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TMI Blog2010 (4) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing" 2 Advert in first to ground nos.1 & 2 in the appeal, facts, in brief , as per relevant orders are that in this case a survey u/s 133A of the Income-tax Act ,1961[hereinafter referred to as the 'Act '] was conducted on 25/9/2000 in the premises of the assessee, when in four cases of the group, including the asseessee, additional income of ₹ 1.10 crores was offered to tax. Out of the total disclosure, an income of ₹ 51,75,000/- not reflected in the books of accounts at the time of survey operation, was offered to tax in the hands of the assessee. Subsequently, assessment was completed on an income of ₹ 85,79,620/- vide order dated 22/01/2003 u/s. 143(3) of the Act in pursuance to return filed on 30/10/2001, declaring income of ₹ 83,84,454/ -. Inter alia, the AO allowed deduct ion u/s.80HHC of the Act as claimed by the assessee on the amount of stock of ₹ 1,09,196/ - and advances receivable of ₹ 49,84,804/ -, disclosed u/s 133A of the Act . Since such stock and receivable were not derived from the business of expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed partakes the character on undisclosed income. (b) In case of advances received, the accounting treatment for the same transact ion does not partakes the character of income because in such a situation party's account will be credited and cash/bank account will be debited. Therefore, the transact ion l does result into any income. I f the assessee intends to treat this transact ion as an income generating transact ion, In no way i t can be considered as business income. (c) Where the disclosure is made u/s 133A, the income disclosed pertains to the year when surveys is carried out . Considering the shelter taken by the assessee that the income disclosed represents receivables recovered, it takes the character of cur rent year's income which has not been recorded prior to the act ion u/s 133A. However , in this situation, the transact ions have to be routed through the booking on sales for the current year. This has not been done in the present case. Verification sales record also become more significant . In the instant case, advances / receivables were recorded in a diary which was found during the course of survey. The amount was disclosed as receivable. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons to that limited extent . 5.4 With respect to the argument that since al l the information was given return, it is to be stated that as delivered in the judgement in the case Rakesh Agrawal Vs. ACIT, by the Hon'ble Delhi High Court that sect ion 147 Act as amended with effect from 01.04.89 provides that if the AO has to believe that any income chargeable to tax has escaped assessment for assessment year , he may subject to the provisions of sect ion 148 to 153 assess or reassess such income and also any other income chargeable to tax which has escaped assessment . The court observed that the sect ion not only merges clause (a) and (b) of the pre-amended sect ion 147 of the Act but also brings about a significant change in the preliminary requirement of certain mandatory conditions before assessment proceedings could be initiated under the old sect ion. The Hon'ble Court observed that in the amended sect ion, the only condition for act ion now is that the AO should have reason to believe that income has escaped assessment which belief can be reached in any manner and is not qualified by the proceedings of failure by the assessee to make full and true disclosure of mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act to the extent of ₹ 12,73,280/- 3. On appeal, the assessee argued that that the or iginal assessment having been completed u/s. 143(3) of the Act , the same can not be reopened on the basis of change of opinion regarding taxability of certain income or al lowabi lity of certain deduct ion, which had al ready been examined in the original assessment . I t was pointed out that no new mater ial was brought on record by the AO to reopen the assessment . Relying upon the decisions in the case of Calcutta Dicount Co. Ltd. Vs. ITO, 41 ITR 191 (SC), ITO Vs. Lakhmani Mewal Das, 103 ITR 437(SC),CIT & Anr. V Foramer France, 264 ITR 566 (SC), Siesta Steel Construct ion Pvt . Ltd. 154 ITR 547 (Bom.), CIT v. Indian Overseas Bank Ltd. 252 ITR 640 (Mad.), CIT v. Omrao Indt l. Corpn. Pvt . Ltd. , 246 ITR 346 (All. ), Garden Silk Mills (P) Ltd. V DCIT & Anr, 237 ITR 668 (Guj), the assessee contended that the AO was not justified in reopening the assessment . However, the ld. CIT(A) upheld the reopening of assessment in the following terms: "4.4. I have considered the submission of the A.R. as well as observation of the A.O. in the assessment order. Under the specific provisions of sect i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve gone through survey report and other evidence fond by the surveytem. The assessee has offered additional income and paid tax on ₹ 51,75,000/ -. This has been duly reflectedin final statement and included in P&L a/c as under ;- 1) Stock : ₹ 1,90,196/- 2) Advance Receivable : ₹ 49.84.8047- - -- -- - -- - -- - -- -- - -- Total ₹ 51,75,0007- " 5.3 The AR argued that even otherwise there is no force in the content ion of the AO as ment ioned in the order that income disclosed in the survey u/s. 133A is not business income and therefore deduct ion u/s. 80HHC of the Act is not al lowable on additional income declared. The AR argued that there is no other ostensible