiated on a mere change of opinion since the issue of allowability of deduction under section 80HHC in the case of negative business income was neither raised nor considered in the original assessment proceedings. Similarly the applicability of section 80AB of the Act was not considered and the decision of the hon'ble Supreme Court in the case of IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 and certain other decisions which were available on the date of framing the assessment were not in the knowledge of the Assessing Officer and thus not considered in the original assessment. 63. On the issue of change of opinion it has been argued before us that section 148 does not confer jurisdiction to reopen a completed assessment on change of opinion on the interpretation of a particular provision earlier adopted by the Assessing Officer. The scope of said section does not extend to reviewing its ea....
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....n paragraph 6(ii). In paragraph 6(iii) the Assessing Officer has considered the aspect that as per procedure laid down in section 80HHC no deduction under section 80HHC can be allowed in case of negative profit and in this regard he has relied on certain decisions. Thus while framing the original assessment it was in the mind of the Assessing Officer that on negative profit deduction under section 80HHC cannot be allowed. Keeping in view all these aspects the Assessing Officer in the original assessment order has computed deduction under section 80HHC as per annexure "A". It is not the case of the Revenue that the Assessing Officer asked some information which was withheld by the assessee during the course of original assessment proceedings rather full details were furnished by the assessee which were examined by the Assessing Officer and such fact of verification of details and examination by the Assessing Officer is very well recorded in the original assessment proceedings. It is a clear case where certain opinions were formed by the Assessing Officer on the grant of deduction under section 80HHC from all necessary and material facts which were made available to him by the assess....
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....pplied to the facts of the present case. 67. Now coming to the third decision relied upon by the learned Departmental representative, i.e. Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394 wherein it has been held that a mere change of opinion would be applicable only in a situation where the Assessing Officer had taken a conscious decision on the matter in issue and it was held that it would have no application where the assessment order does not record a finding on the aspect which formed the basis for reopening the assessment. However, facts in the present case are different as in the present case the elaborate findings have been recorded by the Assessing Officer in the original assessment order itself. Moreover, this decision was subsequently considered by the hon'ble jurisdictional High Court in the case of CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi) (a copy of which has been submitted in the paper book at pages 457 to 460) wherein referring to that decision it was observed by the hon'ble jurisdictional High Court that in view of the earlier Full Bench decision of the Delhi High Court in the case of KLM Royal Dutch Airlines case [2007] 292 ITR 49 t....
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....aken by him or his successor on the same facts, it clearly amounts to change of opinion which cannot form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. Reference can be made to the following observations to their Lordships from the said decision (page 315 of 294 ITR) : "16. Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the asses see before the Assessing Officer at the time when the original assess ment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. 17. In so far as the present appeal is concerned, we find that the assessee had....
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.... reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : 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 of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assess....
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....rant of deduction under section 80HHC as provided in paragraph 3 of reasons recorded are based on two factors as follows : (i) If income from other sources and profits of business not derived from exports are excluded as per the legal provisions of the Income-tax Act, 1961, there is a net loss under the head "Profits and gains of business or profession". (ii) Consequently, in view of the provision of section 80AB of the Income-tax Act, 1961, no deduction under section 80HHC is allowable. 74. While discussing the aspect of change of opinion it has been extensively dealt and found that the Assessing Officer while computing deduction under section 80HHC in the original assessment order, had gone in depth regarding interest, dividend income and other receipts. It has also been found out that dividend income has not at all been considered while computing deduction under section 80HHC and so as it relates to net interest income has been excluded in view of the decisions prevalent at that time. Similar is the position with regard to other receipts which according to the Assessing Officer in the reassessment order are not eligible for deduction under section 80HHC. So as it relates to....
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....90 (Indore) and Yarn Syndicate Ltd. v. Deputy CIT [2001] 114 Taxman 123 (Cal). The learned CIT(A)-XXII, New Delhi has also confirmed this stand in other cases assessed to tax in this range." 76. Thus it can be seen that all these aspects on the basis of which the assessment was proposed to be reopened were elaborately taken into consideration by the Assessing Officer in the original assessment order. As pointed out earlier that the proviso to section 147 postulates a duty on every assessee to disclose fully and truly all material facts for the reassessment. We have observed that the assessee had disclosed fully and truly all material facts necessary for the purpose of computing deduction under section 80HHC. Thus no failure can be attributed on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the years under consideration. From the reading of the reasons recorded it appears that it was in the mind of the Assessing Officer that the assessee itself should not have claimed deduction under section 80HHC in respect of income from other sources and in view of the fact that if this "income from other sources" is excluded and separat....