Income Tax Appellate Tribunal - Delhi
M.M.T.C. Limited vs Dy. Commissioner Of I. Tax on 28 September, 2007
ORDER
I.P. Bansal, Judicial Member
1. These are appeals filed by the assessee and they are directed against two separate orders of CIT (A) dated 21.12.2006 for assessment year 1998-99 and 1999-2000. Grounds of appeal read as under:
Assessment year: 1998-99:
1. That the CIT(A) erred on facts and in law in not holding that the order dated 28.02.06 passed by the AO Under Section 143(3) read with Section 147 of the Income Tax Act, 1961 ('the Act') is beyond jurisdiction, bad in law and void-ab-initio.
1.1 That the CIT(A) erred on the facts and in law in not holding that the impugned order dated 28.02.06 is illegal, bad in law and is liable to be quashed since the initiation of the reassessment proceedings was based on a mere change of opinion.
1.2 That the CIT(A) erred on the facts and in law in not holding that the impugned order dated 28.02.06 is illegal, bad in law and is liable to be quashed since the proceedings Under Section 147 of the Act were initiated without there being reason to believe that income of the appellant had escaped assessment which is sine-qua-non for assumption of valid jurisdiction.
1.3 That the CIT(A) erred on facts and in law in not holding that there being no failure on the part of appellant to disclose fully and truly all material facts necessary for assessment, the reassessment proceedings initiated after 4 years from the end of relevant assessment year were illegal and bad in law.
2. That the CIT(A) erred on facts and in law in confirming the action of the AO in assessing the gross interest income amounting to Rs. 22,18,23,913/- "as income from other sources" against the same being declared as "business income" by the appellant.
2.1 That the CIT(A) failed to appreciate that in the original assessment completed vide order dated 23.02.2001, the AO had, after due application of mind, assessed only net interest income of Rs. 2,62,36,763/- as 'income from other sources' and it was therefore, not open to the AO to come to a different conclusion without there being any change in the facts.
3. Without prejudice, the CIT(A) erred on facts and in law in not directing the AO to exclude tax free income of Rs. 13,92,30,786/- while assessing the gross interest income amounting to Rs. 22,18,23,913/- as "income from other sources."
4. That the CIT(A) erred on facts and in law in confirming the action of the AO.
5. That the CIT(A) in assessing dividend income amounting to Rs. 6,56,18,564/-as "income from other sources" against the same being declared as "business income" by the appellant erred on facts and in confirming the action of the AO in denying deduction of Rs. 13,01,77,391/- allowed to the appellant Under Section 80HHC of the Act in the original assessment order dated 23.02.2001.
5.1 That the CIT(A) erred on facts and in law in upholding the action of the AO in excluding the following out of the business incomes while computing deduction Under Section 80HHC of the Act:
a) Gross Interest Rs. 22,18,23,913/- b) Dividend Income Rs. 6,56,18,564/-
5.1.1 That the CIT(A) erred on facts and in law in alternatively holding that 90% of following gross incomes/receipts is, in any case, excludible for computing deduction under that section:
a) Gross Interest Rs. 22,18,23,913/- b) Dividend Income Rs. 6,56,18,564/-
5.1.2 That the CIT(A) erred on facts and in law in upholding that gross interest and not net interest is excludible from the eligible profits for computing deduction Under Section 80HHC of the Act.
5.1.3 That the CIT(A) erred on facts and in law in upholding the exclusion of 90% of the following receipts for computing "profits of the business" in terms of Clause (baa) of Explanation to Section 80HHC of the Act:
Amount (Rs.) Miscellaneous receipts 3,09,28,014/-
Staff Quarters rent 10,86,567/-
Gain on exchange 2,99,59,498/-
Grant-In-Aid (NRF) 80.000/-
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Total 6,99,74,079/-
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5.1.4 That the CIT(A) and the AO failed to appreciate that the appellant's eligibility is to be computed with reference to Clause (c) of Sub-section (3) of Section 80HHC of the Act (applicable to manufacturer-cum-trader exporter) and not Clause (a) (applicable to an exclusive manufacturer exporter).
5.2 That the CIT(A) erred on facts and in law in upholding that deduction allowable Under Section 80HHC of the Act has to be restricted to business income included in the gross total income and since business income was loss/negative, no deduction was allowable to the appellant under that Section by wrongly invoking provisions of Section 80AB of the Act.
6. That the CIT(A) erred on facts and in law in upholding the imposition of interest Under Section 234B and in confirming the withdrawal of interest Under Section 244A of the Act.
Assessment year 1999-2000:
1. That the CIT(A) erred on facts and in law in not holding that the order dated 28.02.06 passed by the AO Under Section 143(3) read with Section 147 of the Income Tax Act, 1961 ('the Act') is beyond jurisdiction, bad in law and void-ab-initio.
1.1 That the CIT(A) erred on the facts and in law in not holding that the impugned order dated 28.02.06 is illegal, bad in law and is liable to be quashed since the initiation of the reassessment proceedings was based on a mere change of opinion.
1.2 That the CIT(A) erred on the facts and in law in not holding that the impugned order dated 28.02.06 is illegal, bad in law and is liable to be quashed since the proceedings Under Section 147 of the Act were initiated without there being reason to believe that income of the appellant had escaped assessment, which is sine-qua-non for assumption of valid jurisdiction.
1.3 That the CIT(A) erred on facts and in law in not holding that there being no failure on the part of appellant to disclose fully and truly all material facts necessary for assessment, the reassessment proceedings initiated after 4 years from the end of relevant assessment year were illegal and bad in law.
2. That the CIT(A) erred on facts and in law in confirming the action of the AO in assessing the gross interest income amounting to Rs. 34,01,92,899/- "as income from other sources" against the same being declared as "business income" by the appellant.
3. Without prejudice, the CIT(A) erred on facts and in law in not directing the AO to exclude interest free income of Rs. 10,13,13,444/- while assessing the gross interest income amounting to Rs. 34,01,92,899/- as "income from other sources."
4. That the CIT(A) erred on facts and in law in confirming the action of the AO in assessing dividend income amounting to Rs. 6,56,18,564/- as "income from other sources" against the same being declared as "business income" by the appellant.
5. That the CIT(A) erred on facts and in law in confirming the action of the AO in denying deduction of Rs. 14,67,44,405/- allowed to the appellant under Section 80HHC of the Act in the original assessment order dated 28.03.2003.
5.1 That the CIT(A) Srred on facts and in law in upholding the action of the AO in excluding the following out of business income while computing deduction under Section 80HHC of the Act:
a) Gross interest Rs. 34,01,92,899 b) Dividend income Rs. 6,56,18,564
5.2 That the CIT(A) erred on facts and in law in alternatively holding that 90% of following gross incomes/receipts is, in any case, excludible for computing deduction under that section:
a) Gross Interest Rs. 34,01,92,899 b) Dividend income Rs. 6,56,18,564
5.3 That the CIT(A) erred on facts and in law in upholding that gross interest and not net interest is excludible from the eligible profits for computing deduction Under Section 80HHC of the Act.
5.4 That the CIT(A) erred on facts and in law in upholding the exclusion of 90% of the following receipts for computing 'profits of the business' in terms of Clause (baa) of Explanation to Section 80HHC of the Act.
Amount(Rs.) Miscellaneous receipts 6,29,10,669 Staff quarters rent 8,99,511 Gain on exchange 2,02,22,706 Grant-in-aid (NRF) 60,00,000
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Total: 9,00,32,886
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5.5 That the CIT(A) and the AO failed to appreciate that the appellant's eligibility is to be computed with reference to Clause (c) of Sub-section (3) of Section 80HHC of the Act (applicable to manufacturer-cum-trader exporter) and not Clause (a) (applicable to an exclusive manufacturer exporter).
5.6 That the CIT(A) erred on facts and in law in upholding that deduction allowable Under Section 80HHC of the Act has to be restricted to 'business income' included in the gross total income and since business income was loss/negative, no deduction was allowable to the appellant under that Section by wrongly invoking provisions of Section 80AB of the Act.
6. That the CIT(A) erred on facts and in law in upholding the imposition of interest Under Section 234B and in confirming the withdrawal of interest Under Section 244A of the Act.
2. The assessee in the present case is a public sector undertaking. Permission to contest these appeals has been granted by Committee on Disputes vide its order dated 16.5.2007. A copy of the said order is placed at pages 298 to 300 of the paper book. Accordingly we proceed to decide this appeal.
3. One issue in both the appeals is common which is regarding validity or otherwise of the reassessment proceedings. The facts for both the years regarding this issue are identical except difference in figures. Therefore, we shall discuss the facts relating to assessment year 1998-99 and the decision taken for assessment year 1998-99 on this issue will be applicable for assessment year 1999-2000.
4. The impugned assessment order dated 28.2.2006 is passed Under Section 147 read with Section 143(3) of the Act. Originally assessment was framed vide order dated 23.2.2001 passed Under Section 143(3) of the I.T. Act. The return of income was filed at Rs. 82,58,101/- Under Section 115 JA on 13.11.1998. Firstly processing was done Under Section 143(1)(a) vide order dated 25.5.1999. Later on assessment was completed vide above-mentioned order dated 23.2.2001 at an income of Rs. 12,93,09,770/-. Originally assessee computed gross total income at Rs. 19,15,13,221/- which was later on revised at Rs. 13,70,00,572/- and deduction Under Section 80HHC was claimed thereon at Rs. 15,87,06,123/. While examining such claim the AO in the original assessment order observed that deduction Under Section 80HHC cannot exceed profit from business in view of Section 80 AB. Thus he observed that assessee could not claim deduction Under Section 80HHC for a sum of Rs. 15,87,06,123/- against gross total income of Rs. 13,70,00,572/-. He examined the details of profit and loss account, audit report Under Section 80HHC and details furnished by the assessee and observed that there were some mistakes in the computation of deduction Under Section 80HHC. He calculated deduction Under Section 80HHC as per annexure 'A' of the original assessment order at Rs. 13,01,77,391/- and in such manner the AO after considering various aspects had restricted the claim of the assessee Under Section 80HHC to a sum of Rs. 13,01,77,391/- against claim of Rs. 15,87,06,123/-. While considering the claim of the assessed Under Section 80HHC the observations of AO in the original assessment order as per para 6 are as follows:
6. As mentioned above gross total income was computed by the assessee originally at Rs. 19,50,13,221/- and later on revised at Rs. 13,70,00,572/-, and against this deduction Under Section 80HHC has been computed at Rs. 15,87,06,123/-. As deduction Under Section 80HHC can not exceed the profit from business in view of Section 80AB, the claim of assessee Under Section 80HHC at Rs. 15,87,06,123/- against gross total of Rs. 13,70,00,572/- is not correct. On careful examination of details of P. & L. A/c, Audit Report Under Section 80-1IHC and details furnished by the assess, it is found that following mistakes were committed by the assessee while computing deduction Under Section 80-HHC:
i) As mentioned above, deduction Under Section 80HHC cannot exceed the profit as computed under the head 'profit from business' in view of Section 80AB. In fact assessee has wrongly included all income under the head 'Profit from Business'. There is dividend income of Rs. 6,56,18,564/and net interest received of Rs. 2,62,36,763/- which as provided in Section 56 has necessarily to be assessed under the head "Income from Other Sources." The decision of the Kerala High Court reported at 157 CTR 225 (1999) on this issue is in favour of the Revenue. The Kerala High Court has held that interest income should be taxed under 'Income from Other Sources' and should be reduced from Profits of Business for computing deduction Under Section 80-HHC. Thus, deduction Under Section 80-HHC shall be computed on the basis of profits, incoe which doesn't include income from other sources amounting to Rs. 6,56,18,564/- plus 2,62,36,763/-(9,18,S5,327/-) and thus deduction Under Section 80-HHC shall be restricted to profit under the Profit from Business in view of Section 80AB.
ii) In computing indirect cost all expenses debited to P & L A/c except (i) provisions added back to income (ii) expenses which are part of direct expenses shall be included in indirect cost and 'indirect cost' relating to export of trading goods shall be computed on a proportionate basis as per definition given to 'indirect cost' in Clause 2 of Explanation given just before Section 80-HHC(3A).
iii) From audit report Under Section 80-HHC, it is noticed that there was some export of manufactured goods, also and profit from same as per procedure laid down in Section 80-HHC in negative in nature which has been ignored by the assessee. This is not a correct stand because Section 80-HHC prescribes a package of method of computing deduction and so other methods are involved in computation and negative figure arrived upon at some intermediate stage can not be ignored. This view is Supported by ITAT in Prestige Foods Ltd. 61 ITD 390 (Indore) and Yarn Syndicate Ltd. (2001) 114 Taxman 123. Learned CIT(A)-XXII, New Delhi has also confirmed this stand in other cases assessed to tax in this Range.
iv) The deduction Under Section 80-HHC allowable to the assessee shall be as per working given in Annexure to this order.
