TMI Blog2016 (6) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of complete information. In our view though the information were supplied but that was not sufficient for the AO for completing the assessment u/s 143(3) by applying his mind and form his opinion. In our view, there was no opinion formed, therefore, we do not find any merit in the submission of the ld. A/R that there is a change of opinion. In view thereof, we reject the ground of the assessee that reassessment was bad in law. Deduction u/s 10B computation - Held that:- The total profit of business has been mentioned at ₹ 66,32,853/- and total profit of undertaking was mentioned at ₹ 29,33,736/-. Total turnover of the undertaking as well as export turnover was mentioned as ₹ 46,99,000/- whereas the total turnover of the business has been mentioned as ₹ 8,81,97,775/-. The total profit of the undertaking and total turnover of the undertaking is required to be applied, as per the formula accepted in terms of section 10B(4) of the IT Act. AO has correctly applied the formula but has applied wrong figure. In view thereof, we have no option but to remand the matter to the file of the AO to recalculate the deduction after applying the correct for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B works out as under : Total Turnover ₹ 9,11,66,533/- Total Turnover of eligible business ₹ 46,99,000/- Total profit of business profit attributable to eligible business ₹ 66,32,853/- 6632853 x 4699000 = ₹ 3,41,877/- 91166533 Thus exemption u/s 10B has been excessively allowed by ₹ 22,98,485/- . After receipt of the notice, the ld. A/R of the assessee has filed his written submission and has raised the issue of legality of the notice under section 148 because as per the assessee there is a change of opinion. Besides that, on merits, it was submitted that as per the reasons supplied, section 10B has wrongly been applied and the formula given by the revenue in the reasons to believe was incorrect. The reasoning given by the assessee in the reply is reproduced as under :- 5) It is submitted that the assessee company had been granted registration under STPI as 100% EOU undertaking for development of computer software. Necessary documentary evidences in form of registration certificate, performance report etc. were earlier submitted and are once again enclosed as per Annexure-1.The assessee company had this undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notes on clauses and memorandum explaining the provision of Act duly clarifying the position are also enclosed as per Annexure-3 for your kind perusal records. 7) It is submitted that the theory of proportion would be applicable only if the local sales were made from the STPI unit. The profits of the business in the given context would mean the profit of the business carried on by the undertaking to which the provision apply i.e. STPI unit. Circular no. 794 dated 09.08.2000 issued by CBDT further clarifies the position. (245 ITR-St-21). The aforesaid circular at para 15.5 has clarified that export turnover total turnover for purpose of section 10A and 10B shall be of the undertaking located in specified Zones or 100% EOU as the case may be and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purpose of this provision. Copy of relevant extract at page 35 36 of circulars are enclosed for your kind perusal records as per Annexure-4. The AO has considered the reply and after considering the reply has held that the objection of the assessee for reopening was not sustainable and on merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (Delhi) and has also relied upon the judgment of Hon ble Jurisdictional High court in the matter of Mukesh Modi Ors. Vs. DCIT, 366 ITR 418 (Raj.). On merits, it was submitted that the AO has applied the old law which was substituted by the new law in the year 2001 and it was submitted that the calculation given by the AO and confirmed by ld. CIT (A) were not valid. Feeling aggrieved by the above said illegality of the AO and ld. CIT (A) submitted that the orders of the lower authorities were required to be set aside. 6. On the other hand, the ld. D/R has submitted that the reopening has been done by the AO on the basis of income escaped as stipulated under section 147 of the Act and, therefore, the AO has rightly reopened the case. For that purpose, the ld. D/R relied upon the judgment of Hon ble Madras High Court in the case of Sword Global India (P) Ltd. vs. ACIT, 60 taxmann.com 73 (Madras). He has drawn our attention to para 23 of the said order which is reproduced herein below for the sake of convenience :- 23. In the present case, what exactly the petitioner wants to demonstrate that already all the details regarding the income were disclosed and after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... } 55 Taxmann.com 438( Bombay). All the judgments referred herein above were referred by the Hon ble Mumbai High court in the matter of GKN Sinter Metals Ltd. (supra) and the Hon ble High court in para 13, 14 15 has held as under :- 13. The ld A.R invited our attention to the decision rendered by Hon ble Delhi High Court in the case of Kelvinator India Ltd (320 ITR 561),wherein the Delhi High Court has held the assessment cannot be reopened on the basis