Mitesh Trading Co., Dahod V. The Income tax Officer, Ward-1, Dahod

ITA 1299/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8640 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-03-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 30-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Rule of consistency; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI T. K. SHARMA, JM AND D.C.AGRAWAL, AM MITESH TRADING CO., GIDC, DELSAR, CHAKALIYA ROAD, DAHOD. V/S . THE INCOME TAX OFFICER, WARD-1, GODHRA. PAN NO.AACFM 3875 F (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAKAR SHARMA RESPONDENT BY:- SHRI M.C. PANDIT,SR.D.R. O R D E R PER SHRI D.C. AGARWAL. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 19-1-2007 WHERE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- 1. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRM ING THE ACTION OF THE ASSESSING OFFICER INVOKING PROVISIONS OF SEC TION 147 OF THE ACT. 2. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRM ING THE ACTION OF THE A.O. THAT MANUFACTURING OF URAD DAL FROM RAW URAD DOES NOT AMOUNT OF MANUFACTURE AND THEREFORE, BENEFIT OF PROVISIONS OF SECTION 80IA IS NOT AVAILABLE TO THE APPELLANT. ITA NO.1299/AHD/2007 ASST. YEAR :2000-01 2 3. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE ADDITION OF RS.1,40,341/-ON ACCOUNT OF WITHDRAWAL O F DEDUCTION U/S. 80IA BY THE A.O. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE, A PARTN ERSHIP FIRM, WAS ENGAGED IN THE BUSINESS OF PROCESSING OF UDAD INTO UDAD DAL AND WAS ALLOWED DEDUCTION U/S. 80IA W.E.F. ASSESSMENT YEAR 1993-94. SINCE THEN DEDUCTION U/S. 80IA IS BEING ALLOWED TO THE ASSESSE E. THE CHARACTER OF PROCESSING AND MANUFACTURING ACTIVITY OF THE ASSESS EE DID NOT UNDERGO ANY CHANGE. THE RETURN OF INCOME FOR A.Y. 2000-01 WAS F ILED ON 20.10.2000 DECLARING TOTAL INCOME OF RS.4,21,030/-. THIS CASE WAS PROCESSED U/S.143 (1) OF THE ACT AND SUBSEQUENTLY THE CASE WAS SELECTED F OR SCRUTINY AND ASSESSMENT U/S.143(3) WAS DONE ON 20.3.2003 AND INC OME WAS ASSESSED AT RS.4,76,620/-. SUBSEQUENTLY, THE A.O. REOPENED THE ASSESSMENT BY ISSUE OF NOTICE U/S.148 (1) DATED 24.3.2005 FOR WITHDRAWING DEDUCTION U/S.80IA. THE ASSESSEE FILED RETURN IN RESPONSE TO THAT NOTICE ON 15.4.2005 DECLARING TOTAL INCOME OF RS.4,21,030/- BEING THE INCOME DECLARED B Y IT IN THE RETURN FILED ON 20.10.2000. 3. THE A.O. SOUGHT TO WITHDRAW DEDUCTION U/S.80IA I N RESPONSE TO WHICH THE ASSESSEE SUBMITTED AS UNDER :- URAD IS SENT TO 3 BRUSH SEPARATOR WITH ELEVATOR I N ORDER TO SEPARATE MATERIALS LIKE MUD, STONES, KACHARI, SEMI SEEDS PIE CES OF URAD AND THEN BIG SIZE URAD CHARGED TO ROLLER THROUGH ELEVATORS. ON CLEANING, IT IS PASSED THROUGH ROLLER FOR DEHUSK ING WHERE MATERIAL IS DEHUSKED WHICH IS SEND WHICH IS SENT TO SEPARATO R. ON RECEIPT FROM ROLLER IT IS CHARGED TO BURMS WITH ELEVATORS FOR HO T OILINGS IN FIRST STAGE 500 TO 550 GMS. OIL PER QUINTAL IS APPLIED & KEPT F OR 12 HOURS IN OIL 3 GODOWN AND SUNLIGHT FOR ABOUT 8 HOURS ON PLATFORM W ITH THE HELP OF LABOURS, FUNCTION OF THIS PROCESS IS TO MAKE URAD S OFT, SO, DEHUSKING IS QUICKED AND IT REDUCED BREAKING OF URAD. IT IS AGAIN