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TMI Blog2015 (1) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs, the assessee addressed a comprehensive letter dt. 18th Nov., 2009 making a full disclosure of facts – the AO specifically discussed in the course of the assessment order the matters in respect of which he has made a disallowance either fully or in part. Since the AO did not find any justification to reject the claim of the assessee in respect of the issue of CDC, there was no specific discussion in the course of order - the AO has considered the claim of the assessee by applying his mind - there was a decision on this issue in favour of the assessee when the assessment was completed u/s. 143(3) - merely because subsequently another decision of the Co-ordinate Bench of the ITAT is noticed by the AO, that will not vests the jurisdiction in the AO to exercise his powers u/s 147 – the AO was not justified at all to initiate the proceedings u/s. 147 and issued the notice u/s. 148 – thus, the proceedings initiated u/s 147 is set aside – Decided in favour of assessee. - ITA No. 1175/PN/2013 - - - Dated:- 21-11-2014 - Shri R. S. Padvekar And Shri R. K. Panda,JJ. For the Petitioner : Shri P.S. Naik For the Respondent : Shri Nikhil Pathak ORDER Per R. S. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deduction u/s. 10B in the order u/s. 143(3) dated 24/12/2009 at ₹ 4,26,30,184/- on total export turnover of ₹ 10,35,06,894/- after excluding freight insurance. The deduction u/s. 10B has been claimed on direct exports of ₹ 40,53,728/- and exports made to another EOU viz. Magna Casting Machine Works Pvt. Ltd. of ₹ 10,12,61,099/-. The above deduction was allowed by the A.O. relying on Hon'ble ITAT Ahmedabad Bench decision in the case of Anita Synthetic Pvt. Ltd. (2006) 100 TTJ Ahd. 277 and as per the provisions of chapter 8; of Foreign Trade Policy. At the time of following the said deduction the AO was not aware of the Hon'ble ITAT angalore A Bench decision in the case of Tata Elxi Ltd. Vs. ACIT dated -16/10/2007 wherein it has been held that sale of software by one STP to another STP within the country is treated as deemed export only for the purpose of duty draw back and exemption from terminal excise duty. For the purpose Income-Tax what is to be treated as deemed export in respect of such sale is provided in section 10A itself. Therefore the assessee was not entitled to exemption u/s. 10B in respect of sales within India. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: 3.4 The appellant has relied upon the Hon'ble Supreme Court s decision in CIT vs. Kelvinator of India Ltd. reported in 320 ITR 561. A careful reading of this decision shows that the Court was engaged in interpreting the amendment made in sec. 147 by the Direct Tax Laws (Amendment) Act 1987 w.e.f. 1.4.1989, whereby the words for reasons to be recorded by him in writing, is of the opinion that any income chargeable to tax has escaped assessment for any assessment year were replaced with the words reason to believe . The court held that the language used post 1.4.1989 shows that the power to reopen was much wider prior to 1.4.1989 and if left unchanged, would lead to abuse of power by the Assessing Officer. It was therefore, held that after 1.4.1989, one must treat the concept of change of opinion11 as an in-built test to check abuse of power by the Assessing Officer. The Assessing Officer has power to reopen provided there is tangible material to come to the conclusion regarding the escapement of income. In doing so, the Hon'ble Court relied upon Circular No. 545 of CBDT which explained that the amendment to reintroduce the expression has reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are available on the issue. i. CIT vs Raghunath Podar (Cal) 96 ITR 316 ii. CIT vs Makkhansing (Raj) 154 ITR 121 iii. Manaklal Porwal vs CIT (Raj) 155 ITR 648 iv. Kumar Engineers vs CIT (P H) 223 ITR 18 v. CIT vs Novopan India Ltd. (AP) 236 ITR 746 In fact the Andhra Pradesh High Court in the decision cited above at Sr. No. (v) held that a decision of non jurisdictional High Court, even if rendered subsequent to the passing of original assessment order, can be a ground for reopening of the original assessment order. 3.7 It is also seen that the appellant has relied upon the Delhi High Court decision in Eicher Ltd. reported in 294 ITR 310 pertaining to A.Y. 1993-94. In the facts of the case, where even after entire material was placed before the Assessing Officer at the time of original assessment, it was found that the Assessing Officer chose not to give any finding in this regard. Reopening the assessment subsequently on the basis of the same facts was held to be change of opinion which is not permissible. 3.8. The Hon'ble Kerala High Court was examining the case of reopening arising out of ignorance of law and omission on the part of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year. It is immaterial whether the escapement is either on account of ignorance of law or omission on the part of the assessee or the Assessing Officer. So long as income chargeable to tax has escaped assessment and the Assessing Officer has reason to believe so, whether suo motu found by him from records or whether brought to his notice by the audit party or any other agency, the Assessing Officer will be justified in revising the assessment within the period of limitation provided therein. The fact that entire facts were on record and the assessee is not engaged in suppression has relevance only if reassessment is initiated beyond 4 years provided under the section, which is not the case here. If reassessment was not made within four years, it would have been invalid on this ground raised by the assessee. In view of the above findings, the order of the Tribunal and the first appellate authority are to be reversed and reassessment completed under section 147 is to be restored. [Para 8] 3.9. The present case relates to the provisions of sec. 147 read with proviso to Section 147. On the facts of the case therefore, it is held that deduction u/s 10B could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Kelvinator of India Ltd. 320 ITR 561 (SC). ii. NYK Line (India) Ltd. Vs. DCIT 346 ITR 361 (Bom) iii. Parveen P. Bharucha Vs. DCIT and Another 348 ITR 325 (Bom) He pleaded for quashing the reassessment proceedings. Per contra, the Ld. DR supported the impugned order. 