TMI Blog2016 (7) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... above judicial pronouncements have not been fully complied with by the Assessing Officer while passing the order of assessment u/s 143(3) r.w.s. 147 of the Act. Therefore, in our considered view the order passed by the Assessing Officer is bad in law and therefore stands quashed. - Decided in favour of assessee - ITA No. 825/MUM/2012 - - - Dated:- 13-7-2016 - Shri R. C. Sharma, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Assessee : Shri Rajan Vora Shri Hemen Chandariya For the Department : Shri Manoj Kumar ORDER Per Sandeep Gosain, JM The present appeal has been filed by the assessee against the order of CIT(A)-15, Mumbai dt. 28.12.2011 for A.Y 2003-04 in Appeal No. CIT(A)-15/IT-135/08-09 on the following grounds of appeal : Re-opening of assessment 1. (i) The learned Commissioner of Income Tax (Appeals) [ learned CIT(A) ] erred in confirming reopening of assessment under section 147. The learned CIT(A) ought to have appreciated that reopening of the assessment is not permitted as a result of mere change of opinion. 1. (ii) The appellant objects to the reassessment order and prays that the reassessment order shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 reassessing the income at ₹ 60,41,53,464/- under the normal provisions of the Act after withdrawing the deduction u/s 80IB. Aggrieved by the order of assessment u/s 143(3) r.w.s. 147 of the Act, the assessee preferred an appeal before the CIT(A) and CIT(A) after considering the case of both the parties has partly allowed the appeal vide order dated 28.12.2011. Aggrieved by the order of CIT(A), assessee has preferred the present appeal before us on the grounds mentioned hereinabove as per the revised summarized and alternate grounds of appeal. 3. Ground no. 1 - This ground relates to reopening of assessment wherein the assessee has challenged the order of CIT(A) confirming reopening of assessment u/s 147. The Ld. AR representing the assessee drew our attention first of all to the order of the Assessing Officer whereby the Assessing Officer has recorded reasons for reopening which are reproduced as under :- 5. Reasons for reopening The reasons recorded by ACIT-10(1) for issuing notice u/s 148 are as below: Assessee company filed their return of income on 28.11.2003 declaring total income of ₹ 49,48,05,000/-. The assessement was completed u/s. 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs shown under the head 'other income' (i.e. 368.00 lakhs for Rifampicin Unit) was considered for disallowance, the export benefit (advance licence) of ₹ 60,32,80 lakhs adjusted against the cost of raw materials was remained to be considered for disallowance. Out of export benefit of ₹ 60,32.80 lakhs, the export benefit allocable to Rifampicin unit i8s hereby worked out to ₹ 2908.41 lakhs by applying the same ratio/percentage as taken by the assessee in respect of export incentive of ₹ 763.26 lakhs. (i) 368.00 lakhs (export incentive of Rifampicin unit out of 763.26 lakhs) x 100 763.26 lakhs (export incentive shown under other income)= 48.21% (ii) By applying the same percentage Export incentive of Rifampicin unit out of export Incentive of ₹ 60,32,80 lakhs (shown under cost of raw materials) works out to:= 60,32.80 x 48.21% = 2908.41 lakhs The export incentive of ₹ 2908.41 lakhs worked out in respect of Rifampicin unit was also required to be reduced for arriving at profits eligible for 80 IB deductions. After reducing the export incentive of ₹ 2908.41 lakhs, no profit would be available for claiming 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial reopening is bad in law. In this respect, the Ld. AR relied upon the following judgments : i) Kelvinator India Ltd., (2010) 320 ITR 561 (SC) ii) Kalvinator of India Ltd., (2002) 256 ITR 1 (Del HC) iii) Motilal R. Todi, ITA No. 2910/Mum/2013 (Mum Trib) dated 22nd September, 2015 iv) GKN Sinter Metals Ltd., (2015) 371 ITR 225 (Bom HC) v) Oriental Insurance Company, (2015) 94 CCH 12 (Del HC) vi) Amitabh Bachchan, (2012) 349 ITR 76 (Bom HC) vii) Cartini India Ltd., (2009) 314 ITR 275 (Bom HC) viii) Asian Paints Ltd., (2009) 308 ITR 195 (Bom HC) ix) Asteriods Trading Investment P. Ltd., (2009) 308 ITR 190 (Bom HC) x) Commissioner of Income Tax vs Orient Craft Ltd., (2013) 354 ITR 536 (Delhi HC) xi) M/s. GTL Limited vs ACIT, ITA No. 6971/Mum/2010 (Mum Trib) dated 2nd January, 2015 xii) Prashant Joshi vs Income Tax Officer Anr, (2010) (Bom HC) 324 ITR 154 6. The Ld. AR further argued that the ACIT (LTU) without first dealing with the objections and disposing of the said objections through a separate speaking order dismissed the appellant s claim of deduction u/s 80IB in the reassessment order itself. It was further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass the order disposing the objections of the assessee as part of the assessment order due to the delay on the part of the assessee in late filing of its objections. The Ld. DR, lastly, relied upon the order passed by the CIT(A). 8. We have heard the counsels of both sides, perused the material on record as well as the orders passed by the revenue authorities. The moot question before us is to analyze as to whether the order of reopening passed vide reassessment order by the Assessing Officer is correct as per law or not. In this context, after hearing the detailed arguments of both sides we first of all refer to the judgment of Hon'ble Supreme Court in the case of GKN Driveshafts India Ltd., (2003) 259 ITR 19 (SC) (supra). The relevant portion of the said judgment is at para 5 which is reproduced as under:- 5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under s. 148 of the IT Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The Court in Orient Craft Ltd. recorded that the decision in Rajesh Jhaveri Stock Brokers P. Ltd. underscored that the intimation under Section 143(1) of the Act could be disturbed by initiating reassessment proceedings only: so long as the ingredients of Section 147 are fulfilled and with reference to Section 147(1) vis-a-vis Section 147, the only ingredient is that there should be reason to believe that income chargeable to tax has escaped assessment and it does not matter that there has been no failure or omission on the part of the assessee to disclose full and true particulars at the time of the original assessment. There is nothing in the language of Section 147 to unshackle the Assessing Officer from the need to show reason to believe . The fact that the intimation issued under Section 143(1) cannot be equated to an assessment , a position which has been elaborated by the Supreme Court in the judgment cited above, cannot in our opinion lead to the conclusion that the requirements of Section 147 can be dispensed with when the finality of an intimation under Section 143(1) is sought to be disturbed. 