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TMI Blog2016 (1) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. 3. On the facts and in the circumstances of the case and in law the CIT(A) (A) erred in holding that the Appellant is not entitled to deduction under section 80IA and 80HHC of the Act in reassessment proceedings. 4. On the facts and in the circumstances of the case and in law the CIT(A) (A) erred in levying interest under section 34A, 234B and section 234C of the Act". 2. Brief facts of the case are that, assessee is a Public Limited Company, which is engaged in the business of manufacturing and exporting of yarn and textile from its 100% Export Oriented Unit (EOU) in SEZ Andheri (East). It had started its manufacturing from the assessment year 1994-95 and its profit from such an undertaking was eligible for deduction u/s 10B. Since at the relevant time the section 10B provided for choosing of initial assessment year for the purpose of deduction, therefore, the assessee started the claim by treating the initial year for deduction from assessment year 1997-98. For the impugned assessment year i.e. AY 2004-05, the assessee had filed its return of income declaring total income at "nil" after claiming deduction u/s 10B of Rs. 11,84,96,323/-. In support of its claim, it had f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994-95 and hence the period of 10 consecutive assessment years as per the provisions of section 10B expired with A.Y. 2003-04. Hence the entire claim of exemption I deduction u/s 10B made by the assessee for A.Y 2004-05 is no allowable. Considering the above I have reason to believe that income to the extent of Rs. 1129,34,333/-claimed/allowed as a deduction / exemption u/s 10B is chargeable to tax and has escape assessment. (Sd/-) Income Tax Officer 6(3)-2 Mumbai" In response, the assessee has challenged the validity of reopening, which has been rejected by the AO after relying upon various case laws as cited in the assessment order. 3. On merits, the Ld. AO in the impugned assessment order has observed that, the assessee has claimed an amount of Rs. 11,84,96,323/- as deduction u/s 10B from its 100% EOU. As per the certificate enclosed with the return of income, the assessee had mentioned that this was the 8th year of claim, because the assessee had chosen the initial year of claim from the assessment year 1997-98. The AO noted that as per the amended provision of section 10B(1), the deduction is allowable for a period of 10 consecutive assessment years beginning with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom). In these decisions, he submitted that the Hon'ble Bombay High Court has held that, if no new material is brought on record then reopening cannot be done on mere change of opinion. The reasons recorded must be based on tangible material and not on the material which are already on record. He also relied upon a decision of Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd, reported in [2010] 320 ITR 561 (SC), wherein the Hon'ble Supreme Court has emphasized that power to reopen an assessment is not akin to power to review. The order of assessment based on mere change of opinion could not justify the reopening u/s 147. 6. Mr. Agrawal further submitted that, when the assessee has chosen initial assessment year, that is, 1997-98, then as per the amended provision the assessee was eligible for claim for deduction for 10 years, which was applicable uptil the year 2006- 2007, therefore, assessee has rightly claimed the deduction u/s 10B in the impugned assessment year. However, he fairly admitted that on merits the Tribunal in assessee's own case for the assessment year 2005-06 has decided this issue against the assessee inasmuch as the claim of deduction u/s 10B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted fact that, assessee is a 100% EOU; eligible for deduction u/s 10B on the profits derived from such undertaking; it has commenced its production/manufacturing from the assessment year 1994-95; and the period of 10 years there from would be available up till assessment year 2003-04. However, the assessee as per then relevant provision of section 10B had chosen the initial assessment year AY 1997-98 and started its claim for deduction u/s 10B from AY 1997-98 onwards. In support of its claim, it has filed an Audit report as per the requirement of section 10B along with the return of income. The Ld. AO during the course of the original assessment proceedings has specifically embarked upon this issue and has noted the fact about the period of manufacturing; period of claim of deduction and also the overall components of profit of 10B as we have noted above. After examining the various issues relating to section 10B, he has computed the deduction u/s 10B. Thus, from the face of the assessment order it appears that, AO has applied his mind and has reached to a certain conclusion in respect of claim u/s 10B. Now, such an assessment has been sought to be reopened though within the time l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose fully and truly all material facts necessary for assessment during the original assessment proceedings. Thus, the primary requirement to reopen any assessment is a reason to believe that income chargeable to tax has escaped assessment. However, as observed by the Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010] 320 1TR 561 (SC), in the context of section 147/ 148 of the Act that reason to believe found therein does not give arbitrary powers to reopen an assessment. The concept of change of opinion is excluded /omitted from the words "reason to believe". Thus, a change of opinion would not be reason to believe that income chargeable to tax has escaped assessment. Besides the power to reassess is not a power to review. Further, reopening must be on the basis of tangible material. Therefore, the power to reassess cannot be exercised on the basis of mere change of opinion, i.e., if all facts are available on record and a particular opinion is formed, then merely because there is change of opinion on the part of the Assessing Officer notice under section 147/148 of the Act is not permissible. The powers under section 147/148 of the Act cannot he exercised to corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower to review to reopen the assessment. The assessment cannot be reopened on mere change of opinion u/s 147. Merely on fresh application of mind by the AO to the same set of facts initiation of reassessment proceedings cannot be upheld. The foundation of acquiring a jurisdiction u/s 147 is "reason to believe" and such 'reason' should have live-link-nexus with an objective fact and materials coming on record. If there is no tangible material coming on record post assessment which has been completed u/s 143(3), then reopening u/s 147 cannot be done on the same set of facts. Thus, the present reasons recorded by the AO do not clothe him with the jurisdiction to reopen the assessment within the scope of section 147 which has been completed u/s 143(3), firstly, on the ground that it amounts to "change of opinion" and secondly, there is no reason to believe based on any tangible material coming on record. 10. Coming to the decision of Hon'ble Bombay High Court in the case of Export Guarantee Corporation of India (supra) as relied upon by the Ld. CIT-DR, the same is not applicable on the facts of the present case, because here as stated earlier, the AO in the original assessment order h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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