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TMI Blog2014 (5) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of the claim of the assessee makes no difference if the issue was processed at the time of original assessment proceedings - if the entire material has been placed by the assessee before the AO at the time when the original assessment was made and the AO applied his mind to that material and accepted the view taken by the assessee - Merely because he did not express this in the assessment order that by itself would not come as a ground to a conclude that assessee has escaped assessment and therefore, the assessment needed to be reopened - order passed by AO u/s 143(3) read with section 147 is not sustainable in law – Decided in favour of Assessee. - ITA Nos. 1506 & 1507/Ahd/2010 - - - Dated:- 24-4-2014 - Shri D. K. Tyagi And Shri Anil Chaturvedi,JJ. For the Appellant : Sri Milin Mehta, A. R. For the Respondent : Shri K. C. Mathews, Sr. D. R. ORDER Per : Shri D.K. Tyagi, Judicial Member These are assessee s appeals against the separate orders of Ld. CIT(A)-III, Baroda dated. 30-12-2009 31-12-2009. 2. Since facts in both the years are similar, both were heard and are being disposed off by passing a consolidated order by taking the facts for as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roda. The AO found the submission of the assessee not satisfactory and reduced the assessee s claim of deduction u/s. 80HHC from Rs. 39,60,973/- to Rs. 20,99,054/-. 5. Before Ld. CIT(A) the assessee s contention was that re-opening of the assessment u/s. 147 of the Act was not proper since AO had already framed regular assessment u/s. 143(3) of the Act. It was further submitted that the reopening was done on the issues which were already considered at the time of finalizing regular assessment u/s. 143(3) of the Act. To substantiate his claim attention of the Ld. CIT(A) was drawn to the fact that the issue of allocation of indirect cost to export of trading cost was elaborately considered at the time of framing of assessment finalized u/s. 143(3) of the Act. Lengthy discussion had taken place and assessee had also filed written reply clarifying its claim of depreciation. The AO deliberated upon the issue of allocation of indirect cost to export of trading goods for the purpose of working out the admissible deduction u/s. 80HHC. Since the issue raised by the AO in reassessment proceedings was the same as considered by him at the time of finalizing the original assessment, it amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That is, if after passing of the order u/s 143(3), the AO has reason to believe that excess relief has been allowed, he can reopen the case. In other words, even after application of mind, (the scrutiny assessment presupposes application of mind), excess relief is allowed, the same can be reopened. To put it differently, the legislature has envisaged a situation where even after application of mind, there is possibility of an under assessment. To plug this, the above referred provision of law was brought to statute book. There is no doubt that such situation to a large extent involves difference of opinion. Thus a reopening cannot be held invalid only because there has been difference of opinion, provided the difference of opinion is bona fide. In other wards reopening cannot be struck down by merely saying that there is a ' change of opinion'. This is not a magic ward. One has to be very careful and if change of opinion is based on bona fide belief of the AO, reopening has to be held to be valid even if at a later stage, additions made on such reopening may not be sustained. The argument that if excess relief has been allowed after scrutiny, the same cannot be reopened as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1,60,98,86,603 Total export turnover of trading goods Rs. 1,20,58,519 Total direct of Rs. 92,26,547 Total indirect cost 188997000 x 12058519 1509886603 Rs. 15,08,285 Thus, total direct and indirect cost allocable to export of trading goods would be (9226547 + 1508285) Rs1,07,34,832 Total trading goods export Rs1,20,58,519/- Less: Cost. Rs1,07,34,832 Deduction admissible Rs13,23,687 Less: Deduction allowed. Rs23,28,535 Excess deduction allowed Rs. 10,04,848 On the basis of above method of working, the assessee has been granted excess deduction under section 80HHC to the extent of Rs.10,04,848/- which resulted in under assessment to this extent. I have therefore reason to believe that an amount of Rs.10,04,848/- is excess allowed to the assessee and the same required to be withdrawn. The matter was referred to the CIT, Baroda vide this office letter No. DCIT(A)/SR.2/Rev.Audit/98-99, dated 19.01.1999. The CIT, Baroda has approved action u/s 147 vide letter No. BRD/DC(Jud)/185-3(1218)799- 2000 dated 22.03.2000. In the light of the above issue notice under section 148 of the Act for A.Y.1995-96. From the above, it is apparent that the AO had come t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval observations made in its earlier decisions in the case of Praful Chunilal Patel (236 ITR 832) (Guj) which needs reproduction: ..On a proper interpretation of Sec.147 of the Act, it would appear that the power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance and whether it is an error of fact of law that has been discovered or found out justifying the belief required to initiate the proceedings In our view, the words ' escaped assessment' where the return is filed are apt to cover the case of a discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its non consideration or caused by a mistake of law applicable to such transfer or transaction even where there has been a complete disclosure of all relevant fact upon which a correct assessment could have been based . As noted above, the provision of Sec. 147 requires that the AO should have reason to believe that any income chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment must apply a full and true disclosure of all material facts must be rejected out of hand in the light of the provisions of Explanation.1, according to which mere production of the books of account or other evidence from which the AO could have, with due diligence, discovered the material evidence does not necessarily amount to a disclosure within the meaning of the provision. The above decisions have considered the allegation of change of opinion in proper legal perspective. 