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TMI Blog2016 (7) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... we are convinced that principles of natural justice as well as the principles laid down by the above judicial pronouncements have not been fully complied with by the Assessing Officer while passing the order of assessment u/s 143(3) r.w.s. 147 of the Act. Therefore, in our considered view the order passed by the Assessing Officer is bad in law and therefore stands quashed. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2008 reassessing the income at ₹ 60,41,53,464/- under the normal provisions of the Act after withdrawing the deduction u/s 80IB. Aggrieved by the order of assessment u/s 143(3) r.w.s. 147 of the Act, the assessee preferred an appeal before the CIT(A) and CIT(A) after considering the case of both the parties has partly allowed the appeal vide order dated 28.12.2011. Aggrieved by the order of CIT(A), assessee has preferred the present appeal before us on the grounds mentioned hereinabove as per the revised summarized and alternate grounds of appeal. 3. Ground no. 1 - This ground relates to reopening of assessment wherein the assessee has challenged the order of CIT(A) confirming reopening of assessment u/s 147. The Ld. AR representing the assessee drew our attention first of all to the order of the Assessing Officer whereby the Assessing Officer has recorded reasons for reopening which are reproduced as under :- "5. Reasons for reopening The reasons recorded by ACIT-10(1) for issuing notice u/s 148 are as below: "Assessee company filed their return of income on 28.11.2003 declaring total income of ₹ 49,48,05,000/-. The assessement was completed u/s. 143(3) on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs, the export benefit allocable to Rifampicin unit i8s hereby worked out to ₹ 2908.41 lakhs by applying the same ratio/percentage as taken by the assessee in respect of export incentive of ₹ 763.26 lakhs. (i) 368.00 lakhs (export incentive of Rifampicin unit out of 763.26 lakhs) x 100 763.26 lakhs (export incentive shown under other income)= 48.21% (ii) By applying the same percentage Export incentive of Rifampicin unit out of export Incentive of ₹ 60,32,80 lakhs (shown under cost of raw materials) works out to:= 60,32.80 x 48.21% = 2908.41 lakhs The export incentive of ₹ 2908.41 lakhs worked out in respect of Rifampicin unit was also required to be reduced for arriving at profits eligible for 80 IB deductions. After reducing the export incentive of ₹ 2908.41 lakhs, no profit would be available for claiming 80IB deductions in respect of the said unit and therefore, no deduction is allowable. The entire deduction of ₹ 2,22,37,504/-, u/s. 80 IB, was incurred and should have been disallowed. The wrong claim of the assessee resulted in escapement of ₹ 2,22,37,504/- from assessment. In view of the above, I have reason to bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental Insurance Company, (2015) 94 CCH 12 (Del HC) vi) Amitabh Bachchan, (2012) 349 ITR 76 (Bom HC) vii) Cartini India Ltd., (2009) 314 ITR 275 (Bom HC) viii) Asian Paints Ltd., (2009) 308 ITR 195 (Bom HC) ix) Asteriods Trading & Investment P. Ltd., (2009) 308 ITR 190 (Bom HC) x) Commissioner of Income Tax vs Orient Craft Ltd., (2013) 354 ITR 536 (Delhi HC) xi) M/s. GTL Limited vs ACIT, ITA No. 6971/Mum/2010 (Mum Trib) dated 2nd January, 2015 xii) Prashant Joshi vs Income Tax Officer & Anr, (2010) (Bom HC) 324 ITR 154 6. The Ld. AR further argued that the ACIT (LTU) without first dealing with the objections and disposing of the said objections through a separate speaking order dismissed the appellant"s claim of deduction u/s 80IB in the reassessment order itself. It was further argued by the Ld. AR that in respect of the reassessment notice dated 7.3.2008 issued u/s 148 of the Act, the assessee submitted vide letter dated 17.3.2008 that the return filed u/s 139(4) r.w.s. 139(1) shall be treated as a return filed in response to the said notice and requested to provide reasons for reopening the assessment. Simultaneously, the appellant also objected to the reopening pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to analyze as to whether the order of reopening passed vide reassessment order by the Assessing Officer is correct as per law or not. In this context, after hearing the detailed arguments of both sides we first of all refer to the judgment of Hon'ble Supreme Court in the case of GKN Driveshafts India Ltd., (2003) 259 ITR 19 (SC) (supra). The relevant portion of the said judgment is at para 5 which is reproduced as under:- "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under s. 148 of the IT Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." 9. Next, we refer to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable to tax has escaped assessment and it does not matter that there has been no failure or omission on the part of the assessee to disclose full and true particulars at the time of the original assessment. There is nothing in the language of Section 147 to unshackle the Assessing Officer from the need to show "reason to believe". The fact that the intimation issued under Section 143(1) cannot be equated to an "assessment", a position which has been elaborated by the Supreme Court in the judgment cited above, cannot in our opinion lead to the conclusion that the requirements of Section 147 can be dispensed with when the finality of an intimation under Section 143(1) is sought to be disturbed." 