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TMI Blog2018 (7) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Therefore, Explanation 2 cannot be read in isolation and it has to be read harmoniously with the powers under Section 147 of the Act including the proviso under the said Section. Therefore, we are unable to accept the submission of the learned Senior Standing Counsel for the Revenue. One more submission, which was made, was that the Assessing Officer without application of mind, had granted the benefit of deduction and therefore, the Revenue had to file appeals before the CIT(A). On a reading of the assessment orders passed under Section 143(3) dated 18.03.1993, it is clear that there has been discussion between the assessee and the Assessing Officer and all materials have been placed before him and then the assessment has been completed granting benefit. Therefore, the order of assessment cannot not be stated to be an order without application of mind. Whether reopening of an assessment could be done based upon the decision in the case of Madurai Pandian Engineering Corporation Ltd (1998 (3) TMI 65 - MADRAS HIGH COURT ) as as held that retreading of tyres does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under Section 80 HHC? (6) Whether the net amount or the other income has to be excluded from the profits of business for the purpose of Section 80 HHC? 3.In this batch of appeals though six substantial questions of law have been framed, what we are required to decide is the first question as framed in Tax Case (Appeal) Nos.1313 to 1324 and 1326 and 1327 of 2007, viz., whether the Assessing Officer is empowered to reopen an assessment based on a subsequent Supreme Court decision? 4.The reason for framing the other five substantial questions of law, is on account of the fact that those questions were raised by the assessee / Department before the Tribunal. Since the Tribunal decided the question relating to jurisdiction of the officer to reopen the proceedings, both in respect of reopening of assessment done beyond the period of four years and those done within the period of four years, the Department has raised these questions in these appeals. 5.By way of illustration, if we take up T.C.(A) No.1313 of 2007, the second question is with regard to whether profits from service charges are includible in the profits of business for the purpose of Sections 80 HH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Q 1 Q 1 Beyon d 4 years Proviso to section 147 applies Chang e of opinion 2 . Service Charges are includible in profits of business for the purpose of Sections 80HH, 80I and 80IA Q 2 [80H H 80I] Q 2 [80H H 80I] Q 2 [80HH 80I] Q 2 [80H H, 80I 80IA] Q 2 [80HH , 80I 80IA] Q 2 [80H H, 80I 80IA] Q 2 [80HH, 80I 80IA] Does not arise At pg 133 of Typed set The Tribunal annulled the reassessment proceedings and had not gone into other grounds on merits in Assessee s and dismissed Department appeals without going into any of the other grounds raised. 3 . Explanation baa to section 80HHC whether applicable for Tyre Retreading Charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 98,20,860/-. Intimation under Section 143(1)(a) of the Act was sent on 25.06.1991 accepting the returned income without making any adjustments. The assessee filed revised return on 31.12.1992 revising the income of ₹ 1,38,08,720/-. In the said revised return, the assessee claimed additional benefit under Section 80 I of the Act. 10.According to the assessee, certain franchises failed to run the units and accordingly, the main company took over those concerns which produced retreated tyres. According to the assessee, deduction under Section 80 I of the Act is available even in respect of these units. However, at the time of assessment, it was pointed out to the assessee that no cognizance could be taken to the revised return, as no revised return could be filed beyond one year from the end of the assessment year 1990-91. Accordingly, the revised return was ignored. The assessee submitted another letter dated 22.01.1993, wherein revised claim of Section 80 I of the Act was submitted in respect of which notice under Section 143(2) of the Act was issued to the assessee to produce details. After discussion, the assessment was completed and the benefit was extended to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed appeals before the Tribunal, where the common question was regarding the validity of the reopening of the assessments, within the period of four years and beyond the period of four years. Insofar as the relief granted by the CIT (A) to the assessee, the Revenue preferred appeals before the Tribunal. 14.The Tribunal after taking note of the factual position, first took up for consideration as to whether the Assessing Officer has framed the assessment ignoring the decision of the Apex Court in the case of P.C.Cherian vs. Barfi Devi reported in AIR 1980 SC 86. After taking note of the submissions, the ITAT held that the assessment has to be reopened on the basis of the decision of the Hon'ble Supreme Court in the case of P.C.Cherian (supra) and the decision has been discussed by this Court in the case of Madurai Pandian Engineering Corporation Ltd (supra), wherein it has been noted that one of the issues arose was whether retreading of tyres would amount to manufacture under Section 160 of the Transfer of Property Act and this clearly shows that the decision does not relate to deduction under Sections 80 HH and 80 I of the Act. In this regard, the Tribunal relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer is justified in reopening the assessment. The learned counsel, to support his contention, relied upon the decision of the Hon'ble Supreme Court in the case of Honda Siel Power Products Ltd. vs. DCIT reported in [2012] 20 taxmann.com 5 (SC), wherein the assessee was permitted to raise all contentions with regard to the amount being offered for tax as well as its contention under Section 14A of the Act. 19.Relying on the decision of the Hon'ble Supreme Court in Girilal Co. vs. Income-tax Officer reported in [2016] 75 taxmann.com 172 (SC), it was submitted that in the said case, the Hon'ble Supreme Court held that there was no true disclosure by the assessee and the Assessing Officer was justified in reopening the assessment. 20.Mr.M.P.Senthil Kumar, learned counsel appearing for the assessee submitted that the Tribunal rightly held that the reopening was based on change of opinion. Further, it was pointed out that the decision in the case of P.C.Cherian (supra) arose under the provisions of the Transfer of Property Act and the Calcutta High Court in the case of Addl.CIT vs. Kalsi Tyre reported in (1981) 131 ITR 0636 (Cal.), held that retreading activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is absent in the instance case, which would be sufficient to hold that the reopening proceedings are wholly without jurisdiction. 25.Having held so, we proceed to consider the other issues, which were raised by the learned counsels. 26.The learned Senior Standing Counsel appearing for the Revenue argued that in terms of Section 147 of the Act, the Assessing Officer has power to reassess the income and he is entitled to recompute the loss of the depreciation allowance or any other allowance, as the case may be and it is submitted that the case on hand clearly falls in Clause (c)(iii) of Explanation 2 of Section 147 of the Act. 27.In our considered view, the power to assess or reassess or recompute the loss or depreciation allowance or any other allowance could be done only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Therefore, Explanation 2 cannot be read in isolation and it has to be read harmoniously with the powers under Section 147 of the Act including the proviso under the said Section. Therefore, we are unable to accept the submission of the learned Senior Standing Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in Madurai Pandian Engineering Corporation Ltd (supra), reopening could not have been done. 31.The Hon'ble Supreme Court in Simplex Concrete Piles (India) Ltd. (supra), held that the subsequent reversal of the legal position by the judgment of the Hon'ble Supreme Court does not authorise the Department to reopen the assessment, which stood closed on the basis of law, as it stood at the relevant point of time. 32.In Baer Shoes (supra), it was held that the judgment rendered by the Supreme Court is an expression of opinion on the interpretation of statute. The power under Section 147 of the Act will have to be invoked by the Assessing Officer in accordance with the said provision and merely because a judgment has been rendered, the same cannot be a reason for reopening the assessment under Section 147 of the Act. 33.As pointed out by the Hon'ble Supreme Court in Parashuram Pottery Works Co. Ltd. (supra), it has to be kept in mind that policy of law is that there must be a point of finality in all legal proceedings and that stale issues should not be reactivated and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controvers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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