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TMI Blog2021 (4) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... idered view that in the absence of any assessment having earlier been framed in the case of the assessee under sub-section (3) of section 143 or section 147, the contention of the learned authorised representative challenging the validity of the jurisdiction assumed by the Assessing Officer in the backdrop of the first proviso to section 147 does not merit acceptance, and is accordingly rejected. Mere change of opinion on the part of a successor Assessing Officer as against that arrived at by his predecessor, on the same set of facts - As the return of income of the assessee for the year in question was earlier processed under section 143(1) of the Act and was not subjected to any regular assessment under section 143(3) or section 147 of the Act, thus, there was no occasion for the Assessing Officer to have formed any opinion on the issue pertaining to quantification of the assessee's claim for deduction under section 80-IC. In sum and substance, in the absence of any formation of opinion by the Assessing Officer on any earlier occasion, the claim of the assessee that the assessee's case was reopened on the basis of a change of opinion is beyond comprehension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suffered by the eligible unit of the assessee in the assessment year 2007-08 were liable to be set-off against the profits of the said eligible unit for the year in question, i. e., the assessment year 2008-09, as a result whereof the assessee's entitlement for deduction under section 80-IC was to be restricted to an amount of ₹ 10,85,588. On a perusal of sub-section (7) to section 80-IC, we find that the same as an enabling section imports the provisions of sub-section (5) of section 80-IA, which, thus, are to be read for the purpose of quantifying the assessee's entitlement for deduction under section 80-IC On a conjoint reading of section 80-IC(7) read with section 80-IA(5), it can safely be gathered that for the purpose of determining the quantum of deduction under section 80-IC the profits and gains of the eligible business shall be treated as the only stream of income of the assessee during the previous year relevant to the initial assessment year and also for every subsequent assessment year. Accordingly, in the backdrop of our aforesaid deliberations, we find no infirmity in the view taken by the Assessing Officer who had rightly observed that the losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Deputy Director of Income-tax (Investigation), Chandigarh, that the assessee had booked bogus purchases of ₹ 2,23,77,935, its case was reopened under section 147 of the Act. Notice under section 148 was issued and duly served on the assessee on March 23, 2015. In compliance, it was submitted by the assessee vide its letter dated June 4, 2015 that its original return of income filed under section 139(1) may be treated as the return filed in response to the notice issued under section 148 of the Act. Accepting the aforesaid request of the assessee the Assessing Officer proceeded with the assessment and issued notices under section 143(2)/142(1) of the Act. 3. During the course of the assessment proceedings, it was observed by the Assessing Officer that the assessee owned two units, one at Nalagarh and the other at Derabassi. On a perusal of the records, it was observed by the Assessing Officer that the assessee was claiming 100 per cent. deduction under section 80-IC on the profits derived from its Nalagarh unit (here-in-after referred to as eligible unit ). On the basis of the details gathered while framing the assessment in the case of the assessee for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Mohan Breweries and Distilleries Ltd. v. Asst. CIT [2009] 311 ITR (A.T.) 346 (Chennai) ; [2009] 116 ITD 241 (Chennai). (ii) Velayudhaswamy Spinning Mills (P.) Ltd. v. Asst. CIT [2012] 340 ITR 477 (Mad) ; [2010] 38 DTR 57 (Mad). (iii) Patankar Wind Farm P. Ltd. v. Dy. CIT (I. T. A. Nos. 2225 and 2226/Pune/2013). 4. However, the Assessing Officer after deliberating at length on the aforesaid issue, was not persuaded to subscribe to the contentions of the assessee. It was observed by the Assessing Officer that as per form No. 10CCB the assessee had claimed the assessment year 2008-09 as the initial assessment year for the purpose of claim of deduction under section 80-IC of the Act. Rebutting the aforesaid claim of the assessee, it was observed by the Assessing Officer that as per section 80-IC(8)(v), irrespective of the fact that as to whether or not the assessee had claimed deduction under section 80-IC, the year of commencement of business was to be taken as the initial assessment year for the purpose of the said statutory provision. In the backdrop of his aforesaid observation, the Assessing Officer was of the view that as the assessee had commenced its business wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee being aggrieved with the order of the Commissioner of Income-tax (Appeals) has carried the matter in appeal before us. The learned authorised representative (for short AR ) for the assessee at the very outset of the hearing of the appeal assailed the validity of the jurisdiction assumed by the Assessing Officer for reopening the case of the assessee under section 147 of the Act. It was submitted by the learned