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TMI Blog2015 (1) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2007 on which the Revenue relies upon for issuing of the notice, could have undoubtedly been the basis for issuing the impugned notice even if the same has been obtained in assessment proceedings for a subsequent assessment year provided the same was the basis of the impugned notice and so recorded in the reasons in support of the impugned notice. Thus reliance by the Revenue upon the letter dated 15th January, 2007 from the Additional Commissioner of Income Tax cannot be read into the reasons recorded while issuing the impugned notice. Thus once an assessment order is being passed, it has some sanctity. If the assessment order is to be disturbed, then the Assessing Officer must strictly satisfy the condition precedent as provided under Section 147/148 of the Act before he can issue a notice, seeking to reopen an assessment. In this case, as we have pointed out herein above, there has been a change of opinion on the part of the Assessing Officer in issuing a notice and, therefore, he has no reason to believe that income chargeable to tax has escaped assessment. In these circumstances, the jurisdictional requirement for issuing a notice is not satisfied and, therefore, the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following information/ clarification in respect of the working of its claim for deduction under Section 80IA/IB of the Act: 13 From the working of deduction u/s. 80IA in respect of Ahmednagar unit, it is soon the profit of this unit includes interest of ₹ 17.14 lakhs. As interest not derived from such business of the undertaking, please explain why same should not be excluded for the profit of Industrial Undertaking. 14 File the Profit and Loss Account of each unit giving the details of expenditure actually incurred and also the common expenditure allocated against and also give the basis for allocating the expenditure. 15 Details of Power and Fuel unit wise. 16 Please submit depreciation chart as per unit wise. 17 Details of inventories unit wise. 18 Details of stores consume unit wise. 19 Details of consumption of tools/materials etc. unit wise. (e) The Petitioner by its letter dated 25th January, 2005 responded to the queries raised by the communication dated 27th December,2004. In its response dated 25th January, 2005 the Petitioner in particular gave details of the manner in which the expenses had been allocated amongst the three manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g expenses are compared: S. No. Expenses Head Total Amt. Allotted % to Bearing Unit Allotted % to Powder Unit % allotted to other units 1 Misc. Expenses 2.57 Cr. 24.50% 5.22% 70.28% 2 Employee Cost 12.36 Cr. 15.25% 3.68% 81.07% 3 Stores Consumed 2.75 Cr. 49.78% 7.01% 43.21% If the above expenses are reallotted correctly in ratio of the respective turnover, then the assessee's claim of deduction u/s. 80IA will decrease and correspondingly the profits of non 80IA units would be increased as under: 1 Ratio of turnover of non 80IA unit to Total turnover = 49.83% 2 Misc. Expenses allotted to non 80IA Unit= 70.28% of Rs.2,57,16,581/- Rs.1,80,73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. However, in the present case as the Assessing Officer had occasion to form an opinion on the very issue of allocation of expenditure during the regular assessment proceedings, the issue of impugned notice on the same facts being a change of opinion would not satisfy the test of reasons to believe on the part of the Assessing Officer; (b) The impugned order dated 14th November, 2007 not dealing with the Petitioner's objection that the notice has been issued on account of mere change of opinion, is an implicit acceptance of the Petitioner's objection; (c) In any event, the letter dated 6th August, 2007 by which the reasons recorded were furnished to the Petitioner itself indicates that during the regular assessment proceedings, specific questions were raised by the Assessing Officer with regard to the Petitioner's claim for deduction under Section 80IA/80IB of the Act and consequent to the explanation of the Petitioner, the same was accepted in regular assessment proceedings. It is on observations of those very facts that now an opinion is formed, that the allocation of expenditure among the three manufacturing units is disproportionate. Thus, the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral nature and the response being voluminous, it did not indicate any application of mind by the Assessing Officer for forming an opinion in regular Assessment Proceedings; and (d) At this stage, when, only a notice for reopening has been issued, this Court should not interfere. At this stage, it is only a prima facie view and the Petitioner would during the regular assessment proceedings have sufficient opportunity to satisfy the authorities about the appropriates/ corrections of the allocation of expenditure amongst its three manufacturing units. In view of the above, it is submitted that no interference with the impugned notice is warranted. 6. The law on reopening of an assessment under the Act, is fairly settled. An assessment once made, is final. The Assessing Officer can reopen an assessment only in accordance with the express provisions provided in Section 147/148 of the Act. This is for the reason that there is a finality / sanctity attached to an assessment order. It is only on the Assessing Officer strictly satisfying the provisions of Section 147 of the Act, that it acquires jurisdiction to reopen an assessment. Section 147 of the Act, clothes the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer 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. From the aforesaid observations of the Supreme Court, it is clear that the powers to reopen an assessment is not a power to review an order of assessment. Further, a change of opinion on the part of the Assessing Officer in issuing the reopening notice, from the opinion formed on the very issue during regular assessment proceedings would result in the same ceasing to be a reason to believe. 