Annexure 'A' vide which deduction Under Section 80HHC allowable to assessee has been computed at Rs. 13,01,77,391/- is as under:
Annexure 'A' Deduction Under Section 80-HHC
1. Name of the Assessee MMTC Ltd.
2. Assessment Year 1998-99
3. Total turnover of the business 42,90,39,06,171
4. Total export turnover 10,28,98,48,814
5. Total profits of the business 16,86,56,836 (as computed in order)
6. Export turnover in respect of 9,57,01,09,608 trading goods exported
7. Direct cost of trading goods exported 8,97,19,94,075
8. Direct cost attributable to trading goods exported Total Indirect Cost Salaries & allowances 51,85,81,169 A dministrative & indirect 36,43,02,725 Expenses Interest paid 19,55,87,150 Depreciation 2,67,29,808 Deferred revenue expenses 5,48,80,330 Bad debts written off 3,58,30,116 Prior period expenses 1,51,89,372 121,11,00,670 Indirect cost attributable to export of trading goods 121,11,00,670 X 9,57,01,09,608 27,01,47,107 42,90,39,06,171
9. Totalof7 & 8 9,24,21,41,102
10. Profits from export of trading goods (6 minus 9) 32,79,68,426
11. Adjusted total turnover (3 minus 6) 33,33,37,96,563
12. Adjusted export turnover (4 minus 6) 71,97,39,206
13. Adjusted profit of business profit of business as computed under the head Profit from Business (item 5) (16,86,56,836 - 32,79,68,426) (-) 15,93,11,590 (-) 90% of other income except dividend and exchange gain and interest other that interest from I.T. Department) [90% (14,03,43,556 - 22,18,23,918 - 6,56,18,564 2,91,59,198)] 21,03,80,166 (-) 39,96,92,056
14. Profits derived by the assessee from export of goods or merchandise to which Section 80-HHC applies, computed and read with Section (3) of Section 80HHC 39,79,68,176 31,93,38,328 Export turnover, deduction in respect of which will be claimed by a supporting manufacturer in accordance with proviso to Sub-section (1) of Section 80-HHC 551,97,10,815
16. Profit from the export turnover mentioned in item 15 above, calculated in accordance with proviso to Sub-section (1) of Section 80-HHC 32,79.68.126X5.51.97.10.815 18,91,60.931
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9,57,01,09,608
17. Deduction Under Section 80-HHC to which the assessee is entitled (14 minus 16) (31,93,48,043 - 18,91,60,934) 13,01,77,391
5. After completion of original assessment, reassessment proceedings were initiated Under Section 147 and notice Under Section 148 was issued on 23.2.2005. The case of the assessee was reopened on the ground that if income from other sources and profits of business not derived from export are excluded, there is a net loss under the head 'profit of export business' as per Explanation (baa) to Section 80HHC of the Act and consequently in view of provisions of Section 80 AB no deduction Under Section 80HHC is allowable. The reasons recorded for reopening of the assessment are as under:
Reasons recorded for re-opening the assessment of M/s MMTC Ltd. for AY 1998-99 Under Section 147 of the IT Act. 1961.
1. The assessee offered, inter alia, the following incomes in its return of income for taxation as profits and gains of business and profession. The details are as under:
Descriptions Amounts (In Rs.)
Interest Income 22,18,23,913/-
Dividends from investment 6,56,18,564/-
Miscellaneous receipts 3,09,28,014/-
Staff Quarters rent 10,86,567/-
Gain on exchange 2,99,59,498/-
Grant-In-Aid (NRF) 80,00,000/-
Total 35,74,16,556/-
The assessee also claimed deduction Under Section 80HHC on all the aforementioned incomes claiming them to be its income from export business.
2. In fact and in law, the aforementioned incomes should have been offered for taxation as follows:
Descriptions Amounts (in Rs.) Nature of income
Interest Income 22,18,23,913/- Income from other sources
Dividends from investment 6,56,18,564/- -do-
Miscellaneous receipts 3,09,28,014/- Business income not derived from
export activity
Staff Quarters rent 10,86,567/- -do-
Gain on exchange 2,99,59,498/- -do-
Grant-in-Aid (NRF) 80,00,000/- -do-
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Total 35,74,16,556/-
3. Because of suppression of these material facts, a wrong claim of deduction Under Section 80HHC has been granted amounting to Rs. 13,01,77,391/- for the following reasons:
i. If income from other sources and profits of business not derived from exports are excluded as per the legal provisions of the IT Act, 1961, there is a net loss under the head "profits and gains of business or profession".
ii. Consequently, in view of the provision of Section 80AB of the IT Act, 1961, no deduction Under Section 80HHC is allowable.
4. Therefore, I have reason to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for its assessment, for that year, the income chargeable to tax has escaped assessment within the meaning of Section 147 of the IT Act, 1961 because of wrong deduction Under Section 80HHC amounting to Rs. 13,01,77,391/-.
6. Assessee submitted reply to the reasons on 21.11.2005, a copy of which is placed at pages 56 to 77 of the paper book. It was mentioned in the reply that after detailed investigation and due application of mind deduction Under Section 80HHC was allowed at Rs. 13,01,77,391/- in the original assessment order. It was submitted that it has wrongly been mentioned in the reasons recorded that deduction Under Section 80HHC was wrongly allowed on the entire interest and dividend income. It was pointed out that the said allegation is not factually correct. Reference was made to original assessment order to contend that net interest income of the assessee amounting to Rs. 2,62,36,763/- (Rs. 20,18,23,913 - 19,55,87,150) was assessed as 'income from other sources'. Referring to Annexure 'A' it was pointed out that 'profits of the business' was taken to be the profits as computed in the main assessment order (i.e. after excluding the aforesaid net interest income of Rs. 2.62 crores.). It was pointed out that dividend income of Rs. 6,56,18,564/- in its entirety was held to be assessable as 'income from other sources' and thus the same has not been made part of the "business income". Thus it was pointed out that deduction Under Section 80HHC has not been allowed on the net interest and dividend income and aggregating to Rs. 9,18,55,327/- ( 2,62,36,763 net interest + 6,56,18,564 dividend).
7. It was further pointed out that other receipts namely, misc. receipts, staff quarter rent, gains on exchange and grant in aid were also excluded from 'profit of the business' of the assessee in terms of Explanation (baa) of Section 80HHC of the Act and that such income was also not considered eligible for deduction Under Section 80HHC. Thus it was pointed out that allegation contained in the reasons recorded that deduction Under Section 80HHC of the Act has been wrongly allowed on the entire receipts of Rs. 35.74 crores is not factually correct. It was pointed out that substantial part of such receipts was excluded from being considered for the purpose of Section 80HHC.
8. It was pointed out that merely on the basis of change of opinion assessment could not be reopened. To substantiate such proposition reliance was placed on various decisions discussed in the said reply.
9. Further it was pointed out that it is not a case where income has allegedly escaped assessment either due to non-furnishing of material facts by the assessee and/or ignorance/non-consideration of any of the aforesaid claims of the assessee in the original assessment order. It was pleaded that it can be demonstrated that AO at the time of completing original assessment sought all relevant informations/clarifications/material from the assessee and had applied his mind on the claim of the assessee and thereafter came to a conscious decision to either agree or disagree with the claims of the assessee. To substantiate such contention it was pointed out as follows:
(i) On the issue - whether gross interest of Rs. 22.18 crores or net interest of Rs. 2.62 crores was assessable as 'income from other sources' which, as stated above, appears to be the sole basis of initiating the present reassessment proceedings, the following information were sought and duly replied to by the assessee during the original assessment proceedings:
• Your Honours' predecessor issued a detailed questionnaire dated 19th November, 2000 seeking various information/details/explanations from the assessee. Your Honour's kind attention is specifically invited to Question Nos. 10 to 12 of the questionnaire wherein all the aforesaid issues were raised by your Honour's predecessor (copy enclosed as 'Annexure A');
• In response to the aforesaid questionnaire, the assessee, vide letter dated 16th January, 2001, rendered detailed and point-wise replies/explanation to the various queries posed by your Honour's predecessor. Your Honour's kind attention is specifically invited to para No. 9 to 10 on pages 5 to 7 of the said reply. On perusal of the same, it will be appreciated that the assessee gave the details of the other income of Rs. 14.03 crores, which included all the aforesaid receipts (except interest income) (refer para 9). The assessee also rendered detailed explanation justifying its claim for deduction under Section 80-HHC of the Act. In para No. 12, the assessee specifically dealt with the issue of netting of interest income with interest expenditure (copy enclosed as 'Annexure B');
• In continuation of the aforesaid letter dated 16th January, 2001, the assessee, vide letter dated 2nd February, 2001, supplemented its reply. In the said letter the assessee furnished details of interest income and interest paid and invited your Honour's predecessor's attention to the fact that for claiming deduction under Section 80-HHC of the Act interest income has been adjusted against interest expenditure (copy enclosed as 'Annexure C');
• In the above letters, the assessee also referred to its earlier letter dated 11th August, 2000 wherein on page 4 the assessee justified its claim for deduction under Section 80HHC of the Act (copy enclosed as 'Annexure D').
(ii) The claim for deduction under Section 80-HHC of the Act on the aforesaid basis was supported by the certificate of the Chartered Accountant in Form 10CCAC enclosed along with the return of income as also the past assessment orders.
(iii) Your Honour's predecessor, after duly considering the aforesaid detailed replies of the assessee, agreed with some of the contentions of the assessee and disagreed with some other. To the extent your Honour's predecessor did not agree with the assessee's contentions the assessee preferred appeal before the CIT(A).
The findings of your Honour's predecessor with regard to allowance of deduction under Section 80HHC of the Act are recorded in para 6 on page 4 of the assessment order. Your Honour's kind attention is specifically invited to para 6(i) of the assessment order wherein your Honour's predecessor, after referring to the decision of the Kerala High Court in the case reported in 157 CTR 225, held that the net interest income of Rs. 2.62 crores and dividend income of Rs. 6.56 crores are assessable as 'income from other sources'. Based on these findings, while computing the taxable income of the assessee on page 9 of the assessment order, such income aggregating to Rs. 9.18 crore was assessed as Income from other sources'. Further, a detailed working of deduction under Section 80-HHC of the Act was attached as Annexure 'A' to the assessment order. The assessee has, it may be pointed out, preferred appeal to the CIT(A) against the order of your Honour's predecessor assessing net interest and dividend income as Income from other sources'.
From the aforesaid, it will be appreciated that your Honour's predecessor, after considering the detailed replies ol the assessee, came to a conscious decision to assess only net interest income of Rs. 2.62 crores as 'Income from other sources'. Your Honour's predecessor agreed with the contention of the assessee that interest income must be adjusted against interest expenditure, and only the net interest income should be assessed under the head "income from other sources". It cannot, thus, be disputed that your Honour's predecessor consciously arrived at the conclusion that interest income must be adjusted against interest expenditure and only the net interest income of Rs. 2.62 crore is assessable as 'income from other sources'. It is not, therefore, open to your Honour to initiate fresh proceedings to now assess gross interest income as income from other sources', differing/disagreeing with the opinion of your Honour's predecessor. Nothing new has come on record to adopt a different approach.
