TaxTMI 
TaxTMI 
2016 (6) TMI 637
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee filed the return of income on 29.10.2007 declaring total income of Rs. 43,91,220/-. The case was selected for scrutiny assessment and thereafter the assessment under section 143(3) was completed thereby a total income of Rs. 43,91,220/- was assessed. 2.1. It has been noticed that the assessee has claimed excess exemption under section 10B of IT Act, 1961 for Rs. 22,98,485/-. Considering this aspect, a notice under section 147/148 was issued on 23.3.2012 wherein it is mentioned as under :- " Whereas I have reasons to believe that your income chargeable to tax for the assessment year 2007-08 has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961." After receipt of the notice, the assessee has requested the AO to provide the reasons to believe. The AO vide letter dated 09.10.2012 has provided the reasons to believe as under :- " The assessee has claimed exemption u/s 10B of Rs. 26,40,362/- in respect of STPI unit however, no separate profit and loss have been filed by assessee claim u/s 10B was made on the basis of Audit Certificate in form 56G, however no working sheet is submitted by assessee. On the basis of figures & details correct workin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software b ears to the total turnover of the business carried on by the undertaking." Prior to the amendment made on 01.04.2001 in this section the profit meant "the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the assessee." As per the existing provision of sec. 10B, relevant to assessment year in question, the profit means the profit of the undertaking in proportion of the profit to total turnover of the undertaking and not to the total turnover of the business carried on by the assessee. In other words it can be said that the deduction under this section is qua business and not qua assessee. Therefore the assessee company had rightly claimed the deduction of the profit of the undertaking at Rs. 26,40,362/- i.e. the only profit of the 100% EOU to total business carried on by the undertaking. Extract of relevant amendment in the IT Act in form of notes on clauses and memorandum explaining ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment. It is held by honourable Gujarat High Court in the recent decision in the case of Gala Gymkhana Ltd. that unless assessing officer expressed his opinion, it cannot be said that reopening of assessment was on account of change of opinion. As against this, decisions relied upon by the appellant are on different facts. Respectfully following this decision which is clearly applicable in the facts of the appellant's case, reopening made by the assessing officer is held to be as per law and accordingly this ground is dismissed. On merits the ld. CIT (A) has upheld the order passed by the AO and has concluded that the AO was justified in re-computing the eligible deduction under section 10B by applying the formula given in sub-section (4) to section 10B. 4. Feeling aggrieved by the order passed by ld. CIT (A), the assessee is before us. 5. At the outset, the ld. A/R for the assessee has drawn our attention to the reopening of the assessment and for that purpose, the ld. A/R has relied upon the judgment passed by Hon'ble Delhi High Court in the matter of Replika Press Pvt. Ltd. vs. DCIT, 218 Taxman 399 (Delhi) and has also relied upon the judgment of Hon'ble Jurisdictional ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 23.3.2012. For that purpose, the ld. A/R has drawn our attention to the reply submitted by the assessee in response to assessment proceedings u/s 143(3) as under :- "(9) The details of export expenses under STPI have been provided at Schedule - O of the financial statements. Name of various persons along with nature of expenses are submitted at Annexure-5. (25) the certificate and details relating to the claim by the assessee company u/s 10B of the IT Act is enclosed herewith at Annexure-21." The ld. A/R has submitted before us in view of the specific reply given by the assessee, the reopening of the assessment is not correct. We would like to reproduce some of the judgment on this issue dealing with the reopening in the matter of Kelvinator India Ltd, 329 UTR 561 (Delhi), CIT vs.Gabriel India Ltd., 203 ITR 1089 (Bom.) and Hindustan Lever Ltd. vs. ACIT, 268 ITR 332 (Bom.) and also the judgment of Hon'ble Delhi High Court in the matter of Eicher Ltd. (2007) 294 ITR 310 and Hon'ble Mumbai High Court in the matter of GKN Sinter Metals Ltd Vs. Ms Ramapriya Raghavan, ACIT {2015} 55 Taxmann.com 438( Bombay). All the judgments referred herein above were referred by the Hon'ble Mum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise the reasons which were lacking in material particulars would get supplemented, by the time the matter reaches the Court, on the strength of affidavit or oral submission advanced" . The Ld A.R also relied upon the judgment of the Bombay High Court in the case of Bhor Industries Ltd vs ACIT 267 ITR 161 (Bom) wherein the Hon.Bombay High Court has held as under: "By virtue of the proviso to section 147 no action can be taken for reopening after four years unless the Assessing Officer has reason to believe that income had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts. Explanation 2 to section 147 is required to be read with section 147 in its entirety including the proviso. That, if one reads Explanation 2 to section 147 including the proviso then it is clear that in cases where the Department reopens the assessment withi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....priya Raghavan, ACIT {2015}55 Taxmann.com 438( Bombay) and submitted that the facts of present case are similar to the facts that prevailed in the above said case. In the case before Hon'ble Bombay High Court, the assessing officer originally allowed deduction u/s 80-IA/ 80-IB of the Act. Later he reopened the assessment on the reasoning that there was inappropriate allocation of expenses between the units eligible for deduction. The Hon'ble Bombay High Court held that reopening was on change of opinion and the same is not permissible. The relevant observations made by Hon'ble Bombay High Court are extracted below:- "13. In the present facts, the Petitioner had along with its Return of Income filed its Computation of Income wherein claim for deduction under Section 801A/IB of the Act was made. Besides the Auditor's certificate as required under Section 80IA(8) of the Act to claim to deduction was also filed along with a note indicating the basis of allocation of expenditure amongst its three manufacturing units was also filed. These were all primary documents which would not normally escape examination during the scrutiny proceedings. This is also evident from the fact t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 80lAtlS of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a dis-proportionate distribution of expenses between various units belonging to the Petitioner for claiming deduction under Section 80lA/lB of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proceedings for Assessment Year 2002-03 sought information in respect of the allocation of expenses and the explanation offered by the Petitioner was found to be satisfactory. This is evident from query dated 27th December, 2004 and the Petitioner's response to the same on 25th January, 2005 explaining the manner of distribution of common expenses for delaying the process of claiming deduction under Section 80lA/IB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9th March, 2005. This Court in Aroni Commercials Ltd. v. Assistant Commissioner of Incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d his mind at all. The order passed by the AO is flimsy and one page order which shows total non application of mind and the assessment order (original) dated 9.10.2009 has not discussed any issue much less the issue under sec. 10B and the basis of calculation giving the benefit of sec. 10 B to the assessee. Even assuming the information which were supplied by the assessee, as per question no. 9 & 25 of the paper book , then also this information was not correct and complete information i.e was not a sufficient disclosure. In our view the assessee has wrongly claimed the deduction of Rs. 22,91,771/- as mentioned by the AO. In our view the AO is required to form his opinion one way or the other and also required to adjudicate on the entitlement and quantum of the assessee for the deduction under section 10B of the IT Act on the basis of complete information. The Explanation 2(b) of section 147 clearly provides as under :- " Explanation 2(b): Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance of relief i....