AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 1004
X X X X Extracts X X X X
X X X X Extracts X X X X
....easons recorded by the AO for initiating proceedings u/s 147 of the Act were as follows :- "In this case the assessee company had filed its return on 30.10.2007 showing total Income of Rs. 159177514/-. Assessment u/s. 143(3) was completed on 30.12.2010 and the total income was assessed at Rs. 161706690/-. Subsequently, from perusal of assessment record it is noticed that - i) The assessee had a balance with Central Excise Deptt. of Rs. 361.73 lacs under loans and advances (Schedule 'J') under the broad head: Current Assets, Loans and Advances in the Balance Sheet as at 31.03.2007. Scrutiny of the assessment record, however revealed that the assessee should have a balance of Rs. 286.41Iacs. As such, the difference of Rs. 75.32 lacs (Rs.361. 73 lacs - Rs. 2B6.41 lacs] was thus required to be added back as income of the assessee. ii) The assessee claimed deduction u/s. 80IC of Rs. 7,41,46,812/- and the same was allowed on the basis of computation furnished by the assessee. The deduction u/s. 80IC is admissible only if- a) the accounts of the undertaking have been audited by the Chartered Accountant, and the audit report duly signed and verified by such accountant i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in this regard :- (i) With regard to the first reason recorded by the AO for initiating reassessment proceedings u/s.147 of the Act, viz., alleged difference of Rs. 75.32 lacs on account of Central Excise Duty Receivable, the Assessee submitted that in the Balance Sheet under the head "Current, Assets', loans & Advances" the balance with Central Excise Authorities was reflected at Rs. 361.73 lacs. In the Tax Audit Report the MODVAT balance was shown at Rs. 286.41 lacs. The Assesee explained that the difference of Rs. 75.32 lacs between the two figures was a fact already available on record when the original assessment proceedings u/s.143(3) of the Act were concluded and the AO merely re-examined the same documents without any material from external source coming into possession of the AO after the conclusion of the original assessment proceedings u/s.143(3) of the Act. The Assessee drew attention of the CIT(A) to the categorical observations recorded by the AO while framing the original assessment u/s.143(3) of the Act: his predecessor in the original assessment order: "After examining the balance sheet, profit & loss accounts along with schedules, tax audit report and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e further pointed out that the tax Auditor, M/s Ashok Kedia & Co., had in Form 10CCB wrongly mentioned that no deduction is claimed under Sec.80IC of the Act. In an errata subsequently given by the same Auditor filed before the AO in the course of original assessment proceedings, the said auditor had categorically stated that he had inadvertently missed out mentioning the deduction permissible to the assessee under Section 80IC amounting to Rs. 7,41 ,46,812/-. They issued a corrigendum and requested the AO to read the Point No. 26 of the Tax Audit Report to be read as rectified. The tax auditor also referred and enclosed the report in Form 10CCB in respect of the deduction claimed under Section 80-IC of the Income-tax Act, 1961. It is pertinent 'to mention that such errata were furnished and Form 10CCB was submitted in the course of' original assessment at the instance of the Assessing Officer. The AO after taking into account the audit report filed and in light of decisions of various Courts wherein it had been held that the deduction u/s 80-IC was permissible even when Form 10CCB along with the accounts was furnished in, the course of assessment proceedings; allowed the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ight of the decision of the Bombay High Court in the case of Godrej & Boyce Mfg Co.Ltd Vs DCIT (328 ITR 81) it is now well settled that Rule 80 is applicable only from AY 2008-09 and onwards. It was thus submitted that Rule 8D could not be applied to the year under consideration i.e. AY 2007-08. ,Therefore, the predecessor AO had rightly computed and disallowed Rs. 11.62 lacs in the original order passed u/s '143(3) and no further disallowance was warranted in accordance with Rule 80. The reassessment proceedings initiated under Section 147 being a clear case of change of opinion which was not permissible in law and therefore the order passed u/s 147 deserves to be quashed end declared ab initio void. 6. The