M/s Cheviot Co. Ltd., Kolkata V. DCIT, Circle -1, Kolkata, Kolkata

CO 45/KOL/2012

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1941 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 15-05-2012
• Court: TRIBUNAL
• Department Lawyers: ANIL KR PANDE
• Assessee Lawyers: MANISH TIWARI
• Keywords: Reopening of assessment; Business income; Depreciation; Opportunity of being heard; Difference of opinion; Competent authority; Benefit of exemption; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 10B; 147; 148; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO. 530/KOL/2012 ASSESSMENT YEAR: 2003-04 DEPUTY COMMISSIONER OF INCOME-TAX, VS. CHEVIOT CO . LTD. CIRCLE-1, KOLKATA. (PAN: AABCC2380H) ( APPELLANT ) ( RESPONDENT ) & C.O. NO. 44/KOL/2012 IN I.T.A NO. 530/KOL/2012 ASSESSMENT YEAR: 2003-04 CHEVIOT CO. LTD. VS. DEPUTY COMMISSIONER OF INC OME-TAX, CIRCLE-1, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) & I.T.A NO. 531/KOL/2012 ASSESSMENT YEAR: 2004-05 DEPUTY COMMISSIONER OF INCOME-TAX, VS. CHEVIOT CO . LTD. CIRCLE-1, KOLKATA. (PAN: AABCC2380H) ( APPELLANT ) ( RESPONDENT ) & C.O. NO. 45/KOL/2012 IN I.T.A NO. 531/KOL/2012 ASSESSMENT YEAR: 2004-05 CHEVIOT CO. LTD. VS. DEPUTY COMMISSIONER OF INC OME-TAX, CIRCLE-1, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 22.12.2015 DATE OF PRONOUNCEMENT: 20.01.2016 FOR THE REVENUE: SHRI ANIL KR. PANDE, JCIT, SR. DR FOR THE ASSESSEE: SHRI MANISH TIWARI, FCA ORDER PER SHRI MAHAVIR SINGH, JM: BOTH THE APPEALS OF REVENUE AND CROSS OBJECTIONS BY ASSESSEE ARE ARISING OUT OF SEPARATE ORDERS OF CIT(A)-I, KOLKATA IN APPEAL NO.3 76/CIT(A)-I/CIRCLE-1/10-11 AND 423/CIT(A)-I/CIRCLE-1/09-10 BOTH DATED 16.12.2011 R ESPECTIVELY. ASSESSMENTS WERE FRAMED BY DCIT, CIRCLE-1, KOLKATA U/S. 143(3)/147 O F THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2003- 04 AND U/S. 143(3)/251/254/147/143(3) 2 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 OF THE ACT FOR AY 2004-05 VIDE ITS SEPARATE ORDERS DATED 24.12.2010 AND 31.12.2009 RESPECTIVELY. 2. AT THE OUTSET, IT IS NOTICED THAT THE ASSESSEE H AS RAISED A JURISDICTIONAL ISSUE IN ITS CROSS OBJECTIONS REGARDING REOPENING OF ASSESSMENT U/S. 147 READ WITH SECTION 148 OF THE ACT, WHICH GOES TO ROOT OF THE CASE. HENCE, WE WIL L TAKE UP THE CROSS OBJECTIONS FIRST. 3. THE FIRST COMMON ISSUE IN THESE TWO CROSS OBJECT IONS OF THE ASSESSEE IS AS REGARDS TO ASSUMPTION OF JURISDICTION BY THE AO FOR REOPENI NG OF ASSESSMENT U/S. 147 R.W.S. 148 OF THE ACT. FOR THIS, ASSESSEE HAS RAISED IDENTICALLY WORDED GROUND IN BOTH THE YEARS AND HENCE, THE GROUND NO. 2 RAISED IN CO. NO. 44/KOL/20 12 FOR AY 2003-04 READS AS UNDER: 2 (A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS WRONG AND UNJUSTIFIED IN UPHOLDING THE REASSESSMENT AND INITI ATION OF PROCEEDING U/S. 147 OF INCOME TAX ACT, 1961. B) THAT THE ORIGINAL ASSESSMENT HAVING BEEN COMPLE TED U/S. 143(3), INITIATION OF RE- ASSESSMENT PROCEEDING BEYOND FOUR YEARS PERIOD WAS INVALID IN LAW WITHOUT ESTABLISHING THE FAILURE ON THE PART OF THE ASSESSEE COMPANY TO DISC LOSE FULLY & TRULY ALL MATERIAL FACTS FOR ITS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN MANUFACTURING AND SALE OF JUTE GOODS AND GENERATION OF POWER FOR CAPTIVE CONS UMPTION. