TMI Blog2010 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness profit amounting to Rs. 1,90,61,585. It was later on noticed by the AO that deductions under s. 80HHC and s. 80-IA of the Act were claimed on the gross total income without reducing the profits to the extent of deduction claimed and allowed under s. 80-IA. Hence. the excess allowance of deduction under ss. 80HHC and 80-IA of the Act was allowed. The AO on the basis of above reasons has reopened the assessment under s. 147. He has further submitted that the assessee had been allowed deductions under s. 80-IA and s. 80HHC on the basis of the claim made by the assessee and since no fresh material or information was available with AO, the reopening of assessment amounts to change of, opinion, which is not permissible in the law. He placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs. Eicher Ltd. (2007) 213 CTR (Del) 57 : (2007) 294 ITR 310 (Del). He also placed reliance on the decision of Hon'ble Delhi High Court in the case of Jal Hotels Co. Ltd. vs. Asstt. Director of IT (2009) 24 DTR (Del) 37 for the proposition that where there was no material in the hands of the Revenue leading to the view that there was reason to believe that income had escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s discussed the new law w.e.f. 1st April, 1989. Under the new law also, s. 147 does not authorize the AO to reopen assessment on mere change of opinion. The learned Authorised Representative of the assessee after conclusion of hearing also filed the copies of decisions in the following cases for the proposition that even within the period of four years in the cases where there was no fresh material the reopening of the assessment has been held to be based on change of opinion: (i)CarltonOverseas (P) Ltd. vs. ITO Ors. dt.18th Aug., 2009[reported at (2009) 29 DTR (Del) 262-Ed.]; (ii) CIT vs. Late Ramakrishna Hegde Through LR, dt.23rd July, 2009[reported at (2009) 28 DTR (Kar) 332-Ed.]; (iii) CIT vs. Feather Foam Enterprises (P) Ltd. (2008) 296 ITR 342 (Del); (iv) CIT vs. Chakiat Agencies (P) Ltd. (2009) 224 CTR (Mad) 286 : (2009) 24 DTR (Mad) 26 : (2009) 314 ITR 200 (Mad); (v) M.M.T.C. Ltd. vs. Dy. CIT (2009) 119 ITD 175 (Del); and (vi) Shipra Srivastava Anr. vs. Asstt. CIT in IT Appeal No. 8683 of 2007 [reported at (2009) 30 DTR (Del) 25-Ed.]. 6.3 On the other hand, the learned senior Departmental Representative submitted that the original assessment order framed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. 6.4 In rejoinder, the learned Authorised Representative of the assessee submitted that the context may be different, but there should be some material on record to form an opinion that income has escaped assessment. The AO cannot reopen the assessment on the basis on which he has already allowed the deduction. He supported the arguments relying on the decision of Hon'ble Madhya Pradesh High Court in the case of National Textile Corporation Ltd. (MP) vs. CIT (2008) 216 CTR (MP) 153 : (2008) 5 DTR (MP) 117 for the proposition that the decision of jurisdictional High Court is binding. He also placed reliance on the decision of Tribunal, Chandigarh Bench "B", in the case of Shiva Exports vs. ITO (2009) 28 SOT 512 (Chd) for the proposition that there should be material on record to form an opinion that income had escaped assessment. The reopening of assessment will fall within the realm of suspicion and, therefore, proceedings initiated will be for the purpose of investigation and not more. 7. We have heard both the parties and gone through material and the relevant case law on the subject. The learned Authorised Representative of the assessee in cross-objection has raised an is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of deduction under s. 80HHC on the gross eligible profits without reducing the amount of deduction under s. 80-IB, in our considered opinion, is without proper examination of the claim and application of mind on the part of AO. Our view is supported by the decision of Hon'ble Bombay High Court in the case of Yuvraj vs. Union of India Anr. 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 under s. 143(3) of the IT Act, 1961. The Dy. CIT issued a notice under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case. However, no notice to withdraw deduction under s. 80HHC on account of some negative profit shown by the assessee was issued in this case. It is well accepted that the learned CIT under s. 263 of the IT Act cannot revise an assessment on a ground not taken in the show-cause notice. In the present case, the ground for revising assessment is quite different from the ground given in the show-cause notice and, therefore, the impugned order under s. 263 of the Act is held to be unsustainable. It is cancelled." From the above facts it is clear that the Tribunal had cancelled the order under s. 263 on the ground that the ground taken in the show-cause notice was different from the ground shown in the order cancelling the assessment under s. 263 of the Act. The Tribunal had not examined the claim of deduction under s. 80HHC on merits. (c) Subsequent to decision of Tribunal dt.20th Oct., 2005, the AO initiated reassessment proceedings under s. 147 by issuing the notice under s. 148 on17th March, 2006. Reasons were recorded for reopening of assessment on27th Feb., 2006. Thus, the assessment was reopened after the decision of the Tribunal cancelling the order under s. 