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TMI Blog2010 (9) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... enzene and epichlorhydrin and it is eligible for claiming deduction under section 80HHC of the Income-tax Act, 1961 in respect of its export activities. The petitioner is also having four power generating units for production of power, which is partly consumed for its own use and the balance is sold to the Tamil Nadu Electricity Board. The petitioner also claims deduction under section 80-IA of the Act in respect of one power generation unit. (b) According to the petitioner, for the assessment year 2001-02 the petitioner filed its return of income on October 31, 2001 by declaring total income of Rs.57,36,72,000. The said return was processed by the Assessing Officer under section 143(1) of the Act onMarch 22, 2003. The Assessing Officer however reopened the assessment under section 147 by issuing notice under section 148 onSeptember 3, 2004by stating that the petitioner had claimed a sum of Rs. 8,56,47,000 as revenue expenditure instead of treating the amount as capital expenditure. (c) According to the petitioner, the reassessment was completed onFebruary 13, 2006and no addition was made in respect of which assessment was reopened. However, the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the claim of section 80-IA has been wrongly made without reducing the 80HHC profits of the year as per the provisions of section 80-IA of the Act. Hence the objection raised was overruled and stated that the reassessment proceeding were validly initiated. The petitioner was directed to produce the corresponding submission before the second respondent during the next date of hearing onNovember 27, 2008at4.00 p.m. 5. The respondents have filed counter-affidavit stating that notice for reassessment was issued on the information available on record relating to the assessment of M/s. CIBA India Pvt. Ltd., for the assessment year 2001-02 wherein the entire amount of Rs. 63.02 crores was stated to be paid only as compensation to the petitioner for terminating the supply agreement dated January 22, 1998, and entering into the new supply agreement dated March 22, 2001. The petitioner has misrepresented the facts in the original returns of income by way of notes of account schedule 12 under the heading "Contingent liabilities" and therefore there is non-disclosure of full and true material facts before the income-tax authorities. The petitioner's objection submitted for the reasse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have its share in petro araldite. The substantial part of Rs. 63.02 crores should be in relation to compensation for the alleged termination of contract and it should be treated as revenue receipt. The Supreme Court in the decisions reported in CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 148 and Miss Dhun Dadabhoy Kapadia v. CIT [1967] 63 ITR 651 (SC) held that any amount of compensation received for cancellation of supply agreement is only a business income. 8. The petitioner-company has also made wrong claim under section 80HHC treating the interest receipt as export incentive. Therefore the second respondent has reason to believe that the income chargeable to tax has escaped assessment in view of the failure on the part of the assessee-company to disclose true and full material facts as required by the proviso to section 147. The objection raised by the petitioner was also considered and overruled by order datedNovember 19, 2008, and a direction was issued to consider the matter on the merits to produce the corresponding submissions during the next hearing onNovember 27, 2008. 9. W. P. No. 28457 of 2008 challenging notice dated August 3, 2007 is not maintaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year) : ' (emphasis supplied) 5. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from April 1, 1989), they are given a go-by and only one condition has remained viz. that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-April 1, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words `reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of `mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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