TaxTMI 
TaxTMI 
2016 (4) TMI 357
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.... reopening the assessment u/s 147/148 of the I.T. Act. iii. That the learned Deputy Commissioner of Income Tax as well as learned Commissioner of Income Tax(Appeals) was not justified in reducing the deduction u/s 80HHC of the I.T. Act. iv. The assessee craves the right to add, delete, modify any one or more of the grounds of appeal at the time of hearing. 3. The facts in brief are that the assessee filed return of income on 20/09/2001 declaring income of Rs. 4,57,000/- after claiming deduction of Rs. 1,36,62,093/- under section 80HHC and Rs. 47,06,365/- under section 80IA of the Income-tax Act, 1961 (in short "the Act"). The scrutiny assessment under section 143(3) of the Act was completed on 25/03/2003 at total income of Rs. 4,77,000/- after allowing the deduction under section 80HHC and 80IA of the Act , as claimed by the assessee. Subsequently, it was noticed by the Assessing Officer (AO) that the deduction under section 80HHC of the Act was incorrectly allowed, and therefore after recording reasons to believe that income has escaped assessment, and after taking necessary approval from the Commissioner of Income Tax, a notice under section 148 of the Act was issued on 02/....
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....ng fully and truly all material facts necessary for the assessment and in the case of assessee all the facts were disclosed in assessment proceedings and there was no failure on the part of the assessee, and therefore the reopening was bad in law and liable to be quashed; (b) that in the reasons recorded, it was not mentioned what was the failure on the part of the assessee to disclose fully and truly all material facts, and therefore reopening was not sustainable in view of the judgment of the Hon'ble Delhi High Court in the case of global signal cables (India) Private Limited vs. DCIT in writ petition number WPC No. 747/2014 dated 17th of October 2014;. (c) that there was no new tangible material before the Assessing Officer for reopening of the assessment. In support of the proposition, the learned AR relied on the judgment of the Hon'ble Delhi High Court in the case of Orient Craft Ltd reported in (2013) 354 ITR 536; (d) that case cannot be reopened on the basis of a retrospective amendment in law. In support of the proposition, the learned AR relied on judgment of the Hon'ble Kerala High Court in the case of CIT Thiruvanathapuram vs. B Mohanachandranan Nair (2014) 45 tax....
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....any other provisions of this chapter under the heading 'C-Deduction in respect of certain income' and shall in no case exceed the profits & gains of such eligible business of the undertaking or enterprise, as the case may be". In view of the above facts, the deduction u/s 80IA will be calculated first and thereafter it will be reduced from the profit and gains of industrial undertaking and the deduction u/s 80HHC will be calculated on the balance amount of business profit of the undertaking. Further, it is also noticed that while calculated deduction u/s 80HHC, the assessee has incorrectly taken into account the following incomes as export business income. i) Duty entitlement. 126,37,196/- ii) Supervision charges 10,000/- iii) Prior period income 17,748/- As regards assessee's claim of deduction u/s 80HHC on the amount of Duty entitlement of Rs. 126,37,196/-, it is stated that the Taxation Laws Amendment Act, 2005 has amended provisions of Section 28 & 80HHC w.e.f. AY 1998-99, as per section 28(iiid) any profit on the transfer of the Duty entitlement passbook scheme, being Duty Remission Scheme, under the Export & Import policy formulated and announced u/s 5 of the Fore....
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.... Profit u/s 28 as computed u/s 143(3) (18825458 + 20000) 188,45,458/- Deduction u/s 80IA (25% of above) 47,11,364/- Calculation of deduction u/s 80HHC of IT Act Export turnover as declared by the assessee 11,65,43,497/- Total turnover as declared by the assessee. 12,84,71,359/- DEPB as declared by the assessee 1,26,37,196/- Profit on sale of licence as declared by the assessee 3,54,367/- Profit of the business from export activity Profit u/s 28 as above 188,45,458/- Less: Deduction u/s 80IA as calculated above 47,11,364/- 141,64,094/- Less: Supervision charges & prior period income As discussed above 27,748/- 141,06,346/- Less: 90% DEPB 131,73,476/- 27,32,870/- Less: 90% of sale of licence 3,18,930/- 24,13,940/- Deduction u/s 80HHC Profit of export business x ET + 90% of export incentive x ET TT TT 80% of { 2413940 x 116543497 + 318930 x 116543497 128471359 128471359 80% of {2413940 + 318930} x 116543497 128471359 80% of {2732870 x 116543497 } 128471359 80% o 2479138 = 19,83,310/- 80IA 80HHC Total Deduction allowable calculated Above 47,11,364/- 19,83,310/- 66,94,674/- Deduction allow....