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARED TOTAL INCOME AT RS.3,44,34,580/- AFTER CLAIMING DEDUCTION U/S. 10B OF THE ACT IN RESPECT OF 100% EXPORT ORIENTED UNIT (EO U) AT BUDGE BUDGE. THE AO WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT VIDE ITS ORDER DATED 31.03.2006 DENIED THE CLAIM OF DEDUCTION U/S. 10B OF THE ACT BY OBSERVING AS UNDER: THE ASSESSEE COMPANY FILED THE COPY OF THE LETTER NO.242(1996)/EOA/226/96 DT. 21.5.96 ISSUED BY GOVT. OF INDIA, MINISTRY OF INDUSTRY, DEP ARTMENT OF INDUSTRIAL POLICY & PROMOTION. ON PERUSAL OF THE SAID LETTER (VIDE PAR A -3) IT IS SEEN THAT THIS LETTER IS MERELY A PERMISSION FOR IMPLEMENTATION OF THE PROJECT AND CO MMENCEMENT OF COMMERCIAL PRODUCTION. IT HAS BEEN SPECIFICALLY MENTIONED IN THE SAID PARA I.E. PARA 3 THAT AS SOON AS COMMERCIAL PRODUCTION HAS BEEN STARTED INTIMATION S HOULD BE GIVEN TO THE GOVT. OF INDIA, MINISTRY OF INDUSTRY, DEPARTMENT OF INDUSTRIAL POLI CY & PROMOTION. BUT THIS LETTER IS NOT AN APPROVAL FOR BEING DECLARED AS 100% EXPORT ORIEN TED COMPANY AS ENVISAGED IN EXPLANATION 2(IV) TO SEC. 10B. AGAIN THE ASSESSEE COMPANY FILED COPY OF LETTER NO. FEPZ/LIC/C-21/2001/573 DATED 7.4.2001 ISSUED BY THE FALTA EXPORT PROCESSING ZONE. FROM PARA-3 OF THE SAID LETTER IT IS SEEN THAT IT I S ALSO MERELY A PERMISSION TO IMPLEMENT THE PROJECT AND COMMENCE COMMERCIAL PRODUCTION. THIS I S ALSO NOT AN APPROVAL FOR BEING 100% EXPORT ORIENTED COMPANY AS ENVISAGED IN EXPLAN ATION 2(IV) TO SEC. 10B. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT TO EXEMPTION U/S. 10B OF THE AC T BUT DISALLOWED IN RESPECT TO INCENTIVE 3 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 RECEIVED I.E. EXCLUSION OF RECEIPTS OF EXTERNAL MAR KET ASSISTANCE (EMA) BY OBSERVING IN PARA 7.2 AND 7.3 AS UNDER: 7.2 I HAVE CAREFULLY ANALYZED THE RIVAL SUBMISSIO NS. THE PRIMARY REASONS OF THE AO FOR DENYING THE BENEFIT OF EXEMPTION U/S. L0B TO BUDGE BUDGE 100% EOU IS NON-SUBMISSION OF THE LETTER OF THE APPROVAL REGARDING 100% EXPORT OR IENTED UNIT FROM THE COMPETENT AUTHORITY. IN THIS REGARD THE PRESENT AO IN HIS REM AND REPORT DT.07.7.2006 (VIDE PARA-7) HAS STATED 'SO ON THE FACE OF THE CLARIFICATORY LET TER DT. 09.5.2006, THE LETTER DT. 21.5.2006 (AS STATED EARLIER) MAY BE TREATED AS AN APPROVAL FOR 1 00% EOU UNIT'. ACCORDINGLY THE APPELLANT IS ENTITLED TO DEDUCTION U/S.L0B IN RESPE CT OF PROFIT OUT OF BUDGE BUDGE 100% EOU. 7.3 HOWEVER IN THE COMPUTATION OF THE PROFIT FOR TH E PURPOSE OF EXEMPTION U/S.L0B, THE ASSESSEE HAS INCLUDED INCENTIVE RECEIPT WITHIN THE DEFINITION OF 'EXPORT TURNOVER'. IN THIS REGARD IT IS PERTINENT AT THIS STAGE TO CLARIFY THI S ISSUE. IN THE CLAUSE- OF THE EXPLANATION AFTER SUB-SEC.(VII) OF SEC. L0B, EXPORT TURNOVER HA S BEEN DEFINED AS 'THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF ELIGIBLE AR TICLES OR THINGS RECEIVED OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHAN GE IN ACCORDANCE WITH SUB-SEC.(III), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OUTSIDE INDIA. ACCORDING TO THIS DECISION 'EXPORT TURNOVER' MEANS THE AMOUNT OF CONVERTIBLE FOREIGN EXCHANGE BROUGHT INTO INDIA THROUGH EXPORT OF ARTICLES, THINGS OR COMPUTER SOFTWARE AS PROVIDED SUB-SEC.(I) THEREOF. HENCE ON STRICT INTERPRETATION OF THIS DEFINITION OF THE 'EXPORT TURNOVER', THERE IS NO SCOPE OF INCLUDING ANY OTHER ITEM NOT SPECIFICALLY MENTIONED IN THIS DEFINITION. THE AO I S ACCORDINGLY DIRECTED TO RECALCULATE THE ADMISSIBLE AMOUNT OF EXEMPTION U/S.L0B EXCLUDING TH E RECEIPT OF ANY INCENTIVE AMOUNT IN RESPECT OF SUCH EXPORT. 5. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE TRIB UNAL AND TRIBUNAL IN ITA NO. 2010/KOL/2006 VIDE ORDER DATED 25.05.2007 ALLOWED T HE CLAIMS OF THE ASSESSEE IN RESPECT TO EXEMPTION U/S. 10B OF THE ACT BUT IN RESPECT TO INCENTIVE RECEIVED BY WAY OF EMA THE MATTER WAS REMITTED BACK TO THE AO TO VERIFY THE FA CTUAL CLAIM OF THE ASSESSEE WHETHER IT HAS NOT INCLUDED THE INCENTIVE AMOUNT IN THE EXPORT TURNOVER OR NOT BY OBSERVING IN PARA 8.3 AS UNDER: 8.3. SECTION 10B REFERS TO THE PROFITS AND GAINS DERIVED BY A 100% EOU FROM EXPORT AND THEN GOES ON TO LAY DOWN THE METHOD OF COMPUTATION OF SUCH PROFITS WITH REFERENCE TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. THE P ROFITS OF THE BUSINESS OF THE UNDERTAKING WOULD INCLUDE ITS ENTIRE BUSINESS INCOME. NOW, IT CAN HARDLY BE DISPUTED THAT THE INCENTIVE BY WAY OF EXTERNAL MARKET ASSISTANCE WAS PAID BY TH E JUTE MANUFACTURES DEVELOPMENT COUNCIL AT THE SPECIFIED RATE OF THE FOB VALUE REAL IZED BECAUSE OF THE EXPORT BY THE 100% EOU OF THE JUTE GOODS MANUFACTURED BY IT. SUCH INCE NTIVE INDISPUTABLY FORMS PART OF THE PROFITS OF THE BUSINESS OF THE 100% EOU UNDER SECTI ON 28 OF THE ACT. THEREFORE, THE EXTERNAL MARKET ASSISTANCE HAS TO BE TAKEN INTO ACC OUNT IN COMPUTING THE PROFITS OF THE BUSINESS OF THE 100% EOU. THE ASSESSEE CLAIMS TO H AVE DONE SO BUT ACCORDING TO THE CIT(A), THE ASSESSEE HAS INCLUDED THE INCENTIVE AMO UNT IN THE EXPORT TURNOVER WHICH THE ASSESSEE SAYS IT HAS NOT. IN SUCH CIRCUMSTANCES, I T IS DEEMED FIT TO REMAND THE MATTER BACK TO THE AO TO VERIFY THE FACTUAL CLAIM OF THE ASSESS EE THAT IT HAS NOT INCLUDED THE INCENTIVE AMOUNT IN THE EXPORT TURNOVER AND HAS ONLY TAKEN TH E SAME INTO ACCOUNT IN COMPUTING THE PROFITS OF THE BUSINESS OF THE 100% EOU. IF THE AS SESSEES SAID CLAIM IS FACTUALLY CORRECT, ITS COMPUTATION SHOULD BE ACCEPTED. NEEDLESS TO ME NTION, THE AO SHOULD ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIR ECT ACCORDINGLY. 4 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 6. THE AO WHILE GIVING APPEAL EFFECT TO THE ORDER O F ITAT ALLOWED THE CLAIMS OF THE ASSESSEE VIDE ORDER DATED 17.07.2007 BY OBSERVING A S UNDER: HOWEVER, AS PER DIRECTION OF THE HONBLE ITAT, HEA RING WAS FIXED ON 12.7.2007 WHEN SHRI P. K. JAIN, A/R OF THE ASSESSEE, APPEARED AND FILED A WRITTEN SUBMISSION VIDE LETTER DATED 12.7.2007. IN THE ABOVE LETTER, THE ASSESSEE HAS A GREED TO PAY THE TAX ARISING OUT OF DISALLOWANCE OF DEDUCTION U/S. 80HHC IN VIEW OF AME NDED PROVISION OF SECTION 80HHC AND ALSO CBDTS CIRCULAR NO. 2/2006 DATED 17.01.200 6. IT HAS ALSO BEEN EXPLAINED WITH REFERENCE TO THE RECORD THAT INCENTIVE RECEIVED BY THE ASSESSEE HAS NOT BEEN INCLUDED IN THE EXPORT TURNOVER. SO, AS PER HONBLE ITATS DIRECTI ON, ASSESSEE IS TO GET EXEMPTION U/S. 10B ON ACCOUNT OF INCENTIVE. SUBSEQUENTLY, THE AO ISSUED NOTICE U/S. 148 OF THE ACT DATED 16.03.2010 AFTER RECORDING THE FOLLOWING REASONS: REASONS OF ISSUE NOTICE U/S. 148 OF THE I. T. ACT IN THE CASE OF M/S. CHEVIOT COMPANY LIMITED PAN AABCC2380H ASSESSMENT YEAR 2003-04 IN THIS CASE ASSESSEE HAS BEEN ALLOWED A TOTAL EXE MPTION OF RS.11,77,92,580/- U/S. 10B ON PROFIT OF ITS 100% EOU AT BUDGE BUDGE BEING AN ELIG IBLE UNDERTAKING. IT HAS COME TO MY NOTICE THAT AN AMOUNT OF RS.1,75,69,837/- BEING EXT ERNAL MARKET ASSISTANCE IN RESPECT OF THIS UNIT HAS BEEN CREDITED IN THE P&L A/C BELOW THE LIN E AND IS NOT INCLUDED