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M/s Hanil Era Textiles Limited Versus Asst. Commissioner of Income Tax- 6 (3) , Mumbai

2016 (1) TMI 403 - ITAT MUMBAI

Reopening of assessment - disallowance of claim u/s 10B - Held that:- t is an undisputed 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 .....

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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.From the perusal of the “reasons recorded”, it is evident that there is no whisper or reference about any tangible material coming on record having live-link-nexus with the income chargeable to tax escaping assessment.

AO in the original assessment order has applied his mind and eve .....

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L MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Appellant : Shri Madhur Agarwal For The Respondent : Shri L K Dehiya ORDER PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the assessee against impugned order dated 29.03.2011, passed by CIT(A) -12, Mumbai for the quantum of assessment passed u/s 143(3) r.w.s. 147 for the assessment year 2004-05, on the following grounds of appeal :- 1. On the facts and in the circumstances of the case and in law the CIT(A) (A) erred in holdin .....

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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 Uni .....

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ome declaring total income at nil after claiming deduction u/s 10B of ₹ 11,84,96,323/-. In support of its claim, it had filed Audit report as required u/s 10B in Form 56G. The said return of income was initially processed u/s 143(1) on 24.01.2005, however, later on it was selected for scrutiny vide notice dated 20.05.2005 u/s 143(2). The AO in the assessment order passed u/s 143(3), dated 24.03.2006 noted the factum of claim of deduction u/s 10B; the period from which assessee had started .....

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lowing manner:- Thus, the assessee s claim for exemption u/s 10B was duly examined and adjudicated upon by the AO in the order passed u/s 143(3), dated 24.03.2006. After having completed the assessment in the aforesaid manner, the assessee s case was reopened vide notice dated 20.03.2009 u/s 148 after recording the following reasons :- The return of income in this case was filed on 1.11.2004 declaring a total Income at NIL after claiming deduction u/s 10B of ₹ 11,84,96,323/- and balance in .....

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B is allowable for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things. However, on perusal of the records as well as certificate filed for the said claim, it is seen that the undertaking on which assessee was claiming the said deduction u/s 10B had started manufacture or production from 1st January, 1994 relevant to A.Y. 1994-95 and hence the period of 10 consecu .....

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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 ₹ 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. Th .....

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0B in this assessment year. Accordingly, the AO after detailed discussion and analyzing the provisions of section 10B(1) and Proviso thereto, disallowed the claim of deduction u/s 10B for sum of ₹ 11,84,96,323/-. 4. This action of the AO has been confirmed by the CIT(A) including the assessee s challenge of validity of reopening. Besides this, the assessee before the CIT(A) has raised the alternative issues of claim of deduction u/s 80IA for the Power generation unit and claim u/s 80HHC fr .....

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n this case, the assessee had made full disclosure of its claim u/s 10B which has been examined and allowed by the AO in the original assessment proceedings. The AO has also noted the fact that assessee had started its production in the assessment year 1994-95 and claim for the first time u/s 10B was made from the assessment year 1997-98, because, at that time the statute provided for choosing of initial assessment year. Thus, the AO was aware of these facts and after considering these aspects h .....

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tments Pvt Ltd vs DCIT, reported in [2009] 308 ITR 190 (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 t .....

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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 has not been accepted. 7. On the other hand, Ld. CIT-DR submitted that it is not a case of change of opinion here, because it has not been brought on record by the Ld. Counsel that, whether the AO had asked any question or raised any query about .....

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ference to para 13 of the decision, wherein it was held that reassessment would be invalid in the cases where in the assessment order itself the issue has been raised and decided in favour o the assessee or a query was raised by the AO which has been specifically answered by the assessee. Otherwise, it would not amount to change of opinion. If the AO has not examined the particular subject matter, then he cannot be held to be forming any opinion. Thus, there is no question of any change of opini .....

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have deemed to accepted what he has plainly overlooked or ignored in the assessment order. If the AO has ignored a relevant material in arriving at an assessment and acts contrary to the law, then there is an escapement of income within the meaning of section 147. Thus, he strongly placed reliance upon the said decision of the Hon ble Bombay High Court. On merits he submitted that this issue as admitted by the Ld. Counsel is covered against the assessee by the Tribunal for the assessment year 20 .....

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0B 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 h .....

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ot eligible for such a claim in the impugned assessment year. From the perusal of the reasons recorded , it is evident that there is no whisper or reference about any tangible material coming on record having live-link-nexus with the income chargeable to tax escaping assessment. For entertaining reason to believe in the cases where assessment have been completed u/s 143(3), the primary requirement is that the issue which has been examined and dealt upon by the AO cannot be reopened unless there .....

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noted these facts about period of production and the period from assessee has chosen to claim deduction. If some legal mistake is committed by the AO or proper inference has not been drawn section 147 does not empower the succeeding AO to exercise the power of review so as to change the conscious decision taken by the predecessor AO. This is the clear cut mandate of Hon ble Supreme Court in Kelvinator India (supra). In the case of Aroni Commercials Ltd, the Hon ble jurisdictional High Court aft .....

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onal jurisdictional requirement to be satisfied while seeking to reopen the assessment beyond the period of four years from the end of the relevant assessment year, viz., that there must have been a failure on the part of the assessee to disclose 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 obser .....

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w. 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 correct errors/mistakes on the part of the Assessing .....

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on and/or supplemented much less substituted by affidavit and/or oral submissions. Moreover, the reasons for reopening an assessment should be that of the Assessing Officer alone who is issuing the notice and he cannot act merely on the dictates of any another person in issuing the notice. Moreover, the tangible material upon the basis of which the Assessing Officer comes to the reason to believe that income chargeable to tax has escaped assessment can come to him from any source, however, reaso .....

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sing Officer to establish beyond doubt that income indeed has escaped assessment 9. Further, after analyzing the legal provisions and case laws, their Lordships held that tangible material would mean factual material and not inference or opinion on the material already in existence and considered during the assessment proceedings. Here in this case, also if we apply the ratio and the law reiterated by the Hon ble Bombay High Court, then it can be seen that no new fact has come on record which ca .....

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