BROUGHT TO BURMS/SOPILS THEN TAKEN TO R OLLER MACHINE FOR DEHUSKING AND THEREAFTER PASSED THROUGH SEPARATOR F OR PARTING HUSK PIECE AND DAL. COMPLETE DEHUSKED SEMI PROCESSED MATERIAL IS BROUGH T TO GROUND FLOOR TO BRAMS FOR WATERING THROUGH PIPES, WHEREFRO M AFTER 3 TO 4 HOURS IT IS SENT TO DRYING PLATFORM FOR ABOUT 6 HOU RS 7 THEREAFTER OILED AND SENT FOR WATERING. AFTER WATERING THE DAL, IT IS DRYED ON PLATFORM. TH E MATERIAL IS FINALLY SENT TO ROLLER MACHINE AND AFTER POLISHING IT IS PA CKED IN POLYTHENE BAG. IT IS FURTHER EXPLAINED THAT THERE IS COMPLETE CHAN GE IN FORM OF BASIC RAW MATERIAL I.E. RAW URAD. ON APPLYING THE ABOVE M ANUFACTURING PROCESS I.E. SHAPE & THE FORM OF THE BASIC RAW MATE RIAL IS COMPLETELY CHANGED AND DOES NOT REMAIN THE SAME. FOR MANUFACTU RING ANY PRODUCT SOME BASIC RAW MATERIAL IS REQUIRED, AS ST ATED ABOVE AND IN CASE OF MANUFACTURING OF URAD DAL IS BASIC RAW URAD . FROM RAW URAD NOT ONLY URAD DAL IS PRODUCED BUT ALSO BY PRODUCTS LIKE URAD CHURI IS PRODUCED AND WITHOUT MANUFACTURING OPERATIONS THE U RAD DAL AND BY PRODUCT LIKE URAD CHURI CANNOT BE PRODUCED FROM RAW URAD. IT IS ALSO SUBMITTED THAT IT IS THE MANUFACTURING P ROCESS AS UNDER ALL LAWS, MANUFACTURING MEANS ADDING, ALTERING OR CREAT ING AN ARTICLE WHICH IS COMMERCIALLY USEFUL OTHERWISE THAN THE RAW MATERIAL, IN THE INSTANT CASE OUR RAW MATERIAL IS URAD WHICH IS NOT DIRECTLY EDIBLE AND IN COMMERCIAL PARLANCE IT IS NOT A COMMODITY SOLD I N EDIBLE WHERE AS UDAD DAL IS SOLD AS EDIBLE IN THE OPEN MARKET AND I T IS UNDOUBTEDLY MANUFACTURING ITEM. IT IS REQUESTED THAT IT IS MANU FACTURING ACTIVITY AND ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT AND REQUESTED TO DROP THE PROCEEDINGS INITIATED U/S. 148 OF THE ACT. 4. ON THE BASIS OF ABOVE SUBMISSIONS THE ASSESSEE C LAIMED THAT IT IS ENTITLED TO DEDUCTION U/S. 80IA. THE A.O. HOWEVER, DID NOT AGREE. ACCORDING 4 TO HIM URAD DID NOT UNDERGO ANY CHANGE OR EMERGE IN TO A NEW PRODUCT/ARTICLE/THING WITH DISTINCT CHARACTER AND A CCORDINGLY, THE DECISION OF HON. S.C. IN THE CASE OF CST VS. HARBILASH & SONS 21 STC 17 (SC) APPLY. THERE IS NO MANUFACTURING ACTIVITY WHICH WOULD RESU LT INTO A DIFFERENT COMMERCIAL PRODUCT, ARTICLE OR THING. WHAT IS PRODU CED BY THE ASSESSEE DOES NOT HAVE A DISTINCT CHARACTER OR USE. WITH THESE OB SERVATIONS HE WITHDREW DEDUCTION U/S. 80IA WHICH WAS ALLOWED EARLIER AT RS .1,40,341/-. 5. THE LD. CIT (A) OBSERVING THAT THERE WAS NO ASSE SSMENT U/S. 143(3) AND THEREFORE, ACTION U/S. 148 WAS JUSTIFIED. IN TH IS REGARD HE OBSERVED AS UNDER :- THE FIRST GROUND OF APPEAL IS AGAINST REOPENING OF ASSESSMENT U/S.147. IT IS NOTICED THAT NO SUBMISSIONS HAVE BEE N MADE IN REGARD TO THIS GROUND. I HAVE GONE THROUGH THE FACTS OF THE CASE AND DECID E THIS GROUND ON MERIT. IN THIS CASE RETURN WAS FILED ON 20.10.2000 WHICH WAS PROCESSED U/S.143 (1). NOTICE U/S.148 WAS ISSUED ON 24.03.2005 I.E. WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YE AR IN WHICH RETURN FILED. THERE WAS NO ASSESSMENT UNDER SECTION 143(3). THE P ROVISO TO SECTION 147 IS ATTRACTED WHERE THE ASSESSMENT HAS BEEN COMP LETED U/S.143(3) AND THE PROCEEDINGS U/S. 147 