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TMI Blog2011 (3) TMI 1555X X X X Extracts X X X X X X X X Extracts X X X X ..... d further in appeal before the Income Tax Appellate Tribunal (the Tribunal) both by the petitioner as well as the Income Tax Department which were pending at the time of filing the present petition. Thereafter, by the impugned notice dated 31.3.2001, the petitioner's assessment for assessment year 1996-97 came to be reopened. The petitioner, therefore, vide letter dated 3.4.2001, requested the respondent to furnish the reasons for issuing the notice under section 148 of the Act. The respondent vide letter dated 12.4.2001 informed the petitioner that there was no statutory provision for providing "reasons recorded for issuing notice under section 148". Since the copy of the reasons was not provided to the petitioner and the proceedings were also not dropped, the petitioner has filed the present petition challenging the aforesaid notice under section 148 of the Act. 3. In response to the petition, the respondent has filed an affidavit in-reply annexing along therewith a copy of the reasons recorded, which read thus : "M/s United Phosphorous Limited - A.Y. 1996-97 Reasons recorded for issue of notice u/s 148 r.w.s. 147 of the Act The assessee is a widely held company engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment at least to the above extent, without prejudice to any other point noticed afterwards. Accordingly, notice u/s 148 r.w.s. 147 is issued in this case." 4. The petitioner has, thereafter, filed a rejoinder affidavit wherein it has been stated that the petitioner has not claimed any deduction under section 80I and 80IA of the Act on other income. It is further averred that along with the return, the petitioner had filed a copy of the statement showing calculation of deduction under sections 80I and 80IA of the Act. The total eligible profit shown therein, exactly tallies with the total eligible profit shown in Annexure-F as annexed to the rejoinder affidavit. It is further averred that there was a true and full disclosure and that deduction under sections 80I and 80IA of the Act is claimed only on the profits of the eligible units. It is also averred that deduction under section 80HHC of the Act was calculated by the respondent himself and, therefore, the petitioner claiming deduction under section 80HHC of the Act on the amount of duty drawback and cash assistance does not arise. In any case, on both the issues of exclusion of duty drawback and cash assistanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequence of information in his possession, had reason to believe that income had escaped assessment. 7. It is further submitted that the order made by the Assessing Officer was subject matter of appeal before the Commissioner (Appeals) and as such, the said order having merged with the order of the Commissioner (Appeals), there was no question of reopening assessment on an issue which had merged with the order of the Commissioner (Appeals). 8. In support of his submissions, the learned Senior Advocate has placed reliance upon the following decisions : [a] The decision of this High Court in the case of Commissioner of Income Tax v. Nirma Chemicals Works P. Ltd., 309 ITR 67 (Guj.). [b] The decision in the case of Rajesh Babubhai Damania v. Commissioner of Income Tax, (2001) 251 ITR 541. 9. Resisting the petition, Mr. M. R. Bhatt, learned Senior Advocate has submitted that in the present case, the reopening is within a period of four years from the end of the relevant assessment year, hence, the Assessing Officer can assume jurisdiction under section 147 of the Act if he has reason to believe that income chargeable to tax has escaped assessment. Inviting attention to the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ag Lal v. ITO, (1993) 203 ITR 456]. Since earlier assessment had been framed under section 143(3) of the Act for the assessment year under consideration, another aspect that has to be kept in mind is as to whether the reopening is based upon any tangible material which has come to the knowledge of the Assessing Officer subsequent to the framing of the earlier assessment or whether the same is merely a change of opinion on the part of the Assessing Officer. 11. In this regard, it may be pertinent to refer to the reasons recorded which read as under : "The assessee is a widely held company engaged in the business of manufacturing of phosphorous and pesticides. The assessment u/s 143[3] have been finalized on 24.3.99 on the total income of Rs. 19,84,30,202/-. The above total income arrived after granting deduction u/s 80IA of Rs. 12,56,03,453/-. It is seen that the assessee has incorrectly claimed deduction u/s 80I/80IA on the total income, which inter-alia includes income which was not derived from industrial undertaking. The income such as rent of Rs. 5,13,806/-, export incentive Rs. 1,15,58,523/-, advance licence benefit receivable of Rs. 7,92,37,763/-, pass book benefit receiva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n back, sundry credit balances written back interest income, discount, miscellaneous, which had been taken into consideration for deduction under section 80IA of the Act, does not fall within the purview of "Profit derived from Industrial Undertaking" in view of the decision of the Supreme Court in the case of CIT v. Sterling Foods, 237 ITR 579 (SC) and CIT v. Hindustan Lever Ltd, 239 ITR 297 (SC) and as such the assessee has incorrectly claimed deduction under section 80I/80IA of the Act. Further that deduction under section 80IA is not allowable on "Income from other sources". The second ground is that the excise refund, duty drawback and cash assistance which have been charged to tax vide section 28(iii((c) were required to be excluded while working out deduction under section 80/80IA of the Act in the light of the aforesaid decisions of the Supreme Court. The third ground is that for deduction under section 80HHC of the Act, 90% of the above income was required to be excluded which had not been done. Moreover, the excise duty paid and collected was not included in the total turnover while calculating deduction under section 80-HHC of the Act. 13. In the light of the reasons re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be excluded while working out deduction under section 80/80IA , the said issue had been duly considered at the time of framing the original assessment and was also subject matter of appeal before the Commissioner (Appeals). 15. In the light of the aforesaid discussion it is apparent that the assessment order in respect of the items for which assessment is sought to be reopened has merged with the order of Commissioner (Appeals) and as such has no independent existence and therefore the assessment could not be reopened in respect of the said items, Moreover, the reopening of assessment apart from being based on a factually erroneous premise, is also based upon a mere change of opinion without there being any tangible material to come to the conclusion that there is escapement of income from assessment. Hence in view of the law laid down by the Supreme Court in the case of Commissioner of Income-tax v. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC) the condition precedent for reopening of assessment has not been fulfilled and as such, the assumption of jurisdiction under section 147 of the Act is not valid. The impugned notice issued under section 148 of the Act, ther ..... 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