17. The Court in CIT v. Orient Craft Ltd. (supra) further c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said judgment did not pertain to reopening of an assessment under Section 143(1) of the Act. The four questions referred to the Full Bench were as under : (i) What is meant by the term change of opinion ? (ii) Whether assessment proceedings can be validly reopened under Section 147 of the Act, even within four year, if an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment and whether and when in such cases reopening is valid or invalid on the ground of change of opinion? (iii) Whether the bar or prohibition under the principle change of opinion will apply even when the Assessing Officer has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects ? (iv) Whether and in what circumstances Section 114(e) of the Evidence Act can be applied and it can he held that it is a case of change of opinion? 10. We have also analyzed the judgment of Hon ble Delhi High Court in the case of Multiplex Trading Industrial Co. Ltd., (2015) 94 CCH 30 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 90 (Bom HC) wherein it has been held as under :- If the AO does not accept the objections filed by the assessee against reopening of assessment, he is not to proceed further in the matter for a period of four weeks from the date of service of order rejecting the objections on the assessee Above procedure is to be followed strictly in all such cases of reopening of assessment. 12. As per the factum of the aforementioned judgment of the jurisdictional High Court it is made clear that if the Assessing Officer does not accept the objections filed by the assessee against reopening of assessment, then, he is not to proceed further in the matter for a period of 4 weeks from the date of service of order rejecting the objections of the assessee. As per the aforementioned judgment, the Hon ble Court has directed that the above procedure is to be followed strictly in all such cases of reopening of assessment. After going through all the judgments referred to by both the parties and after considering the plea of the Revenue that there was a delay on the part of the assessee to file objections to the reasons for reopening, we noted that the reasons recorded by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made the subject of excessive relief under this Act; or (iv) excessive toss or depreciation allowance or any other allowance under this Act has been computed Further, in (2007) 161 TAXMAN 316 (SC) Assistant Commissioner of Income-tax Vs. Rajesh Jhaveri Stock Brokers (P.) Ltd., Hon'ble Supreme Court has held that In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147... So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings... Hon'ble Delhi High Court also has held in (2006) 151 TAXMAN 41 (DELHI) Consolidated Photo Finvest Ltd Vs Assistant Commissioner of Income-tax that Action under section 147 was permissible even if the Assessing Officer gathered his reasons to believe from the very same record as ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na P. Ltd. V. ITO 221 ITR 538, Indian Oil Corporation ltd. V. ITO 1061TR 1. In this case, assessee though had disclosed some facts related to claim of deduction. However, it had failed to disclose truly and correctly the effect of the same on the income of the assessee. In view of the above and the fact that Assessing Officer had recorded the reasons to believe u/s 148 of the I.T.Act that income had escaped assessment, assessee's claim that all material facts were before Assessing Officer while framing assessment u/s 143(3) and therefore case can not be reopened, is not acceptable and hence rejected. 6.2 coming to the issue of facts of the case, as has been held in the case laws of Cambay Electric Supply Industrial Co Ltd v. CIT 113 ITR 84 (SC), CIT v. Sterling Foods 237 ITR 579 (SC), CIT v. Pandian Chemicals Ltd 262 ITR 278 (SC), CIT v. Ritesh Industries Ltd 274 ITR 324 (Del), CIT v. Sundaram Clayton Ltd 281 ITR 425 (Mad), Liberty India v. CIT 293 ITR 520 (P H) and Mentha Allied Products Pvt Ltd 302 1TR 144 (All) that the income that is 'derived from an industrial undertaking is only deductible u/s 80IB is clearly applicable in this case. Further rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the Learned Solicitor General, it has used the expression derived from , as for instance in section 80-J. In our view since the expression of wider import namely attributed to , has been used, the legislature intended to cover receipts from sources other than actual conduct of the business of generation and distribution of electricity. In view of the above, it is held that the assessee is not eligible for deduction u/s 80IB as held and computed in the reasons for reopening as in Para 5 above. Therefore, deduction u/s 80IB of ₹ 2,22,37,504/- is disallowed and added back to total income of assessee. 13. From the entire reading of the order of assessment we are of the considered view that the Assessing Officer has dealt with the objections in the assessment order itself in a composite manner. The Assessing Officer should have passed a speaking order before proceeding for assessment, and in this case, the Assessing Officer has not passed a well-reasoned speaking order which was required ..... X X X X Extracts X X X X X X X X Extracts X X X X
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