ARE INITIATED AFTER 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. THIS CASE THEREFORE IS NO T COVERED UNDER PROVISO TO SECTION 147 AND IT IS NOT NECESSARY FOR THE A.O. TO SHOW THAT THE INCOME HAD ESCAPED ASSESSMENT FOR REASONS OF FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ASSESSMENT. WHEN THE ASSESSMENT IS COMPLETED U/ S. 143(3) IT IS 5 POSSIBLE THAT THE A.O. HAD APPLIED HIS MIND IN RESP ECT OF ALL THE ISSUES EMERGING OUT OF RETURN FILED BY ASSESSEE. HOWEVER, SAME PRESUMPTION CANNOT BE MADE WHEN THE RETURNED INCOME IS ACCEPTED U/S.143(1) AS THE A.O. HAD NOT APPLIED HIS MIND TO FORM AN OPINIO N ON THE ISSUES. ONCE THE ISSUE IS NOT EXAMINED BY THE A.O. IT CANNO T BE SAID THAT THE AO HAD CHANGED HIS OPINION. RELIANCE IN THIS MATTER IS PLACED ON THE DECISION OF HONBLE ITAT, AHMEDABAD IN THE CASE OF GUJARAT BITUMEN LTD. VS. ACIT 82 ITD 1614 (AHD). IN THAT CASE IT WAS HELD BY HONBLE ITAT THAT WHILE PROCESSING RETURN U/S. 1 43(1)(A) THE A.O. HAD NO OPTION FOR APPLICATION OF MIND ON THE ISSUE WHETHER THE LOSS IN SHARE WAS DUE TO CALCULATION OR NOT AND THEREFORE, IT CANNOT BE SAID THAT THERE WAS CHANGE OF OPINION ON THE PART OF A.O. IN THE CASE OF DR. AMIT PATHOLOGICAL LABORATORY VS. ACIT 252 ITR-673 (BOM.) THE WRIT PETITION FILED BY THE ASSESSEE WAS DISMISSED B Y THE HONBLE HIGH COURT HOLDING THAT PROVISO TO SECTION 147 APPLIES O NLY TO CASES WHERE REOPENING IS SOUGHT ON ASSESSMENT U/S. 143(3). IN V IEW OF ABOVE THE ACTION OF A.O. IN REOPENING OF ASSESSMENT U/S. 147 IS JUSTIFIED. 6. REGARDING WITHDRAWING DEDUCTION U/S. 80IA, LD. C .I.T.(A) RELIED ON THE DECISION OF APEX COURT IN C.I.T. VS. RELISH FOO DS 237 ITR- 59 WHEREIN IT IS HELD THAT PEELING AND FREEZING OF SHRIMPS IS NOT THE MANUFACTURING ACTIVITY. FURTHER, IN THE CASE OF INDIAN HOTELS CO. , 245 ITR -538, THE APEX COURT HELD THAT FOOD STUFFS PREPARED BY COOKING OR BY ANOTHER PROCESS FROM RAW MATERIAL SUCH AS CEREALS, PULSES CANNOT BE REGA RDED AS COMMERCIALLY DISTINCT COMMODITY AND IT CANNOT BE SAID THAT SUCH FOOD STUFF IS MANUFACTURED OR PRODUCED. WITH THESE OBSERVATIONS THE LD. CIT (A) CONFIRMED THE WITHDRAWAL OF DEDUCTION U/S. 80-IA. 6 7. BEFORE US THE LEARNED A.R. FOR THE ASSESSEE SUBM ITTED THAT ACTION U/S. 147 WAS BASICALLY INCORRECT. IT IS BECAUSE ASSESSME NT WAS COMPLETED U/S. 143(3) AS OBSERVED BY THE A.O. IN THE ASSESSMENT OR DER. HE HAD ALLOWED DEDUCTION U/S. 80IA EARLIER U/S. 143(1) AS WELL AS LATER U/S. 143(3). THE LD. CIT(A) WAS INCORRECT IN MENTIONING THAT NO ORDER U/ S.143(3) WAS PASSED. THUS THERE IS ONLY A CHANGE OF OPINION AND NO NEW M ATERIAL IS BROUGHT ON RECORD. HE REFERRED TO THE DECISION OF HONBLE S.C. IN THE CASE OF CIT VS. KELVINATOR INDIA LTD., RECENTLY PRONOUNCED WHICH WA S SUBSEQUENTLY FOLLOWED BY HONNLE BOMBAY HIGH COURT IN THE CASE O F PURITY TECHTEXTILES PVT.LTD., VS. ACIT., IN WRIT PETITION NO.268-269 OF 2010 PRONOUNCED ON FEBRUARY 8, 2010 WHEREIN IT IS HELD THAT WITHOUT TH ERE BEING ANY FRESH MATERIAL, THE REOPENING OF ASSESSMENT EVEN WITHIN 4 YEARS WILL NOT BE JUSTIFIED. IT WOULD ONLY BE MERE CHANGE OF OPINION, IF ASSESSMENT ORIGINALLY COMPLETED U/S.143(3) IS NOW SOUGHT TO BE REOPENED. 