TMI Blog2013 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier - There is no question of "change of opinion" because the earlier opinion was not in accordance with the provisions of law and subsequent decision of the Hon’ble Supreme Court reversing the earlier interpretation of law does constitute fresh material coming in possession of the Assessing Officer, so as to clothe him with the jurisdiction to reopen the case u/s.147 – Decided against assessee. While reducing the 90% labour charges receipts only the net labour charges should be reduced after setting off the labour charges paid – Following Hon’ble Supreme Court in the case of ACG Associates Capsules Pvt. Limited [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - Only the net labour charges should be reduced while computing the deduction under Section 80HHC – Decided in favour of assessee. - ITA No. 1183/Mum/2011, ITA No. 2818/Mum/2011 - - - Dated:- 23-10-2013 - Shri P. M. Jagtap, AM And Shri Amit Shukla, JM,JJ. For the Petitioner : Mr. Keshav B. Bhujle For the Respondent : Smt. Jothilakshmi Nayak ORDER Per Amit Shukla, JM : The aforesaid appeals have been filed by the assessee against two separate orders dated 111-2010 and 27-1-2011, passed by the CIT(A)-19 Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in excess grant of deduction amounting to Rs.8,63,024/- u/s.80HHC involving short levy of tax of Rs.3,17,161/-. 3. In view of the above facts, I have reasons to belief that income in this case has escaped assessment and required to be brought to tax and therefore, notice u/s.148 is being issued. 3.1 Thus, in the "reasons recorded", main allegation was that 90% of the Excise refund of Rs.22,71,462/- should be reduced from the business profits. Before the AO, the assessee submitted that the same should not be reduced as it does not fall within the scope of Explanation (baa) to Section 80HHC and also the exports sale is not subject to Excise Duty but has to be paid on clearance of goods and refund is claimed thereafter. The excise refund is set up against the Excise Duty paid and not on the income which accrues to the assessee. However, the AO rejected the assessee s contention and following the decision of Hon ble Supreme Court in the case of K.Ravindranathan Nair, reported in 298 ITR 228, held that such receipts has to be deducted from the gross total income and accordingly restricted the assessee s claim for the deduction at Rs.48,25,110/-. This has also been confirmed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant material placed on record. The assessee along with return of income filed under Section 139(1) has furnished the tax audit report and also Form 10CCAC, giving details of deduction under Section 80HHC. These details of computation of deduction under Section 80HHC was subject matter of the scrutiny by the AO, who has examined the details after calling for the records and has made certain disallowance in such a computation and thereafter restricted the deduction of Rs.62,89,552/- as against claim of Rs.63,45,381/-. The working of the deduction was also given by the AO in Annexure-A, which was part of the assessment order dated 22-2-2006. Thereafter such an assessment has been reopened mainly on the ground that Excise refund of Rs.22,71,462/- has not been reduced from the eligible export profits. From the perusal of the "reasons recorded" and the materials placed on record, it appears that the AO has sought to reopen the case only on "change of opinion" because all the details for claim for deduction under Section 80HHC including the amounts included in the profit as well as expenses in the working of export profit and total turnover was there before the AO in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 148 on the ground that there is a "change of opinion" as the earlier assessment order was completed under Section 143(3) by the AO. Here, in the present case for the assessment year under consideration, the assessee has claimed deduction under Section 80HHC at Rs.47,81,792/- as per the computation and working given in Form 10CCAC. Such a claim was examined by the AO in the scrutiny proceedings under Section 143(3) vide order dated 15-11-2006 and thereafter allowed the claim of deduction receipts of on labour charges also. For reopening the case under Section 147, following reasons were recorded :- "The assessment for the A.Y.2004-05 has been reopened u/s.147 of the I.T.Act in your case. The reasons recorded for initiating proceedings u/s. 147 of the I.T. Act 1961 for A.Y.2004-05 are as under :- "In this case for A.Y.2003-04 the reassessment u/s 143(3) r.w.s. 147 has been made on 16.10.2008 wherein deduction u/s 80HHC has been recomputed. In re-computation of deduction u/s 80HHC, 90% of labour charges receipt was reduced from eligible profits of the business and the same was included in the total turn over following the principles laid down by the Hon ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Kelvinator India Ltd. (supra). 10.1 Alternatively, he submitted that in any case only net per cent of net labour charges should be excluded under clause (baa) of Explanation to Section 80HHC in view of the decision of the Hon ble Supreme Court in the case of ACG Associates Capsules Pvt. Limited (supra). 11. On the other hand, learned DR submitted that once the law has been laid down by the Hon ble Supreme Court, then it means that the law was always like that and, therefore, the claim allowed earlier by the AO was not in accordance with the provisions of the law and, therefore, the reopening the assessment u/s.147 for disallowing the claim of deduction which has been excessively allowed by the AO, is in accordance with provisions of law and there is no question of "change of opinion". He, thus, strongly, relied upon the order of the AO as well as CIT(A). 12. We have carefully considered the rival submissions and also perused the relevant material placed on record. In this case, the assessee has included labour charges receipts, while computing the profits of the eligible business under the head sales. Such a claim of deduction on account of inclusion of labour charges was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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