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....sment. 8.3 We find from the reasons recorded above that after going through the assessment records of the assessee for the year under consideration, the AO noticed that the deduction under section 80HHC of the Act was allowed incorrectly due to two reasons, firstly, the deduction under section 80IA of the Act should have been calculated first and the deduction under section 80HHC, should have been allowed on the remaining amount of profit and secondly deduction under section 80HHC in respect of DEPB was to be allowed as per amended provisions of section 28 and 80 HHC w.e.f. AY 1998-99. Further, we find that in the last para of the reasons recorded, the AO has mentioned that income to the extent of Rs. 1,16,73,784/- had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the AY 2001-02, but we do not find any mention of the material facts which the assessee failed to disclose. In the absence of any such failure on the part of the assessee, the assessment for the year under consideration cannot be reopened. 8.4 In the case of Global Signal Cables (India) Private Limited versus DCIT (supr....
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....ator (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words "reason to believe" viz-a-viz in intimation issued under section 143(1) can cause to the tax resigm. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation. It reflects and arbitrary exercise of the power conferred under section 147. 16. For the above reason, we answer the substantial question of law framed by us in favour in affirmative, in favour of the assessee and against the Revenue. The appeal of the Revenue is accordingly dismissed. There shall be no order as to cost." 9.2 The Tribunal Mumbai bench in order dated 22/09/2015 in the case of Motolal R Todi Vs. ACIT 7 (3) Mumbai in ITA No. 2910/Mum/2013 after analysis of various judgements on the issue decided that reopening done by the AO in absence of fresh tangible material is invalid and bad in law. The relevant finding of the Tribunal in the case of Moti Lal R Todi (supra) is reproduced as under: "6.19. In the present case, it has already been....
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....is of an amendment made in the Act in year 2005 amending the provisions of section 28 and 80 HHC w.e.f. AY 98-99. The ld. AR has placed reliance on the judgement of Hon'ble High Court of Kerala in the case of CIT, Thiruvanthapuram Vs B Mohanachandran Nair (supra) . In that case the assessment was completed under section 143(3) of the Act, was sought to be reopened after the expiry of 4 years from the end of the relevant assessment year on the ground that the assessee was not eligible for deduction under section 80 HHC, in view of the retrospective amendment made to the said provision by the 2005 amendment, and that loss from export of trading goods was to be set off against profits from export of manufactured goods in view of the judgment of the Hon'ble Apex Court. In response to the question raised by the revenue whether the retrospective amendment of law and subsequent judgement of the Apex Court after filing of the return of income and completion of assessment under section 143(3) can be a basis for reopening of the assessment under section 147 of the Income-tax Act, 1961 the court held as under: "..... First of all on undisputed facts that the assessee cannot be blamed for fil....
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....ly the petitioner is challenging the retrospectivity of the amendments to Section 80 HHC brought about by the Taxation Laws (Amendment) Act, 2005 (hereinafter referred to as 'the said Act'). This issue was considered by the Gujarat High Court in the case of Avani Exports v.CIT [2012] 348 ITR 391/23 taxmann.com 62/209 Taxman 59 (Mag.) which set aside the retrospectivity. The Gujarat High Court held as under:- "26. On consideration of the entire materials on record, we, therefore, find substance in the contention of the learned counsel for the petitioners that the impugned amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assesses. 27. We, accordingly, quash the impugned amendment only to th....
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....ding paras on the issues raised before us, we are of the considered opinion that there was no failure on the part of the assessee to disclose fully and truly all material facts in respect of the assessment and the case has been reopened beyond the period of 4 years from the end of the relevant assessment year, the proceedings of reopening under section 147 of the Act are without jurisdiction and not sustainable. Accordingly, we quash the proceedings under section 147 of the Act in the case of the assessee for the year under consideration. Thus ground No. 2 of the appeal is allowed. 13. As we have already quashed the assessment order proceedings completed under section 147 of the Act, ground No. 3 of the appeal is not adjudicated at this stage. In the result , the appeal of the assessee is allowed. ITA No. 4315/Del/2010, AY 2002-03 14. Now we take up the appeal having ITA No. 4315/Del/2010, grounds of appeal read as under: i. That the order of the learned Assessing Officer as well as Commissioner of Income Tax(Appeals) is bad in law and against the facts of the case. ii. That the learned Assessing Officer as well as Commissioner of Income Tax(Appeals) acted arbitrarily in reo....