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TMI Blog2016 (4) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 8-4-2016 - Sh. C. M. Garg, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Sh. Salil Kapoor , Sanat Kapoor Ms. Ananya Kapoor, Advocates For the Respondent : Sh. P. DAM Kanunjna, Sr. DR ORDER Per O. P. Kant, A. M. These two appeals of the assessee are directed against two separate orders of Ld. Commissioner of Income-tax(Appeals)-XXIV, New Delhi for assessment years 2001-02 and 2002-03 respectively. The grounds of appeal raised in both these appeals are identical, therefore both are heard together and disposed of by this consolidated order: ITA No. 4314/Del/2010, AY 2001-02 2. First we take up appeal in ITA No. 4314/Del/2010. The grounds of appeal read as under: i. That the order of learned Assessing Officer as well as Commissioner of Income Tax(Appeals) is bad in law and against the facts of the case. ii. That the learned Assessing Officer as well as Commissioner of Income Tax(Appeals) acted arbitrarily in reopening the assessment u/s 147/148 of the I.T. Act. iii. That the learned Deputy Commissioner of Income Tax as well as learned Commissioner of Income Tax(Appeals) was not justified in reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,066/- as against deduction of ₹ 47,11,364/-allowed by the AO. Further he upheld the finding of the AO as regard to working of deduction under section 80HHC of the Act, however, directed the AO to re-compute the deduction under section 80HHC in view of the reduction in deduction under section 80IA of the Act and allow the deduction accordingly. Aggrieved, the assessee in appeal before the Tribunal. 5. The grounds No. 1 and 4 of the appeal are general in nature, and therefore not required to adjudicate upon by us. 6. In ground No. 2, the assessee has challenged reopening of the assessment under section 147/148 of the Act. 6.1 Before us, the Ld. Authorized Representative ( AR) of the assessee submitted that the reopening proceedings were not liable to be sustained because of following reasons: (a) since the original assessment was completed under section 143(3) of the Act, subsequent reopening beyond 4 years from the end of the assessment year, cannot be done unless there is a failure on the part of the assessee in disclosing fully and truly all material facts necessary for the assessment and in the case of assessee all the facts were disclosed in assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an income of ₹ 457,000/-. As per CA s certificate in form 10CCAC dated 19.09.2001, the assessee claimed deduction u/s 80HHC at ₹ 13662093/- and as per CA s certificate in form 10CCB dated 19.09.2001, it claimed deduction u/s 80IA at ₹ 4706365/-. The assessment in this case was completed u/s 143(3) on 25.03.2003 on total income of 477000/- and the deductions u/s 80HHC and 80IA as claimed by the assessee were allowed while completed the assessment. On going through the assessment records of the assessee for AY 2001-02, it is noticed that the assessee has incorrectly claimed deduction u/s 80HHC at ₹ 136,62,093/- for the reasons given hereunder: Sub-section (9A) to section 80IA introduced by Finance Act (No. 2) of 1998 with effect from 1.4.1999 which later became sub-section (9) of Sec. 80IA reads as under: (9) Where any amount of profit and gains of the industrial undertaking or of a hotel in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this chapter under the heading C-Deduction in respect of certain in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the assessee firm is entitled to claim deduction u/s 80HHC on the amount of said DEPB only when it fulfills the above said conditions laid down in the Taxation Laws Amendment Act, 2005. The assessment for AY 2004-05 in this case has since been completed u/s 143(e) on 27.12.2006 at a total income of ₹ 37757080/- in which the assessee s claim of deduction u/s 80HHC on the amount of DEPB was not allowed as the assessee did not fulfill the said conditions in that year. The assessee would thus not fulfill the said conditions in A.Y. 2001-02 also. In view of these facts, the assessee firm is not entitled for deduction u/s 80HHC on the amount of said DEPB for the AY 2001-02 also. As regards Supervision Charges amounting to ₹ 10,000/-, the assessee firm is not entitled for deduction u/s 80HHC on this amount as these charges do not pertain to profit of export business. In respect of Prior period income amounting to ₹ 17748/- also the assessee firm is not entitled for deduction u/s 80HHC of the Income Tax Act. In view of the above facts, the deduction u/s 80IA as well as 80HHC are calculated hereunder:- Calculation of deduction u/s 80IA of I.T. Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am, therefore, submitted proposal for taking action u/s 147 in the case for the assessment year 2001-02. 8.1 The undisputed fact in the case in hand is that the original assessment was completed under section 143(3) of the Act on 25th March, 2003 and the assessment has been reopened by way of issue of notice under section 148 of the Act on 02/07/2007. Thus, the notice under section 148 of the Act has been issued beyond 4 years from and of the end of relevant assessment year i.e. 2001- 02. The issue of notice under section 148 of the Act, where the assessment was completed under section 143(3) of the Act, has been restricted by the proviso below the main section, which is reproduced as under: 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 failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble jurisdictional High Court in the case of Global Signal Cables (India) Private Limited (supra), the reopening proceedings after expiry of 4 years from the relevant years are not valid as per law. 9.1 In support of the next proposition, that