source of income other than business income of the appellant . The only source of income is business income. The AR vehement ly argued that despite the act ion of the survey no income other than business income was found. The AR contended that it would not be correct to hold that the income disclosed during the course of survey is not business income. The AR highlighted that the fact of additional income declared is business income was also stated at the time of survey in statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount declared is simply shown as receivables or advances. According to the AO, these receivables or advances have no relevance so far as prof it derived from export business is to be worked out for the purpose of assessment of the income of the appellant is concerned. The AO found that these incomes declared during the survey are unexplained stocks and receivables, which has been declared and rightly brought to tax as non export business income. 5.4 I have considered the facts of the case as well -as the rival content ions. I find merit in the observations of the AO that income of ₹ 51,75,000/- declared during the course of survey on account of variation in stock as well as receivables declared has no relevance with the prof it der ived from export business of the appellant . To avail deduct ion u/s. 80HHC, the appellant has to show that he has exported goods and merchandize outside India and for which, the appellant has brought into India the sales proceeds in convertible foreign exchange within the stipulated time. Once these conditions are fulfilled then the prof it derived from export business has to be computed as per provisions of sect ion 80HHC contained in the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 22.1.2003 contended that assessment having been completed u/s 143(3) of the Act and no new material having been brought on record, the AO was not just if ied in reopening the assessment simply on the basis of review of the original assessment . On the other hand, the ld. DR supported the findings of the ld. CIT(A). 5. We have heard both the parties and gone through the facts of the case. We find that in the original assessment completed u/s 143(3) of the Act on 22.1.2003, the AO al lowed deduct ion u/s. 80HHC of the Act , interalia, on the amount of stock and advances receivable of ₹ 51,75,000 disclosed u/s. 133A of the Act , included in the prof its of the business. Subsequently, the AO recorded the reasons for reopening that such stock and receivable cannot be said to be derived from the business to be included in the prof it of business for the purpose of deduct ion u/s. 80HHC of the Act . The ld. CIT(A) on these facts concluded that the AO was justified in reopening the assessment . The issue before us is as to whether or not the AO was justified in reopening the assessment completed u/s 143(3) of the Act , within four years f rom the end of the relevant assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but - (i) income chargeable to tax has been under-assessed ; or (iI) such income has been assessed at too low a rate ; or (III) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." 5.1 In the instant case, assessment has been reopened within four years from the end of the relevant assessment year . Therefore, we are not concerned with the proviso to sec. 147 of the Act. The AO can reopen the assessment within four years only if he has 'reasons to believe' that any income chargeable to tax has escaped assessment for the assessment year concerned for which the notice is issued . In the case under considerat ion, as is apparent f rom the original assessment order dated 22.1.2003 completed u/s 143(3) of the Act , the AO was well aware of the claim for deduct ion u/s 80HHC of the Act in respect of additional income disclosed during the survey and assessed as business income. When a regular order of assessment is passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods." It was further held by the Bench that: "Reverting back to the case at hand, it is clear from the reasons placed by the Assessing Officer on record as also from the statement made in the counter affidavit that all that the Income-tax Officer has said is that he was not right in allowing deduction under section 80-I because he had allowed the deductions wrongly and, therefore, he was of the opinion that the income had escaped assessment. Though he has used the phrase 'reason to believe' in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax officer nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing Officer to the same set of facts. While passing the original orders of assessment the order dated February 28, 1994, passed by the Commissioner of Income-tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r while making the first assessment to which conscious application of mind is reflected from the proceedings, and allowed in the computation and which has not been disputed by the Revenue." 5.5 Similarly in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi), Hon'ble Delhi High Court held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. While affirming the said decision, Hon'ble Apex Court recently held in their decision dated 18.1.2010 in CIT v. Kelvinator of India Ltd., 320 ITR 561(SC) in CIVIL APPEAL NOS.2009-2011 OF 2003 as follows: "On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment 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 has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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