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. At the stage of issue of notice the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of belief is within the realm of the subjective satisfaction of the AO. From the decision of Hon'ble Supreme Court it is clear that at the time of reopening of assessment there should be some material before the AO on the basis of which he could have formed belief that income has escaped assessment. In the case before us the show-cause notice issued by the learned CIT under 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 under s. 80HHC of the Act has been allowed. Therefore, reopening of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee or the Revenue has preferred an appeal to the Tribunal against that part of the order of the appellate authority which consists of decisions recorded against him, the other party if he had not already appealed, may file cross-objections against that part of the order of the appellate authority, which consists of the decisions with which he is dissatisfied. The appeal by the assessee or the Revenue may be against any parts of the order of the appellate authority which are against him and by which he is aggrieved. It is, therefore, imperative that there must be a decision of the appellate authority by which the assessee or Revenue is aggrieved before he can prefer an appeal against that part of the order of the appellate authority containing such decision. 12. Further, the existence of expression "against any part of the order" in s. 253(4) of IT Act clearly suggests that the cross-objection can be filed only in cases where the appellate authority has decided against the party. Further, under r. 27 of ITAT Rules, 1963, the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 against order of appellate authority can file memorandum of cross-objection against any part of order of appellate authority and cross-objection need not be confined to points taken by opposite party in main appeal. 15. Hon'bleMadrasHigh Court in the case of CIT vs. Sundaram Clayton Ltd. (1982) 30 CTR (Mad) 170 : (1982) 136 ITR 315 (Mad) has held that where the assessee has wholly succeeded before the appellate authority there is no scope for his filing any appeal or cross-objections before the Tribunal. Again, if a particular matter has not been considered and decided by the appellate authority and the decision on it does not form part of the order of the appellate authority there can be no appeal against it. 16. Hon'ble Bombay High Court in the case of Ugar Sugar Works Ltd. vs. CIT (1982) 27 CTR (Bom) 174 : (1983) 141 ITR 326 (Bom) has held that the competence of the AAC ranges over the whole assessment proceedings without any restrictions on him. His jurisdiction is, therefore, not confined to the subject-matter of the appeal, but ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal and has by any reason omitted to raise a ground before the lower authorities relating to relief or deduction provided that assessee explains the reasons for not raising the ground before the lower authority and entire material relating to such legal ground is available on record. In cross-objection, the assessee can raise a ground if it arises out of order of appellate authority. As discussed above the assessee is neither in appeal before us against the order of CIT(A) nor has explained the reasons for not raising the issue relating to assumption of jurisdiction by the AO before the lower authority. As a matter of fact, the issue does not arise out of order of CIT(A). With effect from 1st April, 1999, under s. 80-IA(9) r/w s. 80-IB(13) the profit in respect of which the deduction under s. 80-IB has been allowed, is to be reduced from eligible business profits for the purposes of deduction under s. 80HHC of the Act. 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 av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 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. 30 would be reduced from the business profit for the purpose of computation of deduction under any other section. Therefore, it was pleaded that the amount of deduction claimed under s. 80-IA of the Act will not be reduced from the gross total income for the purpose of computation of deduction under s. 80HHC. The learned CIT(A) after considering the arguments of the assessee came to the conclusion that deductions under ss. 80HHC and 80-IB would be allowable on gross total income and it would not exceed the gross total income of the assessee. He accordingly, allowed the claim of the assessee. 22. 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 Five Member Special Bench in the case of Asstt. CIT vs. Hindustan Mint Agro Products (P) Ltd., wherein it has been held that the restrictions contained in s. 80-IA or 80-IB not to allow repeated deductions are applicable to the same profit. There has to be identity of profits on which deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 475 (Del), wherein it has been held as under: ".......(viii) The word 'interest' in cl. (baa) of the Explanation connotes 'net interest' and not 'gross interest'. Therefore, in deducting such interest, the AO will take into account the net interest, i.e., gross interest as reduced by expenditure incurred for earning such interest, para (ix) Where, as a result of the computation of profits and gains of business and profession, the AO treats the interest receipt as business income, then deduction should be permissible, in terms of Expln. (baa) of the net interest, i.e., the gross interest less the expenditure incurred for the purposes of earning such interest. The nexus between obtaining the loan and paying interest thereon (laying out the expenditure by way of interest) for the purpose of earning the interest on the fixed deposit, to draw an analogy from s. 37, will require to be shown by the assessee for application of the netting principle." 26. Since the AO has not examined the nature of interest as well as the netting of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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