TMI Blog2011 (3) TMI 1555X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 148 of the Act, therefore, cannot be sustained. The impugned notice is set aside - petition allowed. - SPECIAL CIVIL APPLICATION No. 3352 of 2001 - - - Dated:- 8-3-2011 - Harsha Devani And H.B.Antani JJ For the Appellant : MR SN SOPARKAR for Petitioner For the Respondent : MR MANISH R BHATT, Sr. Advocate Oral Judgment (Per : Honourable Ms.Justice Harsha Devani) 1. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 29.3.2001 issued by the respondent under section 148 of the Income Tax Act, 1961 (the Act) reopening the assessment of the petitioner for the assessment year 1996-97. 2. The petitioner, a Limited Company filed its return of income for assessment year 1996-97 on 28.11.1995 declaring total income of Rs.Nil. Subsequently, assessment came to be framed under section 143(3) of the Act at an income of ₹ 19,84,30,202/- on 24.3.1999. The petitioner carried the matter in appeal before the Commissioner of Income Tax (Appeals), Surat who vide order dated 13.3.2000 partly allowed the appeal. The order of the Commissioner (Appeals) was carried further in appeal before the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT Vs. Sterling Foods 237 ITR 579 [SC] and also in the case of CIT Vs. Hindustan Lever Ltd. 239 ITR 297 [SC]. The deduction u/s 80IA is also not allowable on Income from other sources of ₹ 1,90,02,558/-. Thus, the deduction u/s 80IA have been allowed in excess to the extent of above and accordingly, income has escaped assessment within the meaning of provisions of section 147 of the Act in the assessment order u/s 143(3) dated 24.3.99. Moreover, it is also seen that in the assessment order, excise refund, duty drawback and cash assistance receivable to the extent of ₹ 5,48,77,407/- have been charged to tax vide section 28(iii)(c) but these are required to be excluded while working out deduction u/s 80/80IA in view of aforesaid decisions of Hon. Supreme Court. For deduction u/s 80HHC, 90% of above was to be excluded, which has not been done. Moreover, excise duty paid and collected of ₹ 28,80,09,917/- was not included in total turnover while calculating deduction u/s 80HHC. Failure on the part of the assessee to disclose full and true income resulted into under assessment / excess deduction u/s 80I/80IA and 80HHC. Accordingly, I have r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the Assessing Officer, the petitioner had availed of deduction under section 80IA of the Act in respect of the income from other sources of ₹ 1,90,02,558/-. Inviting attention to the statement showing allocation of income and expenses to eligible units and non-eligible units for deduction under section 80I and 80IA of the Act (Annexure F to the rejoinder affidavit), it is pointed out that the reasons recorded are factually erroneous inasmuch as, the petitioner has not claimed deduction under the said provisions in respect of other income amounting to ₹ 1,03,36,210/- as is evident from the said statement. It is submitted that insofar as the second reason for reopening the assessment viz., inclusion of excise refund, duty drawback and cash assistance to the extent of ₹ 5,48,77,407/- charged to tax under section 28(iii)(c) while working out deduction under sections 80I/80IA of the Act is concerned, the Assessing Officer while framing assessment has applied his mind to the said issues and as such, this is only a case of the successor Assessing Officer holding a different opinion from that of his predecessor on the same set of facts. It is submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, notice under section 148 of the Act has been issued on 29.03.2001 in relation to assessment year 1996-97. Hence, the reopening of assessment is within a period of four years from the end of the relevant assessment year and therefore, the proviso to section 147 of the Act would not be attracted in the facts of the present case. In the circumstances, while considering the challenge to the very initiation of proceedings under section 147 of the Act, all that the Court is required to examine as to whether any income chargeable to tax has escaped assessment. Since the belief is that of the Assessing Officer, the sufficiency of the reasons for forming such belief is not for the court to judge but it is open to the assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Assessing Officer and examine whether there was any material available on record from which the requisite belief could be formed by the Assessing Officer and further whether that material had any rational connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reover, it is also seen that in the assessment order, excise refund, duty drawback and cash assistance receivable to the extent of ₹ 5,48,77,407/- have been charged to tax vide section 28(iii)(c) but these are required to be excluded while working out deduction u/s 80/80IA in view of aforesaid decisions of Hon. Supreme Court. For deduction u/s 80HHC, 90% of above was to be excluded, which has not been done. Moreover, excise duty paid and collected of ₹ 28,80,09,917/- was not included in total turnover while calculating deduction u/s 80HHC. Failure on the part of the assessee to disclose full and true income resulted into under assessment / excess deduction u/s 80I/80IA and 80HHC. Accordingly, I have reason to believe that income chargeable to tax has escaped assessment at least to the above extent, without prejudice to any other point noticed afterwards. Accordingly, notice u/s 148 r.w.s. 147 is issued in this case. 12. From the reasons recorded, it is apparent that the Assessing Officer has reopened the assessment mainly on three grounds. Firstly, that the income referred to in the said ground viz., income from rent, export incentive, advance licence benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80HHC of the Act as well as deduction under section 80I and 80IA of the Act were also subject matter of appeal. The Commissioner by an order dated 15.3.2000 allowed some of the grounds of appeal. Thus, the order of the Assessing Officer stood merged with the order of Commissioner (Appeals) and had no independent existence of its own and as such the assessment could not have been reopened in respect of the said items. 14. Apart from the aforesaid position, a perusal of the statement showing allocation of income and expenses to eligible units and non-eligible units for deduction under section 80I and 80IA of the Act (Annexure F to the rejoinder affidavit) clearly shows that the other income to the tune of ₹ 100,336,210/- had not been taken into consideration while computing deduction under section 80I and 80IA of the Act. Thus, the reasons recorded proceed on an erroneous factual premise that the other income had been included while allowing deduction under section 80I of the Act. The third ground for reopening viz., that deduction under section 80IA of the Act is not allowable on Income from other sources also proceeds on a factually erroneous basis as af ..... 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