17. The Court in CIT v. Orient Craft Ltd. (supra) further comprehensively rejected the argument of the Revenue, which it seeks to urge in the present case as well, that an "intimation" under Section 143(1) cannot be equated to an assessment. The Court held: "The argument of the revenue that an intimation cannot be equated to an assessment, relying upon certain observations of the Supreme Court in Rajesh Jhaveri (supra) would also appear to be self-defeating, because if an "in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to income alleged to have escaped assessment and whether and when in such cases reopening is valid or invalid on the ground of change of opinion? (iii) Whether the bar or prohibition under the principle "change of opinion" will apply even when the Assessing Officer has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects ? (iv) Whether and in what circumstances Section 114(e) of the Evidence Act can be applied and it can he held that it is a case of change of opinion? " 10. We have also analyzed the judgment of Hon"ble Delhi High Court in the case of Multiplex Trading & Industrial Co. Ltd., (2015) 94 CCH 30 (Del HC). The relevant portion of the said judgment is at para 33 which is reproduced as under:- "33. In the present case, the objections filed by the Assessee were not disposed of by the AO and he proceeded to frame the assessment. This court in M/s. Haryana Acrylic Manufacturing Co. (P) Ltd. had observed that the requirements regarding recording the reasons to believe; communicating the same to the Assessee; permitting the Assessee to file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdictional High Court it is made clear that if the Assessing Officer does not accept the objections filed by the assessee against reopening of assessment, then, he is not to proceed further in the matter for a period of 4 weeks from the date of service of order rejecting the objections of the assessee. As per the aforementioned judgment, the Hon"ble Court has directed that the above procedure is to be followed strictly in all such cases of reopening of assessment. After going through all the judgments referred to by both the parties and after considering the plea of the Revenue that there was a delay on the part of the assessee to file objections to the reasons for reopening, we noted that the reasons recorded by the Assessing Officer were received by the assessee on 6.10.2008 as per page 133 to 136 of the paper book filed by the assessee. Further, we have also noticed that the said reasons were requested by the assessee in the month of March, 2008 vide letter dated 17.3.2008 which was filed on 19.3.2008. Therefore, calculating the date for seeking reasons from the Assessing Officer and from actually getting the reasons recorded by the Assessing Officer there is a gap of appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147... So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings..." Hon'ble Delhi High Court also has held in (2006) 151 TAXMAN 41 (DELHI) Consolidated Photo & Finvest Ltd Vs Assistant Commissioner of Income-tax that "Action under section 147 was permissible even if the Assessing Officer gathered his reasons to believe from the very same record as had been the subject-matter of the completed assessment proceedings. The argument that production of the account books and other documentary evidence relevant for assessment must imply a full and true disclosure of all material facts must be rejected out of hand in the light of the provisions of Explanation (1), according to which mere production of the books of account or other evidence from which the Assessing Officer could have, with due diligence, discovered the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were before Assessing Officer while framing assessment u/s 143(3) and therefore case can not be reopened, is not acceptable and hence rejected. 6.2 coming to the issue of facts of the case, as has been held in the case laws of Cambay Electric Supply Industrial Co Ltd v. CIT 113 ITR 84 (SC), CIT v. Sterling Foods 237 ITR 579 (SC), CIT v. Pandian Chemicals Ltd 262 ITR 278 (SC), CIT v. Ritesh Industries Ltd 274 ITR 324 (Del), CIT v. Sundaram Clayton Ltd 281 ITR 425 (Mad), Liberty India v. CIT 293 ITR 520 (P&H) and Mentha & Allied Products Pvt Ltd 302 1TR 144 (All) that the income that is 'derived" from an industrial undertaking is only deductible u/s 80IB is clearly applicable in this case. Further reliance is placed on the ratio of decision of the apex court in the case of M/s. Pandian Chemicals ltd vs. CIT 262 ITR 278 (SC) and CIT vs. Sterling Foods 237 ITR 579 (SC). In both the decisions, the apex court have held that the deduction inter-alia under section 80I is available only in respect of such profits and gains which have a direct and proximate nexus with the activity of manufacture or production. Any other profit or gain which is not 'derived from' an industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts from sources other than actual conduct of the business of generation and distribution of electricity." In view of the above, it is held that the assessee is not eligible for deduction u/s 80IB as held and computed in the reasons for reopening as in Para 5 above. Therefore, deduction u/s 80IB of ₹ 2,22,37,504/- is disallowed and added back to total income of assessee." 13. From the entire reading of the order of assessment we are of the considered view that the Assessing Officer has dealt with the objections in the assessment order itself in a composite manner. The Assessing Officer should have passed a speaking order before proceeding for assessment, and in this case, the Assessing Officer has not passed a well-reasoned speaking order which was required as per the principles of natural justice as well as the principles laid down by the above judicial pronouncements. Apart from this, as per the entire order of assessment u/s 143(3) r.w.s. 147 there was no new tangible material on record before the Assessing Officer, and in the absence of any new tangible material on record, the order of the Assessing Officer for reopening is bad in law as has been held in the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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