10. Reference was also made to proviso to Section 147 which read as under:
Provided that where an assessment under Sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
11. To contend that assessment can be reopened beyond the period of 4 years from the end of relevant assessment year only in a case if there is a failure on the part of the assessee either to make a return Under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Reference was made to various decisions to plead that in a case where there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year then assessment could not be reopened after expiry of 4 years from the end of the relevant assessment year. It is in this manner objections were raised for reopening of the assessment.
12. The AO rejected such submissions of the assessee by way of an order dated 21.11.2005 which is as under:
1. In this case, the assessment was completed Under Section 143(3) on 23.2.2001 at a total income of Rs. 12,93,09,770/- after allowing deduction 80HHC of Rs. 130177391/-. Subsequently, the case was re-opened Under Section 147 of the IT Act after recording reasons in writing on 23.2.2005. The case was re-opened on the grounds that if income from other sources and profits of business not derived from exports are excluded as per the legal provisions of the I.T. Act, 1961, there is a net loss under the head "profits of export business as per explanation (baa) to Section 80HHC of the I.T. Act" and consequently in view of the provision of Section 80AB of the I.T. Act, 1961, no deduction Under Section 80HHC is allowable.
2. A detailed show cause alongwith statutory notices Under Section 143(2)/142(1) were issued asking the assessee to give its reply as to why the deduction Under Section 80HHC amounting to Rs. 130177391/- should not be disallowed as itsr business income computed as per the legal provisions of the I.T. Act is a negative figure and as per the provision of Section 80AB and the decision of the Supreme Court in the IPCA Laboratories Ltd. v. DCIT , deduction Under Section 80HHC will not be allowable, if the business profit is a negative/loss figure. A copy of the reasons recorded was also enclosed for assessee's perusal.
3. The assessee filed its detailed reply including the legal objections to the issuance of notice Under Section 148 vide its letter dated 17.11.2005 and requested to treat the return filed vide its letter dated 2.2 2001 as return of income filed Under Section 147/148 of the I.T. Act.
4. The assessee has raised objections to the reasons recorded vide its letter dated 17.11.2005 which are briefly as follows:
(i) it is a case of mere change of opinion.
(ii) The time limit has expired for re-opening of the case.
5. The different objections of the assessee are rejected on the following grounds:
Change of opinion • The facts of the case are that this issue of negative business income and allowability of deduction Under Section 80HHC in such a scenario was never raised in the assessment proceedings.
• The applicability of Section 80AB was never considered by the AO nor was confronted by the AO to the assessee during the assessment proceedings.
• The judgment of the Hon'bie Supreme Court in the case of IPCA Laboratories Ltd. v. DCIT was delivered on 11.3.2004 and the assessment order in this case was passed on 23.2.2001. So, the AO did not have the order of the Hon'bie Supreme Court with him at the time of passing of the order.
• The judgments of the Hon'bie Bombay High Court in the case of Rohan Dyes and Intermediates (P) Ltd. 270 ITR 350 (Bom) and the judgment of the Kerala High Court in the case of CIT v. A.M. Moosa, Bharat Sea Foods (005) 273 ITR 29 (Ker) and the decision of Special Bench of the ITAT, Mumbai, in the case of B. Sorabji v. ITO ITA No. 6503/M/2002. A.Y. 1999-2000 which followed the ratio of the decision of the Hon'bie Supreme Court in IPCA Laboratories case (supra) while holding that in case of negative business income, deduction Under Section 80HHC will not be allowable were not before the AO at the time of the passing of the assessment order.
• The different court decisions in the case laws of CIT v. Sterling Foods 237 ITR 579 (SC), Cambay Electric Supply Industrial Co. Ltd. v. CIT 113 ITR 84 (SC), CIT v. Pandian Chemicals Ltd. 233 ITR 497(SC) and by Madras High Court in the case of CIT v. Sundaram Industries Ltd. 253 ITR 396 (Mad.) and in the case of CIT v. Menon Impex (P) Ltd. and by Kerala High Court in the case of CIT v. Cochin Refineries Ltd. were not in the knowledge of the AO at the time of completion of assessment Under Section 143(3). Now, these case laws have come before the undersigned, as a result of which the meaning of income "derived from" export business has undergone a radical change.
• Thus, it can not be said that there is a mere change of opinion by the AO. Reliance in this regard is placed on the decisions given below.-
• Even though full disclosure is made by the assessee, yet, the assessing officer can reopen the proceeding under Section 147. In Praful Chunilal Patel v. Asstt. CIT (1998) 5 DTC 270 (Guj) 62 it was held that even where full disclosure was made and yet an income chargeable to tax had escaped from being included in the final assessment order in which taxable income was worked out, the assessing officer has, as a matter of fact, a duty to exercise jurisdiction under Section 147 read with Section 148.
• In IPC A Laboratories Ltd. v. Gajanand Meena, Dy.CIT and Ors. (No. 3) there was loss from export of trading goods and resultant amount was a net loss and since resultant amount was a loss, assessee was not entitled to claim relief Under Section 80HHC(1). Therefore, notice Under Section 148 was validly issued by AO to disallow deduction Under Section 80HHC which was wrongly allowed while passing assessment order Under Section 143(3).
• Where the AO had no opportunity to consider a matter, it cannot be said that when he subsequently considers it, that would amount to change of opinion.- Vide S. Srinivasan v. CIT . VE.A. Vairavan Chettiar v. CIT and Smt Nirmla Birla v. ITO .
• Mere silence on a matter or absence of discussion in the original order does not imply that the assessing officer adjudicated upon the same one way or the other, as was held in CIT v. M.P. Sharma (1980) 122 ITR 675 (Del). But this depends upon as to how the material facts were placed during the course of original assessment.
• In Gruh Finance Ltd. v. Joint CIT (2002) 123 Taxman 196 (Guj), it was held that if certain aspect was not consciously considered at the time of first assessment, notice issued Under Section 148 on that ground is valid in law.
• The words 'reason to believe' are stronger than the words 'is satisfied'. The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable, or in other words, it must be based on reasons which are relevant and substantial Gangs Saran & Sons. P. Ltd. v. ITO (1991) 130 ITR 1 (SC).
• These words suggest that action cannot be taken on mere rumours and suspicions and there must be some material on record to enable the Assessing Officer to initiate reassessment proceedings R.S. Chiranjilal & Sons v. CIT .
• Such a material may be a judicial decision Maharaj Kumar Kamal Singh v. CIT which either did not exist when earlier assessment was made or was not in the knowledge of the Assessing Officer and came to his notice subsequently ITO v. Saradbhai M. Lakhani and Anr. , or a factual error pointed out by the audit party, or when the audit party CIT v. P.V.S. Beedies Ltd. New Light Trading Co. v. CIT draws the attention to knowledge of the Assessing Officer in assessment proceeding for subsequent year.
• The assessing officer may act on direct or circumstance evidence but is belief must not be based on mere suspicion, gossip or rumour. - vide Sheo Nath Singh v. AAC .
• In B.S. Agricultural Industries India v. ACIT (2004) 77 TR (Dir. Tax) (Agra-Trib) 189 : (2004) 88 ITD 1 (Agra-Trib), it was held, if the AO on the basis of certain information, for whatever reasons had reason to believe that the income of the assessee has escaped assessment, it confers jurisdiction on him to reopen assessment Under Section 147 read with Section 148.
• In Phool Chand Bajrang Latt Anr. v. ITO , the Supreme Court has held that an AO acquires jurisdiction to reopen assessment only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission of failure on the past of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the assessing officer, the sufficiency of reasons for forming the belief, is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non specific information, also applied in Aditya Mills Ltd. v. Union of India and Ors. .
• Where deduction for interest paid on moneys borrowed for purposes of business was allowed against interest income assessed under other sources, and proceedings for reassessment were initiated on basis of a High Court decision which came to the notice of AO subsequent. vide U.P. State Brassware Corporation Ltd v. CIT (2005) (5) MTC 193 (AH).
• In Asstt. CIT v. Nitin Steel Centre it was held that a perusal of Explanation 2(b) to Section 247 clearly shows that two conditions must be satisfied before its application, namely: (1) the return of income must have been furnished by the assessee, and (2) it is shown that in the return so furnished, the assessee has either understated the income or has claimed excessive loss, deduction, allowance or relief.
• In Om Prakash Munjal v. ACIT (2002) 83 ITD 481 (Chd.- Trib.), it was held that the only requirement of Section 147 after 1.4.1999 is that the AO must have reasons to believe that the income chargeable to tax had escaped assessment. He is not required to establish that such escapement is an account of failure on the part of assessee to disclose true and full facts as required under old provisions, until case is covered under proviso to Section 147. Therefore, reassessment made by AO was well within 4 corners of law.
• Allahabad High Court has held that when deduction at a higher rate was allowed in the original assessment, reassessment is not invalid on the ground of mere change of opinion. vide Renusagar Power Co. Ltd. v. ITO .
• It is not a case of mere change of opinion if a particular legal position has not been considered at the time of processing of return. vide ITO v. Jila Sehkari Kendriya Bank Mydt (1999) 11 DTC 724 (Ind-Trib) : (1999) 69 1TD214(Ind-Trib).
Expiry of time limit:
1. Four years had passed after the completion of assessment Under Section 143(3) in this case. As per the statutory provision of Section 151(1) of the I.T. Act, the CIT's prior approval was obtained on 22.2.2005 before issuance of notice Under Section 148.
2. Thus, it can not be said that the notice is invalid on account of time limit.
3. The notice Under Section 148 was validly issued within the period of 6 years from the end of assessment year after taking approval of CIT. As the notice was sent on 23.2.2005, i.e. within 31.3.2005, the assessee's objection that limitation has expired in this case is without any merit and substance.
4. The assessee has failed to disclose primary facts regarding the nature of different incomes white claiming deduction Under Section 80HHC.
5. Thus, the assessee had failed to disclose truly and fully all material facts necessary for its assessments.
The objections raised by the assessee stand rejected accordingly.
• The assesses has requested to treat the return tiled on 2.2.2001 to be treated as return filed in response to notice issued Under Section 148; This request of the assessee is rejected on the following grounds:
a. The assessee had not filed any revised return with this letter. But it had filed a revised computation citing the judgment of the Hon'ble Supreme Court in the case of Bharat Earth Movers Ltd. and reducing the provision for leave encashment amounting to Rs. 39292190/- and also the fact that the provision for Productivity Linked Incentive amounting to Rs. 18720459/- pertaining to earlier year which has been credited to the P&L account of the A.Y. 1998-99 but was not allowed as expense in the immediately preceding year.
b. This revised computation was considered by the AO at the time of passing of assessment order but relief was not granted by him.
c. The Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works Pvt. Ltd. while elaborating on the scope of reassessment decreed as follows:
i. Claims which have been disallowed in the original assessment proceeding can not be permitted to be re-agitated and a matter not agitated and concluded in assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as escaped income. It is however, open to the assessee to put toward claim for deduction of any expenditure in respect of "escaped income", or the non-taxability thereof at all even where such claims are accepted, the income cannot be reduced beyond the income originally assessed.
ii. The proceedings for reassessment are for the benefit of revenue and not the assessee and an assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision in disguise.
iii. In no case can the income in reassessment proceedings be reduced beyond that originally assessee.
