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TMI Blog2011 (11) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... r reasons to believe that any income has escaped assessment and as such is unlawful and liable to be quashed. " 3. The facts of the case stated in brief are that the assessee filed its return of income declaring income of Rs. 1,31,43,480/- on 30/10/2002 which was processed under section 143(1) of the Act. Subsequently, by Taxation Laws (Amendment) Act, 2005 provisions of section 80HHC were amended. The AO after recording reasons reopened the assessment by issue of notice under section 148 dated 26th March, 2009. During the assessment proceedings it was submitted by the assessee that assessee had filed its return disclosing fully and truly all material facts necessary for its assessment. As such, no reassessment on the issue involved can be made on mere change of opinion. Reassessment in such cases cannot be made on mere suspicion or without proper reasons to believe that income chargeable to tax has escaped assessment. It was also submitted that as per the decision of Special Bench of Mumbai Tribunal in the case of Topman Exports v. ITO [2009] 33 SOT 337, it is only the profit element on transfer of DEPB which was to be considered under clause (iiid) of section 28 and not sale pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra). As regards the contention of the assessee that reasons recorded do not indicate availability of any prima facie material with the AO which gave rise to the belief that income had escaped assessment or what was the basis of treating 80HHC deduction as claimed by the assessee in the return of income as excessive, the ld. CIT (Appeals) observed that inadequacy of reasons in the reopening of assessment was not tenable. In the reasons recorded the AO had brought in vital facts crucial to forming the belief that income had escaped assessment. The AO had recorded that the assessee was an exporter claiming deduction under section 80-HHC of the Act. The deduction as claimed was excessive as the assessee's turnover was more than Rs. 10 crores in view of amendment brought by section 80-HHC by Taxation Laws (Amendment) Act, 2005. Thus by referring to / including the amendment in section 80-HHC by the Taxation Laws (Amendment) Act, 2005 in the reasons recorded, the AO has without mentioning details invoke the relevant sections / provisions / proviso brought on statute by the said amendments i.e. Third proviso to section 80-HHC insert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be quashed in view of decision of Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. Ltd. v. CIT [2009] 308 ITR 38/[2008] 175 Taxman 262 and GKN Driveshaft India Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963 (SC). The ld. AR of the assessee further submitted that the reasons recorded are vague and there is no allegation that what amount of income had escaped assessment. Nowhere from the reasons it is discernible that income has escaped assessment. The notice under section 148 beyond four years can be issued only if escaped income was more than Rs. One lakh. In the reasons recorded there was no finding of any amount of escaped income and tax effect thereon. How and on what account the claim of the assessee was excessive as per the amended provisions of section 80HHC by Taxation Laws (Amendment) Act, 2005 is not borne out from the reasons recorded and as such, even the prima facie material was missing in the reasons recorded. The validity of reopening has to be decided on the basis of reasons recorded and on those reasons alone. Therefore, notice issued under section 148 is based on tenuous grounds and, therefore, the assessment is to be quashed in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Admittedly, no assessment under section 143(3) was made for the year under consideration. Therefore, the reopening of assessment in the instant case falls under provisions of main section 147 and not under its proviso. 9. Section 148(1) reads as under: "148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139." Sub-section (2) of section 148 provides that the AO shall before issuing any notice under section 148 reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here no notice under section 148 shall be issued by the assessing officer, who is below the rank of Jt. Commissioner of Income-tax, after the expiry of four years from the end of the relevant assessment year unless the Jt. Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for issue of such notice. 11. In the case before us there is no issue of sanction to be obtained by the assessing officer before issue of notice u/s 148 from the competent authority which in fact has been obtained by the assessing officer. The contention of the assessee is that reasons recorded have been served on the assessee much beyond the expiry of period of six years. Section 148 (1) of the Act provides that before making the assessment/re-assessment or re-computation under section 147, the AO shall serve on the assessee a notice requiring him to furnish within such period as may be specified in the notice, a return of his income, in the prescribed form and verified in prescribed manner. However, the provisions of section 149 prescribe the time limit for issue of notice under section 148 of the Act. From plain reading of provisions of section 148 and 149 it is clear that the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed" in the first line while in the penultimate line the word "employed" is "issued". Thus in the same short sub section, the legislature had used these words as distinct and separate. The hallmark of a limitation provision is that the same must have clear-cut and fixed termini at both ends. Section 149 fixed the terminus a quo from the end of the relevant assessment year i.e. on the 31st March of the said year. On the other hand, the terminus ad quem under clause (a) and (b) is fixed at 4 years, 8 years and 16 years from the fixed date of 31st March of the relevant assessment year. Clearly enough, if the terminus a quo is fixed as the relevant assessment year, namely, 31st March of the