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2014 (5) TMI 509
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....missioner of Income Tax (Appeal) erred in fact and in law in confirming the action of AO in reopening the assessment on the basis of change in opinion relying on the papers already filed with the Return of Income and available at the time of original assessment u/s 143(3). It may be mentioned that reopening of assessment based on change of opinion is invalid. 3. The learned Commissioner of Income Tax (Appeal) erred in fact and in law in confirming the action of AO in allocating indirect expenses of Rs. 20,98,86,000/- instead expenses of Rs. 4,66,81,001/- to export of trading goods as done by the appellant, for the purpose of computing deduction u/s. 80HHC of the Income Tax Act, 1961. 4. The learned Commissioner of Income (Appeal) erred in fact and in law in confirming the action of AO in charging interest u/s. 234B of the Income Tax Act, 1961. 5. The learned Commissioner of Income Tax (Appeal) erred in fact and in law in confirming the action of the AO in recovering interest u/s. 244A of the Income Tax Act, 1961." 3. First two grounds relate to reopening of the assessment by the AO. 4. Brief facts of the case are that assessment u/s. 143(3) of the Act was finalized o....
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....int CIT(Assessment) 243 ITR 482 (Guj) - Techspan India Pvt. Ltd v. ITO 283 ITR 1 (Del) - CIT v. Kelvinator of India Ltd. 256 ITR 1 (Del). (FB) it was submitted that reopening in this case has wrongly been done and the same should be held to be abinitio void. 6. Ld. CIT(A) however confirmed the action of the AO by observing as under:- "4.2 I have considered the facts of the case, submissions made and the provisions of law. The case was reopened by the AO on the ground that the excess allowance under section 80 HHC on account: of incorrect working of indirect cost was given in the original assessment. From the records, it is apparent that the AO had examined this issue at the time of assessment and appellant's contention that the AO had allowed the deduction after looking into the issue is correct. From the reasons recorded it is also seen that at the time of reopening the case, the AO did not have the benefit of any fresh information. Thus, there was difference of opinion regarding the interpretation of law and facts. It is on this basis that the appellant has objected to reopening stating that reopening was based on merely change of opinion. The appellant has rel....
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.... The Courts have not approved a change of opinion when it is for the purpose of review. But ion the present case, reopening is not for the purpose of review but the AO had come to a bona fide belief regarding exact amount of assessment. These safeguards laid down by the Courts should not be used to reframe the provisions of law itself. If change in the opinion that there is under assessment, is bona fide then reopening has to be held to be valid.'. In the present case, the AO has recorded the reasons as follows: "REASONS RECORFDED FOR THE ISSUE OF NOTICE UNDER SECTION 148 OF THE IT ACT. In the instant case, assessment is completed under section 143(3) on 16.02.1998 on a total income-of Rs.7,08,79,848/-. On verification of the case records, it is seen that the assessee has been granted excess deduction under section 80HHC to the extent of Rs.10,04,848/-. Deduction under section 80HHC in respect of goods exported out of India is allowable in respect of trading goods exported and manufactured goods exported. As regard trading goods export the profit derived from such export means the export turn over of trading goods as reducted by the direct and indirect cost attributabl....
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.... relied upon various decisions in support of the contention that reopening is not valid on mere change support of the contention that reopening is not valid on mere change of opinion. The learned CIT(A) in his order dated 26.11.2002 has discussed some of the decisions and found them not relevant, to the facts of this case. In any case, it has already been held as above that in the instant case, it was not merely a change of opinion. On the other hand, the jurisdictional High Court decision in the case of Inductotherm (India) Pvt Ltd. Vs. James Kurian ACIT (294 ITR 341) had an occasion to examine a case where in the original assessment order excess relief under section 80HHC was allowed. Later the AO reopened the case on the ground that excessive deduction was allowed under section 80HHC in the original assessment. On identical facts, it was observed by the Hon'ble Court as follows. "The AO has categorically found from the record that in place of disallowance of Rs.1,44,038/-, in the original assessment order .only on amount of Rs.3,544 has been disallowed and in calculation for allowance under section 80HHC Rs.50,37,685/- were allowed in the original assessment order. In fac....