9. Besides, this Court in cateina of decisions beginning with Hindustan Lever Limited v/s. R. B. Wadkar 268 ITR 332 has taken a view that a notice for reopening of an assessment would stand or fall on the basis of the reasons recorded at the time of issuing a notice for reopening of an assessment. This Court had observed that the reasons are required to be read as recorded by the Assessing Officer and the same cannot be improved upon either by substitution, addition or deletion. In fact, in the above case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident from the fact that the opinion on the issue of allocation of expenses for claiming deduction under Section 80IA/IB of the Act was formed during the regular assessment proceedings. As observed above, the jurisdiction to issue a notice is acquired on satisfaction of twin conditions i.e. reason to believe and escapement of income tax in case of assessment being sought be opened within a period of less then four years from the end of Assessment Year. Besides, the issue of escapement of income chargeable to tax is also an issue on merits and may not in particular facts establish exfacie absence of jurisdiction. 13. In the present facts, the Petitioner had along with its Return of Income filed its Computation of Income wherein claim for deduction under Section 80IA/IB of the Act was made. Besides the Auditor's certificate as required under Section 80IA(8) of the Act to claim to deduction was also filed along with a note indicating the basis of allocation of expenditure amongst its three manufacturing units was also filed. These were all primary documents which would not normally escape examination during the scrutiny proceedings. This is also evident from the fact that duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice also record the fact that during the regular assessment proceedings, the Petitioner has been asked to furnish details in support of the claim for exemption under Section 80IA/IB of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a disproportionate distribution of expenses between various units belonging to the Petitioner for claiming deduction under Section 80IA/IB of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proceedings for Assessment Year 2002-03 sought information in respect of the allocation of expenses and the explanation offered by the Petitioner was found to be satisfactory. This is evident from query dated 27th December, 2004 and the Petitioner's response to the same on 25th January, 2005 explaining the manner of distribution of common expenses for delaying the process of claiming deduction under Section 80IA/IB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9th March, 2005. This Court in Aroni Commercials Ltd. v/s. Assistant Commissioner of Income Tax 367 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, then in such case, it is open to an Assessing Officer to exercise its jurisdiction under Section 147/148 of the Act and reopen the assessment. In the above decision, during regular assessment proceedings, no query was made with regard to the issue on which the assessment was sought to be reopened, and therefore, ex-facie indicative of non application of mind. In the present case, the Assessing Officer had raised queries with regard to the allocation for expenditure between the three manufacturing units of the Petitioner which could only be raised on consideration of the claim and consequently accepted on consideration of the reply. Thus, it is not a case where the Assessing Officer overlooked/ ignored the material and/or the issue which now forms the basis of issuing the impugned notice for reopening of the assessment order for Assessment Year 2002-03. 17. Further, reliance is also placed by the Revenue upon the decision of the Bombay High Court in Sociedade De Formento Industrial P. Ltd. v/s. Assistant Commissioner of Income Tax 339 ITR 595 to relegate the Petitioner to the remedies available under the Act. In the above case, this Court refused to exercise its extra ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid communication dated 15th January, 2007 is not even referred to in the reasons recorded while issuing the impugned notice dated 14th March, 2007. On the contrary, the communication dated 6th August, 2007 which contains the reasons recorded at the time of issuing the impugned notice refers to the details furnished by the Petitioner during the regular assessment proceedings and it is now observed therefrom that the allocation of common expenses between the three manufacturing units belonging to the Petitioner is disproportionate. 19. As pointed out herein above, this Court in series of decision beginning with Hindustan Lever (supra) has taken a view that reopening notice has to stand or fall on the basis of the reasons recorded at the time of issuing the notice for reopening. It is not open to the Assessing Officer to improve upon the reasons recorded at the time of issuing the notice either by adding and/or substituting the reasons by affidavit or otherwise. The tangible material i.e. letter dated 15th January, 2007 on which the Revenue relies upon for issuing of the notice, could have undoubtedly been the basis for issuing the impugned notice even if the same has been o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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