Assessee placed reliance on the decision of the Supreme Court in the case of CIT Vs Kelvinator of India limited 320 ITR 561 (SC) wherein it was held that it was not permissible for the AO to initiate reassessment proceedings merely on a change of opinion without there being any tangible material which has come to his possession after completion of the original assessment proceedings based on which he comes to a conclusion that income chargeable to tax has escaped assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er letter dated 17.09.2013 that was registered as C.O.No.135/Kol/2013. This was presented by the assessee on 19.09.2013. Again on 24.09.2013 vide cover letter dated 19.09.2013 the assessee has presented another Cross Objection which is identical to the Cross Objection filed earlier. This Cross Objection has been numbered as 136/Kol/2013. Since both the Cross Objections raise identical grounds of appeal and are directed against the very same order of CIT(A), we are of the view that C.O.No.136/Kol/2013 has to be dismissed as infructuous and superfluous. We now proceed to adjudicate the grounds raised in C.O.No.135/Kol/2013 which relates to the validity of initiation of reassessment proceedings u/s 147 of the Act. 9. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR on the grounds raised by the assessee in the cross objection. The ld. Counsel for the assessee reiterated the submissions as were made by the assessee before CIT(A). The ld. DR relied on the order of CIT(A). 10. We have given a very careful consideration to the rival contentions. As far as the first reason assigned by the AO for initiation of proceedings u/s 148 of the Act is concerned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lcutta High Court in the case of Amrit Feeds Limited Vs Asstt CIT (239 CTR 82) has observed that if in the original assessment the AO has raised specific queries in the requisition issued u/s 142( 1) in respect of the deduction claimed u/s 80IB of the I.T. Act and if in response to the same the assessee had furnishes details and explanations which were considered by the AO and the deduction claimed in the return of income was duly accepted, the AO cannot reopen assessment for the reason that deduction u/s 80IB was wrongly allowed and doing so would amount to reopening assessment on a change of opinion. As submitted by the assessee before CIT(A) such a course is not available to the AO in view of the decision of the Supreme Court in the case of CIT vs Kelvinator of India Ltd. (supra). Besides the above, the decision of the Gujarat High Court Devesh Metcash Ltd. vs. JCIT 338 ITR 130(Guj) has taken a view that the belief entertained should be a honest belief that there was escapement of income. In the facts and circumstances of the present case we are of the view that the belief entertained by the AO cannot be said to be a honest belief. For the reasons given above we are of the view ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1961, the profits derived from such new undertaking Qualified for 100% deduction for a period of 10 years. For AY 2003-04, M/s Shyam Century Ferreous Ltd. was allowed the deduction claimed u/s 80lB in its return of income. However in AY 2004-05 there was a schematic change in Act, when Section 80lC was introduced by the Legislature granting deduction to industrial undertakings situated in the North Eastern States. The deduction which was hitherto permissible u/s 80IB(4) could be claimed under Section 80IC of the Act. The Finance Act, 2003 introduced a new proviso in sub-section (4) of Section 80lB discontinuing the deduction permissible u/s 80IB(4) to industrial undertakings covered within the purview 80lC starting from AY 2004-05 & onwards. The alternate deduction u/s 80IC was however granted in respect of the profits derived from these industrial undertakings situated in North Eastern States for the unexpired period of deduction, which was hitherto permissible u/s.80IB(4). Sub-Section (6) clarified this position by providing that the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to sub-section (4) of section 80-I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....akings or enterprises eligible for deduction under section 80IC with effect from the 1st day of April, 2004. These amendments will take effect from 1st April, 2004 and will, accordingly, apply in Relation to the assessment year 2004-2005 and subsequent years." (emphasis supplied) On perusal of the aforesaid, it will be noted that the industrial undertakings which were situated in North Eastern States and which were claiming deduction u/s 80IB(4) till AY 2003-04 statutorily migrated to Section 80lC w.e.f AY 2004-05. 