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TMI Blog2010 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ng regard to the facts and circumstances of the case, learned CIT(A) has erred in not deleting the disallowance made under s. 80HHC in respect of interest of FDR, more so, when this was not the subject-matter of reason recorded." 3. During the course of hearing, ground No. 3 was not pressed and, therefore, the same is dismissed as not pressed. 4. Now, we are left with ground Nos. 1 and 2 of assessee's cross-objection which relate to assumption of jurisdiction under s. 147 of the IT Act. During the course of hearing the learned Authorised Representative of the assessee has fairly conceded that since the assessment has been reopened under s. 147 within the period of four years the proviso to s. 147 of the Act would not be applicable. Referring to the reasons for reopening of the assessment it has been submitted that original assessment was made under s. 143(3) on28th March, 2003on a total income of Rs. 4,06,803. The assessee company claimed deduction of Rs. 1,44,69,294 and Rs. 57,18,475 under s. 80HHC and s. 80-IA, respectively which was restricted to the extent of business profit amounting to Rs. 1,90,61,585. It was later on noticed by the AO that deductions under s. 80HHC and s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 : (2007) 289 ITR 37 (Mad). He also placed reliance on the decision of Hon'ble Gujarat High Court in the case of Hynoup Food & Oil Industries Ltd. vs. Asstt. CIT (2008) 219 CTR (Guj) 124 : (2008) 11 DTR (Guj) 241 : (2008) 307 ITR 115 (Guj) for the proposition that deductions under s. 80HH and s. 80-IA of the Act having been allowed to the assessee following the order of the CIT(A) in earlier years, the reopening of assessment on the basis of findings of another AO in a later assessment that the assessee was not entitled to said deductions, suffered from change of opinion and hence the assessment framed was invalid. He also submitted that Hon'ble Delhi High Court in the case of Techspan India (P) Ltd. & Anr. vs. ITO (2006) 203 CTR (Del) 550 : (2006) 283 ITR 212 (Del) has held that the assessment reopened on mere change of opinion was not valid. He also placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB) for the proposition that Hon'ble Delhi High Court has discussed the new law w.e.f. 1st April, 1989. Under the new law also, s. 147 does not authorize the AO to reopen a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon by the learned Authorised Representative of tile assessee are not relevant. As regards the contention of the assessee that non-availability of the decision of Special Bench has nothing to do with the allowability of the claim under s. 80HHC and s. 80-IA of the Act, the Special Bench has dealt with the interpretation of the provisions, which were already in existence. The decision may be relevant for action under s. 154, but not for reopening of assessment. As regards the decision in the case of Shipra Srivastava & Mr. vs. Asstt. CIT in IT Appeal No. 8683 of 2007, he has submitted that it is not relevant as the decision has been rendered with reference to tax deducted at source on rent-free accommodation. Relying on the decision of Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC), it has been submitted that the decision should be read in the context in which it was rendered. Therefore, the decision in the case of Shipra Srivastava is not applicable to the facts of the assessee's case. 6.4 In rejoinder, the learned Authorised Representative of the assessee submitted that the context may be different, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d replied as under had replied as under: "2. The company has claimed deduction under s. 80HHC and under s. 80-IA/80-IB. Deduction under s. 80HHC has been claimed because the company is an exporter and all the exports made during the year have been realized before the prescribed time-limit. Being the small scale industrial undertaking the company is also entitled for deduction under s. 80-IA/80-IB for 30 per cent of its profit." From plain reading of the query raised by AO for justification of deduction under s. 80HHC/80-IB and reply furnished by the assessee it is clear that neither the AO raised any specific query or examined the issue of allowability of deduction under s. 80HHC after reducing the deduction allowed under s. 80-IB nor had the assessee given any justification for claiming deduction under s. 80HHC without reducing the amount of deduction under s. 80-IB claimed and allowed. The AO had raised a general query relating to the claim of deductions under these sections and assessee had also given the reply in a casual manner. Therefore, the allowance of deduction under s. 80HHC on the gross eligible profits without reducing the amount of deduction under s. 80-IB, in our c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was rejected by the learned CIT by holding that deduction under s. 80HHC was to be computed after reducing the deduction allowed under s. 80-IA of the Act. On appeal, Tribunal, Delhi Bench "F", in ITA No. 1917/Del/2005, dt.20th Oct., 2005for asst. yr. 2001-02 cancelled the order under s. 263 of the Act by observing as under: "8. After careful consideration of the rival submissions, in the light of material available on record, we find substance in the argument taken by the learned counsel for the assessee. It is evident from the record that proceedings under s. 263 of the Act were taken as the learned CIT was of the view that deduction under s. 80-IA of the Act was to be allowed after deducting amount of deduction allowed under s. 80HHC of the IT Act. This is clear from the show-cause notice issued by the learned CIT, which we have discussed above in detail. The issue raised in the show-cause notice was quite different from the issue considered and decided by apex Court in the case of IPCA Laboratories Ltd., which the learned CIT applied in this case. However, no notice to withdraw deduction under s. 80HHC on account of some negative profit shown by the assessee was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon by the learned counsel for the assessee referred to in preceding paras are, therefore, distinguishable on the facts of the case before us and cannot be applied in the present case. 9. Further, it is a case where excess deduction under s. 80HHC has been claimed and allowed within the meaning of sub-cl. (iv) of cl. (c) of Expln. 