AND/OR FORMING PART OF TOTAL INCOME. THIS AMOUNT IS ALSO NOT INCLUDED IN THE PROFIT OF THE UNIT ELIGIBLE FOR EXEMPTION U/S. 10B. HOWEVER, EXEMPTION U/S. 10B ON THIS AMOUNT HAS BEEN CLAIMED BY THE ASSESSEE AND ALLOWED IN THE ASSESSMENT. ANOTHER IM PORTANT ASPECT THAT HAS COME TO NOTICE IS THE DETERMINATION OF THE QUANTUM OF EXEMPTION U/S. 10B. IN FORM NO. 56G THE CHARTERED ACCOUNTANT HAS CERTIFIED AS UNDER: PROFIT AS PER P/L A/C 13,52,33,592/- RELATED INCOME OF EARLIER YEARS (GROSS) NOT INCLUDE D IN ABOVE PROFIT AND APPEARING BELOW THE LINE, NOW ADDED 1,75,69,837/- PROFIT OF THE UNDERTAKING 15,28,03,429/- EXPORT TURNOVER OF THE UNDERTAKING 24,01,84,164/- TOTAL TURNOVER OF THE UNDERTAKING 24,01,84,164/- ELIGIBLE PROFIT OF THE UNDERTAKING 152803429X24018 4164/240184164 (PROFIT X EXPORT TURNOVER/TOTAL TURNOVER) 15,28,03,429/- EXEMPTION U/S. 10B @ 90% OF RS.152803429 13,97,80,6 70/- P&L A/C OF THE BUSINESS ELIGIBLE FOR EXEMPTION IS AS UNDER: INCOME SALES SCH-11 25,88,79,464/- RELATED INCOME 1,70,71,108/- 27,59,50,572/- EXPENDITURE RAW MATERIAL AND FINISHED GOODS MANUFACTURING AND OTHER EXPENSES INTEREST DEPRECIATION SCH-12 SCH-13 SCH-14 4,40,81,967/- 8,94,62,635/- 45,373/- 71,27,005/- 14,07,16,980/- PROFIT BEFORE TAXATION 13,52,33,592/- IT IS SEEN THAT RELATED INCOME OF RS.1,70,71,108/- INCLUDES AN INCOME OF RS.1,66,74,805/- (RS. 1,10,15,747/- RELATING TO ASSESSMENT YEAR 2003-04 A ND RS.56,95,058/- RELATING TO EARLIER YEARS) BEING EXTERNAL MARKET ASSISTANCE (EMA) AND E XCHANGE GAIN (NET) RS.3,96,303/-. THIS INCOME OF RS.1,70,71,108/- IS SURELY FORMING PART O F PROFIT BEFORE TAXATION RS.13,52,33,592/-. 5 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 IN OTHER WORDS, THE INCOME OF RS.1,66,74,805/- BEIN G EMA IS EMBEDDED IN THE PROFIT OF RS.13,52,33,592/- ON WHICH EXEMPTION U/S. 10B WAS C LAIMED AND THERE IS NO DOUBT ABOUT IT. THE INCOME OF RS.1,66,74,805/- BEING EXTERNAL MARKE T ASSISTANCE IS NOT ELIGIBLE FOR EXEMPTION U/S. 10B. THE REASON IS THAT THE PROFIT IS NOT DERIVED FROM EXPORT OF ARTICLE OR THINGS OUTSIDE INDIA. IT CANNOT BE SAID THAT THIS PROFIT S PRINGS OUT FROM EXPORT OF ANY ARTICLE OR THING OUTSIDE THE COUNTRY. THEREFORE, THE PROFIT FAILS TO SATISFY THE BASIC CONDITION 'PROFITS AND GAINS FROM EXPORT OF ARTICLE OR THING' AS PROVIDED IN SUB -SECTION (1) OF SECTION 10B. THE INCOME IS ALSO NOT DERIVED AND RECEIVED IN/BROUGHT INTO INDIA IN CONVERTIBLE FOREIGN EXCHANGE IN ORDER TO SATISFY THE CONDITION OF SUB-SECTION (3) OF SECTION 10B. ABOVE ALL, THIS INCOME IS EXCLUDED BY THE ASSESSEE TO DETERMINE THE 'EXPORT TURNOVER' AND 'TOTAL TURNOVER' FOR COMPUTATION OF EXEMPTION U/S 10B BUT NOT EXCLUDED FROM PROFIT OF R S. 13,52,33,592/- BEING THE NET PROFIT OF THE BUSINESS. THE PRINCIPLE OF DEDUCTION OF AN AMOUNT F ROM NUMERATOR AND DENOMINATOR HAS NOT BEEN FOLLOWED HERE. IN THIS CASE, THERE ARE TWO NUM ERATORS I. E. PROFIT & EXPORT TURNOVER AND BOTH ARE REQUIRED TO BE REDUCED BY RS.1,66,74,805 T O ARRIVE AT THE CORRECT FIGURE OF EXEMPTION U/S 10B BUT ASSESSEE REDUCED ONLY ONE NUMERATOR BEI NG EXPORT TURNOVER BY THE SAID AMOUNT. THE EXPORT PROFIT IS ACCORDINGLY, TO BE CONSIDERED AT RS.11,85,58,787/ (RS.13,52,33,592/- MINUS RS.1,66,74,805/-) AND CONSIDERING SAME EXPORT TURNOVER & TOTAL TURNOVER AS REPORTED IN FORM NO. 56G, THE ELIGIBLE PROFIT WILL BE RS.11,85, 58,787/- FOR THE PURPOSE OF EXEMPTION U/S. 10B. IN THAT CASE, EXEMPTION ALLOWABLE TO THE ASSES SEE IS 90% OF RS.11,85,58,787/- WHICH COMES TO RS.10,67,02,908/-. THUS, IT IS SEEN THAT I N ASSESSMENT, EXCESS EXEMPTION TO THE EXTENT OF RS.1,10,89,672/- WAS ALLOWED BY ALLOWING AN AGGR EGATED AMOUNT OF RS. 11,77,92,580/- AND THEREBY TAXABLE INCOME OF IDENTICAL AMOUNT HAS ESCA PED ASSESSMENT. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE MAT THE AMOUNT OF EXCESS EXEMPTION RS,1,10,89,672/- CLAIMED BY THE ASSESSEE AND ALLOWE D IN THE ORDER OF ASSESSMENT FOR WHICH IDENTICAL AMOUNT OF INCOME HAS ESCAPED ASSESSMENT F OR THE ASSESSMENT YEAR 2003- 04. THEREFORE, TO ASSESS THE SAID INCOME AND ALSO ANY O THER INCC.NE CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO THE NOTICE SU BSEQUENTLY IN THE ASSESSEE OF THE PROCEEDINGS U/S. 147 OF THE IT ACT OR RECOMPUTED TH E DEPRECIATION OR ANY OTHER ALLOWANCE AS THE CASE MAY BE FOR THE ASSESSMENT YEAR 2003-04, A PROCEEDINGS U/S. 147 OF THE IT ACT IS INITIATED BY ISSUE OF A NOTICE U/S 148 OF THE IT AC T. THE AO FRAMED REASSESSMENT U/S. 143(3) R.W.S. 147 O F THE ACT VIDE HIS ORDER DATED 24.12.2010 AND DISALLOWED THE CLAIM OF EXEMPTION U/ S. 10B OF THE ACT AND ALSO EXCLUDED THE RECEIPTS OF EMA FROM EXEMPTION U/S. 10B OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADDITION AND ALLOWED EXEMPTION U/S. 10B OF THE ACT BUT CONFIRMED THE EXCLUSION OF RECEIPTS OF EMA FROM THE CLAIM OF EXEMPTION U/S. 10B OF THE ACT. AGGRIEVED, NOW ASSESSEE IS IN SECOND A PPEAL BEFORE TRIBUNAL. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT IN THE ORIGINAL ASSESSMENT COMPL ETED U/S. 143(3) OF THE ACT ON 31.03.2006 THE CLAIM OF EXEMPTION U/S. 10B OF THE A CT WAS DENIED BY THE AO AND THE SAME WAS CONTESTED BY ASSESSEE BEFORE CIT(A), WHO A FTER OBTAINING REMAND REPORT FROM THE AO HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCT ION U/S. 10B OF THE ACT IN RESPECT TO PROFIT FROM BUDGE BUDGE BEING A 100% EOU. BUT AS R EGARDS QUANTIFICATION OF EXEMPTION U/S. 10B OF THE ACT, THE CIT HELD THAT THE ASSESSEE HAS INCLUDED INCENTIVE RECEIPTS I.E. EMA WITHIN THE DEFINITION OF EXPORT TURNOVER AND, A CCORDING TO HIM, WHICH IS NOT CORRECT 6 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 IN VIEW OF CLAUSE (C) OF EXPLANATION TO SECTION 10B (VII) OF THE ACT. ACCORDINGLY, HE DIRECTED THE AO TO RECALCULATE THE ADMISSIBLE AMOUN T OF EXEMPTION U/S. 10B OF THE ACT BY EXCLUDING INCENTIVE FROM EXPORT TURNOVER. BUT THE TRIBUNAL VIDE ITS ORDER DATED 25.05.2007 DIRICTED THAT PROFITS OF THE BUSINESS OF THE UNDERTAKING WOULD INCLUDE THIS ENTIRE BUSINESS INCOME AND THE INCENTIVE BY WAY OF EMA PAID BY JUTE MANUFACTURER DEVELOPMENT COUNCIL AT A SPECIFIED RATE OF FOB VALU E REALIZED BY WAY OF EXPORT BY 100% EOU FORMS PART OF PROFIT OF THE UNIT AS BUSINESS IN COME. THEREFORE, THE TRIBUNAL HELD THAT EMA HAS TO BE TAKEN INTO ACCOUNT IN COMPUTING THE P ROFIT OF THE BUSINESS BUT THE ISSUE WAS RESTORED BACK TO THE AO FOR VERIFICATION OF ASS ESSEES CONTENTION THAT IT HAS NOT INCLUDED EMA IN THE EXPORT TURNOVER. THE AO WHILE GIVING APPEAL EFFECT TO THE ORDER OF THE TRIBUNAL ACCEPTED THE ASSESSEES CONTENTION AND ALLOWED THE EXEMPTION U/S. 10B OF THE ACT INCLUDING INCENTIVE I.E. RECEIPTS OF EMA. IN S UCH SITUATION, WHETHER THE REVENUE ON SAME SET OF FACTS CAN REOPEN THE ASSESSMENT BY RESO RTING TO THE PROVISIONS OF SECTION 148 R.W.S. 147 OF THE ACT? ADMITTEDLY, IN THE PRESENT CASE, THE RELEVANT AY INVOLVED IS 2003- 04 AND 2004-05 AND IN BOTH THE YEARS ASSESSMENTS WE RE COMPLETED U/S/. 