8. THE LD. A.R THEN FURTHER SUBMITTED THAT ASSESSEE WAS GRANTED DEDUCTION U/S.80IA SINCE A.Y. 1993-94 AND THIS WOUL D BE CONTINUED FOR NEXT 10 YEARS AS PER THAT PROVISION. ACCORDINGLY, ASSES SEE WILL CONTINUE TO GET DEDUCTION U/S.80IA FOR NEXT 10 YEARS IF FACTS AND C IRCUMSTANCES OF THE CASE REMAIN THE SAME. HE REFERRED TO THE DECISION OF TRI BUNAL IN I.T.A.NO.3714/AHD/2003 PRONOUNCED ON 2.5.2008 IN TH E CASE OF ITO VS. M/S. PAREKH POWER CORPORATION, MEHSANA. IT IS HELD THEREIN THAT IF CONDITIONS LAID DOWN U/S.80IA ARE SATISFIED IN THE ORIGINAL ASSESSMENT THEN DEDUCTION U/S. 80IA WILL CONTINUE TO BE GRANTED IN SUBSEQUENT YEARS ALSO. 7 9. THE LD. A.R. THEN SUBMITTED THAT WHEN FACTS AND CIRCUMSTANCES OF THE CASE REMAIN THE SAME AS IN A.Y. 1999-00 OR EARLIER YEARS AND IN ASSESSMENT YEAR 2001-02 TILL 2002-03 ( TILL COMPLETION OF 10 Y EARS), THE A.O. COULD NOT DISALLOW THE DEDUCTION U/S. 80-IA BY FOLLOWING THE RULE OF CONSISTENCY. THE A.O. HAS TO BE SHOW THAT FACTS AND CIRCUMSTANCES HA VE CHANGED THAN WHAT EXISTED IN EARLIER YEARS WHERE THE DEPARTMENT HAS A CCEPTED THE CLAIM OF DEDUCTION U/S. 80IA. 10. THE LEARNED D.R. ON THE OTHER HAND SUBMITTED TH AT IN ITA. 4724 & 4725/AHD/95 FOR THE ASSESSMENT YEARS 1992-93 & 93-9 4 IN THE CASE OF M/S.MAYUR INDUSTRIES VS. ACIT DECIDED ON 4-10-2002 DEDUCTION U/S. 80IA WAS DENIED TO THE CONCERN WHICH WAS MANUFACTURING C HANA FROM CHANA DAL. HE OTHERWISE, RELIED ON THE ORDERS OF AUTHORITIES B ELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ACTION OF THE A. O. IN REOPENING ASSESSMENT IS NOT ACCORDING TO LAW. THE LD. C.I.T.( A) WAS INCORRECT IN HOLDING THAT ASSESSMENT WAS ORIGINALLY PASSED U/S.1 43(1) WHEN THE A.O. IN THE ORDER HAS CLEARLY GIVEN FINDING THAT ASSESSMENT WAS MADE U/S.143(3) ALSO. IN THIS REGARD WE REPRODUCE THE FIRST PARAGRAPH FRO M HIS ORDER AS UNDER :- RETURN OF INCOME IS FILED ON 20.10.2000 DECLARING INCOME AT RS. 4,21,030/- WHICH WAS PROCESSED U/S. 143(1) OF THE A CT. THE CASE WAS SELECTED FOR SCRUTINY AND ON COMPLETION OF THE ASSESSMENT U/S. 143(3) OF THE ACT ON 20.3.2003, INCOME WAS ASSESSED AT RS.4,76,620/-. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED BY ISSUE OF NOTICE U/S/148 OF THE ACT ON 24.3.2005 LOOKING T O THE FACTS THAT THOUGH THE ASSESSEE WAS NOT LIABLE FOR DEDUCTION U/ S 80IA OF THE ACT, IT HAS CLAIMED BY THE ASSESSEE AND ALLOWED BY THE ASSE SSING OFFICER WHILE 8 PASSING ORDER U/S.143(3) OF THE ACT. IN RESPONSE TO THE NOTICE U/S. 148 OF THE ACT, THE ASSESSEE HAS FILED ITS RETURN OF IN COME ON 15.4.2005 SHOWING THE INCOME OFRS.4,21,030/- I.E. THE INCOME WHICH IT HAS RETURNED IN ORIGINAL RETURN OF INCOME. NOTICE U/S. 143(2) OF THE ACT ISSUED ON 19.10.2005 AND SERVED REQUESTING TO ATTEN D ON 27.10.2005. THE ASSESSEE ENGAGED IN PROCESSING OF UDAD & SELLIN G UDAD DAL AND CHURI. 