7. We have heard the rival submissions of the parties and perused the record. In this case, the facts are not in dispute. The assessee is a 100% EOU. The assessee also sold goods to another EOU to the extent of ₹ 10,12,61,099/- and deduction u/s. 10B of the Act to the extent of ₹ 4,26,30,184/- was claimed. On perusal of the original assessment order passed u/s. 143 it is seen that the Assessing Officer discussed issue of deduction in para no. 4 which reads as under: 4. The assessee has made direct export of ₹ 40,53,728/- and export to EOU of ₹ 10,12,61,099/- and deduction u/s. 10B of ₹ 4,26,30,184/- has been claimed on ₹ 10,35,06,894/- (total export turnover after excluding freight and insurance) received in foreign exchange. It is claimed that the sale from the EOU to another EOU are deemed to be exports. As per chapter 8 of the foreign trade policy. As per sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure9 on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts9 necessary for his assessment, for that assessment year. 10. As per the history of Sec. 147 which is recasted section, brought on stature book w.e.f. 01-08-1989, the initial words the reason to believe have been retained by the Parliament even if in the Bill words in the opinion of the Assessing Officer were proposed for the consideration. The entire scheme of Sec. 147 of the Act contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong . 11 One more point very strenuously urged by Mr. Gupta for the Revenue was that the court should not at this stage quash the proceedings as the only obligation of the Revenue is to establish that prima facie material exists to show that income has escaped assessment and the party can thereafter establish in reassessment proceedings that the deductions as allowed in the original assessment proceedings are valid. 12 The issue here is one of jurisdiction to issue notice and not suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulfilment of certain preconditions and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an inbuilt test to check abuse of power by the AO. Hence, after 1st April, 1989, the AO has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words 'reason to believe', Parliament reintroduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the AO. ...... 14. Now, undoubtedly an order of assessment which has been passed for a subsequent asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court in its judgment in Multiscreen Media (supra) also adverted to a decision of the Division Bench in Siemens Information System Ltd. vs. Asstt. CIT (2008) 214 CTR (Bom) 16 : (2007) 295 ITR 333 (Bom). The Division Bench held that the judgment in Siemens Information System Ltd. (supra) would not preclude the AO to reopen an assessment for an earlier year on the basis of fresh material which has come in the course of assessment for a subsequent assessment year. 17. Now, in this background and considering these tests, the facts of the present case would have to be evaluated. The assessee in the present case had made a disclosure in the notes forming part of the accounts of the nature of payments required to be made to the foreign principal on account of CDC. A reference was made to the fact that as a result of a circular issued by the RBI, the assessee was not permitted to remit a certain proportion equivalent to US $ 1.5 for each container. The statutory auditors had also included a note in the report. During the course of assessment proceedings, the assessee addressed a comprehensive letter dt. 18th Nov., 2009 making a full disclosure of facts. Now it is in this background th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Revenue in the course of assessment for asst. yr. 2007-08 which can justify the reopening of the assessment for asst. yr. 2006-07. 13. In the present case the Assessing Officer has considered the claim of the assessee by applying his mind. It is also not disputed in this case that there was a decision on this issue in favour of the assessee when the assessment was completed u/s. 143(3) of the Act. Merely because subsequently another decision of the Co-ordinate Bench of the ITAT is noticed by the Assessing Officer, in our opinion that will not vests the jurisdiction in the Assessing Officer to exercise his powers u/s. 147 of the Act. We, therefore, hold that the Assessing Officer was not justified at all on the facts of this case to initiate the proceedings u/s. 147 and issued the notice u/s. 148 of the Act. We, accordingly, quash the proceedings initiated by the Assessing Officer u/s. 147 of the Act and cancel the assessment. As the assessee has succeeded on the issue of validity of the reassessment proceedings, we do not decide the Ground No. 2 which is taken on merit. 14. In the result, the assessee s appeal is allowed. Pronounced in the open Court on 21-11-2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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