TMI Blog2005 (10) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... sed under section 143(3), the Assessing Officer allowed deduction under section 80HHC at Rs. 1,40,71,562. The Assessing Officer has reduced the export turnover at Rs. 18,04,77,292 as against the export turnover disclosed by the assessee at Rs. 18,18,49,364. The assessee has taken the goods weighing 1.430 MT on loan from some other party and has exported the same. The Assessing Officer was of the opinion that the export of goods taken on loan cannot be considered as export of goods manufactured by the assessee. Therefore, he reduced the export turnover of the assessee. The Assessing Officer also increased the total turnover by including the sales-tax, sale proceeds of gunny bags and weighment charges. In view of above modification in the export turnover as well as total turnover, deduction under section 80HHC claimed by the assessee was reduced. Thereafter the notice under section 148 was issued and served upon the assessee p on 23-11-1996. The Assessing Officer has recorded the following reasons for reopening of assessment: "It has been noticed from the assessment records that the assessee-firm while calculating the deduction under section 80HHC of the Act included receipt from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income is to be excluded from the profits and gains of business as per Explanation (bad) to section 80HHC(3) of the Income-tax Act. He, therefore, submitted that the order of the CIT(A) should be reversed and that of the Assessing Officer be restored. 5. The learned counsel for the assessee, on the other hand, submitted that the Assessing Officer has allowed deduction under section 80HHC in the original assessment after due application of mind. In fact the Assessing Officer has reduced the assessee's claim of deduction under section 80HHC which was partly allowed by the CIT(A) in first appeal. He, therefore, submitted that the reopening of assessment for re-working of deduction under section 80HHC is only change of opinion which is not permissible. In support of this contention, he has relied upon the decisions of the Hon'ble Gujarat High Court in the cases of Garden Silk Mills Ltd v. Dy. CIT [1996] 222 ITR 68 and Gruh Finance Ltd. v. Jt. CIT [2000] 243 ITR 482. 5.1 With regard to the merit of the addition, the learned counsel for the assessee fairly admitted that in view of the decision of the Special Bench of ITAT in the case of Lalsons Enterprises, the interest income is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." 7. From the above it is clear that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may assess or re-assess such income. By way of Explanation 2, the Legislature has specified the circumstances which will be deemed to be escapement of income chargeable to tax. As per sub-clause (iii) of clause (c) of Explanation 2, where an assessment has been ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer-has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words 'reason to believe' cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. Unless the ground or the material on which his belief is based, is found to be so irrational as not to be worthy of being called a reason by any honest man, his conclusion that it constitutes a sufficient reason, cannot be overridden." 8.1 Thus, within a period of four years, the assessment can be reopened where there has been complete disclosure of all the relevant facts by the assessee provided the income chargeable to tax has escaped assessment. Where the Assessing Officer had overlooked something at the first assessment, then there is no question of any change of opinion. In the case under consideration before us, in the first assessment the Assessing Officer has applied his mind to the provisions of section 80HHC and he has considered the total turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen the assessment merely on the basis of change of opinion. It was contended by the learned counsel for the assessee that when the Assessing Officer in the original assessment has already considered the issue of allowability of deduction under section 80HHC and has in fact reduced the deduction, the reopening of assessment for re-computation of deduction under section 80HHC was only change of opinion. However, we are unable to accept this contention of the learned counsel. Section 80HHC allows deduction in respect of profits derived by the assessee from the export of goods or merchandise. Sub-section (3) of section 80HHC provides the method for computation of profits derived from export of goods and merchandise. As per clause (a) of sub-section (3) where the export out of India is of goods or merchandise manufactured by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. Thus for the computation of the profit from export, there are three important ingredients: (i) Export turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC for the purpose of determining the profits and gains of business. Therefore, the excess deduction under section 80HHC was allowed. In view of above, the decision of the Hon'ble Gujarat High Court in the case of Garden Silk Mills Ltd. relied upon by the learned counsel, would not be applicable. On the other hand, the decision of the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel would be applicable wherein their Lordships have held that where the Assessing Officer had overlooked something at the first assessment, there can be no question of any change of opinion. In the original assessment, the Assessing Officer has overlooked Explanation (baa) to section 80HHC and, therefore, the reopening of assessment to apply Explanation (baa) to section 80HHC cannot be said to be a change of opinion. 11. The learned counsel for the assessee has also relied upon the decision of the Hon'ble Gujarat High Court in the case of Gruh Finance Ltd. wherein their Lordships have held as under:- "that insofar as the expressions 'reasons to believe' and 'change of opinion' are concerned though material was available on record at the time of first assessment, when no conscious cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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