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TMI Blog2016 (8) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the record as well as case law which were already available at the time of original assessment. No fresh or tangible material came into the hands of the Assessing Officer when reasons were recorded. In the circumstances, the reopening was sought to be made only to review the original assessment which was actuated by change of opinion by the Assessing Officer, which is clearly impermissible - Decided in favour of assessee - I. T. A. No. 6710/Delhi/2013 - - - Dated:- 2-6-2016 - H. S. Sidhu (Judicial Member) And O. P. Kant (Accountant Member) For the Appellant : J. S. Kochar and Udai Bir Singh Kochar, Advocates For the Respondent : Amit Jain, Senior Departmental Representative ORDER H. S. Sidhu (Judicial Member) 1. The assessee has filed this appeal against the order dated October 8, 2013, passed by the learned Commissioner of Income-tax (Appeals)-XXI, New Delhi, pertaining to the assessment years 2003-04 on the following grounds : 1. That the learned Commissioner of Income-tax (Appeals) erred in upholding the validity of reopening the assessment made under section 143(3) of the Income-tax Act simply because reasons had been recorded by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee appealed before the learned Commissioner of Income-tax (Appeals), who, vide the impugned order dated October 8, 2013, has dismissed the appeal of the assessee. 4. Aggrieved with the order of the learned Commissioner of Income-tax (Appeals), the assessee is in appeal before the Tribunal. 5. At the time of hearing, the learned counsel for the assessee has only argued on the legal issue, i.e., about the validity of the reopening. In this connection, he stated that the deduction under section 80-IB amounting to ₹ 10,13,828 had been disallowed in the original assessment itself. Thus, there was no income which escaped assessment. The learned counsel for the assessee further stated that in the original assessment, the Assessing Officer had not just formed an opinion in respect of the deduction under section 80-IB claimed by the assessee but had actually disallowed the same. Moreover, the assessee had disclosed export incentives in its profit and loss account, which formed the basis of the computation of its total income in the original assessment. The Assessing Officer in the reasons recorded has referred to the record as well as case law that were already available at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. of the eligible profits which have been worked out at ₹ 40,55,313. In Form 3CCB dated August 1, 2003, appended to the return of income. Perusal of the details of income reveal that the assessee has also shown other income which has been taken for the purpose of eligible profits. The details of the other income are as under : (a) Other income comprises the following : Rs. (i) Brokerage 69,337 (ii) Export incentives 43,25,443 (iii) Profit on sale of fixed asset 33,874 (iv) Interest on FDR 983 (v) Rebate and discount 12,240 (vi) Incentives 1,48,115 Besides other incomes like brokerage, rebates, etc., a sum of ₹ 43,25,443 has been shown as export incentives. The export incentives received by the assessee cannot be said to be derived from the business of industrial undertaking. The benefit of deductions under section 80-IB is provided on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits kept in normal course by the industry, such income cannot be said to be attributable to the industry. The distinction between 'derived from' and 'attributable to', which had been emphasised by the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC), has been reiterated by the Supreme Court in its later ruling in the case of CIT v. Sterling Foods [1999] 237 ITR 579 (SC) which reversed the decision of the Karnataka High Court (Sterling Foods v. CIT [1991] 190 ITR 275 (Karn)), The reasoning given by the hon'ble Supreme Court is reproduced hereunder : 'The source of the import entitlements cannot be said to be the industrial undertaking of the assessee. The source of the import entitlements can, in the circumstances, only be said to be the Export Promotion Scheme of the Central Government whereunder the export entitlements become available. There must be, for the application of the words derived from , a direct nexus between the profits and gains and the industrial undertaking. In the instant case, the nexus is not direct but only incidental. The industrial undertaking exports processed seafo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80-IB. In the circumstances of the case to bring the escaped income to the tax provisions as contained in section 147 read with Explanation 2 are clearly attracted. The facts explained above shows the circumstances leading to the wrong claim under section 80-IB made by the assessee and the facts indicating that there was failure on the part of the assessee to comply with the provisions of the Income-tax Act and also the law enunciated by the hon'ble Supreme Court for these sections are fully discussed above. In the circumstances of the case the provisions as contained in section 147 read with Explanation 2 are clearly attracted. As 4 years have not elapsed from the end of the relevant assessment year the power of issuing rests with the Deputy Commissioner of Income-tax, hence no permission is required from the learned Commissioner of Income-tax/Additional Commissioner of Income-tax, New Delhi, as mentioned in section 151(1) of the Income-tax Act, 1961. Therefore, on the above reasons I am satisfied that the income to the tune of ₹ 10,13,828 has escaped assessment within the meaning of section147 of the Income-tax Act. Issue notice under section 148 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under (at page 564 of 320 ITR) : After the Amending Act, 1989, section 147 reads as under : '147. Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, 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).' On-going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o believe had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression has reason to believe in place of the words for reasons to be recorded by him in writing, is of the opinion . Other provisions of the new section 147, however, remain the same.' For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 7.3 In view of the aforesaid facts and circumstances, as explained above and respectfully following the law laid down by the hon'ble Supreme Court of India in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC), as aforesaid, we are of the view that both the authorities below have gone wrong in deciding the reopening as valid. Therefore, we quash the orders of the authorities below on this legal issue and decide the same in favour of the assessee. 8. Since we have already quashed the reassessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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