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TMI Blog2011 (2) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... BAY HIGH COURT) considered the issue on similar facts and held that power conferred under section 147 cannot be used like the power of review to reopen the assessment under section 147 of the Act - the reassessment proceedings are considered bad in law and the Assessing Officer has no jurisdiction to reopen under section 147 - Accordingly the orders of the Assessing Officer and CIT(A) are set aside - Decided in favour of assessee. - I.T. APPEAL NO. 2501 (MUM.) OF 2006 - - - Dated:- 25-2-2011 - R.K. GUPTA, B. RAMAKOTAIAH, JJ. Ms. Aarti Vissanji for the Appellant. Ajay Srivastava for the Respondent. ORDER B. Ramakotaiah, Accountant Member. This appeal by the assessee is against the order of the CIT(A)-1, Mumbai dated 13-2-2006. 2. Assessee has raised the following grounds:- "(1) The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer of reopening the assessment under section 147 of the Income-tax Act, 1961. Your appellant strongly objects to the reopening proceedings and submits that the reopening proceedings are illegal, bad in law and void and ought to be quashed. (2) Without prejudice to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was Rs. 3,22,99,743 which was restricted to the gross total income computed. While completing the assessment under section 143(3) dated 27-2-2003 the Assessing Officer noticed that the assessee had a loss of Rs. 1,51,78,643 while working out the profit of export trade goods which was ignored while computing the profit for the purpose of section 80HHC and in the scrutiny order under section 143(3) he has adjusted the trading losses to the profits or the business and arrived at the deduction under section 80HHC at Rs. 61,28,616 after excluding the claim pertaining to supporting manufacturer at Rs. 5,62,468. The claim of deduction under section 80HHC was restricted to Rs. 55,66,148. While adjusting the losses on trading of goods the Assessing Officer in his order referred to decision of the Hon'ble Bombay High Court in the case of IPCA Laboratories Ltd. v. Dy. CIT [2001] 251 ITR 401/[2003] 127 Taxman 7 and also various decisions of the Appellate Tribunal. Along with the other adjustments made in the computation, the matter was carried to the CIT(A) and ultimately to the 1TAT. The ITAT in ITA No. 2143/Mum./2004 and ITA No. 3195/Mum./2005 has considered the issues regarding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Mangalya Trading Investment Ltd. v. Dy. CIT [2005] 2 SOT 480 (Mum.) and Rohan Dyes Intermediates Ltd.'s case (supra) he completed the assessment denying the deduction under section 80HHC all together. 4. The matter was carried to the CIT(A) and in the meantime the provisions of section 80HHC were also amended by the Taxation (Amendment) Act, 2005 retrospectively with effect from 1-4-1998 by introducing various provisos to section 80HHC(3). The assessee made submissions before the C1T(A) not only with reference to reopening of the assessment under section 147 but also on merits. The CIT(A), however, held the jurisdiction was there to initiate the reassessment proceedings by giving the following findings:- "3.3 I have carefully considered the facts. I find that the very same objections to the reopening of the assessment were raised before the Assessing Officer. The same have been dealt with by the Assessing Officer in the assessment order. For reasons given, the Assessing Officer rejected the contentions of the appellant. It was held by the Assessing Officer that since the assessment was reopened within four years from the end of the relevant assessment year, the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able Hon'ble Bombay High Court judgment in the case of IPCA Laboratories Ltd. (supra) allowed the deduction after setting off the export losses to the incentives provisions. It is also in accordance with the subsequent amendments brought to the statute and there is nothing wrong in the order passed by the Assessing Officer as the assessee has still positive profit after adjusting the trading losses and the findings in Rohan Dyes and Intermediates Ltd. was not applicable. The computation is according to the amended provisions of section 80HHC(3). She referred to the orders and pages in the paper book to submit that these issues were originally considered by the Assessing Officer and so it is mere change of opinion. She also referred to the judgment of the Hon'ble Bombay High Court in the case of Asteroids Trading Investments (P.) Ltd. v. Dy.CIT [2009] 308 ITR 190 for the proposition that no new material was brought on record and reassessment only on change of opinion by the Assessing Officer cannot be a ground for reassessment under section 147 once the order under section 143(3) was passed considering the issues. 7. The second proposition made by the learned counsel is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 80HHC can be computed with reference to 90 per cent of the export incentives ignoring the trading loss? 4. Both the parties have been heard. As far as Question No. 1 is concerned, it is covered against the assessee by the decision of the Supreme Court in the case of IPCA Laboratories Ltd. 266 ITR 521, wherein it has been held that loss incurred in the export cannot be ignored and it is the net profit, which should be taken into consideration. However, both the parties have agreed that the matter requires readjudication in the light of retrospective amendment made by the Legislature by Taxation Laws (Amendment) Act, 2005. In view of the same, the order of the CIT(A) is set aside on this issue and the matter is remitted back to the file of the Assessing Officer for fresh adjudication in accordance with the amended provisions of section 80HHC." 10. This indicates that at the time of initiation of proceedings under section 147 and issuance of notice dated 5-1-2005 the issue was subject-matter of appeal. Once the issue is subject-matter of appeal during the pendency of appeal, issuance of notice of reassessment has to be considered bad in law, as decided by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt. The Hon'ble Supreme Court has given the judgment on the issue in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 wherein it was held :- "The concept of "change of opinion'' on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief." 12. Considering the facts and the law we are of the opinion that the Assessing Officer has reopened the assessment on mere change of opinion and it tantamount to review of the earlier order. Accordingly t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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