12. IN VIEW OF THE ABOVE FACTS AND THERE BEING NO F RESH MATERIAL AVAILABLE ON RECORD AS TO SHOWING CHANGE IN FACTS OR CIRCUMST ANCES OR AVAILABILITY OF ANY MATERIAL CONTRADICTING THE FACTS ON THE BASIS O F DEDUCTION U/S. 80-IA WAS ALLOWED IN EARLIER YEARS, IN THE CURRENT YEAR OR IN PREVIOUS YEAR, THE ASSESSMENT CANNOT BE REOPENED AS IT WILL BE ONLY BE A CHANGE OF OPINION. IN THIS REGARD WE REPRODUCE THE EXTRACTS FROM THE DECI SION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PURITY TECHTEXTILES PVT. LTD., WHEREIN IT WAS OBSERVED AS UNDER :- 12. SECTION 147 PROVIDES THAT IF THE ASSESSIN G OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SU BJECT TO THE PROVISIONS OF SECTIONS 148 TO 163 ASSESS OR RE ASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NO TICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. UNDER THE FIRST PROVISO, WHERE AN ASSESSMENT HAS BEEN M ADE UNDER SECTION (3) OF SECTION 143 OR SECTION 147 FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION CAN BE INITIATED UNDER SECTIO N 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE OF THE ASSESSEE IN TER ALIA TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. THE JURISDICTIONAL CONDI TION UNDER SECTION 147 IS THE FORMATION OF BELIEF BY THE ASSES SING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSME NT FOR ANY ASSESSMENT YEAR. THE REASONS WHICH ARE RECO RDED BY THE 9 ASSESSING OFFICER ARE CRUCIAL AND IT IS ON THE BASIS OF THOSE REASONS ALONE THAT THE VALIDITY OF THE ORDER REOPENING AN ASSESSMENT HAS TO BE DECIDED. WHERE AN ASSES SMENT HAS BEEN MADE UNDER SECTION 143(3), ACTION CAN BE INITI ATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR IF THE INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT BECAUSE OF THE FAILURE OF THE ASSESSEE TO M AKE FULLY AND TRULY A DISCLOSURE OF THE MATERIAL FACTS. THE PROVISI ONS OF SECTION 147 HAVE BEEN INTERPRETED IN A RECENT JUDGMENT OF TH E SUPREME COURT IN COMMISSIONER OF INCOME TAX V/S. KELVINATOR OF I NDIA LIMITED.1 THE SUPREME COURT NOTED THAT AFTER 1 ST APRIL 1989 THE POWER TO REOPEN IS MUCH WIDER THAN EARLIER SINCE THE SUBSTANTIVE PART OF SECTION 147 ONLY IMPOSES ONE CONDITION NAMELY THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELIEV E THAT INCOME HAS ESCAPED ASSESSMENT. THE SUPREME COURT HELD TH AT NONETHELESS, A MERE CHANGE OF OPINION WOULD NOT JUSTIFY THE EXERCISE OF THE POWER TO RE OPEN AN ASSESSMENT AND THERE MUS T BE TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER TO COM E TO THE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. THE SUPRE ME COURT HELD THUS : ......., ONE NEEDS TO GIVE A SCHEMATIC INTER PRETATION TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AF RAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE OPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION , WHICH CANNOT BE PER SE REASON TO RE OPEN. WE MUS T ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO RE VIEW AND POWER TO RE ASSESS. THE ASSESSING OFFICER HAS NO POWE R TO REVIEW; HE HAS THE POWER TO RE ASSESS. BUT RE ASSESSMENT HA S TO BE BASED ON FULFILLMENT OF CERTAIN PRE CONDITION AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHA LF OF THE DEPARTMENT, THEN, IN THE GARB OF RE OPENING TH E ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL , 19 89, ASSESSING OFFICER HAS POWER TO RE OPEN, PROVIDED THERE IS TAN GIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK W ITH THE FORMATION OF THE BELIEF. 