M/S. KANSAI NEROLAC PAINTS LTD., MUMBAI V. DCIT Rg. - 6(3), MUMBAI

ITA 1524/MUM/2007

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78981 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-03-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 15-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRITAM SINGH
• Assessee Lawyers: AARTI VSSANJI
• Keywords: Reopening of assessment; Business income; Tangible material; Difference of opinion; Validity of assessment; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 154; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND SANJAY GARG, (JM) . . , , , ./I.T.A.NO.1524/MUM/2007 ( / ASSESSMENT YEAR: 2002-03) KANSAI NEROLAC PAINTS LIMITED (ERSTWHILE KNOWN AS GOODLASS NEROLAC PAINTS LIMITED) NEROLAC HOUSE, G K MARG, LOWER PAREL, MUMBAI-400013 / VS. DY. COMMISSIONER OF INCOME TAX RANGE 6(3), ROOM NO.576, AYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ./ ./PAN/GIR NO. : AAACG1376N ( $ / APPELLANT) .. ( %&$ / RESPONDENT) $ / APPELLANT BY : MS. AARTI VSSANJI %&$ ( /RESPONDENT BY : SHRI P RITAM SINGH - ( + / DATE OF HEARING : 12.3.2014 ( + /DATE OF PRONOUNCEMENT : 23. 5.2014 / O R D E R PER P.M.JAGTAP,AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF LD. CIT(A)- XXVI, MUMBAI DATED 8.12.2006. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO THIS APPEAL ARE AS FOLLOWS. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PAINTS AND VARNISHES . THE RET URN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS ORIGINALLY FILED BY IT ON 31.10 .2012 DECLARING TOTAL INCOME OF RS.29,83,85,660/- AFTER CLAIMING DEDUCTION OF RS.9 ,89,72,231/- U/S 80IA OF THE INCOME TAX ACT, 1961 (THE ACT) IN RESPECT OF THE PROFIT OF ITS INDUSTRIAL UNDERTAKING AT KANPUR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE PROFIT OF ITS KANPUR UNIT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT WAS WORKED OUT BY THE ASSESSEE I.T.A.NO.1524/MUM/2007 2 COMPANY AFTER APPORTIONING OVERHEADS OF HEAD OF FICE AND SALES DEPOTS ON THE BASIS OF METHOD PRESCRIBED BY THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF FOOD SPECIALITY LTD V/S ACIT REPORTED IN 54 ITD 352. IN THIS REGARD, HE NOTED THAT THE DEDUCTION U/S 80IA WAS ALLOWED TO THE ASSESSEE-COM PANY IN AYS. 1999-2000, 2000-01 AND 2001-02 ON THE PROFIT OF KANPUR UNIT AS WORKED OUT AFTER APPORTIONING THE OVERHEADS OF HEAD OFFICE AND SALES DEPOTS ON THE B ASIS OF TURNOVER AND NOT ON THE BASIS OF METHOD ADOPTED BY THE ASSESSEE. HE THEREFORE RECOMPUTED THE PROFIT OF THE KANPUR UNIT OF THE ASSESSEE AT RS. 28,45,81,658/- AFTER A PPORTIONING THE OVERHEADS OF HEAD OFFICE AND SALES DEPOTS ON THE BASIS OF TURNOVER AN D RESTRICTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA TO RS.8,53,74,497/- IN THE A SSESSMENT ORIGINALLY COMPLETED U/S 143(3) VIDE ORDER DATED 7.3.2005 . 