13. After rejection of the objections of the assessee AO made reassessment vide impugned order dated 28.2.2006 passed Under Section 147/143(3) of the Act in which deduction Under Section 80HHC has completely been denied and taxable income has been computed at Rs. 25,94,87,160/-. The net result computation of income as per reassessment order is as under:
With these remarks, the total income is computed as under:
Gross total income as computed by the assessee 19,50,13,221
Less:
1. Interest income of Rs. 22,18,23,913/- to
be considered separately as income
from other sources as discussed above. 22,18,23,913
2. Dividend income of Rs. 6,56,18,564/- to
be considered separately as income
from other sources as discussed above. 6,56,18,564
---------------- 28,74,42,477
-----------------
(-) 9,24,29,256
Add:
Disallowance made in the order passed Under Section
143(3) dated 23.2.2001
i) Productivity linked bonus disallowed Under Section
43B 13,62,417
ii) Sales tax liability disallowed Under Section 43B 3,39,137
iii) Provision for D WA risk 1,99,74,498
iv) Capital receipt from National Renewal
Fund 80,00,000
v) Prior period expenses disallowed 1,51,89,3 72
vi) Deferred expenditure of MITCO
disallowed 1,01,37,518
vii) Capital expenditure on renovation of
jewellery display centre 11,06,000
viii) A bnormal shortage not allowed 1,43,90,000
-------------- 7,04,98,942
---------------
Gross Business Income (-) 2,19,30,314
Less: Deduction Under Section 35 50,00,000
------------------
(-) 2,69,30,314
Less:
Deduction under Chapter VI-A
Deduction Under Section 80HHC NIL
Deduction Under Section 80G 10,25,000
------------ 10,25,000
--------------
Business Income (-) 2,79,55,314
Add:
Income from other sources
1. Interest income 22,18,23,913
2. Dividend income 6,56,18,564
-------------
28,74,42,477
-------------
14. As it can be seen from above the net effect of reassessment is that deduction Under Section 80HHC which was earlier granted has been completely withdrawn by holding that interest income and dividend income is assessable as income from other sources and if these are assessed as income from other sources then assessee has negative business income on which deduction Under Section 80HHC could not be allowed. It is against such reassessment order the assessee is aggrieved hence in appeal.
15. In ground No. 1 the validity of reassessment proceedings has been challenged. To contest the validity of reassessment proceedings following broad propositions were laid by the learned Counsel of the assessee Shri Ajay Vohra.
(a) The impugned reassessment proceedings were initiated on a mere change of opinion, which is not permissible in law;
(b) The impugned reassessment proceedings were initiated without forming a reasonable belief that income of the appellant had escaped assessment, which is a pre-requisite condition for validly initiating proceedings under that section;
(c) In terms of proviso to Section 147 of the Act, proceedings under that Section could be validly initiated beyond the period of four years from the end of the relevant year only if there was any failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment. That being not so in the present case, the pre-requisite condition for initiating reassessment proceedings, in terms of proviso to Section 147 of the Act, were not fulfilled/satisfied.
16. Further elaborating his arguments, learned Counsel stated that appellant is manufacturer-cum-trader exporter, eligible for claiming deduction as per Clause (c) of Section 80HHC (3) of the Act. Against interest income of Rs. 22,18,23,913/-, assessee had paid interest amounting to Rs. 19,55,87,150/-and interest income and dividend income of Rs. 6,56,18,564/- was declared as income being part of 'business income'. In original assessment AO assessed the dividend income of Rs. 6,56,18,564/- as income from other sources against the same being declared as business income. Further the AO has also considered the net interest income of Rs. 2,62,36,763/- (22,18,23,913 gross interest - 19,55,87,150 interest paid) as income from 'other sources'. Further in the original assessment order, the AO while computing deduction Under Section 80HHC treated the amount of Rs. 19,55,87,150/- (interest paid ) as 'indirect cost'. AO also reduced 90% of the following receipts for the purpose of computing 'adjusted profits of the business in terms of Clause (baa) of Explanation 2 to Section 80HHC Amount (Rs.) Gross interest income 22,18,23,913 Miscellaneous receipts 3,09,28,014 Staff Quarters rent 10,86,567 Grant-In-Aid (NRF) 80,00,000 Others 5,00,000
--------------
Total 26,70,89,407
--------------
90% of above 24,03,80,466
--------------
17. The learned Counsel pleaded that in the original assessment after detailed investigations and due application of mind deduction of Rs. 13,01,77,391/- Under Section 80HHC of the Act was allowed to the assessee which was computed as under:
Profit from export of traded goods 32,79,68,426
Loss from manufactured goods (86,30,101)
--------------
Net deduction Under Section 80HHC(3) 31,93,38,325
Less: Disclaimed Profits 18,91,60,934
--------------
Eligible deduction Under Section 80HHC 13,01,77,391
--------------
18. Reading from reasons recorded by the AO for initiating reassessment proceedings, the learned Counsel pleaded that according to AO following incomes which were declared to be 'business income' and consequently on which deduction Under Section 80HHC was claimed by the assessee should have been offered for taxation as follows:
------------------------------------------------------------------
Descriptions Amount Nature of Income
(Rs.)
------------------------------------------------------------------
Interest Income 22,18,23,913 Income from other sources
------------------------------------------------------------------
Dividends 6,56,18,564 -do-
------------------------------------------------------------------
Misc. receipts 3,09,28,014 Business income not derived
from export activity
------------------------------------------------------------------
Staff Quarters rent 10,86,567 -do-
------------------------------------------------------------------
Gain on exchange 2,99,59,498 -do-
------------------------------------------------------------------
Grant (NRF) 80,00,000 -do-
------------------------------------------------------------------
Total 33,74,16,556
------------------------------------------------------------------
19. Ld Counsel pleaded that it is further mentioned in the reasons that once aforesaid incomes are properly taxed in the manner indicated by the AO, the assessee would not be eligible for claiming any deduction Under Section 80HHC of the Act and the assessee has been wrongly allowed deduction of Rs. 13,01,77,391/- and thus the income of the assessee has escaped from assessment on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for its assessment.
20. The learned Counsel pointed out that the allegations as recorded by the AO in the reasons are factually incorrect. Further elaborating this proposition he pointed out that it has been wrongly recorded in the reasons that deduction Under Section 80HHC of the Act has been wrongly allowed on the entire interest and dividend income whereas such allegation is factually incorrect. He pointed out that on a consideration of original assessment order, the reasons recorded and the impugned reassessment order it can be noted that
(a) other receipts namely miscellaneous receipts, staff quarter rent, gains on exchange and grant-in-aid were given identical treatment and were not considered for allowing deduction under Section 80-HHC of the Act;
(b) dividend income of Rs. 6,56,18,564 was in its entirety held to be assessable as Income from other sources' and thus did not form part of the business income;
(c) while computing deduction in respect of traded goods, the assessing officer considered the entire interest paid amounting to Rs. 19,55,87,150 as 'indirect cost' and while computing 'adjusted profits of the business' the assessing officer excluded 90% of the gross interest amounting to Rs. 22,18,23,913. Consequently, entire interest income of Rs. 22,18,23,913 was not at all considered for allowing deduction under Section 80HHC of the Act;
21. Thus he pleaded that in original assessment deduction Under Section 80HHC of the Act was not at all allowed on all the receipts mentioned above.
22. The learned Counsel further pleaded that in fact the only variance in the original assessment order and the reasons recorded is that the assessing officer assessed the entire gross interest income of Rs. 22.18 crores as 'income from other sources' as against net interest income of Rs. 2,62,3 6,763 (Rs. 22,18,23,913 minus Rs. 19,55,87,150) assessed in the original assessment, which was a conscious decision of the assessing officer.
23. Further referring to the letter of AO dated 21st/22nd November, 2005 in which it has been observed by the AO that reassessment proceedings have not been initiated on a mere change of opinion since:
a) The issue of allowability of deduction under Section 80HHC in case of negative business income was neither raised nor considered in the original proceedings;
b) The applicability of Section 80AB of the Act was not considered in the original assessment;
c) The decision of Supreme Court in IPCA laboratories: 266 ITR 521 and subsequent decisions thereto were not available at the time of original assessment and were, therefore, not considered.
d) Certain decisions of the Supreme Court, which though available at the time of original assessment, were not in the knowledge and thus not considered in original assessment;
24. Referring to the objections of the AO on the issue of change of opinion the learned Counsel pleaded that Section 147 of the Act authorizes and permit an AO to assess or reassess income chargeable to tax if he has reasons to believe that such income for any assessment year has escaped assessment. He pleaded that Section 148 does not confer jurisdiction to reopen a completed assessment on change of opinion on the interpretation of a particular provision earlier adopted by the assessing officer. The scope of the said Section does not extend to reviewing its earlier order suo motu irrespective of there being any material to come to a different conclusion apart from just having second thoughts about the inferences drawn earlier.
25. He further pleaded that the power to reopen an assessment has been conferred by the Legislature not with the intention to enable the Assessing Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position, it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods.
26. Thus he pleaded that where the reasons recorded by the AO disclosed no more than mere change of opinion the reassessment proceedings are liable to be quashed. For raising such contentions he placed reliance on the following decisions:
CIT v. Foramer France 264 ITR 567 (SC) CIT v. Kelvinator of India Ltd. 256 ITR 1 (Del.) (FB) KLM Royal Dutch Airlines 208 CTR 33/159 Taxman 191 (Del.) CIT v. Eicher Ltd (Delhi High Court) Jindal Photofilms Ltd. v. DCIT 234 ITR 170 (Del.) Berger Paints India Ltd. v. JCIT 245 ITR 645 (Cal) Mercury Travels Ltd. v. DCIT 258 ITR 533 (Cal) Ranchi Handloom Emporium v. CIT 235 ITR 604 (Pat.) CIT v. Hardware Trading Co. 248 ITR 673 (Kar.) CIT v. Rajasthan Patrika Ltd. 258 ITR 300 (Raj) Marudhar Hotels (Pvt) Ltd. v. DCIT 259 ITR 509 (Raj) ONGC. v. DCIT 262 ITR 648 (Uttaranchal) Simplex Concrete Piles (India) Ltd. 262 ITR 603 (Cal.) Biswanath Tea Co. Ltd. v. DCIT 267 ITR 687 (Calcutta) J.P. Bajpai, HUF v. CIT 269 ITR 40 (All.) Duli Chand Singhania v. ACIT 269 ITR 192 (P&H) Zuari Estate Development and Investment Co. Pvt. Ltd. 271 ITR 269 (Bom) India Steamship Co. Ltd. v. JCIT 275 ITR 155 (Cal.) CIT V. Mittal Castings Ltd. 124 Taxman 11 (Del) Jay Shree Tea and Industries Ltd. v. DCIT 165 CTR 193 Parikh Petrol Chemical Agencies (P) Ltd. v. ACIT 183 CTR 243 (Bom) Bhor Industries Ltd. v. ACIT 183 CTR 248 (Bom)
27. Referring to the facts of the present case he pleaded that original assessment Under Section 143(3) of the Act was completed after due application of mind on the claims made by the assessee in the return and/or during the assessment proceedings. It was not a case where the income had allegedly escaped assessment either due to non-furnishing of all material facts by the assessee and/or ignorance/non-consideration of any of the aforesaid claims of the appellant by the assessing officer in the original assessment.