10 HONBLE S.C. IN CIT VS. KELVINATOR INDIA PVT. LTD. , IN CIVIL APPEAL NO.2009 TO 2011 OF 2003 PRONOUNCED ON JANUARY 18, 2 010 AND REPORTED IN 2010 TAXMAN.COM THE HONBLE S.C. HAD OBSERVED AS UN DER :- A SHORT QUESTION WHICH ARISES FOR DETERMINATION IN THIS BATCH OF CIVIL APPEALS IS, WHETHER THE CONCEPT OF 'CHANGE OF OPINION' STANDS OBLITERATED WITH EFFECT FROM 1 ST APRIL, 1989, I.E., AFTER SUBSTITUTION OF SECTION 147 OF THE INCOME TAX ACT, 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987? TO ANSWER THE ABOVE QUESTION, WE NEED TO NOTE THE CHANGES UNDERGONE BY SECTION 147 OF THE INCOME TAX ACT, 1961 [FOR SHORT, 'THE ACT']. PRIOR TO DIRECT TAX LA WS (AMENDMENT) ACT, 1987, SECTION 147 READS AS UNDER: INCOME ESCAPING ASSESSMENT. 147. IF-- [A] THE INCOME-TAX OFFICER HAS REASON TO BELIEVE THAT, BY REASON OF THE OMISSION OR FAILURE ON THE P ART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE INCOME-TAX OFFICER OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR, OR [B] NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE, THE INCOME- TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIO NS 148 TO 153, ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE, A S THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 148 TO 153 REFERRE D TO AS THE RELEVANT ASSESSMENT YEAR).' 11 AFTER ENACTMENT OF DIRECT TAX LAWS (AMENDMENT) ACT, 1987, I.E., PRIOR TO 1ST APRIL, 1989, SECTION 147 OF THE ACT, READS AS UNDER: '147. INCOME ESCAPING ASSESSMENT.-- IF THE ASSESSING OFFICER, FOR REASONS TO BE RECORDED BY HI M IN WRITING, IS OF THE OPINION THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO153, 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 RECOMPUTED 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).' AFTER THE AMENDING ACT, 1989, SECTION 147 READS AS UNDER: 'INCOME ESCAPING ASSESSMENT. 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).' ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, RE-OPENING 12 COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFILLMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BAC K ASSESSMENT, BUT IN SECTION 147 OF THE ACT [WITH EFFECT FROM 1ST APRIL, 1989], THEY ARE GIVEN A GO B Y AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO RE-OPEN THE ASSESSMENT. THEREFORE,POST-1 ST APRIL,1989, POWER TO RE-OPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICE R TO RE-OPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE-OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE-ASSESS. BUT RE-ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN- BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1-4-1989, ASSESSING OFFICER H AS POWER TO RE-OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT,1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED TH E WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES 13 AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE-INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREINBELOW THE RELEVANT PORTION OF CIRCULAR NO.549 DATED 31ST OCTOBER, 1989, WHICH READS AS FOLLOWS: '7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION `REASON TO BELIEVE' I N SECTION 147.A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS `REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTIO N BY THE `OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, `REASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED A ND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION `HAS REASON TO BELIEVE' IN PLACE OF THE WORDS `FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF TH E OPINION'. OTHER PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME.' FOR THE AFORE-STATED REASONS, WE SEE NO MERIT IN THESE CIVIL APPEALS FILED BY THE DEPARTMENT, HENC E, DISMISSED WITH NO ORDER AS TO COSTS. THEREFORE, IN A CASE COMPLETED U/S.143(3) ORIGINALL Y THE A.O. HAD IN FACT FORMED AN OPINION AND SUBSEQUENTLY WITHOUT THERE BE ING ANY FRESH MATERIAL ON RECORD, ASSESSMENT CANNOT BE REOPENED ON THE BAS IS OF MERE CHANGE OF OPINION WHICH CANNOT BE PER SE REASON TO BELIEVE TO REOPEN THE ASSESSMENT. WHAT IS BEING DONE NOW BY THE A.O IS TO REVIEW HIS ORDER BY TAKING RECOURSE TO SECTION 147/148 WHICH IS NOT PERMISSIBLE WITHIN THE MEANING OF THESE 14 PROVISIONS. HONBLE S. C. HAS HELD THAT THERE SHOUL D BE SOME TANGIBLE MATERIAL IN THE POSSESSION OF THE A.O. TO COME TO T HE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE REASONS M UST HAVE A LIVE LINK WITH THE FORMATION OF BELIEF. THEREFORE, REOPENING IS BAD IN LAW ON THIS ACCOUNT AS CONDITIONS LAID DOWN U/S. 147 ARE NOT SA TISFIED. 13. EVEN OTHERWISE, REOPENING OF THE ASSESSMENT IS BAD ON ANOTHER ACCOUNT ALSO. ONCE THE DEPARTMENT HAS ALLOWED THE D EDUCTION U/S. 80IA IN THE EARLIER ASSESSMENT YEARS AND ALSO IN THE SUBSEQ UENT ASSESSMENT YEARS AND NO ACTION HAS BEEN TAKEN TO REOPEN OR SET ASIDE OR REVISE THE ASSESSMENT FOR THESE YEARS, EVEN THOUGH ASSESSEE HAD POINTED OUT T HIS FACT TO THE DEPARTMENT DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE N FOLLOWING THE RULE OF CONSISTENCY THE DEPARTMENT SHOULD HAVE ALLOWED DEDU CTION U/S. 80-IA OR IN THE ALTERNATIVE THEY OUGHT TO HAVE TAKEN ACTION IN ALL THE YEARS, WHEREVER LAW PERMITTED, IF THEY THOUGHT THAT CONVERSION OF UDAD INTO UDAD DAL IS NOT A MANUFACTURING ACTIVITY WITHIN THE MEANING OF SECTIO N 80IA. HAVING NOT DONE SO THE A.O. OUGHT TO HAVE FOLLOWED THE RULE OF CONS ISTENCY AND OUGHT NOT TO HAVE TAKEN ACTION THIS YEAR ALSO. THE PRINCIPLE OF CONSISTENCY CANNOT PERMIT THE REVENUE TO TAKE A STAND CONTRARY TO THE ONE ACC EPTED BY IT. (CIT VS. H.P. COTTON TEXTILE MILLS LTD. (2009) 311 ITR 436 (P & H ). THE PRINCIPLE OF CONSISTENCY REQUIRE THAT THE VIEW TAKEN BY THE DEPA RTMENT IN THE PRECEDING YEARS SHOULD NOT BE DISTURBED UNLESS THERE WAS A CH ANGE IN THE FACTUAL AND 15 LEGAL POSITION (CIT VS. MALBORO POLYCHEM PVT. LTD., (2009) 309 ITR -43) WHEREIN IT IS HELD AS UNDER:- WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH DIF FERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT, ONE WAY OR THE OTHER, AND THE PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAI NED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPRO PRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. FOR TH E SAKE OF CONSISTENCY AND FOR THE PURPOSE OF FINALITY IN ALL LITIGATIONS , INCLUDING THE LITIGATION ARISING OUT OF THE FISCAL STATUTES, EARLIER DECISIONS ON THE SAME QUESTION SHOULD NOT BE REOPENED UNLESS SOME FR ESH FACTS ARE FOUND IN THE SUBSEQUENT YEAR. (CIT VS. MOONLIGHT BU ILDERS & DEVELOPERS- 2008 307 ITR- 197 (DEL). 