TaxTMI 
TaxTMI 
2020 (2) TMI 941
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....he same set of facts. 2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the learned ACIT, Circle IV, Amritsar had allowed the deduction U/s 80IB & 80HHC on the same set of facts U/s 143(3) of the Income Tax Act, 1961 and that it was a case of mere "change of opinion". 3. That learned Commissioner of Income Tax (Appeals), Amritsar has grossly erred in confirming the action of ACIT, Circle 4, Amritsar in disallowing deduction claimed U/s 80IB of Income Tax Act, 1961 claimed at Rs. 25,05,619/-. 4. That learned Commissioner of Income Tax (Appeals), Amritsar has grossly erred in confirming the action of ACIT, Circle 4, Amritsar in not allowing deduction U/s 80IB on following incomes on the ground that these are not incomes derived from the Industrial undertakings : i. Export Incentive 1,50,04,432 ii. Fabrication Charges 31,83,911 iii. Sizing Charges 7,26,972 iv. Excise Duty Refund 57,21,663 v. Discount 2,31,893 vi. Insurance Claim 4,41,035" 3. The brief facts qua the issue are thatthe assessee company filed its Return of Income for the assessment year 2004-05 on 31.10....
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....the figures reflected in return filed on 31-10-2004. You are further requested to give detailed working of deduction as being worked out by you." 5. In response to notice u/s 142(1)/143(2) of the Act, the Authorized representative of the assessee attended the assessment proceedings. On request of the AR, the reasons recorded for reopening were supplied by AO on 24.6.2008. Assessee filed replies on 30.6.2008. However, on the issue of detailed working of Section 80HHC deduction, reiterated what has been submitted in return of income.The assessee company is engaged in manufacturing and trading of manmade fabrics. Admittedly, the assessee is also carrying out the job work of sizing of yarn of other units. In addition to internal manufacturing of grey fabrics by the assessee, certain grey fabric was also purchased from the local market and then issued for job work of processing. The finished fabric is then sold in the local/ overseas market. 6. During the reassessment proceedings the assessee submitted written submissions before AO, which are as follows: "It is further submitted that while passing the order U/s 143(3) of Income Tax Act, 1961 all the informatio....
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....ming that the ld. A.O. after applying her mind independently on the basis of information in her possession proceeded to reopen the assessment proceedings u/s. 147, to cover the escapement of income occurred due to wrong claim of deduction u/s.80IB & 80HHC of the I.T.Act, 1961. It is undisputed fact that reasons recorded were duly served upon the appellant and in response to notice u/s. 148, the appellant's filing of revised return on 13/5/2008 declaring income of Rs. 3723248/- thereby revising its claim of deduction u/s.80-HHC downwardly. Further, it is observed that even in the consequential statutory notices issued u/s. 143(2) & 142(1) vide letter dt. 12/6/08, the appellant's revised return dt. 13/5/2008 for AY 04-05 was duly referred to. It is further seen that original assessment u/s. 143(3) was made in this case on 29.12.2006 after the appellant's original return filed on 31.10.04 showing income of Rs. 2203158/- was duly processed u/s. 143(1) on 14/1/05. As is apparent from perusal of para. 1.3, 2.1 the AO has duly taken into her consideration the appellant's replies dt. 20th and 30th June, 2008. As regards the appellant's plea of challenging the reopening of assessme....
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....e facts as per reasons recorded (including non consideration of loss under profit from business) are not covered as per assessment order, notice u/s 142(1) and office note (copies of notice u/s 142(1) and office note enclosed. 3. Notice issued after the original assessment on the basis of facts regarding escapement as detected by Audit party (including including non consideration of loss under profit from business) leaving no scope of change of opinion also in view of the following settled law. 4. Reassessment is permissible even without any new material and on the basis of return. SEWAK RAM vs. INCOME TAX OFFICER 236 CTR 462(P&H) 2010- No doubt, mere change of opinion by itself is not a ground for reassessment as held in the judgments relied upon on behalf of the assessee but if there are reasons to believe that tax has escaped, reassessment is permissible. Reasons can be even on the basis of particulars of the return without any new material. Even if proceedings under s. 143(2) are not taken, reassessment proceedings can be taken." 12. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along w....
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....rofits of business in accordance with Explanation (baa) to Section 80HHC. After making the above adjustments, profits of the business come to a negative figure of Rs. 1,44,26,853/- against which the 80HHC deduction will not be available as per the scheme of Further, the assessee has claimed deduction u/s.80IB on profits/gains of industrial undertaking which includes other income of Rs. 2,53,09,906/- on account of export incentives, Fabrication charges, sizing charges, profits on investments, insurance claim, excise duty refundable, discount etc. These incomes cannot be said to be derived from the Industrial undertaking in view of the settled legal position. In view of the above, I have reasons to belief that Rs. 63,04,228/- (3798609+ 2505619) has escaped assessment on account of wrongful claim of deduction under Ss. 80HHC & 80IB of the IT Act by the assessee. Hence action u/s.147 of the Income-tax Act is warranted to tax the above income and any other income chargeable to tax which has escaped assessment and which comes to notice subsequently in the course of the proceedings under this section." We note that reasons were recorded twice by AO which is a....
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....n u/s 80HHC and 80IB can be allowed. Therefore,AO disallowed the claims of the assessee during reassessment. The ld Counsel, at this juncture submitted before the Bench that it is a legal issue where two opinion are available and AO while allowing the claim of the assessee has taken one possible view available in law therefore original assessment made by AO u/s 143(3) should be sustained and reassessment proceedings should be quashed. 15. We note that conditions laid down in section 147 of the Act for reopening the assessment has not been fulfilled by AO. Let us examine the essential condition of section 147 in the context of assessee`s case: "If the A.O. has reason to believe that any income chargeable to tax has escaped assessment for any assessment year." (i).There must be material for the belief. In the assessee`s case material in relation to deduction u/s 80IB and 80HHC have already been examined by AO during the original assessment. There is no any new material to verify. (ii).Circumstances must exist and cannot be deemed to exist for arriving at an opinion. Assessee`s assessment was completed u/s 143(3) of the Act and AO accepted the claim of assessee. (....
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....is escapement of income from assessment. We note that in assessee`s case under consideration there is no any tangible material in relation to deduction u/s 80IB and 80HHC of the Act. The material in relation to deduction u/s 80IB and 80HHC was available before the AO during the original assessment u/s 143(3) of the Act. In reassessment proceedings u/s 147 there is no any new tangible material available before the AO to frame "reason to believe". 16. We note that Hon`ble Supreme Court in the case of Indian and Eastern Newspaper Society Vs. CIT 119 ITR 996, has held thatan error discovered on a reconsideration of the same material (and no more) does not give AO power to assume jurisdiction to make reassessment. The aforesaid view on the above proportion has been reiterated by theHon`ble Supreme Court in the case of A.L.A. Firm vs. CIT 183 ITR 285. Reasons must have a live link with the formation of the belief. This is supported by Circular No.549 dated 31.10.1989 which clarified that the words "reason to believe" did not mean a change of opinion. The Hon'ble Supreme Court in ITO vs Lakhmani Mewal Das [1976 ]103 ITR 437 has lucidly explained the power of assessing officer to bri....