15. M/s Shyam Century Ferreous Ltd., was allowed the deduction u/s 80IC in the assessment u/s 143(3) for the A Ys 2004-05 & 2005-06. Effective from AY 2006-07 the said Shyam Century Ferreous Ltd stood amalgamated with the Assessee. In the assessment completed u/s 143(3) for A Ys 2006-07 & 2007-08, the deduction u/s 80IC was allowed to the Assessee. In the original assessment u/s 143(3) for AY 2008-09, the Assessee was allowed the deduction under Section 80IC of the Income-tax Act, 1961. The CIT however in its order u/s 263 restored back the issue of deduction permissible u/s 80IC to the file of the AO because in his opinion the deduction was not permissible sinc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecember, 1997 to April 2007 in any of the specified North Eastern States. 18. According to the Assessee, its case squarely falls within the first part of the provisions of Section 80IC(2) of the Income-tax Act. 1961, because: The undertaking was newly set up in AY 2002-03, i.e. after 24.12.1997, was engaged in the business of manufacture of ferro alloy, i.e. article specified in Fourteenth Schedule. and Industrial undertaking is located in Meghalaya i.e. in the North Eastern State. According to the Assessee, the AO misinterpreted the provisions of section 80IC(2) and alleged that an assessee is both required to set-up new industrial undertaking and undertake substantial expansion during the period 24th December 1997 to 1st Apri1 2007. The expression however used in Section 80IC(b) is "or" not "and" as alleged by the AO. Clause (b) is divided into two parts being (i) setting-up new industrial undertaking or (ii) undertaking substantial expansion of existing undertaking. The AO wrongly read further conditions into Section 80IC(2) which was not there nor specified by the Legislature. 19. The Assessee thus claimed that the new industrial undertaking was set-up in the State of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herefore, the deduction u/s. 80IC of the I.T. Act, 1961 is not to be allowed in this case. During the appellate proceeding the A.R. has submitted a written submission along with a copy of memorandum explaining provisions of Finance Bill 2003 in which a new section 80le was inserted. As per the memorandum explaining provisions of Finance Bill 2003 Clause-9, 34, 35 and 92 explain this provisions. New provisions allowing a ten years tax holiday in respect of certain undertakings in the State of Himachal Pradesh, Sikkim, Uttaranchal and North-Eastern States. "The Union Cabinet has announced a package of Fiscal and non-fiscal concessions for the special category states of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States, in order to give boost to the economy in these states with a view to give effect to these new packages announced by the Union Cabinet in respect of these states, it is proposed to insert a new section 80IC to allow a deduction for ten years from the profits of new undertakings OR enterprises OR existing undertakings OR enterprises on their substantial expansion, in States of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States." Se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed. The A.O. should also have considered the principle of consistency in fact the department has been allowing assessee's claim of deduction u/s. 80IB/80IC of the I.T. Act, 1961 right from A.Y,. 2003-04. Nothing new or specific is there on record to reject the claim of the assessee on the same facts in one particular assessment year. Accordingly, assessee's appeal on grounds no. 1 and 2 are allowed." 21. Aggrieved by the order of CIT(A) the revenue has preferred the present appeal before the Tribunal. 22. We have heard the rival submissions. The ld. DR relied on the order of AO. The ld. Counsel for the assessee relied on the order of CIT(A) and the submissions made before the CIT(A). 23. We have given a very careful consideration to the rival submissions. It is an admitted fact that M/s.Shyam Century Ferreous Ltd established a new undertaking in the state of Meghalaya in A.Y.2002-03 for manufacturing of ferro alloys. In respect of profits derived from the said undertaking that the assessee was entitled to claim deduction u/s 80IB(4) of the Act. The deduction u/s 80IB of the Act was available for a period of ten years. M/s. Shyam Century Ferreous Ltd established a n....