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TMI Blog2014 (6) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... elieve that income has escaped assessment confers jurisdiction to reopen the assessment - It was held that although the power to reopen the assessment is much wider post 1st April 1989, one needs to give schematic interpretation to the words “reason to believe” failing which, section 147 would give arbitrary powers to the AO to reopen assessment on the basis of “mere change of opinion” which cannot be per se reason to reopen. The issue relating deduction allowable to the assessee u/s 80IA was examined by the AO during the course of assessment proceedings originally completed u/s 143(3), the deduction claimed by the assessee us/ 80IA was recomputed by the AO by rejecting the basis adopted by the assessee for apportionment of Overhead of head office and sales depots to the Kanpur Unit and taking turnover as basis for such apportionment - This issue thus was examined and decided by the AO on application of mind and in the absence of any “tangible material” coming to his possession after completion of original assessment, the reopening of the assessment by the AO on recompute the deduction eligible to the assessee u/s 80IA was clearly based on a “mere change of opinion” which is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions made on behalf of the assessee during the course of re-assessment proceedings, the order u/s 143(3) r.w. section 147 was passed by the AO on 20.2.2006 wherein the mistake committed in the original assessment in apportioning the overheads of head office and sales depots to compute the profit of the Kanpur Unit of the assessee company was corrected by the AO and the claim of the assessee for deduction u/s 80IA was further restricted by him to Rs.7,95,68,898/-. 4. Against the order passed by the AO u/s 143(3) r.w. section 147 of the Act, an appeal was preferred by the assessee before the ld. CIT(A) challenging the action of the AO in restricting the deduction u/s 80IA of the Act allowable in respect of profit of Kanpur Unit. Although no ground was specifically raised by the assessee in the appeal filed before the ld. CIT(A) challenging the validity of the assessment made by AO under section 143(3) r.w.s. 147 of the Act, submissions were made on behalf of the assessee on this issue.. It was submitted in this regard on behalf of the assessee before the ld. CIT(A) that the original assessment was completed u/s 143(3) by the AO after due examination of the relevant facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the calculation error could not be considered as based on change of opinion. He, therefore, rejected the contention raised on behalf of the assessee on this issue and upheld the validity of assessment made by AO u/s 143(3) r.w. s 147. 6. As regards the action of the AO in restricting the claim of the assessee for deduction u/s 80IA in respect of the profit of its Kanpur Unit, the ld. CIT(A) held that the Overheads of head office and sales depots were required to be allocated on the basis of value of turnover as rightly done by the AO in the re-assessment instead of volume of turnover as made in the original assessment. He, therefore, confirmed the action of AO in restricting the claim of the assessee for deduction u/s 80IA of the Act to Rs.7,95,68,898/-. At his stage, the ld. CIT(A) noted that there was transfer of raw material between Kanpur unit and other units aggregating the value of Rs.9.67.68.042/-. The valuation adopted for this transfer of material however, could not be substantiated by the assessee. According to the ld. CIT(A), adjustment of 10% of the value shown by the assessee for this transfer of material was required to be made for computing deduction u/s 80IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 320 ITR 561(SC) and Delhi High Court in the case of CIT V/s Usha International Limited (2012)348 ITR 485 (Del). 9. The ld. DR, on the other hand, submitted that although the basis adopted by the assessee for apportionment of the overheads of head office and sales depots was not accepted by the AO and such apportionment was done by him on the basis of turnover to compute the profit of the Kanpur Unit of the assessee company eligible for deduction u/s 80IA in the assessment originally completed u/s 143(3), there was a mistake in the said calculation in taking the volume of turnover as basis instead of value of turnover. He contended that this mistake resulted in allowing excess deduction to the assessee u/s 80IA of the Act and in order to correct the same, the assessment was rightly reopened by the AO u/s 148 of the Act as there was a clear escapement of income of the assessee. He contended that reopening of the assessment thus was not based merely on the change of opinion as sought to be contended by the ld counsel for the assessee and the validity of the assessment made by the AO u/s 143(3) r.w. 147 of the Act cannot be challenged on this ground. 10. We have considered the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Variable expenses 4,207.17 1,409.22 1,338.30 70.92 206.45 In view of the above, I have reason to believe that there is an excess allowance of deduction u/s 80IA of Rs.61.93 lakhs. Hence, an income chargeable to tax has escaped assessment; Therefore, I am satisfied that this a fit case to be reopened u/s 147 of the IT Act, 1961, and accordingly notice u/s 148 is issued . 13. The perusal of the above reasons recorded by the AO clearly shows that the assessment originally completed u/s 143(3) was reopened by him without there being any new information or material coming to his possession after completion of the said assessment and this position clearly evident from the reasons recorded by the AO is not disputed even by the ld. DR at the time of hearing before us. He, however, has contended that the reopening of assessment to correct the mistake committed by AO in the original assessment resulting into excess allowance of deduction u/s 80IA of the Act was in accordance with law. Before we deal with this contention of the ld. DR, it would be relevant first to appreciate the case of ld. counsel for the assessee challenging the validity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of any tangible material coming to his possession after completion of original assessment, the reopening of the said assessment by the AO on recompute the deduction eligible to the assessee u/s 80IA, in our opinion, was clearly based on a mere change of opinion which is not permissible in law as held interalia by the Hon ble Supreme Court in Kelvinator of India Ltd., (supra). 15. As regards the contention of ld. DR that reopening of assessment u/s 147 r.w. s. 148 of the Act to correct the mistake which resulted in allowing excess deduction is permissible, we may usefully refer to decision of Hon ble Gujarat High Court in the case of Damodar H Shah V/s ACIT (2000) 245 ITR 774, wherein it was held by Their Lordships that the nature of power of reopening assessment under section 147 is different from that of the power under section 154 for rectifying any mistake, which is apparent from the record of the proceedings in which an order is made. It was held that process of assessment, reassessment and re-computation u/s 147 is much more onerous to the assessee than the process of rectification/s 154 of the Act. It was held that in case of mistake resulting in escapement, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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