TMI Blog2017 (8) TMI 1695X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade and commerce, hence, merchandise. Transaction in question was covered under section 80HHC, it was inappropriate to hold that merely because section 80HHF was not on the statute book during the assessment years in question, the assessee was not entitled to claim deduction without any hindrance under section 80HHC in spite of compliance of the ingredients thereunder. Reopening of assessment - Taking into consideration the main aspect that the earlier order has not been challenged and the basis for Section 148 was not sound, it ought to have been quashed in view of the decision reported in the case of CIT Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open - The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the order which has been referred has not been challenged. 4. On issue No.1, counsel for the appellant has relied on the following decisions: (1) Diamond World v. CIT :: reported in (2003) 133 Taxman 772 (Rajasthan) wherein it has been held as under:- 4. On scrutiny of assessment orders for 1991-92 and 1992-93, CIT found that the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue. He issued the notice to the assessee to show cause as to why the benefit of section 80HHC should not be withdrawn. After considering his submissions, CIT has directed the Assessing Officer to withdraw the benefit of section 80HHC given to the assessee on the amount received against advertisement which has been published in the journal. Thereafter, assessee carried the matter before the Tribunal. The Tribunal has also upheld the view taken by CIT under section 263 of the Income-tax Act, 1961. (2) CIT v. Kelvinator of India Ltd. :: (2010) 320 ITR 561 (SC) wherein it has been held as under:- However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, section 147 would give arbitrary power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite of full disclosure made by assessee, Assessing Officer gave benefit of provision by considering materials on record, it could not be said that any income escaped assessment in accordance with law - Held, yes - Whether fact that Assessing Officer in assessment proceedings under section 143(3) did not give any opinion regarding allowability or otherwise of deduction under section 80-IB(10) could be ground for invoking section 147 - (5) CIT v. Hindustan Zinc Ltd. :: (2017) 393 ITR 264 (Rajasthan) wherein it has been held as under:- Section 32, read with sections 80-IA, 80- IB and 148 of the Income-tax Act, 1961 - Depreciation - Additional depreciation (Reassessment) - Assessment year 2005-06 - Assessing Officer initiated reassessment proceedings on ground that assessee had made incorrect claim of additional depreciation on Captive Power Plant - However, it was found that assessee had made true and full disclosure of all relevant facts relating to claim of additional depreciation and also in respect of claim for grant of deduction under section 80IA - Further, a separate audit report in prescribed form 10CCB in support of claim for deduction under section 801A/80IB was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Merely an audit report, would not authorize the Assessing Officer to reopen the assessment even within the period of 4 years from the end of the relevant assessment year, when the said material was already before him when the original assessment was made. Any such attempt on his part would be based on mere change of opinion. To reiterate when a claim was processed at length and after calling for detailed explanation from the assessee, the same was accepted, merely because a certain element or angle was not in the mind of the Assessing Officer while accepting such a claim, cannot be a ground for issuing notice for reassessment. Therefore, the Assessing Officer cannot change his opinion, which he has already accepted in his assessment order. Thus, the Tribunal has committed an error in reversing the finding of the Commissioner (Appeals) and also committed an error in holding that the reopening proceedings are valid, legal and within the jurisdiction of the respondent. (7) CIT v. Vaishali Avenue :: (2014) 48 taxmann.com 289 (Rajasthan) wherein it has been held as under:- Section 37(1), read with section 147, of the Incometax Act, 1961 - Business expenditure - Allowability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable. Therefore, it is not necessary for the Revenue to prima facie establish that there has been a failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment, while issuing a notice reopening a completed assessment. However, even in case of reopening of assessment within a period of four years from the end of the relevant assessment year the Assessing Officer has to have reason to believe that income chargeable to tax has escaped assessment on the basis of tangible material. The words reason to believe has been construed by the Supreme Court in the matter of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 ; wherein the court has observed: However one needs to give schematic interpretation to the words 'reason to believe' failing which we are afraid section 147 would give arbitrary powers to the Assessing Officer to reopen assessment on the basis of 'mere change of opinion' which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has power to reassess. But r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof clearly indicates that it has been issued merely on the basis of change of opinion and would amount to a review of the assessment order dated December 11, 2003. Further, the reasons for reopening as communicated by the petitioner is not on the basis of any tangible material but merely on verification of the material and primary facts already on record that the Assessing Officer has duly considered while passing the order dated December 11, 2003, for the assessment year 2007-08. There is no fresh tangible material which would warrant taking a view different from the one taken during the regular assessment proceedings. In fact even the order dated October 15, 2012 disposing of the objections clearly records that radiography charges and labour charges were made to various persons like senior technicians, senior radiographer and Jr. technicians, etc., from the chart submitted in the regular assessment proceeding leading to order dated December 11, 2009. Therefore, it is very clear that the impugned notice for reassessing the assessment year 2007-08 has been issued merely on change of opinion and in fact seeks to review the