143(3) OF THE ACT AND MATTER TRAVELLED UP TO TRIBUNAL AS NOTED IN THE REASONS RECORDED BY THE AO IN BOTH THE YEARS. WE FIND FROM REASSESSMENT ORDER FRAMED U/S. 143(3) R.W.S. 147 OF THE ACT AND CONSEQUENT TO THAT THE ORDER OF CIT(A), THERE IS NO FINDING AS SUCH THAT THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. THE C IT(A) HAS SIMPLY CONFIRMED THE ACTION OF AO FOR REOPENING OF ASSESSMENT VIDE PARA 5.3 AS UNDER: 5.3. I HAVE GONE THROUGH THE SUBMISSIONS OF THE AP PELLANT AND THE REASONS FOR THE REOPENING OF THE ASSESSMENT BY THE AO. THERE ARE REASONS FOR REOPENING THE ASSESSMENT TO DISALLOW EXEMPTION CLAIMED U/S. 10B OF THE ACT AND IT SQUARE LY FITS INTO THE EXPLANATION TO THE SECTION 147 OF THE INCOME TAX ACT, 1961 FOR REOPENING OF TH E ASSESSMENT AND THUS, THE ACTION OF THE AO FOR REOPENING OF THE ASSESSMENT IS UPHELD. THE APPELLANT FAILS TO GET RELIEF ON THIS ISSUE. 8. WE FIND THAT THE ENTIRE ISSUE HAS BEEN DELIBERAT ED UPON IN FIRST ROUND BY THE AO, BY CIT(A) AND EVEN BY TRIBUNAL ON BOTH THE ISSUES AND EXEMPTION U/S. 10B OF THE ACT AND ALSO EXEMPTION ON RECEIPTS RELATING TO EMA. ACCORD INGLY, WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST REVENUE BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR INDIA LTD. (2010) 310 ITR 561 (SC), WHEREIN NEWLY SUBSTITUTED PROVISION OF SECTIO N 147 OF THE ACT WITH EFFECT FROM 01.04.1989 IS INTERPRETED BY OBSERVING, THAT SECTIO N 147 OF THE ACT, AS SUBSTITUTED W.E.F. 01.04.1989 DOES NOT POSTULATES CONFERMENT OF POWER UPON THE AO TO INITIATE REASSESSMENT 7 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 PROCEEDING UPON HIS MERE CHANGE OF OPINION. FURTHE R, IF REASON TO BELIEVE OF THE AO IS FOUNDED ON AN INFORMATION WHICH MIGHT HAVE BEEN REC EIVED BY THE AO AFTER THE COMPLETION OF ASSESSMENT, IT MAY BE A SOUND FOUNDAT ION FOR EXERCISING THE POWER UNDER SECTION 147 R.W.S. 148 OF THE ACT. IT CANNOT BE AC CEPTED THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN RE CORDED, AN ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY BE JUSTIFYING THE AO TO IN ITIATE A PROCEEDING U/S. 147 OF THE ACT. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TER MS OF SECTION 143(3) OF THE ACT, A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BE EN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF SECTION 114(E) OF THE INDIAN EVIDENCE ACT, 1872, JUDICIAL A ND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS B EEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTIO N UPON THE AO TO REOPEN THE PROCEEDING WITHOUT ANY THING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 9. SIMILARLY, HONBLE SUPREME COURT IN THE CASE OF CIT VS. FORAMER FRANCE (2003) 264 ITR 566 (SC) AFFIRMED THE JUDGMENT OF HONBLE A LLAHABAD HIGH COURT IN THE CASE OF FORAMER VS. CIT (2001) 247 ITR 436 (ALL), WHEREIN H ONBLE ALLAHABAD HIGH COURT HELD AS UNDER: HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE AR E OF THE VIEW THAT THESE PETITIONS DESERVE TO BE ALLOWED. IT MAY BE MENTIONED THAT A NEW SECTION SUBSTITUTED SECTION 147 OF THE INCOME-TAX ACT BY THE DIRECT TAX LAWS (AMENDMENT) A CT, 1987, WITH EFFECT FROM APRIL 1, 1989. THE RELEVANT PART OF THE NEW SE CTION 147 IS AS FOLLOWS: 147. IF THE ASSESSING OFFICER, HAS REASON TO BELIE VE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT 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 ESCAPE D ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THIS SECTION, OR RE-COMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESS- MENT 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 THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN R ESPONSE 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. 