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TMI Blog2014 (5) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd Vs. DCIT [2013 (11) TMI 1494 - BOMBAY HIGH COURT] - the AO has power to re-assess but has no power to review an assessment - The power of re-assessment could only be exercised if certain pre-conditions are satisfied - the AO must have reason to believe that income chargeable to tax has escaped assessment. For reopening the assessment the primary condition to be satisfied is that the AO must have reason to believe that the income chargeable to tax has escaped assessment and this reason to believe must be based on some tangible material and cannot be a mere assertion of the AO - the reopening of assessment after four years from the end of the assessment year in the case of the assessee is without any tangible material on the basis of which the AO could have formed the belief that the income assessable to tax has escaped assessment and further since the assessment has been reopened after expiry of four years - in the absence of any allegation that income assessable to tax has escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment, the reopening is hit by the proviso to section 147 - the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding validity of reopening of assessment. 3. The assessee filed its return of income for assessment year under conisderation on 1.12.2003 declaring total income at Rs. 49, 77,189/- under the normal provisions and book profit u/s 115JB at Rs. 80,43,994/-. The assessment u/s 143(3) was completed on 28.02.2006 determining the total income under normal provisins at Rs. 50,00,950/- and book profit u/s 115JB at Rs. 80,67,756/-. Subsequently the AO reopened the assessment by issuing notice u/s 148 of Income Tax Act on 31st March 2010 on three grounds i.e. (i) the assessee is not in the activity of manufacturing or production to qualify for deduction u/s 80IB (ii) the assessee has not furnished form no. 10CCB along with return of income and, threrefore, the deductgion u/s 80IB for the year under consideration is liable to be disallowed (iii) while computing the deduction u/s 80HHC the profit of 80IB unit was not reduced from the profits of business which has resulted in allwoance of double deduction. The AO completed the reassessment vide order dated 9.11.2010, however no disallowance was made u/s 80IB and, therefore, the first two grounds on which the assessment was reopened were final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n he has relied upon the decision of Hon ble Jurisdictional High Court in the case of Lalitha Chem Industries Pvt. Ltd Vs. DCIT (2013) 86 CCH 177 and submitted that the power of reassessment could only be exercised if certain pre conditions are satisfied. The primary conditions being that the Assessing Officer must have reason to believe that income chrageable to tax has escaped assessment. This reason to believe must be based upon some tangible material i.e. it cannot be a mere ipsi dixit of the Assessing Officer. A different view on tangible material available earlier would be a change of opinion and not amount to reason to bellieve income chargeable to tax has escaped assessment. He has also relied upon the decision of Hon ble Delhi High Court in the case of CIT Vs. Purolator India Ltd. (343 ITR 155). Thus the Ld. AR of the assessee has submitted that the reopening is based on change of opinion without any tangible material or information on the basis of which the AO could have form the opinion that income assessable to tax has escaped assessment. 6. On the other hand, the Ld. DR has submitted that during the reassessment, the AO has also disallowed the deduction u/s 80IB in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that while computing the deduction u/s 80HHC in the assessment order, the profit of 80IB unit was not reduced from the profits of business, which has resulted in allowance of double deduction on the same profits of the undertaking. In view of the above, I have reasons to believe that an income amounting to Rs.29,10,649/- has escaped assessment within the meaning of Sec.147 of the Income Tax Act, 1961. Further, I also have reason to believe the assessee has been allowed benefit of deduction u/s.80IB as well as 80HHC, on the profits of the same undertaking. Hence, this is a fit case for initiation of proceedings u/s.147 of the Income Tax Act, 1961. 8. The first two points recorded in the reasons by the AO are regarding deduction u/s 80IB however while framing the reassessment the AO has not made any disallowance in respect of deduction u/s 80IB already allowed in the original assessment, therefore, these two points recorded in the reasons become irrelevant for the purpose of deciding the issue of validity of reopening of the assessment before us. Moreover, both the parties have conceded on this aspect that the point number 1 and 2 are not relevant for deciding the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said questionnaire reads as under:- Show cause as to why deduction u/s 80HHC as per the provisions of section 80IA(13) r.w.s 80IA(9) should not be disallowed. 10. The assessee replied the query of the AO vide its reply dated 10.6.2005 as under:- In our letter dated 8/03/2005, we have furnished all the details of our above said client except point no 18. Under instructions of our client we are giving the reply point no. 18 of your notice as under. Section 80IA(9) reads as under: Where any amount of profits and gains of an undertaking or ' an enterprise in the case of an assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provision of this Chapter under the heading C-Deductions in respect of certain Incomes , and shall in no case exceed the profits and gains of such eligible business of undertaking or enterprise, as the case may be. In this connection, reference is invited to: . 1) The Explanatory Memorandum (Circular No. 772 dated 23.12.1980) had clarified that under Chapter VI-A, various deductions from profits and gains are allowed. The total deduction under Chapter VI-A is restricted to the Gross T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections of Ld. DR that the assessee has not raised the issue of change of opinion before CIT(A) and therefore is not permitted to raise this issue at this stage is without any merits. This issue of validity of reopening is a subject matter involving all the legal aspects. Therefore, it is clear from the record that the issue u/s 80IA(9) had been examined by the AO in the original assessment and allowed the claim by due application of mind then the question of reopening on the basis of change of opinion is part and parcel of the main issue of validity of reopening of assessment. Hence such plea can be raised at any stage as it does not require any investigation of facts. The decision relied upon by the Ld. DR in the case of Export Credit Guarantee Corporation of India Ltd. Vs. Additional CIT (supra) is not applicable on the facts of the present case because the issue of allowability of deduction on the interest income was not the reason for reopening of the assessment in the case of the assessee. Therefore, even if there is a complete failure on the part of the AO to apply is mind during the original assessment but the same point is not the basis of reopening of assessment then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. We find that in the case in hand both the primary conditions as well as additional condition in case of reopening beyound four years are absent. Accordingly we hold that the reopening of assessment after four years from the end of the assessment year in the case of the assessee is without any tangible material on the basis of which the AO could have formed the belief that the income assessable to tax has escaped assessment and further since the assessment has been reopened after expiry of four years, therefore, in the absence of any allegation that income assessable to tax has escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly all material facts relevatn for the assessment, the reopening is hit by the proviso to section 147. Consequently the reopenign of assessment is not sustainable and reassesment is quashed. 14. Since the reopening of assessment is not sustainable and is quashed, therefore, the other ground raised on merits become infructuous and we do not propose to dispose off the same. 15. In the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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