said year the other terminus must equally be fixed with regard to the fixed date of issuance of the notice, which is precise and predictable. The plain scheme of section 148 and 151 is that the satisfaction and the sanction of the Commissioner or the Board on the reasons recorded by the ITO is necessary before the notice under section 148 is sent out. If the word "issued" used in both these sub sections is read as "served", it will lead to the strange phenomenon that even after the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide reasons recorded under section 148 of the Act for escapement of income. The assessee, however, filed a return in response to notice under section 148, under protest, on 19th May, 2009. It was specifically mentioned by the assessee in the covering letter to return of income that the return filed under section 148 was subject to revision of deduction under section 80-HHC as per prevailing legal position as regards retrospective amendments in the provisions of section 80-HHC. From the letter dated 13th May, 2009 (filed on 19th May, 2009) it is clear that the assessee was aware of amendment brought into statute with retrospective effect and had specifically mentioned to this effect in its covering letter. The income returned in the return of income filed in response to notice u/s 148 was the same as admitted in original return of income. The conduct of the assessee is in line with the decision of Hon'ble Supreme court in the case of GKN Driveshaft India Ltd. (supra). The AO vide letter dated 14/07/2009 informed the assessee the extract of reasons recorded as below:- "The assessing officer while recording reasons for issuing notice under section 148 observed that your claim for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality making the assessment bad. Since law is settled on this issue, we are unable to concur with arguments of the ld. counsel for the assessee that non disposal of objection challenging initiation of proceedings under section 147 before completion of assessment would make the assessment bad in law. 16. The next contention of the assessee is that the reasons recorded are vague and there is no allegation as to what amount of income had escaped assessment. The assessing officer has reopened the assessment on the basis of reasons recorded as below:- "M/s. Taurus Exports P. 65 - 3rd Floor, South Extension - III, New Delhi. PAN AADFT 8762B A.Y. 2002-03 The assessee's main source of income was from export and claim of deduction under section 80-HHC by the assessee during the period. It is however found that the claim is excessive in as much as the actual claim under section 80-HHC would come much lower, on account of the facts that the assessee's turnover is more than Rs.10 crores during the year, thereby attracting amended provisions of section 80-HHC of the Act made by the Taxation Laws (Amendment) Act, 2005. In view of the above, necessary approval is required under proviso a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that,- (a) he had an option to choose either the duty drawback or the Duty Free Replenishment Certificate, being the Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme. Explanation.- For the purposes of this clause, "rate of credit allowable" means the rate of credit allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme calculated in the manner as may be notified by the Central Government ." From the amended provisions of section 80-HHC of the Act it is clear that second and third proviso will be applicable in the case of assessee. There is no dispute about the fact that the AO has not quantified that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal (supra) it is clear that sufficiency of reasons for forming the belief cannot be judged by the Court. There should be live nexus between the reasons recorded and escapement of income. The assessing officer has specifically mentioned that since the turnover of the assessee is more than Rs.10 crores, amended provisions of section 80-HHC of the Act will be applicable. The amended provisions of section 80-HHC(3) have restricted the deduction under section 80-HHC. Therefore, there is live nexus between the reasons recorded and escapement of income. We may like to mention that the AO has initiated reassessment proceedings in other years which have not been objected to by the assessee. This fact has been clearly mentioned by the ld. CIT (A) in his order while deciding the issue relating to reopening of assessment. In view of the above, in our considered opinion, reopening of assessment is justified. Accordingly, we do not find any infirmity in the order of the ld. CIT (Appeals) upholding the reopening of assessment. 18. The assessee had placed reliance on the decision of Hon'ble Delhi High Court in the case of Haryana Acryli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings under section 148 against the assessee was not in conformity with the legislative prescriptions mandated in section 147. The facts of the case before us are entirely different from the facts of the case of Panchratan Cement (P.) Ltd. (supra) wherein original assessment was made u/s 143(3). Therefore, the decision rendered by Hon'ble Gauhati High Court is not applicable to the facts of the assessee's case. 19. Another decision relied upon by the assessee is in the case of Jay Bharat Maruti Ltd. (supra). In this case it has been held that the AO cannot reopen proceedings based on a particular item and thereafter proceed to bring to tax items which are not connected with what was initially indicated in the reasons disclosed under section 148(2) of the Act for the purpose of issuance of notice under section 148(1) of the Act. The facts of this case are also not applicable to the facts of the assessee's case. Hence, this decision is also not applicable. 20. Another decision relied upon by the assessee is in the case of Prashant S. Joshi (supra). In this case it has been held that the reasons which are recorded by the AO for reopening an assessment are only reasons which can be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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