28. He further pleaded that on the contrary the following facts will sufficiently demonstrate that the assessing officer, before completing the original assessment, sought all relevant information/clarifications/material from the appellant, applied his mind to the claims of the assessee and thereafter came to a conscious decision to either agree or disagree with the claims of the appellant: On the issue - whether gross interest of Rs. 22.18 crores or net interest of Rs. 2.62 crores was assessable as "income from other sources' which, as stated above, can only be considered to be the sole basis of initiating the present re-assessment proceedings, the following information were sought and duly replied to by the appellant during the original assessment proceedings:
a) In questionnaire dated 19th November, 2000 the aforesaid issues were raised by the assessing officer in the original assessment (refer Question Nos. 10 to 12);
b) In response to the aforesaid questionnaire, the appellant, vide letters dated 16th January, 2001 and 2nd February, 2001, rendered detailed and point-wise replies/explanation to the various queries posed;
c) Claim for deduction under Section 80-HHC of the Act was supported by the certificate of the Chartered Accountant in Form 10CCAC enclosed with the return of income;
29. The learned Counsel referring to the relevant portion of original assessment order which has already been reproduced in the above part of this order in para 4 pleaded that it can be appreciated that the following issues were considered by AO while partly allowing the claim of the assessee.
i) As deduction Under Section 80-HHC could not exceed the profit from business in view of Section 80AB, the claim of assessee Under Section 80-HHC at Rs. 15,87,06,123/- against gross total income of Rs. 13,70,00,572/- was not correct;
ii) The assessee had wrongly included all income under the head 'Profit from business'. Dividend income of Rs. 6,56,18,564/- and net interest received of Rs. 2,62,36,763/-, have necessarily to be assessed under the head 'Income from other sources' as provided in Section 56;
iii) Deduction Under Section 80-HHC has to be computed on the basis of profit/income which does not include 'income from other sources' amounting to Rs. 6,45,18,564/- plus 2,62,36,763 (9,18,55,327/0) and thus, deduction Under Section 80HHC has to be restricted to profit under the head 'Profit from business', in view of Section 80AB of the Act;
iv) It was noticed from audit report Under Section 80-HHC, that there was some export of manufactured goods also and profit from same as per procedure laid down in Section 80-HHC was at negative figure which had been ignored by the assessce. This, as per the assessing officer, was not a correct stand because Section 80-HHC prescribes a package of method of computing deduction and so many stages are involved in computation and negative figure arrived upon at some intermediate stage can not be ignored.
30. Relying on the above arguments learned Counsel pleaded that AO after considering the detailed replies of the assessee came to conscious decision to assess only net interest income of Rs. 2.62 crores as income from other sources in the original assessment order. Subsequent incumbent of the AO, after perusal of assessee's record also agreed with the conclusion of AO who completed the original assessment order in the case of the assessee as it is evident from the fact that in the remand report submitted vide letter dated 16.1.2002 before CIT(A) the said officer specifically stated that he agrees with the aforesaid conclusion. He pointed out to the following observations of subsequent incumbent AO in the remand report (page 49 of the paper book) which is as under:
As regards interest, the appellant explains that during the year under consideration, the appellant earned interest of Rs. 22.18 crores and paid an amount of Rs. 19.56 crores. As a result thereof there has been a surplus and it has to be treated as business income and not as income from other sources. The appellant further claims that the earning of interest income related to the deposits with the bank earned from customers against credit facilities, inter-corporate deposit on short term deposit, interest from staff advance and other interest earned from P.S.Us. As regards the payments the appellant explains that all the payments were meant for imports and did not relate to exports. The appellant has netted the interest which has also been allowed by the learned CIT (A) in the past years. I agree with the appellant that the interest has to be netted as done in the past and only deficit has to be taken to the expenditure account.
The appellant has in its written submission quoted various decisions in support of its claim that the income from interest has to be netted, therefore, personally feel that the claim of the claim of the appellant is justified.
(emphasis supplied)
31. Referring to these facts learned Counsel pleaded that it is clearly established that the assessment of net interest income of Rs. 2.62 crores (and not gross interest income) as 'income from other sources' cannot even be regarded as an over-sight. On the contrary he pleaded that the said assessment was a result of a conscious decision arrived at by the AO based on in depth investigation and due application of mind. He pleaded that in the aforesaid background facts, it was not open to the AO to initiate fresh proceedings merely to assess gross interest income as 'income from other sources', deferring/disagreeing with the option of his predecessor.
32. Further learned Counsel pleaded that allegation of the AO that the applicability of Section 80 AB was not examined in the original assessment order is also factually incorrect as this aspect was also considered by AO as it can be seen from the observations of AO in the original assessment order. For the plea of the AO regarding applicability of subsequent decision of IPCA Laboratories (supra), [reason stated at Sl. No. (c)] he pleaded that their Lordships of the Hon'ble Supreme Court have held that profit/loss from export of trading goods must be set off against profit/loss of manufactured goods and vis-a-vis. He pleaded that in the original assessment the principle laid down by Supreme Court in the said case was, in fact, applied and the deduction claimed by the assessee was consequentially reduced as is evident from the computation of deduction made in the original assessment order.
33. Referring to reason (d), learned Counsel pleaded that concept of 'derived from ' as enunciated in the decision of Supreme Court in the case of Sterling Foods 237 ITR 579 could not be applied in the reassessment proceedings. He contended that as explained above, in the original assessment no deduction was allowed at various incomes referred in the reasons recorded and thus he pleaded that concept of 'derived from' was not at all relevant for reopening. He pleaded that in the original reasons Clause (c) and (d) do not find any mention. Thus even otherwise, reopening cannot be supported on the basis of such further reasons, namely (c) and (d).
34. The learned Counsel further pleaded that it is a settled law that the validity of initiation of reassessment proceedings must be tested on the basis of reasons recorded by the AO prior to initiation of reassessment proceedings and nothing more. He pleaded that it has consistently been held in the various decisions that the reasons recorded cannot be supplemented by fresh/further reasoning to justify the initiation of reassessment proceedings.
• Seth Brothers v. JCIT: 251 ITR 270 (Guj.) • Saradbhai M. Lakhani v. ITO 231 ITR 779 (Guj.) • Chunnilal Onkarmal (P) Ltd. v. CIT 224 ITR 233 (MP) • Shambhu Nath Sheo Prasad 113 CTR 166 (Pat.)
35. Pleading on these lines the ld. Counsel submitted that initiation of reassessment proceedings is based on mere change of opinion and, therefore, is illegal and bad in Jaw.
36. The learned Counsel elaborating his pleading that reassessment proceedings are invalid in view of proviso to Section 147 argued that proviso to Section 147 places fetters on the power of AO to initiate reassessment proceedings beyond the period of 4 years from the end of relevant assessment year, where the assessment has been completed Under Section 143(3) of the Act unless the income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. For raising such proposition he relied on the following decisions:
- CIT v. Foramer France 264 ITR 566 (SC)
- Orient Beverages Ltd. v. ITO 208 ITR 509 (Cal)
- Peico Electronics & Electricals Ltd. v. DCIT 210 ITR 991 (Cal)
- Kaira District Cooperative Milk Producers Union Ltd. 216 ITR 371 (Guj)
- Garden Silk Mills Ltd. v. DCIT 222 ITR 27 (Guj)
- Parle Marketing Cooperative Society Ltd. 236 ITR 604 (Ker)
- Avani Corporation v. ITO 238 ITR 407 (Guj.)
- Vareli Weaves (P) Ltd. v. DCIT 240 ITR 77 (Guj)
- Fenner (India) Ltd. v. DCIT 241 ITR 672 (Mad)
- Shree Tharad Jain Yuvak Mandal v. ITO 242 ITR 612 (Guj.)
- Dy. CIT v. Pala Marketing Coop. Society Ltd. 243 ITR 499 (Ker.)
- Sheth Brothers v. JCIT 251 ITR 270 (Guj.)
- Hemraj Munshi Ram v. UOI 245 ITR 155 (Pat)
- Arvind Mills Ltd. v. Dy. CIT 242 ITR 173 (Guj.)
- Mcdermott International Inc. v. ACIT 259 ITR 138 (Uttr)
- Marudhar Hotels Pvt. Ltd. v. DCIT 259 ITR 509 (Raj).
- G.N.Shaw(Wine) Pvt Ltd v. ITO 260 ITR 513(Cal)
- Bhor Industries Ltd. v. ACIT 261 ITR 161 (Bom)
- Parikh Pelrol Chemical Agencies P Ltd. v. ACIT 266 ITR 193 (Bom)
- ICICI Bank v. K.J. Rao 268 ITR 203 (Bom)
- Hindustan Lever Ltd v. R.B. Wadkar ACIT 268 ITR 339 (Bom)
- Girdhar Gopal Gulati v. UOI 269 ITR 45 (All.)
- Mahavir Spinning Mills Ltd. v. CIT 270 ITR 290 (P&H)
- Parikh Petrol Chemical Agencies (P) Ltd. v. ACIT 183 CTR 243 (Bom)
- Duli Chand Singhania v. ACIT 188 CTR90(P&H)
- CIT v. Nedingadi Bank Ltd. 130 Taxman 93 (Ker)
- ONGC v. DCIT 133 Taxman 27 (Utt)
- Chandan Metal Products (P) Ltd v. DCIT 81 ITD 366 (Pune)
- Chem Crown Exports Ltd. v. ITO 93 TTJ 710 (Cal.)
37. The ld. AR contended that expression "material facts" has been explained in the decision of Hon'ble Rajasthan High Court in the case of CIT v. A.R. Enterprises 255 ITR 121 and he invited our attention towards the following observations of their Lordships.
The expression "material facts" refers only to primary facts. There is no duty cast on the appellant to indicate or draw the attention of the AO to what factual or legal or other inferences can be drawn from primary facts. Relying on the decision of the apex Court in Calcutta Discount Co. Ltd. v. ITO and Anr. , the apex Court in a later decision, viz., Associated Stone Industries (Kotah) Ltd. v. CIT , held that the duty of the assessee is only to fully and truly disclose all material facts. Explaining the expression "material facts" as contained in Section 34(1)(a), the Court observed that it refers only to the primary facts and the duty of the assessee is to disclose such primary facts. The court further observed that there is no duty cast on the assessee to indicate or draw the attention of the ITO to what factual or legal or other inferences can be drawn from the primary facts disclosed. There is not a word in the order of assessment if the respondent-assessee omitted to disclose any material fact.
38. He contended that similar proposition has been laid out in the case of Oriental Carpet Manufacturers India Ltd. 168 ITR 296.
39. Referring to the decision of Bombay High Court in the case of Hindustan Lever Limited 268 ITR 332 the ld. AR pleaded that it has been categorically observed in the said decision that the reasons recorded by the AO should satisfy the failure on the part of the assessee to disclose the necessary facts. Their Lordships observed that it is for the AO to reach conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and he has to put his opinion/conclusion on record in black and white. For raising such proposition he further relied on the following decisions:
- Jashan Textile Mills (P) Limited 284 ITR 542 (Bom.)
- German Remedies Ltd. v. DCIT: 287 ITR 494 (Bom.): No allegation of any failure on the part of the assessee-notice invalid
- Babu Lal Jug Raj & Co. v. ITO 289 ITR 115 (Raj.): Notice not specifying omission on the part of the assessee - reassessment bad.
- Durga Prashad Goyal v. ITO 98 ITD 227/101 TTJ 1 (Asr.) (SB) - Reasons not specifically stating failure on the part of the assessee to disclose material facts.
40. Referring to the facts of the case the ld. AR pleaded that AO has clearly failed to justify initiation of impugned re-assessment proceedings in the term of proviso to Section 147 of the Act. There is nothing on record to establish any failure on the part of the assessee to disclose any material fact necessary for the assessment of the assessee. Thus he pleaded that reassessment proceedings are initiated without jurisdiction and thus are had in law and void ab initio.
41. Referring to the order of AO dated 21/22-11.2005 he pleaded that reassessment proceedings have been initiated just to consider certain judicial precedents. He pleaded that non-consideration of judicial precedents which was available at the time of original assessment cannot be the basis for reopening of concluded proceeding as assessee is not at all required to bring to the notice of AO the judicial precedents relevant for making the assessment. He pleaded that on the contrary, it is the duty of AO to frame the assessment on the basis of judicial precedent available at the time of framing of the assessment. He pleaded that merely on account of non-consideration of any decision which is rendered subsequently it will not be justified to hold that there was any default on the part of the assessee to disclose truly and fully all material facts obviously for the reason that such decision was not available at the time of original assessment.
