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2010 (1) TMI 53 - AT - Income TaxReopening of assessment - any change of opinion while initiating the reassessment proceedings u/s. 147 - assumption of jurisdiction u/s. 147 is bad in law - In the case before us the show-cause notice issued by the learned CIT u/s. 263 of the Act and the order passed by him constituted a material on the basis of which the AO formed belief that the excess deduction u/s. 80HHC has been allowed. Therefore, reopening of assessment cannot be treated based on mere change of opinion. Hence, the AO was justified in reopening the assessment u/s.147. HELD THAT:- Excess deduction u/s. 80HHC has been claimed and allowed within the meaning of sub-cl. (iv) of cl. (c) of Expln. 2 to s. 147. Hence, the income to the extent of deduction allowed u/s. 80-IB had escaped assessment. In this case reassessment proceedings have been initiated within four years from the end of asst. yr. 2001-02 and hence the case falls under main s. 147. We are also aware of the legal position that at the time of reopening of the assessment the AO has to record the reasons for assumption of jurisdiction on the basis of material available on record. Hon'ble Supreme Court in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd.[2007 (5) TMI 197 - SUPREME COURT] has held that the expression "reasons to believe" in s. 147 would mean cause or justification. If the AO has a cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. What is required is "reason to believe" but not the established fact of escapement of income. In this case the assessee received a consideration of Rs 12 lakhs on the sale of right to purchase an open plot in Pune and disclosed it as income for the asst. yr. 1996-97. The Asstt. CIT assessed the income and passed order u/s.143(3). The Dy. CIT issued a notice u/s 154 stating that the long-term gain on sale of right to purchase an open plot was to be treated as casual income and brought to tax at forty per cent. The Dy. CIT passed an order in 2000 stating that he had reason to believe that income of the petitioner had escaped assessment within the meaning of s. 147 and proposed to reassess the income for asst. yr. 1996-97. On a writ petition it has been held that the value of the land had not been determined nor the issue relating to whether the income was to be treated as capital gain or casual income been addressed by the AO. He did not apply his mind and failed to record good and proper reasons for passing the order under s. 143(3). On facts, it was not a mere change of opinion in recording reasons for issuing notice u/s 148 by the AO. Therefore, the AO was justified in issuing the notice u/s 148. Whether an issue arises from the order of CIT(A) which can be agitated in cross-objections raised by the assessee? HELD THAT:- Considering the matter on record, it is clear that an aggrieved party can file memorandum of cross-objection only when an issue has been decided against the cross-objector. The assessee by way of cross-objection is not seeking relief to which it is entitled to but seeking cancellation of reassessment proceeding so that additional tax relating to escaped income may not be fastened on him and hence the assessee is attempting to avoid payment of due tax to Revenue. Under these circumstances, assessee cannot be permitted to raise a ground not arising from the order of CIT(A) that too by way of cross-objections. Consequently, the decision of NTPC Ltd.[1996 (12) TMI 7 - SUPREME COURT] cannot be pressed into service for getting the assessment annulled in appeal filed by the Revenue. In view of above discussions we are of the considered opinion that the cross-objection filed by the assessee with an objective to get the assessment annulled is not maintainable and deserves to be dismissed. Thus, We hold that the cross-objection by the assessee is to be dismissed on merits as well as on maintainability as the issue raised does not arise from the order of CIT(A). Appeal filed by the Revenue - Disallowance u/s. 80HHC - Interest of FDR - HELD THAT:- In the case before us, the income has been derived from the same undertaking and repeated deductions u/s. 80-IB and 80HHC have been claimed. Therefore, the issue is squarely covered by the decision of the Special Bench in the case of Hindustan Mint & Agro Products [2009 (6) TMI 124 - ITAT DELHI-C]. Respectfully following the decision of the Special Bench of the Tribunal, it is held that the amount of deduction allowed u/s. 80-IA/80-IB shall be reduced from the eligible profits and on the balance amount deduction u/s. 80HHC will be allowable. Therefore, the ld CIT(A) was not justified in allowing deduction u/s. 80-IB and 80HHC on the same gross profit. We, therefore, set aside the order of the learned CIT(A) and restore the order of the AO. Netting of interest received on FDRs - The assessee debited to P&L a/c the bank interest of Rs. 49,31,123 after reducing the interest earned of Rs. 4,06,803 on fixed deposits and claimed deduction u/s. 80HHC without reducing the 90 per cent of the interest from the profits. The AO following various decisions treated the interest received earned on deposits not derived from export business. He accordingly treated the interest received as income from other sources. Since the AO has not examined the nature of interest as well as the netting of interest, we set aside the issue to the file of the AO with the directions to examine the claim of the assessee in the light of decision of Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equip [2007 (1) TMI 86 - HIGH COURT, DELHI] after affording the assessee a reasonable opportunity of being heard. In nutshell, the appeal filed by the Revenue is allowed for statistical purposes and the cross-objection filed by the assessee is dismissed.
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