of change of opinion. He also relied upon the decision rendered by the Hon ble jurisdictional Bombay High Court in the case of CIT vs Gabriel India Ltd 203 ITR 1089 (Bom) and also in the case of Hindustan Lever Ltd vs ACIT 268 ITR 332(BOM). In the case of Hindustan Lever Ltd (supra), the Hon. High Court has elaborately discussed the scope and ambit of sections 147 148 and has concluded in the following manner: The reasons recorded by the Assessing Officer nowhere stated therewas failure on the part of the assessee to disclose fully and truly allmaterial facts necessary for the assessment of that assessment year. The reasons are required to be read as they were recorded by the Assessing Officer. No substitution or dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147 including the proviso then it is clear that in cases where the Department reopens the assessment within a period of four years, it can do so on the round of income having escaped assessment. However, in cases of reopening after four years, the Assessing Officer must have reason to believe that income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts. Explanation 2 cannot be read without reading the proviso to section 147. Explanation 2( c) has to be read with section 147 including the proviso and, if so read, the above dichotomy would be clearly spelt out . 14. The CIT(A), while upholding the reopening of the assessment order, had expressed the view that there is no discussion in the original assessment order for allowing the impugned expenditure. The ld. A.R submitted that when an assessment is completed u/s 143(3) of the Act , it is presumed that the assessing officer has applied his mind to the issue and that the assessing officer should not resort to provisions of section 147 and 148 of the Act. In this regard, the Ld A.R relied upon the judgement of the Delhi High Court in the matter of Eic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents which would not normally escape examination during the scrutiny proceedings. This is also evident from the fact that during assessment proceedings, the Assessing Officer had by letter dated 27th December, 2004 called upon the Petitioner to furnish details with regard to its claim for deduction under Section 801A/IB of the Act including the method/manner of allocation of expenditure amongst its three manufacturing units. The Petitioner by its letter dated 25th January, 2005 submitted various details of allocation of expenses supporting its note filed along with the Return of Income that the expenditure had been allocated actual basis, turn over basis and time spent basis amongst the three manufacturing units. The aforesaid allocation of expenses on different basis was on the basis of the nature of expenditure. The Assessing Officer was satisfied with the Petitioner's response and consequently in the assessment order dated 9th March, 2005 under Section 143(3) of the Act accepted the Petitioner's claim for deduction under Section80lA/lB of ₹ 2.08 Crores. This establishes that an opinion was formed in respect of allocation of expenses amongst the three manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion while passing the order dated 9th March, 2005. This Court in Aroni Commercials Ltd. v. Assistant Commissioner of Income Tax MANU/MH/1838/20140: 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in the Assessment Order. Besides, the manner in which an Assessing Officer would draft/frame his order is not within the control of an assessee. Moreover, if every contention raised by the assessee which even if accepted is to be reflected in the assessment order, then as observed by the Gujarat High Court in CIT v. Nirma Chemicals Ltd. MANU/GJ/0136/20080: 305 ITR 607, the order would result into an epic tome. Besides, it would be impossible for the Assessing Officer to complete all the assessments which have to under gone scrutiny at its hand. In the above view, it is clear that once a query has been raised during the assessment proceedings and the Petitioner has responded to the query to the satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance of relief in the return; In our view though the information were supplied but that was not sufficient for the AO for completing the assessment u/s 143(3) by applying his mind and form his opinion. In our view, there was no opinion formed, therefore, we do not find any merit in the submission of the ld. A/R that there is a change of opinion. In view thereof, we reject the ground of the assessee that reassessment was bad in law. 7.2. In respect to the second issue, it would be relevant to point out that as per page 31 of the paper book, the total profit of business has been mentioned at ₹ 66,32,853/- and total profit of undertaking was mentioned at ₹ 29,33,736/-. Total turnover of the undertaking as well as export turnover was mentioned as ₹ 46,99,000/- whereas the total turnover of the business has been mentioned as ₹ 8,81,97,775/-. The total profit of the undertaking and total turnover of the undertaking is required to be applied, as per the formula accepted in terms of section 10B(4) of the IT Act. Section 10B(4) provides as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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