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TMI Blog2012 (12) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... anted at Rs. 1,73,91,386/-. While examining the deduction u/s 80IB it was found that the assessee has included the export incentives with DEPB profits for the purpose u/s 80IB. It was held following the decision of Hon'ble Madras High Court in case of CIT V. Jameel Leathers and Uppers, 246 ITR 97 that such incentives could not be included in business profits for the purpose of deduction u/s 80IB. After reducing such incentives the deduction u/s 80IB @ 25% was held to be allowable at Rs. 27,90,740/-. The assessee made an appeal challenging the disallowance of part of deduction u/s 80IB on account of export incentives and the ld. CIT(A) allowed part relief. 3. Later on the Department issued a notice u/s 148 because the assessee had been granted excessive deduction u/s 80HHC. The reasons given for this was that the assessee was doing direct as well indirect exports and the assessee was wrongly granted deduction of 90% on export incentives both in respect of export turnover and sale to export house. In the reassessment proceedings the deduction u/s 80HHC was worked out as under: "Profit of the business 1,32,30,262/- 90% of export incentives 2,36,21,435/- A) Deduction as a direct ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 90% of DEPB realization and other incomes for computing the deduction u/s 80HHC resulting in excess deduction of Rs. 96,19,262/-. Ultimately in the reassessment proceedings the deduction u/s 80HHC was reduced to Rs. 77,72,122/- against which he assessee filed an appeal before the ld. CIT(A)-II, Ludhiana who allowed the appeal and deduction u/s 80HHC was determined at Rs. 1,43,93,733/-. This appellate order was confirmed by the Tribunal vide order dated 24.8.2009. Thus it is clear that the Assessing Officer failed to verify the application of Section 80IB(13) r.w.s. 80IB(9). at the originally stage. During re-assessment proceedings only issue was that profit of business in respect of sales made to export house and indirect export was wrongly calculated without reducing export incentives. It was contended that in view of the decision of Hon'ble Punjab & Haryana High Court in case of Vipin Khanna V CIT, 255 ITR 220, wherein it was held that when the assessment is reopened only qua items of under assessment and finality of the assessment proceedings with regard to other issues remain undisturbed. Since the deduction u/s 80IB and 80HHC was allowed by the original assessment order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes to his notice during the course of the proceedings u/s 147 of the Act." Thus the Assessing Officer was not at all prevented from examining this issue in the reassessment proceedings even though it was not one for the reasons for reopening the assessment. The proceedings u/s 263 of the Act has been initiated against the reassessment order and failure of the Assessing Officer to examine the applicability of Section 80IB(13) r.w.s. 80IA(9). There was no case of finality of this issue in any order since this issue was not considered at all. Therefore, the contention of the assessee's representative that the impugned issue had attained finality in the earlier order is without any basis and is irrelevant. It is also settled that once the reassessment proceedings are pending, the entire assessment is open and is not confined to scope of reasons recorded for reopening the assessment. The contention that proceedings u/s 147 and limited scrutiny as per Section 143(2)(i) which was applicable up to May 2003 were at par and were legality same is misconceived and without any legal basis. This argument of the assessee's representative is irrelevant. The action u/s 263 has been taken with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. The facts of this case are almost identical with that of CIT V. Alagendran Finance Ltd (Supra). In that case the returns for Assessment Years 1994-95, 1995-96 and 1996-97 were filed on 23.11.94. 27.11.94, 26.11.97. These assessments were completed and in the said orders the assessees's claim regarding "lease equalization fund" was accepted. Later on the assessments were reopended by the Assessing Officer on March 04, 2004 for examining (i) the expenses claimed for share issue (ii) bad and doubtful debts (iii) excess depreciation on gas cylinders and goods containers. Later on the Commissioner invoked jurisdiction u/s 263 and passed revisionary order dated March, 29, 2004 vide which it was held as extracted by Hon'ble Supreme Court.at page 4. "In short, from the example given it is the depreciation on the leased assets that is claimed as book depreciation and disallowed in the computation of income, the assessee sought to claim in the form of lease equalization from the lease rentals by virtue of the guidelines note of the Institute of Chartered Accountants of India. Since the assessee has not given the complete, the method adopted by the assessee in arriving at the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided in the original assessment proceedings. It is only the under-assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings u/s 147............" 20 We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of matters other than the allowance of "lease equalization fund". The said finding of fact is binding on us. The doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject matter of reassessment and the subject matter of assessment were the same. They were not. 21 It may be of some interest to notice e that a similar contention raised at the instance of an assessee was rejected by a three judge Bench of this Court in CIT V. Shri Arbuda Mills Ltd (1998) 231 ITR 50. This Court took note of the amendment made in section 263 of the Act by the Finance Act., 1989 with retrospective effect from June 1, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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