assessment which is already completed. (10) ICICI Hom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Idea Cellular Ltd. v. Dy. CIT [2008] 301 ITR 407 has held that once all the material with regard to particular issue is before the Assessing Officer and he chooses not to deal with the same, it cannot be said that he had not applied his mind to all the material before him. [Para 7] Therefore, in the instant case one would have to examine the contention of the assessee that the impugned notice is without jurisdiction as the self same facts were not only before the Assessing Officer but he had also viewed the very issues on which the assessment is sought to be reopened. So far as the issue in respect of provisions claimed as deduction for arriving at taxable profit aggregating to Rs. 52.87 crores is concerned, the same was not only disclosed in the notes to account filed with the return of income but also in response to specific queries raised during the assessment proceedings. It was reiterated at the hearing that on the aforesaid account of provision, the tax had already been paid in the earlier years and the amounts were merely written back in this year to the extent they were in excess of the provisions required. So far as failure to deduct TDS on adverti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious decoders and had recorded movies on beta-cam tapes which were transferred as telecasting rights to Star TV for five years (it has a limited life). Hence such rights would certainly fall in the category of articles of trade and commerce, hence, merchandise. (2) CIT v. Faqir Chand HUF :: (2013) 350 ITR 207 (SC) wherein it has been held as under:- Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1995-96 - Whether in view of decision of Supreme Court in CIT v. B. Suresh [2009] 313 ITR 149, telecasting rights of T.V. serials are entitled to benefit of section 80HHC (3) CIT v. Sun TV Ltd. :: (2007) 296 ITR 274 (Madras) wherein it has been held as under:- The goods may be tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a ) its utility; (b) capable of being bought and sold; and (c) capable of being transmitted, transferred, delivered, stored and possessed. If the above attributes are satisfied, the same would be goods. [Para 11] In the instant case, it was found that the assessee assigned rights to telecast the programmes in foreign countries ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific provision under section 80HHF for deductions in respect of profits and gains from export or transfer of any film software, television software, music software, television news software, including telecast rights, the assessee could very well in future claim such deductions and the same would be taken care of under section 80HHF(5) to prevent double benefits being claimed by the assessee in such events. However, in view of finding that the transaction in question was covered under section 80HHC, it was inappropriate to hold that merely because section 80HHF was not on the statute book during the assessment years in question, the assessee was not entitled to claim deduction without any hindrance under section 80HHC in spite of compliance of the ingredients thereunder. (5) CIT v. Motor Industries Co. Ltd. :: (2012) 20 taxmann.com 463 (Karnataka) wherein it has been held as under:- Section 80HHC provides for deduction in respect of the profits retained for export business. It is not in dispute that the condition precedent for application of this provision is that the assessee must be engaged in the business of export out of India of any goods or merchandise to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to 1991 often used to provide a distorted figure of export profits when receipts like interest, commission, etc. which did not have an element of turnover were included in the profit and loss account. Therefore, it was clarified that 'profits of the business' for section 80HHC would not include receipts by way of brokerage, commission, interest or any other receipt of a similar nature. The expression 'income arising out of business of export' brings within its sweep not only the export of any goods or merchandise manufactured or processed by the assessee but also of trading goods. The Parliament, therefore, intended to provide incentive when a positive profit is earned by an exporter. [Para 7] It is well settled that in computing the profits of the business for the purpose of Explanation (baa ), the incomes which are deductible are those which are expressly prescribed in the aforesaid provision and which are similar in nature. If the income is derived out of the activity which would have direct and immediate nexus to the activity of export, then the said income is not deductible from the said profits of the business under the aforesaid provisions. Profits ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions under section 80-O. The receipt of consideration from a foreign enterprise is not in dispute. From the very same business that the assessee is carrying on, it is having an income under two heads and, therefore, it is not a case of any independent income unrelated to or unconnected with the business carried on by the assessee which is sought to be included in the profits of the business. In these circumstances, the Tribunal was justified in holding that the said consideration received for developmental work is not liable to be deducted under Explanation (baa) in computing the profits of the business. The said order is legal and valid. It does not suffer from any legal infirmity. (6) CIT v. Prasad Productions Pvt. Ltd. :: (2009) 313 ITR 120 (Madras) wherein it has been held as under:- Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment years 1996-97 to 2001-02 - Transfer of rights for manufacture of cassettes outside India amounts to export of goods eligible for deduction under section 80HHC 6. Taking into consideration the main aspect that the earlier order has not been challenged and the basis for Section 148 was not sound, it ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary powers in the Assessing Officer. We quote herein below the relevant portion of Circular No. 549 dated 31st October, 1989, which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147.--A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same. 7. In that view of the matter, both the issues are required to be answered in favour of the assessee against the department. 8. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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