8 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 THIS NEW SECTION HAS MADE A RADICAL DEPARTURE FROM THE ORIGINAL SECTION 147 INASMUCH AS CLAUSES (A) AND (B) OF THE ORIGINAL SECTION 147 HAVE BEEN DELETED AND A NEW PROVISO ADDED TO SECTION 147. IN RAKESH AGGARWAL V. ASST. CIT [1997] 225 ITR 496, THE DELHI HIGH COURT HELD THAT IN VIEW OF THE PROVISO TO SECTION 1 47 NOTICE FOR REASSESS- MENT UNDER SECTION 147/148 SHOULD ONLY BE ISSUED IN ACCORDANCE WITH THE NEW SECTION 147, AND WHERE THE ORIGINAL ASSESSMENT HAD BEEN MADE UNDER SECTION 143(3) THEN IN VIEW OF THE PROVISO TO SECTI ON 147, THE NOTICE UNDER SECTION 148 WOULD BE ILLEGAL IF ISSUED MORE THAN FOUR YEARS AFTER THE END OF THE RELEVANT ASSESSMENT YEAR. THE SAME VIEW WAS TAK EN BY THE GUJARAT HIGH COURT IN SHREE THARAD JAIN YUVAK MANDAL V. ITO [2000] 242 ITR 612. IN OUR OPINION, WE HAVE TO SEE THE LAW PREVAILING O N THE DATE OF ISSUE OF THE NOTICE UNDER SECTION 148, I.E., NOVEMBER 20, 19 98. ADMITTEDLY, BY THAT DATE, THE NEW SECTION 147 HAS COME INTO FORCE AND, HENCE, IN OUR OPINION, IT IS THE NEW SECTION 147 WHICH WILL APPLY TO THE F ACTS OF THE PRESENT CASE. IN THE PRESENT CASE, THERE WAS ADMITTEDLY NO FAILUR E ON THE PART OF THE ASSESSEE TO MAKE A RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. HENCE, THE PROVISO TO THE NEW SECTION 147 SQUARELY APPLIES, AND THE IMPUGNED NOTICES WERE BAR RED BY LIMITATION MENTIONED IN THE PROVISO. LEARNED DEPARTMENTAL COUNSEL RELIED ON SECTION 153( 3)(II) OF THE INCOME- TAX ACT AND SUBMITTED THAT THERE WAS NO BAR OF LIMI TATION IN VIEW OF THE SAID PROVISION. WE DO NOT AGREE. SECTION 153 RELATE S TO PASSING OF AN ORDER OF ASSESSMENT AND IT DOES NOT RELATE TO ISSUING OF NOTICE UNDER SECTION 147/ 148. MOREOVER, THIS IS NOT A CASE WHERE REASSESSMEN T IS SOUGHT TO BE MADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN THE ORDER OF THE TRIBUNAL IN BOUDIER CHRISTIANS CA SE. AS ALREADY STATED ABOVE, BOUDIER CHRISTIANS CASE RELATED TO THE EMPL OYEES OF THE COMPANY, WHEREAS THE IMPUGNED NOTICE HAS BEEN ISSUED TO THE COMPANY. HENCE, IT CANNOT BE SAID THAT THE PROPOSED REASSESSMENT IN CO NSEQUENCE OF THE IMPUGNED NOTICE WOULD BE IN CONSEQUENCE OF OR TO GI VE EFFECT TO ANY FIND- INGS OF THE TRIBUNAL IN BOUDIER CHRISTIANS CASE. A DIRECTION OR FINDING AS CONTEMPLATED BY SECTION 1 53(3)(II) MUST BE A FINDING NECESSARY FOR THE DISPOSAL OF A PARTICULAR CASE, THAT IS TO SAY, IN RESPECT OF THE PARTICULAR ASSESSEE AND IN RELEVANCE TO A PARTICULAR ASSESS- MENT YEAR. TO BE A NECESSARY FINDING IT MUST BE DIR ECTLY INVOLVED IN THE DISPOSAL OF THE CASE. TO BE A DIRECTION AS CONTEMPL ATED BY SECTION 153(3)(II) IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE D ISPOSAL OF THE CASE BEFORE THE AUTHORITY OR COURT VIDE RAJINDER NATH V. CIT [1979] 120 ITR 14 (SC) ; GUPTA TRADERS V. CIT [1982] 135 ITR 504 (ALL) ; CIT V. TARAJAN TEA CO. (P.) LTD. [1999] 236 ITR 477 (SC) AND CIT V. GOEL BROS. [1982] 135 ITR 511 (ALL), ETC. THE CASE OF AN EXPATRIATE EMPLOYEE WAS TO BE DECIDED ON THE BASIS OF