TaxTMI 
TaxTMI 
2013 (2) TMI 292
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..... 1,82,745/- was filed on 29-11-2003 after claiming the deduction of Rs. 1,82,746/- u/s. 80HHC. On verification of the said return, it is noticed that while computing the deduction u/s 80HHC, the assessee has considered DEPB License income of Rs. 29,85,543/- and excise duty refund of Rs. 22,35,799/-. If these two export incentives are excluded from the income of the assessee, there will be a loss from the export business and consequently the assessee will not be entitled to get deduction u/s. 80HHC of the I.T. Act, 1961. 2. It is imperative that deduction u/s. 80HHC of the Act has to be computed within the parameters of the provisions of section 80AB of the I.T. Act, 1961. In other words, if there is insufficient profit from the export business after setting off the export incentives, the assessee will not be eligible for deduction u/s. 80HHC of the I.T. Act, 1961. This finds support from the decision of the Hon'ble Supreme Court of India in the case of IPCA Laboratory Ltd., 266 ITR 530. The CBDT, New Delhi also vide its letter No. D.O. No. 275/50/2004-IT (B) dated 6-7-2004 issued directions to reopen cases, wherein deduction u/s. 80HHC has been....
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....oceedings. In view of the above fact we find that the issue is squarely covered by the recent decision of the Hon'ble Bombay High Court in the case of CIT. v. Jet Airways (I) Ltd., wherein the Hon'ble Bombay High Court after considering the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Atlas Cycle Industries [1989] 180 ITR 319 and the decision of Hon'ble Rajasthan High Court in the case of CIT v. Shri Ram Singh [2008] 306 ITR 343 (Raj) held as under:- "If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently." 4. We thus find that in the instance case no assessment was made in respect of income for which the Learned Assessing officer recorded reasons to belief to issue notice under section 148(2) of the Act. Moreover, we find that no discussion also was made in the impugned order about that income. Thus we find that the income in respect of which reassessment notice was issued by the Learned Assessing officer ....
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..... Counsel relied on a decision of Punjab and Haryana High Court in case of Majinder Singh Kang v. Commissioner of Income-Tax and anr reported in [2012] 344 ITR 358 (P &H) in which the Division Bench of the High Court held and observed as under: "A plain reading of Explanation 3 to section 147 clearly depicts that the Assessing Officer has power to make additions even on the ground on which reassessment notice might not have been issued in case during the reassessment proceedings, he arrives at a conclusion that some other income has escaped assessment which comes to his notice during the course of proceedings for reassessment under section 148 of the Act. The provision no where postulates or contemplates that it is only when there is some addition on the ground on which reassessment had been initiated, that the Assessing Officer can make additions on any other ground on the basis of which income may have escaped assessment. The reassessment proceedings, thus, in the present case cannot be held to be vitiated." 12. On the other hand, learned counsel, Mr. Soparkar drew our attention to the statutory provisions contained in Section 147 of the Act, as amended w.e.f. 01.04.1....
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....3 to the said section. The High Court placed heavy reliance on the explanatory memorandum and held that if upon issuance of a notice under Section 148 of the Act the Assessing Officer does not assess the income which he has reason to believe had escaped assessment and which forms the basis of a notice under Section 148, it is not open to the Assessing Officer to assess independently any other income which does not form the subject matter of the notice. In the process, the High Court observed as under: "23. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in section 147 and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147 as it stands prostulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words 'and....
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....by including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148." 17. In case of Assistant Commissioner of Income Tax v. Major Deepak Mehta reported in [2012] 344 ITR 641 wherein Division Bench of Chhattisgarh High Court also adopted the view taken by the Bombay High Court in case of CIT v. Jet Airways (I) Ltd. (supra). It was observed as under: "35. In the case on hand, the main object and purpose of section 147 read with section 148 is that if there is any escaped assessment and the Assessing Officer has reason to form the opinion a notice must be given to the assessee to file returns or to show that there was no escaped income an under section 152(2) the proceedings may be dropped. In that context, the Explanation provides that along with the proceedings for the escaped income which had formed reason to believe and the assessee has been properly intimat....
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....tutory provisions applicable. Section 147 of the Act underwent significant changes w.e.f. 01.04.1989. In the present form as it stands the section reads as under: "[Income escaping assessment.] 147. Income escaping assessment.- If the Assessing Officer has 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 ass....
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....) of section 148." 20. We may notice that Explanation 3 to Section 147 of the Act was inserted by Finance Act 2 of 2009 w.e.f. 01.04.1989. To this aspect of the matter and the effect of the explanation itself we would advert to at a later stage. 21. Section 148 of the Act pertains to "issuance of notice where income had escaped assessment". Subsection (1) of Section 148 pertains to the requirement of issuance of notice by the Assessing Officer before making the assessment, reassessment or recomputation of income under Section 147 of the Act. Sub-section (2) of Section 148 provides that the Assessing Officer shall before issuing any notice under the said section record his reasons for doing so. 22. Section 147 of the Act thus, gives power to the Assessing Officer for reopening an assessment. Such powers, however, are hedged with several conditions. First the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment. Further if the reopening is resorted beyond the period of four years from the end of the relevant assessment year, additional requirement that income chargeable to tax has escaped assessment by the reason of failure o....
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....duction of Explanation 3 to Section 147 of the Act, the situation has not undergone any material change is accepted, the question that immediately would come to one's mind is, what then was the purpose of introducing such an explanation. An argument may arise that if before and after introduction of Explanation 3, the nature of jurisdiction exercised by the Assessing Officer was not to undergo any change, would Explanation 3 not be rendered redundant. Would such a situation not run counter to a well known legal principle that the Legislature cannot be seen to have enacted a redundant legislation and that every effort should be made to give such interpretation which ensures that a provision in a statute is not rendering otiose. Such question may have led to some interesting discussion. However, the entire issue has been put beyond any pale of controversy by virtue of the explanatory memorandum for introducing such explanation. Such explanatory memorandum reads as under: "Clarificatory amendment in respect of reassessment Proceeding under section 147 The existing provisions of section 147 provides, inter alia, that if the Assessing officer has reason to believe ....
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....ned in the reasons recorded for reopening the assessment. We may also notice that Kerela High Court in case of Travencore Cements Ltd. v. Assistant Commissioner of Income-Tax and Anr. reported in 305 ITR 170 had taken somewhat similar stand. 28. Explanation 3 to Section 147 of the Act thus does not in any manner, even purport to expand the powers of the Assessing Officer under Section 147 of the Act. In any case, an explanation cannot expand the scope and sweep of the main body of the statutory provision. In case of S. Sundaram Pillai v. V.R. Pattabiraman reported in AIR 1985 Supreme Court 582 the Supreme Court observed that, an explanation added to a statutory provision is not a substantive provision but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. It was observed as under: "52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is- (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main....