TMI Blog2022 (9) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the assessee. As pointed out that not only once but twice proceedings under Section 154 of the Act was initiated and both the proceedings were on the very same issue as regards the entitlement of the assessee to claim deduction under Section 80HHC of the Act. Therefore, such finding of the learned tribunal was absolutely perverse. Tribunal also had held that no conscious opinion was formed by the assessing at the original assessment stage while allowing deduction u/s 80HHC and there was no exemption or deliberation. This finding appears to be no supported by any justifiable reasons but on a perusal of the assessment order it is definitely clear that the case was discussed with the assessee and thereafter taking into consideration the Chartered Accountant s certificate the deduction as claimed was granted. In fact, there were two decisions of the learned Tribunal which were namely, International Research Park Laboratories Ltd. and A.M. Moosa which decisions would clearly support the stand and the conclusion arrived at the by the assessing officer while completing the scrutiny assessment under Section 143(3) of the Act vide order dated 3.3.1997. Thus, we find that Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of clause (c) of Sub-section (3) of Section 80HHC and such profits were to be further increased by the amounts mentioned in the proviso to the said Sub-section. Sub-section (4) of Section 80HHC provided that the deduction to Sub-section (1) shall not be admissible unless the assessee furnished in the prescribed form along with return of income the report of an accountant certifying that the deduction has been correctly claimed in accordance with the provisions of the said Section. During the said financial year on the export of the trading goods the assessee had suffered a loss of Rs.22,08,222/- and earned a profit from export of own manufactured goods to the tune of Rs.3,54,97,167/-. According to the assessee, in terms of Sub-section (3) of Section 80HHC, the amounts were required to be increased and considering the decision, which was in vogue at the relevant point of time, passed by the Special Bench of the learned Tribunal in the case of International Research Park Laboratories Ltd., (1995) 212 ITR (AT) 1 holding that there need not be profit in the export business for availing deduction under Section 80HHC. The Chartered Accountant of the assessee issued a certificate in Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the assessing officer issued notice under Section 154 dated 11.12.1997 to rectify the computation under Section 80HHC by adjusting setting off export of trading goods with profit on export of manufactured goods. The assessee filed their objections to the said notice on 17.2.1998. As against the order of assessment dated 3.3.1997 under Section 143(3), on other issues, the assessee had filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] who passed an order on 31.3.1998 granting various reliefs. This order passed by the CIT(A) was given effect to on 30.4.1998 and a deduction of Rs.4.02 crores was allowed under Section 80HHC of the Act. It is thereafter a notice was issued to the assessee under Section 148 of the Act dated 18.11.1998 for reopening the assessment proposing withdrawal of the deduction granted under Section 80HHC of the Act. Reasons for reopening was also furnished to the assessee, who, in turn, filed their objections on 5.1.1999. For about nearly six months the assessing officer did not proceed further with the reopening proceedings, but on 11.6.1999 passed an order under Section 154 of the Act pursuant to the notice dated 11.12.1997 withdrawing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was not based upon discovery of any new facts or figures, but solely based upon an interpretation of the statutory provision as understood by the audit wing of the income tax Department. The question would be as to whether such could be the basis for reopening the assessment. In this regard, it is beneficial to refer to the decision of the Hon ble Supreme Court in Indian and Eastern Newspaper Society vs. Commissioner of Income Tax, New Delhi reported in (1979) 119 ITR 996 wherein it was held as follows: It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the ITO constitutes information within the meaning of s.147(b); the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the ITO. In every case, the ITO must determine for himself what is the effect and consequence of the law which has now come to his notice. He can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer which was not available to him at the time of original assessment or passing the order under Section 154 of the Act. Furthermore, the CIT(A) pointed out that the audit department s interpretation of law cannot constitute material for initiating reassessment as it is not for the audit party to interpret the law. Furthermore, the CIT(A) pointed out that the materials as well as the decisions which were referred to by the assessing officer in the reassessment proceedings were all available at the time of original assessment and, therefore, the reopening was held to be bad in law as it was based on change of opinion. On appeal before the Tribunal, the revenue reiterated the stand taken before the CIT(A). While on this issue we take note of the decision in the case of COMMISSIONER OF INCOME TAX VS. MAX INDIA LIMITED ;2004 68 ITR 128 (P H) , the said case arose for assessment for the year 1992-1993 and the facts in the said case are more or less identical to the case on hand. The Hon ble Division Bench of Punjab Haryana High Court held as follows : We find no merit in this contention. For expressing a view, it is not necessary that it should be based on a judicial pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the learned Additional Solicitor General, on an interpretation of the provision of section 80HHC(3) as it then stood the view taken by the Assessing Officer was unsustainable in law and therefore the Commissioner was right in invoking section 263 of the Income-tax Act. In this connection, he has further submitted that in fact the 2005 amendment which is clarificatory and retrospective in nature itself indicates that the view taken by the Assessing Officer at the relevant time was unsustainable in law. We find no merit in the said contentions. Firstly, it is not in dispute that when the order of the Commissioner was passed there were two views on the word profits in that section. The problem with section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of section 263 particularly when as stated above we have to take into account the position of law as it stood on the date w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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