THE PROVISIONS OF ARTICLE XIV OF THE TREAT Y, WHEREAS CORPORATE INCOME WAS TO BE DECIDED ON THE BASIS OF EITHER ART ICLE III OR ARTICLE XVI OF THE TREATY OR SECTION 44BB OF THE ACT. HENCE, THE O BSERVATIONS OF THE TRIBU- NAL IN BOUDIER CHRISTIANS CASE WAS NOT A DIRECTION NECESSARY FOR THE DIS- POSAL OF THE APPEAL RELATING TO THE PETITIONER. THE EXIGIBILITY OF INCOME OF THE PETITIONER FROM MANNING AND MANAGEMENT CONTRACT S WAS NEVER AN ISSUE DIRECTLY OR INDIRECTLY INVOLVED IN THE CASE O F BOUDIER CHRISTIAN. MOREOVER, THE TRIBUNAL IN THE APPEAL RELATING TO TH E ASSESSMENT OF THE PETITIONERS OWN CASE, VIDE DEPUTY CIT V. ONGC [199 9] 70 ITD 468 (DELHI) HAS CONSIDERED 9 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 THE DECISION OF THE TRIBUNAL IN BOUDIER CHRISTIANS CASE. IT IS SETTLED LAW THAT AN APPEAL IS A CONTINUATION OF THE ORIGINAL PROCEEDINGS AND HENCE WHEN THE TRIBUNAL IN THE APPEAL RELATING TO THE PETITIONER HAS CONSIDERED THE DECISION OF THE TRIBUNAL IN BOUDIER CHRISTIANS CASE, THE IMPUGNED NOTICE UNDER SECTION 147/148 WOULD OBVIOUS LY BE ON THE BASIS OF A MERE CHANGE OF OPINION BY THE INCOME-TAX AUTHO RITIES, WHICH WOULD NOT BE VALID AS HELD BY THE SUPREME COURT IN INDIAN AND EASTERN NEWS- PAPER SOCIETY V. CIT [1979] 119 ITR 996 ; GEMINI LEATHER STORES V. ITO [1975] 100 ITR 1 (S C) AND JINDAL PHOTO FILMS LTD. V. DEPUTY CIT [1998] 234 ITR 170 (DELHI), ETC. IN THE DECISION OF THE TRIBUNAL IN THE ASSESSEES O WN CASE, DEPUTY CIT V. ONGC [1999] 70 ITD 468 (DELHI) IT HAS BEEN HELD THA T THE INCOME FROM THE CONTRACT BETWEEN THE PARTIES WAS BUSINESS INCOME AN D NOT FEE FOR TECHNI- CAL SERVICES. ALTHOUGH WE ARE OF THE OPINION THAT THE LAW EXISTIN G ON THE DATE OF THE IMPUGNED NOTICE UNDER SECTION 147/148 HAS TO BE SEE N, YET EVEN IN THE ALTERNATIVE EVEN IF WE ASSUME THAT THE LAW PRIOR TO THE INSERTION OF THE NEW SECTION 147 WILL APPLY EVEN THEN IT WILL MAKE NO DI FFERENCE SINCE EVEN UNDER THE ORIGINAL SECTION 147 NOTICE FOR REASSESSM ENT COULD NOT BE GIVEN ON THE MERE CHANGE OF OPINION AS HELD IN NUMEROUS C ASES OF THE SUPREME COURT, SOME OF WHICH HAVE BEEN MENTIONED ABOVE. SIN CE THE TRIBUNAL IN THE APPEAL RELATING TO THE ASSESSEE-COMPANY HAD CON SIDERED THE TRIBUNALS EARLIER DECISION IN BOUDIER CHRISTIANS CASE, IT WI LL OBVIOUSLY AMOUNT TO MERE CHANGE OF OPINION, AND HENCE THE NOTICE UNDER SECTION 147/148 WOULD BE ILLEGAL. 10. FROM THE ABOVE FACTS OF THE CASE AND LEGAL POSI TION AS ENUNCIATED BY HONBLE SUPREME COURT IN THE ABOVE TWO CASE LAWS, WE ARE OF THE CONSIDERED VIEW THAT THE REOPENING U/S. 147 R.W.S. 148 OF THE ACT IS BAD IN LAW. HENCE, REOPENING IS QUASHED. BOTH THE COS OF THE ASSESSEE ARE ALLOWED ON JURISDI CTIONAL ISSUE. 11. AS WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS , WE NEED NOT TO GO INTO MERITS OF THE CASE AND ACCORDINGLY, THE REVENUES APPEALS ARE DISMISSED. 12. IN THE RESULT, THE APPEALS OF REVENUE ARE DISMI SSED AND COS OF ASSESSEE ARE ALLOWED. 13. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.01. 2016 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20TH JANUARY, 2016 JD. SR. P.S 10 ITA NO.530 & 531/K/2012 & CO NOS. 44&45/K/2012 M/S. CHEVIOT CO. LTD. AY 2003-04 & 2004-05 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CIRCLE-1, KOLKATA. 2 RESPONDENT M/S. CHEVIOT CO. LTD., 24, PARK STREET , MAGMA HOUSE, KOLKATA-700016. 3. THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .