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TMI Blog2015 (11) TMI 1380X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer and thereby allowing deduction claimed by the assessee under section 80IB of the Income Tax Act without appreciating the fact that deduction under section 80IB is eligible for SSI unit only where the investment in fixed assets on Plant & Machinery does not exceed Rs. 3 crore whereas the total value of Plant & Machinery as per the Balance Sheet for all the three assessment years under consideration was above 3 crore ?" 2. In the tax appeals arising out of the cross objections, the following question of law has been proposed: "Whether the Appellate Tribunal has erred in law and on facts in holding that the issuance of notice under section 148 which was issued as per provisions available as per explanation 2(c)(iii) and 2 (c)(iv) given below section 147 of the Income Tax Act ?" 3. The assessment years are 2004-05 and 2005-06 and the relevant accounting periods are the financial years 2003-04 and 2004-05. The respondent assessee filed return of income claiming deduction under section 80IB (10) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") of Rs. 37,13,631/- for assessment year 2004-05 and Rs. 44,22,737/- for assessment year 2005-06. The original assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted under section 80IB of the Act on the ground that the assessee was not a small scale industrial undertaking, whereas the assessee, in fact, was a small scale industrial undertaking and, therefore, the deduction under section 80IB was rightly allowed, and secondly, on the ground that the reopening was bad in law as the same was merely based upon a change of opinion. The Commissioner (Appeals) partly allowed the appeal by holding that the assessee being a Small Scale Industrial (SSI) unit had rightly been allowed the deduction under section 80IB(10) of the Act. He, however, upheld the reopening of assessment under section 147 of the Act. The revenue carried the matter in appeal before the Tribunal. The assessee filed its cross objections qua the issue which was decided against it by the Commissioner (Appeals). The Tribunal by the impugned order allowed the cross objections filed by the assessee by holding that the reopening of assessment by the Assessing Officer was without authority of law. In view of the decision taken on the jurisdictional ground, the Tribunal dismissed the appeals filed by the revenue for all the three years. 5. Insofar as assessment year 2003-04 is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that the reopening of assessment was bad in law and has not decided the same on merits. 8. Opposing the appeals, Mr. J. P. Shah, learned counsel for the respondent assessee invited the attention of the court to the reasons recorded by the Assessing Officer for reopening the assessment. It was submitted that the sole reason for reopening the assessment is that the respondent assessee did not satisfy the requirements for availing of the benefit of a small scale industrial unit. It was submitted that the record of the case before the Assessing Officer clearly shows that being a pharmaceutical industry, the limit of expenditure incurred on plant and machinery was Rs. 5 crores. It was submitted that the Assessing Officer in the reasons recorded has not reduced the exempted items as permitted under the exemption notification. Under the circumstances, the reasons recorded by the Assessing Officer are invalid for the reason that it goes by the gross block plus the upper limit of one crore without considering the deduction which the assessee was entitled. It was submitted that on the material available on record, the Assessing Officer could not have formed the requisite beli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years under consideration. 11. In this regard, a perusal of the reasons recorded for reopening the assessment for the assessment years under consideration reveals that the Assessing Officer was of the opinion that the total value of plant and machinery was certified at Rs. 4,80,33,282/- as on 1.4.2003, that is, at the beginning of the financial year 2003-04 relevant to assessment year 2004-05, and Rs. 4,97,88,775/- as on 1.4.2004, that is, at the beginning of financial year 2004-05 relevant to assessment year 2005-06 which exceeded the limit fixed for investment in plant and machinery and thereby the assessee ceased to be an SSI Unit and was thus not eligible for deduction under section 80IB of the Act. However, the assessee had claimed deduction under section 80IB of the Act of Rs. 37,13,631/- and Rs. 44,22,737/- for assessment year 2004-05 and 2005-06 respectively and thus income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. 12. While it is true that the satisfaction of the Assessing Officer for the purpose of reopening is subjective in character and the scope of judicial review is limited. When the reasons recorded show a nexus bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopening the assessment, if such material is sufficient for him to hold the requisite belief that income chargeable to tax has escaped assessment. It is however always open to the assessee to question the existence of such belief. If the assessee can demonstrate that in fact the Assessing Officer did not have any reason to believe, the exercise of authority conferred on him would be ultra vires the provisions of law and would be an abuse of such authority. It is true that while recording the reasons for reopening the assessment, it is not necessary for the Assessing Officer to establish fact of escapement of income but what is necessary is whether there is relevant material on which a reasonable person could have formed the requisite belief. The court, therefore, can certainly examine the material on record to ascertain as to whether on the basis of such material the Assessing Officer could have formed the requisite belief that income chargeable to tax has escaped assessment. 15. As is manifest on a perusal of the reasons recorded, the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment is based on the material on record. The ground fo ..... 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