TaxTMI 
TaxTMI 
2010 (4) TMI 1134
X X X X Extracts X X X X
X X X X Extracts X X X X
.... allowed the appeal of the assessee in toto. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing" 2 Advert in first to ground nos.1 & 2 in the appeal, facts, in brief , as per relevant orders are that in this case a survey u/s 133A of the Income-tax Act ,1961[hereinafter referred to as the 'Act '] was conducted on 25/9/2000 in the premises of the assessee, when in four cases of the group, including the asseessee, additional income of Rs. 1.10 crores was offered to tax. Out of the total disclosure, an income of Rs. 51,75,000/- not reflected in the books of accounts at the time of survey operation, was offered to tax in the hands of the assessee. Subsequently, assessment was completed on an income of Rs. 85,79,620/- vide order dated 22/01/2003 u/s. 143(3) of the Act in pursuance to return filed on 30/10/2001, declaring income of Rs. 83,84,454/ -. Inter alia, the AO allowed deduct ion u/s.80HHC of the Act as claimed by the assessee on the amount of stock of Rs. 1,09,196/ - and advances receivable of Rs. 49,84,804/ -, disclosed u/s 133A of the Act . Since such stock and receivable were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; Total Rs. 51,75,000/ - 5.1 However, while completing assessment the AO has allowed deduct ion u/s 80HHC on the amount of stock and advances receivable of Rs. 51,75,000/- disclosed u/s 133A of the Act . Such stock and receivable cannot be said to be derived from the business to be included in the prof it of business for the purpose of deduct ion u/s.80HHC for the following reasons. (a) In any case where income is disclosed u/s.133A of the Act , the same to be taken separately under the head income from other sources because the income disclosed partakes the character on undisclosed income. (b) In case of advances received, the accounting treatment for the same transact ion does not partakes the character of income because in such a situation party's account will be credited and cash/bank account will be debited. Therefore, the transact ion l does result into any income. I f the assessee intends to treat this transact ion as an income generating transact ion, In no way i t can be considered as business income. (c) Where the disclosure is made u/s 133A, the income disclosed pertains to the year when surveys is carried out .....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fact or even if there is no omission or failure on the part of the assessee but the income is deemed to have been escaped as per the provisions of sect ion 147 of the Act . Reliance is placed on the decision of Phoolchand Bajrang Lal Vs. ITO 2O3 ITR 4S6 wherein the Hon'ble Supreme Court has held that since for the purpose of reopening the belief is that of the ITO, the sufficiency of reasons for forming the belief is not for the court to judge but i t is open to an assessee to establish that there in fact existed no belief or that belief was not bonafide. The Court can only look into the reasons to that limited extent . 5.4 With respect to the argument that since al l the information was given return, it is to be stated that as delivered in the judgement in the case Rakesh Agrawal Vs. ACIT, by the Hon'ble Delhi High Court that sect ion 147 Act as amended with effect from 01.04.89 provides that if the AO has to believe that any income chargeable to tax has escaped assessment for assessment year , he may subject to the provisions of sect ion 148 to 153 assess or reassess such income and also any other income chargeable to tax which has escaped assessment . The court....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of income generated during the regular course of business and cannot be considered as business income within the meaning of sect ion 80HHC of the Act . Thus the deduct ion claimed by the assessee and allowed u/s 80HHC while passing the order u/s 143(3) dated 22-1-2003, requi res to be recalculated and to be allowed only on the prof it of Rs. 52,35,022/ -, excluding the disclosure made of Rs. 51,75,000/-, out of the prof it disclosed by the assessee in the P&L Account of Rs. 1,04,10,022/ -. " 2.1 In the light of aforesaid discussion, the AO restr icted the claim for deduct ion u/s 80HHC of the Act to the extent of Rs. 12,73,280/- 3. On appeal, the assessee argued that that the or iginal assessment having been completed u/s. 143(3) of the Act , the same can not be reopened on the basis of change of opinion regarding taxability of certain income or al lowabi lity of certain deduct ion, which had al ready been examined in the original assessment . I t was pointed out that no new mater ial was brought on record by the AO to reopen the assessment . Relying upon the decisions in the case of Calcutta Dicount Co. Ltd. Vs. ITO, 41 ITR 191 (SC), ITO Vs. Lakhmani Mewal Das, 103 ITR 437(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivable of Rs. 49,84,804/- were disclosed as additional business income at the time of survey and these receivables have arisen in the course of carrying on the eligible business, the said amount was correctly considered by the AO while calculating deduct ion u/s. 80HHC as evident from the Assessment order dated 22.1.2003. the abstract of which is re-produced below :- "Before I discuss points for assessment , I discussed the matter regarding survey proceedings. I have verified the survey report and other evidence produced by the survey team at the time of survey proceedings. I have gone through survey report and other evidence fond by the surveytem. The assessee has offered additional income and paid tax on Rs. 51,75,000/ -. This has been duly reflectedin final statement and included in P&L a/c as under ;- 1) Stock : Rs. 1,90,196/- 2) Advance Receivable : Rs. 49.84.8047- - -- -- - -- - -- - -- -- - -- Total Rs. 51,75,0007- " 5.3 The AR argued that even otherwise there is no force in the content ion of the AO as ment ioned in the order that income disclosed in the survey u/s. 133A is not business income and therefore deduct ion u/s. 80H....