in absence of no new tangible material, reassessment will amount to change of opinion and therefore the reassessment will not be sustainable, the Ld. AR has relied on the judgement of the Hon ble jurisdictional High Court in the case of CIT versus Orient Craft Ltd (supra). In that case the assessment was completed under section 143 (1) of the Act and subsequently the AO noticed from the return of income that the assessee was wrong in treating the proceeds of premium on sale of quota and DEPB income as part of export turnover for claiming deduction under section 80HHC of the Act and made reassessment under section 147 of the Act. In the circumstances, the Hon ble jurisdictional High Court held that there was no fresh tangible material before the Assessing Officer, subsequent to the intimation issued under section 143(1) of the Act and the AO was not having any power of reviewing whatever concluded under section 143(1) proceedings of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot go into the other aspect i.e. whether there was change of opinion or not. This issue has been aptly clarified by Hon ble High Court in the case of Madhukar Khosla, (supra), wherein it has been held by their lordships that external facts or material constitute the driver, or the key which enables the AO to Motilal R. Todi legitimately reopen the completed assessment and in absence of this objective trigger , the AO does not possess jurisdiction to reopen the assessment. Further, most importantly, it was held by the Hon ble High Court that it is at the next stage when the question, whether the reopening of assessment amounts to review or change of opinion arises. In other words, if there are no new tangible materials , then there would be no reasons to believe , and consequently reopening would be an impermissible review. Under these circumstances there would not arise any need to go the next stage to examine the next question, i.e., whether there was review or change of opinion . The condition with respect to availability of new tangible material is step anterior to the condition of no change of opinion or review . 9.3 When we advert to the facts of the case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be done within a period of 4 years 10.2 Similarly, the Hon ble High Court of Gujarat in the case of Sadbhav Engineering Ltd versus DCIT (supra), where the assessee was a works contractor, for the assessment year in question notices were issued under section 148 beyond a period of 4 years from the end of the relevant assessment year and the assessment was sought to be reopened on the ground that as per Explanation given below the subsection (13) of section 80-IA, which had been substituted by the finance (No. 2) Act, 2009 with retrospective effect from 01/04/2000, deduction under section 80-IA would not be admissible to an assessee who carried on business which was in the nature of works contract, held that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for each assessment and in the circumstances the very initiation of proceeding under section 147 stood vitiated and as such could not be sustained. 11.1 In the case in hand , the proceedings under section 147 of the Act were initiated by the Assessing Officer in view of the retrospective amendment to the provisions of sections 28 and 80HHC of the Act w.e.f. AY 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Gujarat High Court, prayer (a) of the writ petition has to be allowed. 4. It is ordered accordingly. 5. In view of the fact that we have allowed prayer (a) to the extent that the amendment brought about by introducing the 2nd, 3rd and 4th proviso to Section 80 HHC (3) (c) is to operate only prospectively and not retrospectively, the other prayers which are in the nature of consequential reliefs also stand allowed. 11.2. In the case of Avani Export(supra), the matter was carried to Hon ble Supreme Court, and their Lordship in the judgment of CIT Vs. Avani exports reported in ( 2015) 58 taxmann.com 100 (SC), has upheld the findings of the Hon ble High Court of Gujarat. The relevant findings of the Hon ble Supreme Court are as under: 5. We find that in essence the High Court has quashed the severable part of third and fourth proviso to Sec.80HHC (3) and it becomes clear therefrom that challenge which was laid to the conditions contained in the said provisos by the respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following direction: Having seen the twin conditions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment in the year under consideration was not completed under section 143(3) of the Act and the return was processed under section 143(1) of the Act. In the circumstances the proviso below the section 147 of the Act is not applicable in the year under consideration. However, as discussed in detail in para 9.3 of ITA No. 4314/Del/2010, following the findings of the Hon ble jurisdictional High Court in the case of Orient Crafts Ltd.(supra) as there was no tangible material for reopening the assessment, we hold that the initiation of proceeding under section 147 of the Act in the year under consideration are without jurisdiction and not valid. The proceedings also cannot survive, as discussed in para 11.3 of ITA No. 4314/Del/2010, in view of the judgement of the jurisdictional High Court in the case Pawan Kumar Jain versus union of India (supra) and Avani exports versus CIT (supra) that the amendment in reference is prospective and not retrospective. Accordingly, the ground No. 2 of the assessee is allowed. 16. Since we have already quashed that assessment completed section 147 of the Act, remaining ground No. 3 of the appeal is not adjudicated. 17. The ground Nos. 1 and 4 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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