7. Aggrieved by this order of Ld CIT(A) now the assessee is in appeal before us. 8. At the time of hearing learned counsel of the assessee reiterated the submission made before the Ld. CIT(A) placing reliance on the following decisions:- - ACIT v Fag Bearings India Ltd ITA No. 4564/Ahd/2007 - CIT v. M/s. Usha International Ltd [2002] 348 ITR 485 (Delhi) (FB) - Gujarat Power Corporation Ltd v. ACIT (2002) 26 taxnabb, com 51 (Guj) Ld. DR on the other hand relied on the orders of lower authorities and the following case laws: i) Gala Gymkhana (P) Ltd vs. ACIT [2012] 27 taxmann.com 294 (Guj) ii) Sun Pharmaceutical Industries Ltd vs. DCIT [2012] 25 taxmann.com 509 (Guj) iii) Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions are verified in depth and it is found to be correct in view of the fact that assessee is able to identify and correlate every export with specific purchases made from Baroda Office. In view of these facts assessee s claim u/s. 80HHC amounting to Rs. 23,28,535/- on export of trading goods is hereby allowed. It is clear from the above that while allowing the claim of the assessee u/s. 80HHC detailed inquiry was made as to why all the other expenses which were not directly attributable to export of trading goods should not be considered as indirect cost and be apportioned accordingly and only after verifying the assessee s contention which was found to be correct as the assessee was able to identify and co-relate every export with specific purchases made from Baroda office, AO allowed the claim of the assessee. In view of these undisputed facts of this case, we are of the considered opinion that reopening of the assessment on the part of the AO was nothing but a case of change of opinion which is not sustainable in law. This view of ours get support from judgment of Hon ble Gujarat High Court in the case of Gujarat Power Corporation Ltd vs. ACIT wherein on similar facts Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts and the balance sheet of the unit EOU claiming exemption of income u/s 10B of the Act and to furnish the same along with the detail of sales/purchases, other income and major expenses. In case of failure it was proposed to disallow the claim and consider the same as taxable income of the assessee (page 67 of the paper book). The assessee vide its letter dated 25.03.2004 furnished the detail at para 11 by stating that required details are enclosed along with working of profit and loss accounts for the year ending 31.03.2001 for EOU unit. These details also included allocation of common expenses along with the basis of allocation incurred for the said EOU. Complete break up of the profit and loss accounts, as per schedule-VI of the Companies Act, showing separately for EOU and other units was also furnished. These details are available at pages 76 and 78 to 80 of assessee's paper book. After considering these detailed submissions of the assessee the A.O. had accepted the assessee's claim, though this fact was not recorded in the body of the assessment proceedings. Since the assessment order is sought to be reopened within the period of four years, the only ground on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, Ahmedabad placing reliance on the decision of jurisdictional High Court has held as under:- 'We have heard the parties and considered the submissions. It is true that the assessment has been reopened within four years from the end of the assessment year and in view of the decision of the Gujarat High Court in the case of Prafful Chunilal Pate! [236 ITR 832] wherein it was held that assessment can be reopened even in cases where there has been complete disclosure of all the relevant facts necessary for assessment and the words escaped assessment are apt to cover the case of discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its non-consideration or caused by a mistake of law applicable to such transfer or transaction. But in the present, in our opinion, is not a one of that type. Here, the Assessing Officer has specifically asked for the details and the assessee had submitted the details of payments and only thereafter the assessment has been completed In these circumstances, to say that there was no conscious decision has been taken in the assessment order may not be proper. The case, in our opinion, would fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange and to carry on the business at the terminal of the Stock Exchange is revenue expenditure. In view of this also the reopening does not seem to be justified. We, accordingly, hold that reopening of assessment was invalid and cancel the assessment. 12. The case law of Hon'ble Apex Court, relied upon by the Revenue in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd, (supra) is not applicable to the facts of this case because in that case no scrutiny assessment u/s 143(3) of the Act was done in the first place and the return filed by the assessee was processed u/s 143(l)(a) of the Act and in view of this reassessment proceedings u/s 147 of the Act were held to be valid by the Hon'ble Apex Court. Interestingly judgment of Hon ble Delhi High Court in the case of Usha International Ltd relied by the DR also support the case of assessee as in this case Hon ble Court held that reassessment proceedings will be invalid in case issue or query is raised and answered by assessee in original assessment proceedings and AO does not make any addition in assessment order. 9.1 In none of the case laws relied by revenue AO made such inquiries as has been done in this case in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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