2013 (1) TMI 177 - DELHI HIGH COURT

Reopening of assessment - excessive allowance of the deduction under Section 80HHC - sale proceeds of the quota cannot be considered as export turnover but represented business income covered u/s 28(iv) and had to be reduced to the extent of 90% from the business income as per section 80HHC(baa) - Held that:- The eligibility of the assessee for the deduction under Section 80HHC in respect of premium on sale of quota was covered in favour of the assessee by the order of the Tribunal in the earlier years as well as the orders passed by his predecessor in the assessee's case for the assessment years 2000-01 and 20001-02 and accordingly upheld the assessee's stand.

There was no fresh material which came to the notice of the Assessing Officer after the original return was processed under Section 143(1) and having regard to the orders of the Tribunal(supra) and the instruction of the CBDT dated 23rd February, 1998 regarding the treatment to be given to the premium received on transfer of quotas, there was no escapement of income and thus the notice was without jurisdiction.

As decided in CIT vs. Kelvinator of India Ltd.[2010 (1) TMI 11 - SUPREME COURT OF INDIA] AO has no power to review, he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer.The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority; the reason be held in good faith and cannot merely be a pretence.

The reasons disclose that the AO reached the belief that there was escapement of income “on going through the return of income” filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the AO both strongly deprecated by the Supreme Court in CIT vs. Kelvinator (supra). The reasons recorded by the AO in the present case do confirm apprehension about the harm that a less strict interpretation of the words “reason to believe” vis-à-vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147 - substantial question of law answered in favour of the assessee.