TaxTMI 
TaxTMI 
2015 (1) TMI 832
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....ng units of the Petitioner were located at Ahmednagar were entitled to the benefit of tax under Section 80IA/ 80IB of the Act as they were situated in a backward region; (b) On 30th October, 2002, the Petitioner filed its Return of Income for the Assessment Year 2002-03, declaring total income of Rs. 6.89 Crores. In its Return of Income, the Petitioner claimed deduction under Section 80IA/80IB of the Act in respect of two manufacturing units situated at Ahmednagar aggregating to Rs. 2.86 Crores; (c) Along with its Return of Income, the Petitioner had filed two Auditor Certificates both dated 26th October, 2002 in respect of its two manufacturing units situated at Ahmednagar, claiming the benefit of Section 80IA/IB of the Act. The Auditor's certificate was given in terms of Section 80IA(8) of Act as then existing for claiming the deduction. Along with the Auditor's report, the Petitioner had also filed a note indicating the manner in which it had worked out its claim for deduction under Section 80IA of the Act. The note indicated that the expenses were allocated between the three manufacturing units on its turnover, actual basis and time spent depending upon the nature....
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....hich it has been observed that there is a disappropriate allocation of expenses between the various units eligible and those not eligible for deduction u/s. 80IA in view of the above, the Assessing Officer has reopened your proceedings u/s. 148, the reasons for which are being provided to you as under: "The assesssee in this case filed Return of Income on 30/10/2002 declaring income of Rs. 6,89,93,550/-. The assessment was completed u/s. 143(3) on 09/03/2005, assessing the income at Rs. 7,13,08,960/-. The assessee company is engaged in the business of manufacturing and sale of sintered automotive parts, sintered bearings and parts, fittings and mental powders. The assessee is claiming deduction u/s. 80IA for its unit located at Ahmednagar for manufacturing (i) Bearing and Parts (year of commencement 1994-95) & (ii) Metal Powder (year of commencement 1992-93). The comparative figures for the turnover and profit in respect of the assessee's 80 IA units and non 80IA units is as per Annexure 'A' enclosed herewith. Prima facie it appears that while preparing the accounts, the assesee has claimed most of its expenditure in the units which are not eligible for 8....
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.... Assessing Officer by an order dated 14th November, 2007 rejected the Petitioner's objections to the reasons recorded. This inter alia, on the ground that income had escaped the assessment and post the amendment to Section 147 of the Act w.e.f. 1st April,1989, the power of Assessing Officer to issue notice under Section 148 of the Act is much wider then that existing under the earlier provisions. SUBMISSIONS:- 4. Mr. Irani, learned Counsel in support of the Petition submits as under: (a) The sinequanon for the issue of a notice to reopen the assessment even within the period of four years from the end of the relevant assessment year would be a reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped assessment. However, in the present case as the Assessing Officer had occasion to form an opinion on the very issue of allocation of expenditure during the regular assessment proceedings, the issue of impugned notice on the same facts being a change of opinion would not satisfy the test of reasons to believe on the part of the Assessing Officer; (b) The impugned order dated 14th November, 2007 not dealing with the Petitioner's ....
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....iture to non-80IA/ IB unit. It is settled position of law that the material obtained during the subsequent assessment proceedings would be a tangible material for the purpose of invoking a provisions of Section 147/148 of the Act for reopening the assessment; (c) Without prejudice to the above, it is submitted that in any view the Assessing Officer had formed no opinion in respect of the allocation of expenditure amongst the three manufacturing units while passing the Assessment Order on 9th March, 2005 under Section 143(3) of the Act. This is evident from the fact that no reference to the same is found in the Assessment Order dated 9th March, 2005. Moreover, the queries raised by letter dated 27th December, 2004 by the Assessing Officer were of a general nature and the response being voluminous, it did not indicate any application of mind by the Assessing Officer for forming an opinion in regular Assessment Proceedings; and (d) At this stage, when, only a notice for reopening has been issued, this Court should not interfere. At this stage, it is only a prima facie view and the Petitioner would during the regular assessment proceedings have sufficient opportunity to satisfy t....
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....s 'reason to believe' as: ".... ..... ..... .... However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. Bur reassessment has to be based on fulfillment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." From the aforesaid observations of the Supreme Court, it is clear that the powers to reopen an assessment is not a power to review an ....
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....at there is no change of opinion in issuing the impugned notice although not supported by reasons. Therefore, the contention of the Petitioner that the Petition be allowed only on the above basis cannot be accepted. 12. Similarly, the contention of Revenue that merely because Petitioner had not contested the fact of escapement of income in its objections to the reasons recorded, it must conclusively follow that the impugned notice is valid in law and this Court should not interfere is not acceptable. The Petitioner had in its objections questioned the jurisdiction of the Assessing Officer to issue the impugned notice on the ground that there was no reason to believe on the part of the Assessing Officer this on the basis of the impugned notice is a change of opinion. This is evident from the fact that the opinion on the issue of allocation of expenses for claiming deduction under Section 80IA/IB of the Act was formed during the regular assessment proceedings. As observed above, the jurisdiction to issue a notice is acquired on satisfaction of twin conditions i.e. reason to believe and escapement of income tax in case of assessment being sought be opened within a period of less th....
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....th regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v/s. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to to the deduction/ claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter dated 6th August, 2007 addressed by the Assessing Officer to the Petitioner containing the reasons recorded for issuing the impugned notice also record the fact that during the regular assessment proceedings, the Petitioner has been asked to furnish details in support of the claim for exemption under Section 80IA/IB of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a disproportionate distribution of expenses between various units belonging to the Petitioner for cla....
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....r of India Ltd. (supra). Moreover, the power to reassess under Section 147/148 of the Act is not a power to review an order of assessment passed under Section 143(3) of the Act. 16. It is further submitted on behalf of the Revenue that so far as letter dated 27th December, 2004 issued by the Assessing Officer is concerned, same was of general nature and particulars furnished by the Petitioner in response to the same are voluminous and, therefore, not indicative of any application of mind on this issue by the Assessing Officer. Reliance was placed upon the decision of this Court in Export Credit Guarantee Corporation v/s. Additional CIT 350 ITR 651 by the Revenue in support of its stand that as the issue of allocation of expenses was ignored/ overlooked while passing an assessment order, then in such case, it is open to an Assessing Officer to exercise its jurisdiction under Section 147/148 of the Act and reopen the assessment. In the above decision, during regular assessment proceedings, no query was made with regard to the issue on which the assessment was sought to be reopened, and therefore, ex-facie indicative of non application of mind. In the present case, the Assess....
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.... the observations were made in the context of the Assessing Officer admittedly not having formed an opinion on the issue on which a reS. opening notice for reassessment was issued. The aforesaid decision is also of no avail to the Revenue. 18. In was next contended by Mr. Chhotrary, learned Counsel appearing for the Revenue that in the present case, the impugned notice does not emante from any change of opinion but on account of communication dated 15th January, 2007 received by the Assessing Officer from Additional Commissioner of Income Tax who had assessed the Petitioner to tax for the Assessment Year 2004-05. The aforesaid communication dated 15th January, 2007 has been annexed to the affidavit in reply dated 11th January, 2008 filed by the Assistant Commissioner of Income Tax. The aforesaid communication dated 15th January, 2007 is not even referred to in the reasons recorded while issuing the impugned notice dated 14th March, 2007. On the contrary, the communication dated 6th August, 2007 which contains the reasons recorded at the time of issuing the impugned notice refers to the details furnished by the Petitioner during the regular assessment proceedings and it is now ob....