3. SUBSEQUENTLY, ON PERUSAL OF THE ASSESSMENT RECO RD, IT WAS NOTICED BY THE AO THAT WHILE COMPUTING THE PROFIT OF KANPUR UNIT OF THE ASSESSEE COMPANY FOR THE PURPOSES OF ALLOWING DEDUCTION U/S 80IA, THE OVER HEADS OF HEAD OFFICE AND SALES DEPOTS WERE NOT APPORTIONED ON THE BASIS OF SALES T URNOVER CORRECTLY. HE, THEREFORE, REOPENED THE ASSESSMENT U/S 147 OF THE ACT AND ISSU ED NOTICE TO THE ASSESSEE U/S 148 OF THE ACT ON 30.1.2006. AFTER CONSIDERING THE SUB MISSIONS MADE ON BEHALF OF THE ASSESSEE DURING THE COURSE OF RE-ASSESSMENT PROCEE DINGS, THE ORDER U/S 143(3) R.W. SECTION 147 WAS PASSED BY THE AO ON 20.2.2006 WHERE IN THE MISTAKE COMMITTED IN THE ORIGINAL ASSESSMENT IN APPORTIONING THE OVERHEADS O F HEAD OFFICE AND SALES DEPOTS TO COMPUTE THE PROFIT OF THE KANPUR UNIT OF THE ASSES SEE COMPANY WAS CORRECTED BY THE AO AND THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA WAS FURTHER RESTRICTED BY HIM TO RS.7,95,68,898/-. 4. AGAINST THE ORDER PASSED BY THE AO U/S 143(3) R. W. SECTION 147 OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THE ACTION OF THE AO IN RESTRICTING THE DEDUCTION U/S 80IA OF THE ACT ALLOWABLE IN RESPECT OF PROFIT OF KANPUR UNIT. ALTHOUGH NO GROUND WAS SPECIFICALLY RAISED BY THE ASSESSEE IN THE APPEAL I.T.A.NO.1524/MUM/2007 3 FILED BEFORE THE LD. CIT(A) CHALLENGING THE VALIDI TY OF THE ASSESSMENT MADE BY AO UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, SUBMIS SIONS WERE MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE.. IT WAS SUBMITTED IN THI S REGARD ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) BY THE AO AFTER DUE EXAMINATION OF THE RELEVANT FACTS AVAILA BLE ON RECORD AND AFTER MAKING ALL THE NECESSARY INQUIRIES. IT WAS POINTED OUT THAT SPEC IFIC QUERY HAD BEEN RAISED BY THE AO PERTAINING TO THE APPORTIONMENT OF OVERHEAD WHILE E XAMINING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA OF THE ACT AND EVEN THE BASI S OF APPORTIONMENT ADOPTED BY THE ASSESSEE WAS CHANGED BY THE AO THEREBY RESTRICTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS.9,89,72,231/- TO RS.8,53,74,497/-. IT WAS CONTENTED THAT THE ISSUE RELATING TO ASSESSEES CLAIM FOR DEDUCTION U/S 80I A THUS WAS DECIDED BY THE AO IN THE ORIGINAL ASSESSMENT AFTER APPLICATION OF MIND AND T HE RE-OPENING OF THE SAID ASSESSMENT ON RE-APPRAISAL OF THE SAME FACTS AND MATERIAL, WH ICH WERE AVAILABLE WITH THE AO AND CONSIDERED BY HIM AT THE TIME OF ORIGINAL ASSESSMEN T, WAS BASED ON A MERE CHANGE OF OPINION. RELYING INTERALIA ON THE DECISIONS OF HO NBLE SUPREME COURT IN THE CASE OF FORAMMER (264 ITR 566) (SC), DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., 256 ITR 1(DEL.FULL BENCH) AND HON BLE BOMBAY HIGH COURT IN THE CASE OF GERMAN REMEDIES LTD V/S DCIT,201 CTR 193 (BOM), I N WAS CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE REOPEN ING OF THE ASSESSMENT BY THE AO MERELY ON THE BASIS OF CHANGE OF OPINION WAS NOT P ERMISSIBLE IN LAW AND THE ASSESSMENT COMPLETED IN PURSUANCE THEREOF U/S 143 R .W. 147 OF THE ACT WAS LIABLE TO BE QUASHED BEING INVALID. 5. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE AS SESSEE ON THE PRELIMINARY ISSUE CHALLENGING VALIDITY OF RE-ASSESSMENT MADE BY TH E AO, THE LD. CIT(A) AT THE OUTSET NOTED THAT THERE WAS NO SPECIFIC GROUND RAISED BY T HE ASSESSEE IN ITS APPEAL ON THIS PRELIMINARY ISSUE. HE, THEREFORE, HELD THAT THE O BJECTION RAISED BY THE ASSESSEE ON THIS PRELIMINARY ISSUE WAS NOT SUSTAINABLE. WITHOUT PR EJUDICE TO THIS CONCLUSION, THE LD. I.T.A.NO.1524/MUM/2007 4 CIT(A) FURTHER PROCEEDED TO CONSIDER AND DEALT WITH THE SUBMISSIONS/OBJECTIONS OF THE ASSESSEE ON THIS PRELIMINARY ISSUE. IN THIS REGA RD, HE HELD THAT THERE WAS A MISTAKE IN ALLOCATION OF EXPENSES EVEN ON THE BASIS OF SALE S TURNOVER ADOPTED IN THE ORIGINAL ASSESSMENT ORDER AND THE AO, THEREFORE, HAD SUFFI CIENT REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION HAD ESCAPED ASSESSMENT. HE HELD THAT THE ASSESSMENT ORIGINALLY COMPLETED U/S 1 43(3) IN THE CASE OF ASSESSEE THUS WAS VALIDLY RE-OPENED BY THE AO AND SUCH RE-OPEN ING TO CORRECT THE CALCULATION ERROR COULD NOT BE CONSIDERED AS BASED ON CHANGE OF OPIN ION. HE, THEREFORE, REJECTED THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE ON THI S ISSUE AND UPHELD THE VALIDITY OF ASSESSMENT MADE BY AO U/S 143(3) R.W. S 147. 6. AS REGARDS THE ACTION OF THE AO IN RESTRICTING T HE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA IN RESPECT OF THE PROFIT OF ITS KANPUR UNIT, THE LD. CIT(A) HELD THAT THE OVERHEADS OF HEAD OFFICE AND SALES DEPOTS WERE REQUIRED TO BE ALLOCATED ON THE BASIS OF VALUE OF TURNOVER AS RIGHTLY DONE BY THE AO IN THE RE-ASSESSMENT INSTEAD OF VOLUME OF TURNOVER AS MADE IN THE ORIGINAL ASSESSM ENT. HE, THEREFORE, CONFIRMED THE ACTION OF AO IN RESTRICTING THE CLAIM OF THE AS SESSEE FOR DEDUCTION U/S 80IA OF THE ACT TO RS.7,95,68,898/-. AT HIS STAGE, THE LD. CI T(A) NOTED THAT THERE WAS TRANSFER OF RAW MATERIAL BETWEEN KANPUR UNIT AND OTHER UNIT S AGGREGATING THE VALUE OF RS.9.67.68.042/-. THE VALUATION ADOPTED FOR THI S TRANSFER OF MATERIAL HOWEVER, COULD NOT BE SUBSTANTIATED BY THE ASSESSEE. ACCORDING TO THE LD. CIT(A), ADJUSTMENT OF 10% OF THE VALUE SHOWN BY THE ASSESSEE FOR THIS TRANSFER OF MATERIAL WAS REQUIRED TO BE MADE FOR COMPUTING DEDUCTION U/S 80IA AND A CCORDINGLY AFTER GIVING THE NOTICE OF ENHANCEMENT AND AFTER CONSIDERING THE SUBMISSIONS M ADE BY THE ASSESSEE IN RESPONSE TO THE SAID NOTICE, HE DIRECTED THE AO TO RE-COMPU TE THE DEDUCTION AFTER MAKING SUCH ADJUSTMENT TO THE PROFIT OF THE KANPUR UNIT OF THE ASSESSEE-COMPANY. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS PREFERRED TH IS APPEAL BEFORE THE TRIBUNAL CHALLENGING THEREIN THE VALIDITY OF ASSESSMENT MADE U/S 143 R.W.S 147 OF THE ACT AND I.T.A.NO.1524/MUM/2007 5 DISPUTING THE ADDITION MADE BY AO BY RESTRICTING ITS CLAIM OF DEDUCTION U/S 80IA WHICH HAS BEEN FURTHER ENHANCED BY THE LD. CIT(A). 