2 to s. 147 of the Act. Hence, the income to the extent of deduction allowed under 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 of the Act. 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. 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yor may not be exercised by the assessee under sub-s. (1) or by the Department under sub-s. (2) of s. 253. In a given case it is quite possible that certain matters may not be agitated either by the learned CIT or by the assessee by way of an appeal, but if any appeal is filed either by the assessee or the AO, then the opposite party may consider it necessary to file a cross-objection in respect of such matters, which were not fit originally to be agitated by way of an independent appeal as has been held by Hon'ble Bombay High Court in the case of CIT vs. New India Assurance Co. Ltd. (1982) 28 CTR (Bom) 206 : (1983) 141 ITR 367 (Bom). Thus, sub-s. (4) of s. 253 of the Act confers a light of cross-objection both on the assessee and the Revenue. The words "the AO or the assessee, as the case may be,......... may, notwithstanding that he may not have appealed against such order or any part thereof........... file a memorandum of cross-objections............. against any part of the order" appearing in S. 253(4) postulate that in respect of the same order of the appellate authority there may be an appeal by the assessee as to one part and an appeal by the Revenue as to the other where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld only be against a part of the order of the AAC and that as, in the instant case, the appeal was disposed of ex parte by the Tribunal, the proviso to r. 24, which contemplates only the restoration of an appeal, which was dismissed for default, and that too for sufficient cause, would not apply. Hon'ble Madras High Court has held that the words employed under sub-s. (4) of s. 253 of the IT Act, 1961, would show that such memorandum of cross-objection shall be against any part of the order of the AAC. The use of the expression "any part of the order" is clearly indicia to show that it could be also against the entirety of the order of the AAC insofar as it is prejudicial to the cross-objector. Therefore, the contention that the memorandum of cross-objection filed by the assessee in the instant case was said to be against the whole of the order of the AAC and that by itself was sufficient to reject the same on the threshold, was not sustainable. 14. In the case of CIT vs. Purbanchal Paribahan Gosthi (1999) 152 CTR (Gau) 102 : (1998) 234 ITR 663 (Gau), Hon'ble High Court has held that s. 253(4) of the IT Act, 1961, r/w r. 22 of the ITAT Rules, 1963 provides that any party aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le appeal before the Tribunal nor memorandum of cross-objection raising the issue relating to assumption of jurisdiction even when the assessee has right to file cross-objection against the whole order of CIT(A). 18. We are also aware of decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (l998) 229 ITR 383 (SC) wherein it has been held that if, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. can be pressed into operation by the assessee if the assessee is in appeal before the Tribunal and has by any reason omitted to raise a ground before the lower authorities relating to relief or deduction provided that assessee ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The learned CIT(A) has erred in law in negating the first leg of the s. 80-IA(9) which clearly says that amount of deduction allowed under s. 80-IA or 80-IB is not to be allowed under any other provisions of Chapter VI-A of which s. 80HHC happens to be a part." 21. The facts of the case relating to this ground of appeal are that the AO while computing deduction under s. 80HHC of the Act reduced the amount of deduction under s. 80-IB amounting to Rs. 55,96,435 from the profits of business determined at Rs. 1,90,61,585. On the balance amount the AO computed deduction under s. 80HHC as per the provisions of s. 80HHC(3) of the Act. Before the learned CIT(A), the assessee challenged the reduction of deduction under s. 80-IB of the Act for the purpose of computation of deduction under s. 80HHC of the Act. It was argued that part of the s. 80-IA(9) stating that "deduction to the extent of such profits and gains shall not be allowed under any other provisions of this chapter" would not mean that out of total profit of Rs. 100, if Rs. 30 had been allowed under s. 80-IA, then this amount of Rs. 30 would not be allowed under any section. The sub-s. (9) of s. 80-IA does not say that Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext issue in the Revenue's appeal relates to netting of interest received on FDRs against the interest paid to the bank. 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 under s. 80HHC of the Act 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. 24. On appeal, the learned CIT(A) observed that interest earned on FDRs was to be treated as income from business as FDRs were purchased for giving performance guarantee to Apparel Export Promotion Council (AEPC). He accordingly directed the AO to treat the interest on FDRs as business income and allow the netting of the interest received against interest paid. 25. We have heard both the parties and gone through the material available on record. We find that this issue is now covered by the decision of Hon'ble Delhi High Court in the case of CIT vs. Shri Ram Honda Power Equip & Ors. (2007) 207 CTR (Del) 689 : (2007) 289 ITR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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