42. Referring to the decision of Hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO 41 ITR 191, the ld. AR pleaded that it is held in no uncertain terms that proper legal inferences have to be drawn by the AO which would obviously include applying the available judicial precedent and the said proposition of law was subsequently applied in the decision of Associated Stone Industries Ltd. v. CIT 224 ITR 560.
43. The ld. AR further relied on the following decisions:-
• CWT V. C.M. Ghosh Trust 279 ITR 346 (AIL): Duty of assessee is only to disclose primary facts. AO having failed to apply decision of High Court, it cannot be said that assessee failed to furnish primary facts.
• Denish Industries Ltd. v. ITO 271 ITR 340 (Guj.): Held that for deciding the question of jurisdiction, the law applicable on the date of filing of return has to be considered. A retrospective amendment made after the filing of return would not result in holding that the assessee had failed to disclose fully and truly all material facts.
• CIT v. A.R. Enterprises (P) Limited 255 ITR 121 (Raj.) • A.V. Thomas Exports Limited v. DCIT 99 ITD 745 (Chennai): Subsequent decision of Supreme Court - No failure on the part of the assessee to disclose primary facts - re-opening beyond 4 years bad in law.
• The aforesaid decision has recently been affirmed by the Madras High Court in CIT v. A v. Thomas (Madras High Court)
44. The ld. AR contended that the decisions relied upon by the AO in his order dated 21/22.11.2005 while rejecting the legal objections of the assessee are distinguishable and are not applicable to the present case. He contended that in the majority of the decisions the issue before the Courts/Tribunal was whether-initiation of proceedings Under Section 147 of the Act is justified, where fresh facts come to the knowledge of the AO, which were not available at the time of original assessment. He contended that the decisions relied upon by the AO have been elaborately distinguished by the assessee vide letter dated 29.11.2005 and he in this regard referred to pages 84 to 94 of the paper book where copy of such letter is furnished.
45. Referring to the facts of the present case he contended that no fresh facts were considered in the present reassessment proceedings and on the contrary the reassessment was done by the AO only for taking into consideration certain decisions. The ld. AR pleaded that the consideration/non-consideration of a judicial precedent cannot be considered to be fresh facts coming to the notice subsequent to the conclusion of the original assessment proceedings. He pleaded that a clear distinction exists between fresh facts coming to the knowledge of the AO and a judicial precedent.
46. Finally concluding his arguments on this issue the ld. AR pleaded that the allegation of the AO that the assessee has failed to disclose the primary facts regarding the nature of different incomes while claiming deduction Under Section 80HHC of the Act is factually incorrect. Referring to his earlier arguments he contended that the details of interest income and miscellaneous receipts were duly furnished and considered by the AO while framing original assessment. Thus he pleaded that there was no failure on the part of assessee to disclose the primary facts regarding the nature of different incomes while claiming deduction Under Section 80HHC of the Act and that no new particulars/facts were furnished by the assessee during the present proceedings which fact clearly shows that no fresh facts/particulars were indeed required by the AO. Thus he pleaded that initiation of reassessment proceedings was illegal and, therefore, bad in law.
47. On the other hand, the ld. DR contended that according to Explanation 1 of Section 147 mere production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso. Thus he pleaded that according to Explanation 1 to the proviso to Section 147assessee cannot contend that there was a full disclosure in the terms of proviso to Section 147. The ld. DR then referred to the detailed order passed by AO rejecting the objections of assessee for reopening of the assessment. The ld. DR heavily relied upon the said order which has already been reproduced in the above part of this order. He further referred to the order of CIT (A) to contend that reassessment proceedings were validly initiated Under Section 147 of the Act.
48. He further referred to the recent decision of Hon'ble Delhi High Court in ITA No. 1381(Del)06 dated 23.5.2007 in the case of CIT v. Highgain Finvest Pvt. Ltd. (a copy of which was placed on record). In the said case for assessment year 1997-98 the assessee had filed its return of income at a sum of Rs. 42,700/- which was processed Under Section 143(1) (a) on 24.3.1998. A letter was received by AO from Addl. Director of Income Tax (Investigation), New Delhi giving information that the assessee was involved in giving and taking bogus entries/transactions during financial year 1996-97. A survey was conducted in the office premises of one Shri Sanjay Rastogi, Chartered Accountant and in his deposition said Shri Sanjay Rastogi stated that a credit of Rs. 5 lakh was given by M/s. Mehram Exports Pvt. Ltd. to the assessee and that the same was a bogus transaction. Consequently a notice Under Section 148 was issued. The assessee contested reopening of the assessment before CIT(A). The CIT(A) held that the assessee had merely disclosed the fact that he had received share application money and what the assessee did not disclose was true source and nature of the receipt and to this extent the assessee did not make the full and true disclosure of facts. Since the assessee did not fully and truly disclose all material facts necessary for assessment, the AO could reopen the assessment even though four years had gone by from the end of the relevant assessment year. Before ITAT it was contended on behalf of the assessee that AO had merely acted on the basis of some letter without making any enquiry in respect of truth of the contents of that letter. Thus it was contended that reasons recorded were not those of AO but were effectively those of ADIT (Inv.). The Tribunal took the view that AO had not made any enquiry or investigation on his own to form a belief that income of the assessee had escaped assessment. It was concluded that there was nothing to show in what capacity Shri Sanjay Rastogi had made his statement and, therefore, the information obtained by the AO is vague, hearsay and indefinite having no direct nexus with the formation of belief regarding escapement of income. Thus it was held that the initiation of proceedings was invalid. After referring to various case laws their Lordships have upheld initiation of proceedings Under Section 147/148.
49. The ld. DR further relied on the decision in the case of Sri Krishna Pvt. Ltd. v. ITO . In this case it was held that disclosure of loans which was subsequently discovered to be false, reassessment was validly initiated. This case law was relied upon to contend that since the belief is that of ITO, the sufficiency of reasons for forming the belief is not for the court to be judged but it is open to an assessee to establish that, in fact there existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the ITO and examine whether there was any material available on the record from which the requisite belief could be formed by the ITO and further whether that material had any rational, connection or a live link for the formation of the requisite belief. In the said case the earlier decision of Supreme Court in the case of Phool Chand Bajrang Lal v. ITO 203 ITR 456(SC) was followed.
50. The ld. DR further referred to the decision of Hon'ble Delhi High Court in the case of Consolidated Photo and Finvest Ltd. v. ACIT 281 ITR 394 (Del) to contend that when the issues are not addressed in the assessment order, it cannot be said that action of reopening of assessment is based on change of opinion and, therefore, the same cannot be said to be incompetent or otherwise improper. On the basis of that decision it was contended by the ld. DR that the principle of change of opinion is applicable only to situations where the AO has applied his mind and taken a conscious decision on a particular matter in issue.
51. In the said case assessee was engaged in the business activity of acting as import agent. The return was filed at a loss of Rs. 2,96,44,790/-. Assessee had received interest free advances/trade deposits from its principals to pay the import bills against letter of credit opened by assessee at its own cost. These interest free funds, according to the assessee, could be used for any gainful activity till such time the same were utilized to meet the demand under the import bills. Thus the assessee claims to have utilized these funds in making short time advance by way of intercorporate deposits and had earned interest income on the same which according to the assessee was incidental to its business. Further it was pleaded on behalf of the assessee that during the assessment proceedings it had furnished details of all the expenses incurred by it including import expenses comprising interest, foreign exchange fluctuations, rebate and discount, LC charges/bank charges and hundi charges. AO had concluded the assessment proceedings vide order dated 27.9.2000 Under Section 143(3) of the Act. Later on more than 4 years a notice Under Section 148 was received from the AO stating therein that the income of the assessee had escaped for the said asstt. year and a return was required to be filed. Assessee filed the very same return as was originally filed. Initiation of reassessment proceedings were challenged before the AO on the ground of "mere change of opinion". The objection of the assessee was rejected by way of an order dated 21.10.2005 observing therein that assessee had failed to disclose fully and truly all material facts necessary for the assessment which had resulted in escapement of income. Relying on the decision of Hon'ble Supreme Court it was held by AO that mere production of evidence by the petitioner before the ITO was not enough. Assessee was duty bound to bring to the notice of AO all material and relevant facts which may lie embedded in the evidence produced by the assessee no matter the AO could have uncovered such facts but had not actually done so. Correctness of such order was challenged before the Hon'ble High Court in the said case. Reliance on behalf of the assessee was placed on the Full Bench decision of jurisdictional High Court in the case of CIT v. Kelvinator of India 256 ITR 1 in support of the submission that an order of assessment must be presumed to have been passed by the concerned AO after due and proper application of mind and thus the reassessment is based on change of opinion.
52. On behalf of the revenue it was pleaded that mere production of account books and other evidence relevant to the meaning of an assessment did not tantamount to disclosure within the meaning of Section 147 of the Act. It was pleaded that although the assessee had given the reply to the questionnaire and referred to the expenses claimed by way of deduction, there was nothing in the order of assessment to show that the AO had critically examined the same claim or material. It was pleaded that it is also not the case of the assessee that the material furnished by him to the AO before the conclusion of assessment had been examined and analyzed by passing the order of assessment. Thus it was contended that it cannot be said to be a case of change of opinion and it was pleaded that in fact the AO had recorded no opinion whatsoever on, admissibility of deductions claimed by the assessee. Reference was made to Clause (c) of Explanation 2 to Section 147 to contend that it is abundantly clear that cases in which the taxable income had been made the subject of excessive relief under the Act or cases in which excessive loss or depreciation allowed or any other allowance under the Act had been computed to constitute the cases of escaped assessment within the meaning of Section 147 of the Act.
53. Considering these submissions it was held by Hon'ble High Court that in view of Explanation 1 to proviso to Section 147 the action initiated by revenue does not suffer from any error of jurisdiction to warrant interference from High Court in exercise of jurisdiction. It was observed that the principle that a mere change of opinion cannot be the basis for reopening of concluded assessment would be applicable only the situation where the AO has applied his mind and taken a conscious decision on a particular matter in issue and it will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment. It was further observed that what is important is that whether AO has based on the material available to him taken a view and when he had not done so the proposed reopening could not be assailed on the ground that the same is based only on a change of opinion.
54. Thus it was pleaded by the ld. DR that the ld. CIT(A) was right in holding that reassessment proceedings were validly initiated.
55. In rejoinder the learned Counsel appearing on behalf of the assessee pleaded that the case law relied upon by the ld. DR is not applicable to the facts of the present case. He contended that in the case of Sri Krishna Pvt. Ltd. v. ITO (supra) the loans which were treated to be genuine in the original assessment proceedings were subsequently discovered to be false and, therefore, it was held by the Hon'ble Supreme Court that reassessment proceedings were validly initiated. He contended that in the present case no material fact disclosed by the assessee is found to be false rather part disallowance is made on the basis of change of opinion.
56. With regard to the decision of Hon'ble Delhi High Court in the case of CIT v. Highgain Fin vest Pvt. Ltd. (supra) it was submitted by the learned Counsel that assessment in the said case was framed Under Section 143(1)(a) of the Act and in that circumstances it was held by the Hon'ble Delhi High Court that the assessee did not disclose the true source and nature of the receipt and thus no true and full disclosure was made. He contended that in the present case each and every entry was disclosed in the return of income itself and the same was also considered by the AO by way of his conscious and detailed order. Thus he contended that this case is also not applicable. Referring to the decision of Hon'ble Delhi High Court in the case of Consolidated Photo and Finvest Ltd. v. ACIT (supra) he pleaded that this case was later on considered by Hon'ble Delhi High Court in the case of CIT v. Eicher Ltd. in ITA No. 309/2006 order dated 22.5.2007 (a copy of this order is placed at pages 457 to 460 of the paper book). He contended that their Lordships have observed as under:
11. Learned Counsel for the revenue relied upon Consolidated Photo & Finvest Ltd. v. Asstt. CIT 1, wherein a Division Bench of this Court considered the case law and came to the conclusion that in principle a mere change of opinion would be applicable only to a situation where the Assessing Officer had taken a conscious decision on the matter in issue. It was held that it would have no application where the assessment order does not record a finding on the aspect which formed the basis for reopening the assessment.