authorised representative that after accepting the return of income of the assessee under section 143(1) of the Act, as no fresh tangible material had came to the notice of the Assessing Officer, therefore, he had exceeded his jurisdiction and reopened the case of the assessee for the year in question. In order to buttress his aforesaid claim the learned authorised representative had drawn support from the judgment of the hon'ble High Court of Delhi in the case of CIT v. Orient Craft Ltd. [2013] 354 ITR 536 (Delhi) ; [2013] 29 taxmann.com 392 (Delhi). Taking us through the copy of the reasons to believe on the basis of which the case of the assessee was reopened, it was submitted by the learned authorised representative that the aforesaid proceedings were in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r authorities had gravely erred in law and the facts of the case in dislodging the assessee's well founded claim for deduction of ₹ 45,23,863 under section 80-IC. It was submitted by the learned authorised representative that as the assessee-company had opted the year under consideration, i. e., the assessment year 2008-09 as the initial assessment year for the purpose of claim of deduction under section 80-IC, the lower authorities were in error in drawing adverse inferences by wrongly concluding that the year in which the business of the assessee had commenced, i. e., the assessment year 2007-08 was to be taken as the initial assessment year. It was averred by the learned authorised representative that the option to choose the initial assessment year for claiming deduction under section 80-IC remained with the assessee. In order to support his aforesaid claim the learned authorised representative had drawn support from the parimateria provisions contemplated in section 80-IA of the Act. In order to fortify his aforesaid claim the learned authorised representative had relied on the order of the Income-tax Appellate Tribunal, Chandigarh Bench in the case of Dy. CIT v. Yam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with us. Admittedly, as provided in the first proviso to section 147, where any assessment under sub-section (3) of section 143 or section 147 had been made for the relevant assessment year, then, inter alia, unless any income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all facts necessary for his assessment, its case cannot be reopened after the expiry of four years from the end of the relevant assessment year. Undisputedly, the return of income of the assessee for the year in question was earlier neither subjected to an assessment under section 143(3) nor under section 147 of the Act. Accordingly, we are of the considered view that in the absence of any assessment having earlier been framed in the case of the assessee under sub-section (3) of section 143 or section 147, the contention of the learned authorised representative challenging the validity of the jurisdiction assumed by the Assessing Officer in the backdrop of the first proviso to section 147 does not merit acceptance, and is accordingly rejected. 10. We shall now deal with the claim of the learned authorised representative that a mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of which the case of the assessee was reopened under section 147 of the Act, which reads as under : Reasons for reopening the case under section 147/148 of the Income-tax Act, 1961 Name of the assessee M/s. Samrat Plywood Ltd. 182/11, Ind. Area, Phase-l Chandigarh Assessment year 2008-09 PAN AACCS0259L Status Company Reasons : During the course of assessment proceedings of M/s. Samrat Plywood Ltd. for the assessment year 2012-13 details were called with reference to the profit/loss of the unit eligible for 80-IC deduction (Nalagarh Unit) since its commencement. From the details furnished, it is observed that the assessee had incurred a loss of ₹ 34,38,275 during the assessment year 2007-08 (initial assessment year) which was set off against the other income for that year. However, the eligible unit showed a profit of ₹ 45,23,863 during the assessment year 2008-09 and the entire amount was claimed as deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 2008-09. That there was a loss of ₹ 34,38,275 from the eligible unit was not disclosed along with the return filed by the assessee for the assessment year 2008-09. In view of the above, I have reasons to believe that the income of the assessee chargeable to tax of more than ₹ 1 lakhs has escaped assessment for the assessment year 2008-09 by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year 2008-09. Thus, notice under section 148 is being issued with the approval of the Joint Commissioner of Income-tax, Range-11, Chandigarh. Sd/- (Garima Sharma) Assistant Commissioner of Income-tax Circle 2(1), Chandigarh. Date : 18-2-2015 On a perusal of the aforesaid reasons to believe , we find that the Assessing Officer had taken recourse to proceedings under section 147, for the reason, that she was of the view that the quantification of the asses see's claim for deduction under section 80-IC was not found to be in conformity with the statutory provisions therein contemplated. However, the Assessing Officer had not referred to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the assessee by failing to do so had claimed an excess deduction of ₹ 34,38,275 under section 80-IC. It was, thus, in the backdrop of the aforesaid view that was arrived at by the Assessing Officer on the basis of material already available on her record, dehors any fresh tangible material coming to her notice, that she had reopened the assessee's case for the purpose of withdrawing the excess claim of deduction under section 80-IC that as per her was claimed by the assessee on the basis of a wrong quantification. 