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TMI Blog2013 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. In the audited accounts, the assessee has claimed deduction of Rs.63,45,381/- under Section 80HHC. After claiming this deduction, return of income was filed at an income of Rs.87,49,280/-. Such a return of income was subject to scrutiny proceedings under Section 143(3) by the DCIT-9(1), Mumbai. In the assessment order, the AO after calling for all the details and also working of the profits and deduction u/s80HHC in Form 10CCAC furnished along with the return of income, examined the said claim for deduction under Section 80HHC and restricted the claim of deduction at Rs.62,89,552/-. The detail working of the deduction was given in Annexure-A of the assessment order which was completed on 22-2-2006. Thereafter on 17-4-2007 such an assessment was reopened by issuance of notice under Section 148 on following "reasons recorded" :- In this case, the return of income filed on 15-10-2003 declaring the total income of Rs.87,49,280/-. The assessment u/s.143(3) was completed on 22.02.2006 and the total income was assessed at Rs.88,64,410/-. 2. Perusal of record reveals the following facts : As per the provisions contained in Section 80HHC while computing profits eligible for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has required to pay Excise Duty and on export of goods the same was refunded. During the year the assessee has paid the Excise Duty of Rs.27,17,196/- out of which the Excise Duty refund received/receivable for the year was Rs.22,71,462/-. The net Excise Duty payable/paid was Rs.4,45,734/- only. This amount is deductible from the total income and the entire Excise Duty has no relevance while estimating the total income, business profit or the amount deductible under Section 80HHC. Thus, on both the counts, not only the reopening is invalid but also on merits the same is not sustainable. On the issue of "change of opinion", learned counsel had strongly relied upon the decision of the Hon'ble Apex Court in the case of CIT Vs. Kelvinator India Pvt. Ltd., 320 ITR 561 (SC) and on the issue of netting off (herein this case net excise duty payable), he relied upon the decision of the Hon'ble Supreme Court in the case of ACG Associates Capsules Pvt. Limited, reported in 343 ITR 89. 5. On the other hand, learned DR strongly relied upon the findings of the AO and submitted that in this case reopening has been done within the period of four years from the end of the relevant assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y direct decision of the Hon'ble Apex Court entirely changing the earlier view taken, which goes to suggest that income chargeable to tax has escaped assessment and which has not been examined by the AO or was not there in the record. The „reason to believe' does not mean purely subjective satisfaction on the part of the AO but it must be held in good faith based on certain material and there should be rationale connection and relevant bearing on the formation of belief that income chargeable to tax has escaped assessment. The "reason to believe" cannot be based on that some different opinion which can be formed on the same set of material later on. Hon'ble Apex Court in the case of CIT Vs. Kelvinator India Ltd., reported in 320 ITR 561 (SC) has clearly laid down that, "change of opinion" is in-built test to check the abuse of power by the AO, otherwise there would always be some case of review taking place in the garb of reopening of the assessment. The relevant observations of the Hon'ble Supreme Court in this context are reproduced here under :- On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were received against the omission of the words `reason to believe' from section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." 7. Here in this case also as per the "reasons recorded", it could be gathered that there is no tangible material coming into knowledge of the A.O. but he is trying to take a different opinion on the same set of material, which has been examined by the AO in the course of original assessment proceedings. Thus, the reopening of the assessment under Section 147 in the present case is definitely on account of "change of opinion" only, which is not permissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11,19,863/- being excess deduction u/s 80HHC has escaped assessment for A.Y. 2004-05 within the meaning of section 147 of the I.T Act, 1961." 9. Thus, the main "reason" for reopening the case was that profits of the eligible business also included labour charges receipts of Rs.43,64,000/- under the head sales and 90% thereof has not been reduced from the eligible profits and thus, there was a clear cut mistake of law by the AO while allowing the deduction under Section 143(3), which in a direct violation of decision of Hon'ble Supreme Court in the case of K.Ravindranathan Nair (supra). The AO in the order passed under Section 143(3) r.w.s. 147, reduced the 90% of the labor charges for computing the profits following the decision of the hon'ble Supreme Court. This has been confirmed by the CIT(A) also. 10. Before us, learned counsel submitted that, once a view has been taken by the AO which was also based on certain decisions prevalent at that time, then it cannot be held that such a view taken by the AO during the course of original assessment proceedings was a wrong view. The subsequent judgment of the Hon'ble Supreme Court cannot render the earlier assessment order as erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay High Court has been impliedly overruled by the decision of the Hon'ble Supreme Court in the case of K.Ravindranathan Nair (supra). Once, the Hon'ble Supreme Court interprets any law and lays down its decision on such interpretation of law then, such judicial decision applies retrospectively. It is trite law that the courts do not make any new law, they only discover and find the correct interpretation of the law, as if it is always the same and such a correct principle of law subsequently laid down by the Hon'ble Supreme Court applies retrospectively, because, it clarifies a legal position which is binding on all the courts subordinate to it. Once, the Hon'ble Supreme Court in the case of K.Ravindranathan Nair (supra) has held that such kind of charges have to be reduced by 90% while computing the profits of the business eligible for deduction under Section 80HHC and such a reduction is to be made from gross total income and would be included in the total turnover as per the formula given in Section 80HHC(3) then, such a law applies retrospectively overriding all the view taken earlier. Thus, if the law has been laid down by the hon'ble Supreme Court even after the passing of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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