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and it is actually income from other sources. The AO has pinpointed that the captioned declarat ion of Rs. 49,84,804/- on account of receivables and Rs. 1,90.146/- are on account of variation in stocks has no relevance with the business income as the additional income declared can not be termed as prof it derived from export business as envisaged in sect ion ,80HHC of the Act . The AO contended that the appellant has not even explained or proved during the course of survey as well as during the course of assessment that the receivables of Rs. 49.84,804/ - are trade receivables as the amount declared is simply shown as receivables or advances. According to the AO, these receivables or advances have no relevance so far as prof it derived from export business is to be worked out for the purpose of assessment of the income of the appellant is concerned. The AO found that these incomes declared during the survey are unexplained stocks and receivables, which has been declared and rightly brought to tax as non export business income. 5.4 I have considered the facts of the case as well -as the rival content ions. I find merit in the observations of the AO that income of Rs. 51,75,000/-....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the AO and I uphold the view taken by the AO that deduct ion u/s. 80HHC claimed by the appellant is liable to be reduced to the extent of Rs. 7,99,438/-. I am therefore, of the considered view that income of Rs. 51,75,000/ - declared during the course of survey as income not eligible for deduct ion u/s. 80HHC of the Act . The Appellant 's Ground No. 2 is Dismissed. " 4 The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A) . The ld. AR while carrying us through the relevant pages in the paper book and original assessment order dated 22.1.2003 contended that assessment having been completed u/s 143(3) of the Act and no new material having been brought on record, the AO was not just if ied in reopening the assessment simply on the basis of review of the original assessment . On the other hand, the ld. DR supported the findings of the ld. CIT(A). 5. We have heard both the parties and gone through the facts of the case. We find that in the original assessment completed u/s 143(3) of the Act on 22.1.2003, the AO al lowed deduct ion u/s. 80HHC of the Act , interalia, on the amount of stock and advances receivable of Rs. 51,75,000 disclosed u/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (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 or relief in the return ; (c) where an assessment has been made, but - (i) income chargeable to tax has been under-assessed ; or (iI) such income has been assessed at too low a rate ; or (III) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." 5.1 In the instant case, assessment has been reopened within four years from the end of the relevant assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the interest paid by the assessee was not adjustable against the interest earned on investment allowable for deduction under section 80P(2)(d) of the Act. Hence, the notice in question had been issued on a mere change of opinion and was not valid." 5.2 In Jindal Photo Films Ltd. [1998] 234 ITR 170 (Delhi), Hon'ble Delhi High Court, while adjudicating a similar issue, observed: "The power to reopen an assessment was conferred by the Legislature not with the intention to enable the Income-tax Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods." It was further held by the Bench that: "Reverting back to the case at hand, it is clear from the reasons placed by the Assessing Officer on record as also from the statement made in the counter affidavit that all that the Income-tax Officer has said is that he was not right in allowing deduction under section 80-I because he had allowed the deductions wrongly a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome on record enabling the AO to invoke the powers under section 147 of the Act. The instant case is a case of mere change of opinion which does not provide jurisdiction to the AO to initiate proceedings under section 147 of the Act. Here we may also refer to a decision of the Hon'ble Gujarat High Court in Garden Silk Mills Pvt. Ltd. [1999], 237 ITR 668, while expressing similar views, observed: "The reasons recorded by the Assessing Officer which led to the belief about the escapement of assessment disclose that the present case is nothing but mere change of opinion on the facts which were already before the Assessing Officer while making the first assessment to which conscious application of mind is reflected from the proceedings, and allowed in the computation and which has not been disputed by the Revenue." 5.5 Similarly in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi), Hon'ble Delhi High Court held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. While affirming the said decision, Hon'ble Apex Court recently held in their decision dated 18.1.....