13. We have deliberated at length on the aforesaid issue in the backdrop of the contentions advanced by the authorised representatives for both the parties. On a perusal of the aforesaid reasons to believe , we find, that there is no whisper of any fresh tangible material that had came to the possession of the Assessing Officer subsequent to the issuance of the intimation under section 143(1) of the Act. In fact, the Assessing Officer holding a conviction that the quantification of deduction under section 80-IC being fallacious had resulted to allowing of excess claim of deduction therein raised by the assessee, had thus, for withdrawing such exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... believe is not relevant for the formation of the belief that income chargeable to tax had escaped assessment. As observed by us hereinabove, the Assessing Officer in the case before us had formed the belief that there was escapement of income by merely referring to the quantification of the deduction under section 80-IC by the assessee in its return of income for the year under consideration, i. e., the assessment year 2008-09 coupled with that for the preceding year, i. e., the assessment year 2007-08, after having accepted the same under section 143(1) without scrutiny, and nothing more. In fact, there is no whisper in the reasons recorded of any tangible material which came to the possession of the Assessing Officer subsequent to the issuance of intimation under section 143(1). If in a case where only an intimation was earlier issued to the assessee under section 143(1) of the Act, the Assessing Officer, despite absence of any fresh tangible material coming in his possession after issuance of the intimation is permitted to reopen the case under section 147 for dealing with issues which had earlier been overlooked, the same, in our considered view would render the provisions regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, there has to be some tangible material in possession of the Assessing Officer to reopen such case. In the backdrop of our aforesaid deliberations, we are of the considered view that in the case of the assessee before us, in the absence of any tangible material coming to the possession of the Assessing Officer after issuing of the intimation under section 143(1), it was not justified on her part to have reopened the case of the assessee. Resultantly, in terms of the aforesaid observations we are unable to persuade ourselves to subscribe to the validity of the jurisdiction assumed by the Assessing Officer for reopening the assessee's case under section 147 of the Act. The ground of appeal No. 1 is partly allowed in terms of our aforesaid observations. 14. Although we have accepted the claim of the assessee that the Assessing Officer in the absence of any fresh tangible material coming in her possession after the issuance of intimation under section 143(1), had wrongly assumed jurisdiction and reopened the assessee's case under section 147 of the Act , however, in the backdrop of the judgment of the hon'ble High Court of Madras in CIT v. Ramdas Pharmacy [1970] 77 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent. of such profits and gains for five assessment years commencing with the initial assessment year and there after, twenty five per cent. (or thirty per cent. where the assessee is a company) of the profits and gains. On a perusal of the aforesaid definition of the initial assessment year as provided in section 80-IC(8)(v) of the Act, we find that the previous year in which an undertaking or the enterprise begins to manufacture or produce articles or things, or commences operations or completes substantial expansion, has to be taken as the initial assessment year within the meaning of section 80-IC of the Act. The assessee had not been provided with any liberty to opt for any year as the initial assessment year. In so far the support drawn by the learned authorised representative on certain judicial pronouncements referred before us as well as in the course of the proceedings before the lower authorities, we find that all of those were in context of the deduction claimed by the respective assessee's under section 80-IA of the Act. Unlike sub-section (2) to section 80-IA where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (5) of section 80-IA, which, thus, are to be read for the purpose of quantifying the assessee's entitlement for deduction under section 80-IC of the Act. On a perusal of sub-section (5) of section 80-IA, we find that the same reads, as under : (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of deter mining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. In our considered view, the aforesaid non obstante sub-section (5) to section 80-IA which has an overriding effect on the other provisions of the Act, therein, isolates the profits and gains of an eligible business by treating the same as the only source of income of the assessee during the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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