12. In response, learned Counsel for the assessee drew our attention to CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 2, wherein the Full Bench of this Court had taken a completely contrary view and it was submitted that the Division Bench did not follow the Full Bench. It was pointed out that the Full Bench held that when a regular order of assessment is passed in terms of Section 143(3) of the Act, a presumption can be drawn that such an order has been passed on due application of mind. Reference was also made to Section 114(e) of the Indian Evidence Act for drawing a presumption to the effect that judicial acts and official acts are performed in a regular manner. The Full Bench was of the view that if it be held:
...that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong.
13. Before the Full Bench, a decision of the Gujarat High Court, namely, Praful Chunilal Patel v. M.J. Makwana, Asstt. CIT , was relied upon by learned Counsel for the revenue and the Full Bench clearly stated that it was with respect, unable to accept the view propounded in that judgment. Notwithstanding this, in Consolidated Photo and Finvest Ltd., the Division Bench found itself in respectful agreement with the view of the Gujarat High Court.
14. Subsequently, a similar issue came up before another Division Bench of this Court in KLM Royal Dutch Airlines v. Asstt. Director of Income-tax [2007] 159 Taxman 191. The Division Bench noted the conflict between the decision of the Full Bench and the Division Bench of this Court and quite naturally concluded that since the view expressed by the Division Bench cannot be reconciled with the view of the Full Bench, it must be held that the Division Bench did not lay down the correct law. Following the view expressed in KLM Royal Dutch Airlines' case (supra), we are of the view that it would not be correct on our part to overlook the decision of the Full Bench in Kelvinator of India Ltd.'s case (supra) and rely upon the decision of the Division Bench in Consolidated Photo & Finvest Ltd.'s case (supra). That would be subversive of judicial discipline.
15. In Hari Iron Trading Co. v. CIT 1, a Division Bench of Punjab and Haryana High Court observed that an assessee has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. We agree.
16. Applying the principles laid down by the Full Bench of this Court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse.
17. Insofar as the present appeal is concerned, we find that the assessee had placed all the material before the Assessing Officer and where there was a doubt, even that was clarified by the assessee in its letter dated 8-11-1995. If the Assessing Officer, while passing the original assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made. Since the facts were before the Assessing Officer at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion. This cannot form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee.
18. In sum and substance, (his was the decision rendered by the Tribunal and we do not find any fault in the view taken. Consequently, we are of the view that since the case is one of a mere change of opinion, that does not justify the Assessing Officer's reopening the assessment of the assessee.
9. No substantial question of law arises. The appeal is, therefore, dismissed.
57. Thus he contended that the decision relied upon by the ld. DR in the case of Consolidated Photo And Finvest Ltd. v. ACIT (supra) also cannot be applied. Thus the ld. AR pleaded that initiation of reassessment proceedings in the present case should be held illegal and, therefore, should be quashed.
58. We have carefully considered the rival submissions in the light of material placed before us. The reassessment has been challenged by the assessee mainly on three grounds. Firstly, that the impugned reassessment proceedings are based on mere change of opinion and, therefore, not permissible in law. Secondly, no reasonable belief was formed for initiating reassessment proceedings to hold that income of the assessee had escaped assessment which is a pie-requisite condition for valid initiation of reassessment proceedings. Thirdly and lastly, reassessment proceedings are invalidly initiated as according to proviso to Section 147 reassessment proceedings cannot be validly initiated beyond the period of 4 years from the end of assessment year only in the circumstances where there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.
The following facts are not in dispute:
i). Assessee filed its return of income on a sum of Rs. 3,02,82,098/- on 30.11.1998;
ii). Assessment Under Section 143(3) of the Act was completed vide order dated 23.2.2001 assessing the income of assessee at a sum of Rs. 12,93,09,770;
iii). In the original assessment the AO, inter alia, recomputed deduction allowable to the assessee Under Section 80HHC at a sum of Rs. 13,01,77,391/-against the claim of the assessee at a sum of Rs. 15,87,06,123/-;
iv). A notice dated 23.2.2005 was issued by the AO Under Section 148 initiating reassessment proceedings for the year under consideration.
v) The reassessment was completed vide order dated 28.2.2006 in which deduction Under Section 80HHC granted earlier was withdrawn.
59. The main reasons recorded by the AO to initiate reassessment proceedings are as follows.
60. That interest and dividend income should have been offered for taxation under the head 'income from other sources' as against the same was offered by the assessee under the head 'business income' and other income namely, misc.receipts, staff quarter rent, gain on exchange and grant (NRF) should have been offered for taxation as 'business income not derived from export activity'. It was further observed in the reasons that once the aforesaid income are properly taxed in the manner thus indicated, the assessee would not be eligible for claiming deduction Under Section 80HHC of the Act as the income derived from export will be negative. Thus it is recorded in the reasons that deduction Under Section 801IHC of a sum of Rs. 13,01,77,391/- has wrongly been allowed and thus income of the assessee has escaped assessment on account of failure on the part of assessee to disclose truly and fully all material facts necessary for assessment.
61. As against above reasons the case of the assessee is that deduction on interest income in its entirety was not considered for deduction Under Section 80HHC. It is the case of the assessee that other receipts namely, misc. receipts, staff quarter rent, gain on exchange and grant in aid were not considered for allowing deduction Under Section 80HHC by the AO in the original assessment order. It is also the case of the assessee that dividend income of Rs. 6,56,18,564/- in its entirety was held to be assessable as 'income from other sources' and thus did not form part, of business income. It is also the case of assessee that while computing deduction in respect of traded goods, the AO considered the entire interest paid amounting to Rs. 19,55,87,150/- as 'indirect cost' and 'while computing adjusted profit of the business' the AO excluded 90% of the total interest amounting to Rs. 22,18,23,913/- and thus the entire interest income of Rs. 22,18,23,913/- was not considered for allowing deduction Under Section 80HHC. Thus it is the case of the assessee that deduction Under Section 80HHC has not been allowed in the original assessment order on all the above-mentioned receipts. According to the assessee in fact the only variation in the original assessment order and reasons recorded are that the AO assessed the entire receipt income of Rs. 22.18 crores as 'interest from other sources' as against net interest income of Rs. 2,62,36,763/- assessed in the original assessment which was a conscious decision of the AO in the original assessment order.
62. Further according to the letter of AO dated 21/22.11.2005 the AO expressed that reassessment proceedings are not initiated on a mere change of opinion since the issue of allowability of deduction Under Section 80HHC in the case of negative business income was neither raised nor considered in the original assessment proceedings. Similarly the applicability of Section 80 AB of the Act was not considered and decision of Hon'ble Supreme Court in the case of IPCA Laboratories (supra) and certain other decisions which were available on the date of framing the assessment were not in the knowledge of the AO and thus not considered in the original assessment.
63. On the issue of change of opinion it has been argued before us that Section 148 does not confer jurisdiction to reopen a completed assessment on change of opinion on the interpretation of a particular provision earlier adopted by the AO. The scope of said Section does not extent to reviewing its earlier order suo moto irrespective of there being any material to come to a different conclusion apart from just having second thought about the inferences drawn earlier. The relevant portion of original assessment order wherein the AO has discussed various aspects regarding grant of deduction has already been reproduced in the above part of this order in para No. 4. Similarly computation of deduction Under Section 80HHC in the original assessment order has also been reproduced in said para. It can be seen from para 6.i) of original assessment order that AO has observed that deduction Under Section 80HHC cannot exceed profit from business in view of Section 80 AB and, therefore, the claim of assessee Under Section 80HHC at a sum of Rs. 15,87,06,123/- against gross total income of Rs. 13,70,00,572/- is not correct. It has further been mentioned in para 6.iii) that he has carefully examined details of profit and loss account, audit report Under Section 80HHC and other details furnished by the assessee and after careful examination he has pointed out the mistakes which according to him were committed by the assessee while computing deduction Under Section 80HHC. In para 6 & 6.i) the AO in the original assessment has considered the applicability of Section 80 AB in the context of deduction Under Section 80HHC and he has also considered the aspect of dividend income as well as net interest income which according to the AO necessarily has to be assessed under the head 'income from other sources'. Thus so as it relates to allowability or otherwise of deduction Under Section 80HHC on dividend income and interest income, this aspect was very well considered by the AO in the original assessment order and after careful consideration he has held that dividend income and net interest income cannot be considered for the purpose of deduction Under Section 80HHC. The AO also has referred to decision of Hon'ble Kerala High Court in 157 CTR 225. Thus AO has excluded a total sum of Rs. 9,18,55,327/- (Rs. 6,56,18,564/- being dividend income.+ 2,62,36,763/-being net interest income) from business income of the assessee. Similarly the aspect of indirect cost has also been considered in para 6.ii). In para 6.iii) AO has considered the aspect that as per procedure laid down in Section 80HHC no deduction Under Section 80HHC can be allowed in case of negative profit and in this regard he has relied on certain decisions. Thus while framing the original assessment it was in the mind of AO that on negative profit deduction Under Section 80HHC cannot be allowed. Keeping in view all these aspects the AO in the original assessment order has computed deduction Under Section 80HHC as per annexure 'A'. It is not the case of the revenue that AO asked some information which was with-held by the assessee during the course of original assessment proceedings. Rather full details were furnished by the assessee which were examined by the AO and such fact of verification of details and examination by AO is very well recorded in the original assessment proceedings. It is a clear case where certain opinions were formed by the AO on the grant of deduction Under Section 80HHC from all necessary and material facts which were made available to him by the assessee during the course of original assessment proceedings.
64. In the light of these facts we have to examine whether reassessment proceedings can be held invalid on the grounds taken by the assessee.
65. So as it relates to the issue of change of opinion, it has already been found that in the present case it cannot be said that AO had not formed any opinion during the course of original asstt. proceedings regarding the issues on the basis of which reassessment proceedings are initiated by the revenue. The fact of having formed an opinion is apparent and findings in this regard are well recorded in the original assessment order itself. The ld. DR has placed reliance in the case of CIT v. Highgain Finvest Pvt. Ltd. (supra). In the said case return was processed Under Section 143(1)(a) of the Act and it was found as a matter of fact that the credit of Rs. 5 lakhs given by M/s. Mehram Exports Pvt. Ltd. to the assessee was a bogus transaction on the basis of which reassessment proceedings were initiated and thus the reasons recorded for reassessment proceedings were supported by material which came into the possession of AO after framing of the assessment. This decision was relied upon by the ld. DR to contend that sufficiency or correctness of the material could not be gone into at that stage. The facts in the present case are entirely different. The present case is not a case where bogus transactions are entered into by the assessee or they have subsequently been discovered. No new material has come to the notice of AO after framing of the original assessment. Rather original assessment is also based on the same material and no new material has been relied upon for framing the reassessment proceedings. Thus the said case cannot be relied upon.
66. Further the ld. DR has placed reliance in the case of Sri Krishna Pvt. Ltd. v. ITO (supra). In that case also the material facts which were disclosed by the assessee during the course of original assessment proceedings were subsequently discovered to be false. However, in the present case no material fact submitted by the assessee during the course of original assessment proceedings has been found to be false. Thus the said decision also cannot be applied to the facts of the present case.
67. Now coming to the third decision relied upon by the ld. DR, i.e. Consolidated Photo And Finvest Ltd. v. ACIT (supra) wherein it has been held that a mere change of opinion would be applicable only in a situation where AO had taken a conscious decision on the matter in issue and it was held that it would have no application where the assessment order does not record a finding on the aspect which formed basis for reopening the assessment. However, facts in the present case are different as in the present case the elaborate findings have been recorded by the AO in the original assessment order itself. Moreover, this decision was subsequently considered by Hon'ble jurisdictional High Court in the case of CIT v. Eicher Ltd. 163 Taxman 259 (Del) (supra) (a copy of which has been submitted in the paper book at pages 457 to 460) wherein referring to that decision it was observed by Hon'ble jurisdictional High Court that in view of earlier Full Bench decision of Delhi High Court in the case of KLM Royal Dutch Airlines v. ADI 159 Taxman 191 the view expressed in the case of Consolidated Photo And Finvest Ltd. v. ACIT (supra) cannot be said to have laid down correct law. It will be relevant to reproduce the following observations of their Lordships from the said decision:
14. Subsequently, a similar issue came up before another Division Bench of this Court in KLM Royal Dutch Airlines v. Asstt. Director of Income-tax [2007] 159 Taxman 191. The Division Bench noted the conflict between the decision of the Full Bench and the Division Bench of this Court and quite naturally concluded that since the view expressed by the Division Bench cannot be reconciled with the view of the Full Bench, it must be held that the Division Bench did not lay down the correct law. Following the view expressed in KLM Royal Dutch Airlines' case (supra), we are of the view that it would not be correct on our part to overlook the decision of the Full Bench in Kelvinator of India Ltd.'s case (supra) and rely upon the decision of the Division Bench in Consolidated Photo & Finvest Ltd.'s case (supra). That would be subversive of judicial discipline.
68. Thus no help can be derived by the ld. DR from the said decision.
69. It has already been mentioned that all the aspects were considered by the AO in the original assessment order while computing deduction Under Section 80HHC. If the contention of assessee that the reassessment proceedings are based on change of opinion is examined in the light of latest decision of Hon'ble jurisdictional High Court in the case of CIT v. Eicher Ltd. (supra), the reassessment proceedings must be held to be invalid. In the said case it was held that when assessee had placed all material' before the AO and where there was a doubt even that was clarified by the assessee and AO while passing the original order chose not to give any finding in this regard which cannot give AO or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made. If the facts were placed before the AO at the time of framing the original assessment and later a different view was taken by him or his successor on the same facts, it clearly amounts to change of opinion which cannot form the basis for permitting the AO or his successor to reopen the assessment of the assessee. Reference can be made to the following observations to their Lordships from the said decision:
16. Applying the principles laid down by the Full Bench of this Court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse.
17. Insofar as the present appeal is concerned, we find that the assessee had placed all the material before the Assessing Officer and where there was a doubt, even that was clarified by the assessee in its letter dated 8-11-1995. If the Assessing Officer, while passing the original assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, a full and true disclosure was not made. Since the facts were before the Assessing Officer at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion. This cannot form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee.
18. In sum and substance, this was the decision rendered by the Tribunal and we do not find any fault in the view taken. Consequently, we are of the view that since the case is one of a mere change of opinion, that does not justify the Assessing Officer's reopening the assessment of the assessee.
(emphasis ours)
70. The facts of the present case are rather on strong footings as in the above-mentioned case of CIT v. Eicher Ltd. no findings were recorded by the AO in the assessment order itself and from the assessment record it was noticed that AO had raised the query and assessee had submitted the replies. In the present case not only the queries were raised by the AO and replies were given by the assessee but findings are also recorded in express terms in the original assessment order. Thus an opinion was formed by the AO in the original assessment order itself and subsequent reopening has to be held to be based on mere change of opinion. Therefore, reassessment proceedings cannot be held to be validly initiated in accordance with the facts of the present case by applying the law laid down by Hon'ble jurisdictional High Court in the case of CIT v. Eicher Ltd. (supra).
71. Now coming to the other proposition argued by the learned Counsel for the assessee i.e. regarding proviso to Section 147. Section 147 and proviso thereof with Explanation 1 read as under:
Section 147 If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this Section and in Sections 148 to 153 referred to as the relevant assessment year):
Provided that where an assessment under Sub-section (3) of Section 143 or the Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of ofur years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return Under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
Explanation 1.- Provided before the Assessing Officer of account of books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
72. The words used in proviso "the failure on the part of the assessee...to disclose fully and truly all material facts necessary for his assessment for that assessment year" postulate a duty on every assessee to disclose fully and truly all material facts for his assessment. At the same time, an assessee cannot delve into the mind of AO and try to fathom it and predicate what are material facts in the view of the officer. The facts must be such that if taken into account, that would have an adverse effect on the assessee by passing of a greater assessment than the one actually made. At the same time, the rule of full disclosure of material and necessary facts should not be so fastidiously construed as would enable the department to say that non-disclosure of a fact which may have a remote bearing on the assessment attracts the section, as the AO would have material use of it to charge the assessee more than what he did. The AO cannot certainly fall back on the one to make good his deficiency in the first completed assessment, nor is he at liberty to take hold of any and every circumstance, call it non-disclosure of material facts and set machinery of reassessment in motion.
73. Keeping in view the above position of law we have to examine that whether there was any such failure on the part of the assessee. The observations of the AO in the original assessment order on the issue of grant of deduction Under Section 80HHC have already been reproduced in para 4 of this order. The reasons recorded for reopening have also been reproduced in para 6 of this order. While concluding the reasons the AO has referred that he has reasons to believe that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment the income chargeable to. tax has escaped assessment within the meaning of Section 147 of the Act because of wrong deduction Under Section 80HHC has been granted amounting to Rs. 13,01,77,391/-. The reasons for non-grant of deduction Under Section 80HHC as provided in para 3 of reasons recorded are based on two factors as follows:
i. If income from other sources and profits of business not derived from exports are excluded as per the legal provisions of the IT Act, 1961, there is a net loss under the head "profits and gains of business or profession".
ii. Consequently, in view of the provision of Section 80AB of the IT Act, 1961, no deduction Under Section 80HHC is allowable.
74. While discussing the aspect of change of opinion it has been extensively dealt and found that AO while computing deduction Under Section 80HHC in the original assessment order, had gone in depth regarding interest, dividend income and other receipts. It has also been found out that dividend income has not at all been considered while computing deduction Under Section 80HHC and so as it relates to net interest income has been excluded in view of the decisions prevalent at that time. Similar is the position with regard to other receipts which according to the AO in the reassessment order are not eligible for deduction Under Section 80 HIIC. So as it relates to application of Section 80AB, said aspect has also been taken under Consideration by the AO in the original assessment order as it can be seen from para 6.i). Though the relevant portion in the assessment order has already been reproduced in para 4 of this order but to demonstrate that these aspects were considered and taken into consideration by the AO in the original assessment order, the relevant observations are again reproduced below:
i) As mentioned above, deduction Under Section 80HHC cannot exceed the profit as computed under the head 'profit from business' in view of Section 80AB. In fact assessee has wrongly included all income under the head 'Profit from Business'. There is dividend income of Rs. 6,56,18,564/- and net interest received of Rs. 2,62,36,763/- which as provided in Section 56 has necessarily to be assessed under the head 'Income from Other Sources.' The decision of the Kerala High Court reported at 157 CTR 225 (1999) on this issue is in favour of the Revenue. The Kerala High Court has held that interest income should be taxed under 'Income from Other Sources' and should be reduced from Profits of Business for computing deduction Under Section 80-HHC. Thus, deduction Under Section 80-HHC shall be computed on the basis of profits, income which doesn't include income from other sources amounting to Rs. 6,56,18,564/- plus 2,62,36,763/- (9,18,55,327/-) and thus deduction Under Section 80-HHC shall be restricted to profit under the Profit from Business in view of Section 80AB.
75. Further in the original assessment order the AO has considered the aspect of negative income as per para 6(iii) which is also reproduced below for the sake of convenience:
iii) From audit report Under Section 80-HHC, it is noticed that there was some export of manufactured goods, also and profit from same as per procedure laid down in Section 80-HHC in negative in nature which has beep ignored by the assessee. This is not a correct stand because Section 80-HHC prescribes a package of method of computing deduction and so other methods are involved in computation and negative figure arrived upon at some intermediate stage can not be ignored. This view is supported by ITAT in Prestige Foods Ltd. 61 ITD 390 (Indore) and Yarn Syndicate Ltd. (2001) 114 Taxman 123. Learned CIT(A)-XXII, New Delhi has also confirmed this stand in other cases assessed to tax in this Range.
76. Thus it can be seen that all these aspects on the basis of which the assessment was proposed to be reopened were elaborately token into consideration by the AO in the original assessment order. As pointed out earlier that the proviso to Section 147 postulates a duty on every assessee to disclose fully and truly all material facts for the reassessment. We have observed that the assessee had disclosed fully and truly all material facts necessary for the purpose of computing deduction Under Section 80HHC. Thus no failure can be attributed on the part of assessee to disclose fully and truly all material facts necessary for his assessment for the years under consideration. From the reading of the reasons recorded it appears that it was in the mind of AO that assessee itself should have not claimed deduction Under Section 80HHC in respect of income from other sources and in view of the fact that if this 'income from other sources' is excluded and separately assessed, the business income will come to negative figure, therefore, no deduction should have been claimed and thus there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The well settled law does not support such contention of the revenue as according to law an assessee cannot delve into the mind of AO and try to fathom it and predicate what are material facts in view of the officer. The rule of full disclosure of material and necessary facts should not be so fastidiously construed as would enable the department to say that non-disclosure of a fact which may have a remote bearing on the assessment attracts the section, as the AO would have material use of it to charge the assessee more than what he did. The AO cannot certainly fall back on the one to make good his deficiency in the first completed assessment, nor is he at liberty to take hold of any and every circumstance, call it non-disclosure of material facts and set machinery of reassessment in motion.
77. In the reasons recorded as well as in the reassessment order, there was no fresh material with the AO which was not made available by the assessee during the course of original assessment proceedings. As material facts were disclosed fully and truly during the course of original assessment proceedings, there was no such failure on the part of assessee. Therefore, reassessment proceedings also cannot be held valid according to proviso to Section 147. The case law relied upon by the learned Counsel and referred to and discussed in para 37 to 40 of this order duly support this conclusion. However, for the sake of brevity and also to avoid repetition these are not referred again here.
78. Reliance on Explanation 1 to Section 147 is also misplaced as Explanation 1 envisages a situation where the issue with regard to which income is found to have been escaped was not discussed during the course of original assessment proceedings and later on during the course of reassessment proceedings the assessee claims that it had produced account books and other evidences before the AO from which material evidence could with due diligence have been discovered by the AO, therefore, reassessment proceedings are invalid. But in the present case the issue regarding allowability of commission was examined by the AO and relevant evidences were also produced by the assessee to justify the claim and after discussion of all the facts and figures deduction Under Section 80HHC was computed by the A.O. in the original assessment order. Thus according to the facts of the case, Explanation 1 to Section 147 is not applicable and, therefore, this argument of revenue is liable to be rejected and is accordingly rejected.
79. For the reasons and factual aspect discussed as above we hold that reassessment proceedings were not validly initiated and are liable to be quashed. The assessee is saved by the proviso to Section 147 as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the year under consideration. Accordingly the reassessment proceedings are quashed.
80. As we have quashed the reassessment proceedings on the ground of change of opinion as well as for the reason that there was no failure on the part of the assessee to disclose all necessary and material facts as envisaged in proviso to Section 147 of the Act, we do not consider it necessary to go into other third aspect challenging the validity of reassessment proceedings i.e., the aspect that impugned reassessment proceedings were initiated without forming a reasonable belief that income of the assessee has escaped assessment and also the merits of the claim of the assessee which will be of academic interest only.
81. Before parting we may mention that while concluding that reassessment proceedings are invalid we have taken into consideration all the case laws relied upon by both the parties and which have been discussed in the earlier part of this order in the arguments of both the parties.
82. The appeals filed by the assessee are allowed in the aforesaid manner.
83. Order pronounced in the open court on 28.09.2007.