14. THE REVENUE HAD TO MAINTAIN THE CONSISTENCY FOR THE PURPOSE OF FINALITY IN ALL LITIGATION AND A DECISION ON THE SA ME QUESTION WOULD NOT BE REOPENED UNLESS SOME NEW FACTS WERE FOUND WITH MATE RIAL DIFFERENCE IN SUBSEQUENT YEARS. THIS WAS OBSERVED BY HONBLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF SOOD HARVESTOR (2008) 304 ITR 379 (P&H) AND FOLLOWING THE DECISION OF HONBLE S.C. IN THE CASE OF RADHASWAMY SATSANG VS. CIT 193 ITR 321 (SC). 15. IN VIEW OF ABOVE REASONING AND FOLLOWING THE RU LE OF CONSISTENCY THE ASSESSMENT FOR THE A.Y. 2000-01 OUGHT NOT TO HAVE B EEN REOPENED AS THERE IS NO CHANGE IN FACTS AND LEGAL POSITION. 16. FURTHER, WE ARE OF THE VIEW THAT ONCE THE CONDI TIONS LAID DOWN FOR CLAIM OF DEDUCTION U/S. 80IA WERE HELD SATISFIED WH EN DEDUCTION WAS GRANTED IN THE FIRST ASSESSMENT YEAR I.E. A.Y. 1993 -94 THEN IT OUGHT TO HAVE BEEN ALLOWED IN SUBSEQUENT YEARS ALSO IF THERE IS N O CHANGE IN FACTUAL AND 16 LEGAL POSITION. THIS WAS SO OBSERVED BY THE TRIBUNA L IN M/S. PAREKH POWER CORPORATION (SUPRA) OBSERVING ON PAGE 16 & 17 AS UN DER :- THE ASSESSEE WAS ALLOWED DEDUCTION IN A.YS.1998-99 TO 1999- 2000.THE CONDITIONS AS STIPULATED U/S.80IA HAVE TO BE COMPLIED WITH IN THE FIRST YEAR AND THE ASSESSEE HAS DULY COMPLIE D WITH THESE CONDITIONS. FOR THIS RELIANCE WAS PLACED ON THE DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. TYRESOLES CONCESSIONARIES PVT. LTD., 213 ITR 660 (BOM.). THE ASSESSEE CLAIMED DEDUCTION U/S. 80IA (2)(IV)(B) OF THE ACT AS IT IS LOCATED IN INDUSTRIALLY BACKWARD STATE SPECIFIED IN EIGHTH SCHEDULE. SUBSEQUENT TO SPLIT OF ORIGINAL SECTION 80 IA, DEDU CTION IS NOW AVAILABLE U./S. 80IB(4) OF THE ACT. THE ASSESSEE CO MMENCED THE PRODUCTION WITH EFFECT FROM 08.08.1997 AND, THEREFO RE, THE FIRST ASSESSMENT YEAR WAS A.Y. 1998-99. THERE HAD BEEN NO REOPENING OR ACTION U/S. 263 FOR WITHDRAWAL OF DEDUCTION EVEN AF TER MAKING THE ASSESSMENT U/S. 143(3) FOR A.Y. 2000-01 IN WHICH DE DUCTION SOUGHT WAS DENIED. IT IS A SETTLED PROPOSITION OF LAW THAT THE A.O. HAS NO POWER TO WITHDRAW RELIEF WITHOUT DISTURBING THE REL IEF GRANTED IN THE EARLIER YEARS AS HELD IN SAURASHTRA CEMENT &CHEMICA L INDUSTRIES LTD., VS. CIT 123 ITR 669 (GUJ.), CIT VS. INDIA FORGE & D ROP STAMPINGS LTD. 240 ITR-208 (MAD) AND GLAXO SMITHKLIN CONSUMER HEALTHCARE LTD. V. ACIT 112 TTJ-94 (CHD.). 17. THUS, ONCE THE RELIEF GRANTED IN EARLIER YEARS IS NOT DISTURBED THE A.O. COULD NOT WITHDRAW RELIEF GRANTED IN THE ASSESSMENT YEAR 2000-01. 17 18. IN VIEW OF THE ABOVE WE HOLD THAT THE REOPENING OF THE ASSESSMENT U/S. 147/148 WAS BAD IN LAW. AS A RESULT ASSESSMENT ORDE R FRAMED BY THE ASSESSING OFFICER ON 15.03.2006 WAS ILLEGAL AND IS CANCELLED. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12/03 /2010 SD/- SD/- ( T. K. SHARMA) (D. C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 12 /03/2010. PATKI. COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD