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2016 (4) TMI 357 - ITAT DELHI

2016 (4) TMI 357 - ITAT DELHI - [2016] 49 ITR (Trib) 47 - Reopening of assessment - Disallowance u/s 28 and 80HHC - Held that:- In the case in hand , the proceedings under section 147 of the Act were initiated by the Assessing Officer in view of the retrospective amendment to the provisions of sections 28 and 80HHC of the Act w.e.f. AY 98-99, by Taxation Laws Amendment Act, 2005, however, we find that the Jurisdictional High Court in the case of Pawan Kumar Jain Vs. Union of India, [2014 (8) TMI .....

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are without jurisdiction and not sustainable - Decided in favour of assessee - ITA Nos. 4314 & 4315/Del/2010 - Dated:- 8-4-2016 - Sh. C. M. Garg, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Sh. Salil Kapoor , Sanat Kapoor & Ms. Ananya Kapoor, Advocates For the Respondent : Sh. P. DAM Kanunjna, Sr. DR ORDER Per O. P. Kant, A. M. These two appeals of the assessee are directed against two separate orders of Ld. Commissioner of Income-tax(Appeals)-XXIV, New Delhi fo .....

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er as well as Commissioner of Income Tax(Appeals) acted arbitrarily in reopening the assessment u/s 147/148 of the I.T. Act. iii. That the learned Deputy Commissioner of Income Tax as well as learned Commissioner of Income Tax(Appeals) was not justified in reducing the deduction u/s 80HHC of the I.T. Act. iv. The assessee craves the right to add, delete, modify any one or more of the grounds of appeal at the time of hearing. 3. The facts in brief are that the assessee filed return of income on 2 .....

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deduction under section 80HHC of the Act was incorrectly allowed, and therefore after recording reasons to believe that income has escaped assessment, and after taking necessary approval from the Commissioner of Income Tax, a notice under section 148 of the Act was issued on 02/07/2007, however, no compliance was made by the assessee in this respect. The AO also sent a certified copy of reasons recorded for reopening the case on 7/11/2008 requesting the assessee to file the return as required un .....

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wance of ₹ 1,16,73,784/-. 4. The Ld. Commissioner of Income-tax(Appeals) upheld the reopening of assessment under section 147 of the Act following his own finding in assessment year 2002-03 inter alia mentioning that the assessee had neither filed any objection to notice under section 148 of the Act nor filed return of income in response to the notice. The Ld. Commissioner of Income-tax( Appeals) issued a show cause for enhancement of the disallowance in respect of deduction under section .....

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Aggrieved, the assessee in appeal before the Tribunal. 5. The grounds No. 1 and 4 of the appeal are general in nature, and therefore not required to adjudicate upon by us. 6. In ground No. 2, the assessee has challenged reopening of the assessment under section 147/148 of the Act. 6.1 Before us, the Ld. Authorized Representative ( AR) of the assessee submitted that the reopening proceedings were not liable to be sustained because of following reasons: (a) since the original assessment was comple .....

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was not mentioned what was the failure on the part of the assessee to disclose fully and truly all material facts, and therefore reopening was not sustainable in view of the judgment of the Hon ble Delhi High Court in the case of global signal cables (India) Private Limited vs. DCIT in writ petition number WPC No. 747/2014 dated 17th of October 2014;. (c) that there was no new tangible material before the Assessing Officer for reopening of the assessment. In support of the proposition, the learn .....

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ted in (2012) 20 taxmann.com 784 (Guj); (e) that the amendment in section 80HHC of the Act on the basis of which the case was reopened, has been held prospective by the Hon ble Courts in the case of Pawan Kumar Jain vs. Union of India reported in (2014) 46 taxmann.com 341 (Delhi) and CIT versus Awani Exports (2015) 58 taxmann.com 100 (SC) and and therefore the reason on the basis of which assessment was reopened did not survive and therefore proceedings under section 147 of the Act are not susta .....

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for taking action u/s 147/148 of the IT Act in the case of M/s. Magpie Exports, PD-4B, Pitampura, Delhi -34 for the AY 2001-02. Return of income in this case was filed on 20.09.2011 declaring an income of ₹ 457,000/-. As per CA s certificate in form 10CCAC dated 19.09.2001, the assessee claimed deduction u/s 80HHC at ₹ 13662093/- and as per CA s certificate in form 10CCB dated 19.09.2001, it claimed deduction u/s 80IA at ₹ 4706365/-. The assessment in this case was completed u/ .....

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) of Sec. 80IA reads as under: "(9) Where any amount of profit and gains of the industrial undertaking or of a hotel in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this chapter under the heading C-Deduction in respect of certain income and shall in no case exceed the profits & gains of such eligible business of the undertaking or enterprise, .....

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pervision charges 10,000/- iii) Prior period income 17,748/- As regards assessee s claim of deduction u/s 80HHC on the amount of Duty entitlement of ₹ 126,37,196/-, it is stated that the Taxation Laws Amendment Act, 2005 has amended provisions of Section 28 & 80HHC w.e.f. AY 1998-99, as per section 28(iiid) any profit on the transfer of the Duty entitlement passbook scheme, being Duty Remission Scheme, under the Export & Import policy formulated and announced u/s 5 of the Foreign T .....

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uction of 90% of export incentive on account of profits on transfer of DEPB Licences but assessees having export turnover exceeding ₹ 10 Cr. would get this deduction only if the assessee has necessary and sufficient evidence to prove that a) He had an option to choose either the duty draw back or the DEPB Scheme or the Duty Free Replacement Certificate as the case may be, being Duty Remission Scheme, and b) The rate of Duty draw back credit attributable to the Custome Duty was higher than .....

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leted u/s 143(e) on 27.12.2006 at a total income of ₹ 37757080/- in which the assessee s claim of deduction u/s 80HHC on the amount of DEPB was not allowed as the assessee did not fulfill the said conditions in that year. The assessee would thus not fulfill the said conditions in A.Y. 2001-02 also. In view of these facts, the assessee firm is not entitled for deduction u/s 80HHC on the amount of said DEPB for the AY 2001-02 also. As regards Supervision Charges amounting to ₹ 10,000/- .....

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uction u/s 80IA (25% of above) 47,11,364/- Calculation of deduction u/s 80HHC of IT Act Export turnover as declared by the assessee 11,65,43,497/- Total turnover as declared by the assessee. 12,84,71,359/- DEPB as declared by the assessee 1,26,37,196/- Profit on sale of licence as declared by the assessee 3,54,367/- Profit of the business from export activity Profit u/s 28 as above 188,45,458/- Less: Deduction u/s 80IA as calculated above 47,11,364/- 141,64,094/- Less: Supervision charges & .....

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10/- 66,94,674/- Deduction allowed. 47,06,365/- 1,36,62,093/- 1,83,68,458/- Deduction allowed in excess (-) 4,999/- 1,16,78,783/- 1,16,73,784/- Income escaped assessment 1,16,73,784/- From the above calculation of deductions u/s 80IA & 80HHC, it is seen that the assessee has claimed excess deduction of ₹ 116,78,783/- u/s 80HHC of IT Act. Also income to the extent of ₹ 11673784/- has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly al .....

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f issue of notice under section 148 of the Act on 02/07/2007. Thus, the notice under section 148 of the Act has been issued beyond 4 years from and of the end of relevant assessment year i.e. 2001- 02. The issue of notice under section 148 of the Act, where the assessment was completed under section 143(3) of the Act, has been restricted by the proviso below the main section, which is reproduced as under: Provided that where an assessment under sub-section(3) of section 143 or this section has b .....

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, for that assessment year. 8.2 So in a case where the original assessment was completed under section 143(3) of the Act, for issue of notice under section 148 of the Act beyond 4 years from the end of relevant assessment year, it is essential that the escapement of income is due to reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. 8.3 We find from the reasons recorded above that after going through the assessment records o .....

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, we find that in the last para of the reasons recorded, the AO has mentioned that income to the extent of ₹ 1,16,73,784/- had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the AY 2001-02, but we do not find any mention of the material facts which the assessee failed to disclose. In the absence of any such failure on the part of the assessee, the assessment for the year under consideration .....

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f the assessment after expiry of 4 years from the relevant assessment year. 8.5 In the facts of the case in hand also, the AO has not mentioned which was the material fact which was not disclosed by the assessee truly and fully, and thus respectfully following the finding of the Hon ble jurisdictional High Court in the case of Global Signal Cables (India) Private Limited (supra), the reopening proceedings after expiry of 4 years from the relevant years are not valid as per law. 9.1 In support of .....

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n sale of quota and DEPB income as part of export turnover for claiming deduction under section 80HHC of the Act and made reassessment under section 147 of the Act. In the circumstances, the Hon ble jurisdictional High Court held that there was no fresh tangible material before the Assessing Officer, subsequent to the intimation issued under section 143(1) of the Act and the AO was not having any power of reviewing whatever concluded under section 143(1) proceedings of the Act. The relevant find .....

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(supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words reason to believe viz-a-viz in intimation issued under section 143(1) can cause to the tax resigm. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation. It reflects and arbitrary exercise of the power conferred under sect .....

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ible material is invalid and bad in law. The relevant finding of the Tribunal in the case of Moti Lal R Todi (supra) is reproduced as under: 6.19. In the present case, it has already been discussed that admitted facts are that there was no fresh material coming into the possession of the AO, at the time of recording of the Reasons . These facts have not been rebutted by Ld DR also. The case law relied upon by Ld DR in the case of Dr. Amin s Pathology, supra is not applicable on the issue being d .....

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of Madhukar Khosla, (supra), wherein it has been held by their lordships that external facts or material constitute the driver, or the key which enables the AO to http://www.itatonline.org 18 Motilal R. Todi legitimately reopen the completed assessment and in absence of this objective trigger , the AO does not possess jurisdiction to reopen the assessment. Further, most importantly, it was held by the Hon ble High Court that it is at the next stage when the question, whether the reopening of ass .....

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nion or review . 9.3 When we advert to the facts of the case in hand, we find from the reasons recorded that there was no fresh tangible material before the Assessing Officer. In the circumstances respectfully following the Hon ble jurisdictional High Court in the case of Orient Craft (supra) and the decision of the Tribunal in the case of Moti Lal R Todi (supra), the reassessment proceedings under section 147 of the Act in the case of the assessee are not justifiable, illegal and bad in law. 10 .....

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end of the relevant assessment year on the ground that the assessee was not eligible for deduction under section 80 HHC, in view of the retrospective amendment made to the said provision by the 2005 amendment, and that loss from export of trading goods was to be set off against profits from export of manufactured goods in view of the judgment of the Hon ble Apex Court. In response to the question raised by the revenue whether the retrospective amendment of law and subsequent judgement of the Ap .....

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s from the end of the relevant assessment year. Admittedly the amendment and the judgement relied upon by the Assessing Officer was subsequent to the finalisation of the assessment proceeding. It is trite law that subsequent amendments are subsequent interpretation of the statute is not a ground to reopen concluded transactions. Admittedly the assessment had been completed under section 143(3) of the Act and in order to reopen the same, necessarily it has to be done within a period of 4 years&he .....

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2009 with retrospective effect from 01/04/2000, deduction under section 80-IA would not be admissible to an assessee who carried on business which was in the nature of works contract, held that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for each assessment and in the circumstances the very initiation of proceeding under section 147 stood vitiated and as such could not be sustained. 11.1 In the case in hand , the proceedings under se .....

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ective in nature and not retrospective. The finding of the Hon ble High Court in the case of Pawan Kumar Jain (supra) are reproduced as under: 2. It would be evident from prayer (a) itself that essentially the petitioner is challenging the retrospectivity of the amendments to Section 80 HHC brought about by the Taxation Laws (Amendment) Act, 2005 (hereinafter referred to as 'the said Act'). This issue was considered by the Gujarat High Court in the case of Avani Exports v.CIT [2012] 348 .....

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sessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assesses. 27. We, accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendmen .....

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ivision Bench of this Court as also the views expressed by the Gujarat High Court, prayer (a) of the writ petition has to be allowed. 4. It is ordered accordingly. 5. In view of the fact that we have allowed prayer (a) to the extent that the amendment brought about by introducing the 2nd, 3rd and 4th proviso to Section 80 HHC (3) (c) is to operate only prospectively and not retrospectively, the other prayers which are in the nature of consequential reliefs also stand allowed. 11.2. In the case o .....

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contained in the said provisos by the respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following direction: "Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. This order is in substitution of the judgment in Appeal." 11.3. In view of the above facts, we find .....

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e assessment and the case has been reopened beyond the period of 4 years from the end of the relevant assessment year, the proceedings of reopening under section 147 of the Act are without jurisdiction and not sustainable. Accordingly, we quash the proceedings under section 147 of the Act in the case of the assessee for the year under consideration. Thus ground No. 2 of the appeal is allowed. 13. As we have already quashed the assessment order proceedings completed under section 147 of the Act, .....

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pening the assessment u/s 147/148 of the I.T. Act. iii. That the learned Deputy Commissioner of Income Tax as well as Commissioner of Income Tax(Appeals) was not justified in disallowing ₹ 2096635/- and ₹ 8788257/- under Section 80IA and 80HHC of the Income Tax Act, 1961 respectively. iv. The assessee craves the right to add, modify any one or more of the grounds of appeal at the time of hearing. 15. The facts and circumstances of the present appeal are identical to the facts and cir .....

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