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....e examination he makes and if he likes from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he had reason to believe that such income had escaped assessment. The justification of his belief is not to be judged from the standards of proof required for coming to a final decision. A belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings under section 147 may ultimately stand altered after the hearing and while reaching the final conclusion on the basis of intervening enquiry. At the stage where he finds a cause or justification to believe that such income has escaped assessment. The AO is not required to base his belief on any final adjudication of the mater. " Another decision on identical fact which bear mention is the Hon'ble Delhi high Court decision in the case of Consolidated Photo & finvest Ltd Vs. ACIT (281 ITR 394) (Delhi), in this case, it was held as follows: "The AO had not received any additional information from any outside source or quar....
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....micals [2006] ITD 41 (AHD). x) Jawand Sons vs. CIT(A)-II [2010] taxman 144 (Punj. & Har) 9. After hearing both the parties and perusing the record, we find that there is no dispute that reopening of assessment in this case has been done within 4 years. We further find that AO while allowing claim of the assessee u/s. 80HHC amounting to Rs. 23,28,535/- on traded goods has observed as under while passing his original order:- "15. Deduction u/s. 80HHC: Assessee company has claimed the deduction u/s. 80HHC of Rs. 39,60,973/- in respect of export of traded goods and export of goods manufactured by itself. Both the deductions are worked out separately after considering the following: (a) Deduction u/s. 80HHC on traded goods To calculate the profit earned on export of trading goods assessee has excluded indirect expenses such as factory overheads, non-receivables sales-tax, advertisement, sales promotion, discount, freight outwards and royalty on domestic sales. It was contended by the assessee that as these expenses pertain to domestic sales, they should be excluded from indirect expensed for working out the deduction u/s. 80HHC on trading goods exports. Assessee was as....
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.... us that any reopening of the assessment of same claims on the basis of same material amounts to a mere change of opinion. The fact that the Assessing Officer did not record reasons for making no disallowance on such claim of exemption, would he of no consequence. 52. In the result, we are of the opinion that the notice was issued without jurisdiction. The same, therefore, requires to be and is hereby quashed. Rule is made absolute accordingly with no order as to costs." and the decision of ITAT, Ahmedad in ITA No. 4564/Ahd/2007 in the case of ACIT vs M/s Fag Bearing India Ltd dated 06-07-2012 in which on similar facts Hon'ble ITAT has found re-opening of the assessment as bad in law by placing reliance on various judicial pronouncements on the issue by observing as under:- "9. Heard both the parties and perused the record. We find that the assessee is engaged in the business of manufacturing and trading of ball and rollers bearing having two units; one which is in existence since 1962 and the other unit set up as 100% export oriented unit in 1966-67. The original assessment was completed by the A.O. without making any adjustment in the profit of EOU. This assessment has b....
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....ator of India Ltd. reported in 320 ITR 561 (SC) Hon'ble Supreme Court has held as under:- "The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an inbuilt test to check the abuse of power. Hence after April l, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material'' to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief." 11. The fact that in the body of original assessment order the A.O. did not give any specific finding accepting the claim of the claim of the assessee makes no difference if the issue was processed at the time of original assessment proceedings. It is well settled that if ....
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....lowed. In view of this fact, the CIT(A) concluded that the Assessing Officer consciously applied his mind in the original assessment and that was the reason for quashing the reassessment. But in the present case, according to him, the assessee had furnished information about the impugned payment before the Assessing Officer (without giving any reasons regarding its allow/ability as revenue expenditure) and considers that after conscious application of mind, the Assessing Officer has accepted the claim. The Court in the case of Garden Silk Mills (P) Ltd. (supra) clearly stated that "the consistent view is that even after amendment of Sec. 147 mere change of opinion does not confer jurisdiction on the ITO to initiate proceedings for reassessment merely by resorting to Explanation 1 on the basis of change of opinion. The Assessing Officer made inquiry about the claim of the assessee and asked for the details, which were furnished. Therefore, in these circumstances, in our opinion, it cannot be stated that it was not a conscious decision of the Assessing Officer to allow the claim of the assessee. Similarly, the Delhi High Court in the case of Jindal Photo Films Ltd, Vs. DCIT [234 ITR ....