7. IN GROUND NO.1 OF ITS APPEAL, THE ASSESSEE HAS RAISED THE PRELIMINARY ISSUE CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY AO U/S 143(3) R.W. SECTION 147 OF THE ACT ON THE GROUND THAT THE REOPENING ITSELF WAS IN VALID. 8. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, INVITED OUR ATTENTION TO THE COPY OF A LETTER DATED 4.3.2005 (COPY PLACED AT PAGE 1 AND 2 OF THE PAPER BOOK) SUBMITTED BEFORE THE AO AND POINTED OUT THAT ALL THE RELEVAN T DETAILS IN RESPECT OF DEDUCTION CLAIMED BY ASSESSEE U/S 80IA OF THE ACT WERE SUBMIT TED BY THE ASSESSEE BEFORE THE AO. SHE ALSO POINTED OUT THAT EVEN THE STATEMENT SHOWIN G UNIT-WISE PROFITABILITY WAS FURNISHED BY THE ASSESSEE BEFORE THE AO SHOWING T HEREIN CLEARLY THE BASIS OF ALLOCATION OF OVERHEADS. SHE INVITED OUR ATTENTION TO PAGE 1 1 OF THE ASSESSMENT ORDER ORIGINALLY COMPLETED BY THE AO U/S 143 (3) TO POINT OUT THAT THE BASIS OF APPORTIONMENT OF OVERHEAD OF HEAD OFFICE AND SALES DEPOTS TO THE KA NPUR UNIT WAS NOT ACCEPTED BY THE AO AND THE PROFITABILITY OF THE SAID UNIT ELIGIBL E FOR DEDUCTION U/S 80IA WAS RECOMPUTED BY THE AO BY APPORTIONING THE OVERHEADS OF THE HEAD OFFICE AND SALES DEPOTS ON THE BASIS OF TURNOVER. SHE CONTENDED TH AT THE ISSUE RELATING TO COMPUTATION OF DEDUCTION U/S 80IA IN RESPECT OF PROFIT OF KANP UR UNIT THUS WAS DECIDED BY THE AO AFTER APPLYING HIS MIND TO THE RELEVANT DETAILS AN D DOCUMENTS AVAILABLE ON RECORD AND THE REO-OPENING OF THE ASSESSMENT BY THE AO ON THE SAID ISSUE, WITHOUT THERE BEING ANY NEW MATERIAL COMING TO HIS POSSESSION, WAS BASED O N A MERE CHANGE OF OPINION. IN SUPPORT OF THIS CONTENTION, THE LD. COUNSEL FOR TH E ASSESSEE RELIED ON THE CASE LAW CITED ON BEHALF OF THE ASESEEE BEFORE THE LD. CIT(A) AS WELL AS THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., 320 ITR 561(SC) AND DELHI HIGH COURT IN THE CASE OF CIT V/S USHA INT ERNATIONAL LIMITED (2012)348 ITR 485 (DEL). I.T.A.NO.1524/MUM/2007 6 9. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT AL THOUGH THE BASIS ADOPTED BY THE ASSESSEE FOR APPORTIONMENT OF THE OVERHEADS OF HEAD OFFICE AND SALES DEPOTS WAS NOT ACCEPTED BY THE AO AND SUCH APPORTIONMENT WAS DONE BY HIM ON THE BASIS OF TURNOVER TO COMPUTE THE PROFIT OF THE KANPUR UNIT OF THE AS SESSEE COMPANY ELIGIBLE FOR DEDUCTION U/S 80IA IN THE ASSESSMENT ORIGINALLY COM PLETED U/S 143(3), THERE WAS A MISTAKE IN THE SAID CALCULATION IN TAKING THE VOLUM E OF TURNOVER AS BASIS INSTEAD OF VALUE OF TURNOVER. HE CONTENDED THAT THIS MISTAKE RESULT ED IN ALLOWING EXCESS DEDUCTION TO THE ASSESSEE U/S 80IA OF THE ACT AND IN ORDER TO CORRE CT THE SAME, THE ASSESSMENT WAS RIGHTLY REOPENED BY THE AO U/S 148 OF THE ACT AS TH ERE WAS A CLEAR ESCAPEMENT OF INCOME OF THE ASSESSEE. HE CONTENDED THAT REOPENIN G OF THE ASSESSMENT THUS WAS NOT BASED MERELY ON THE CHANGE OF OPINION AS SOUGHT TO BE CONTENDED BY THE LD COUNSEL FOR THE ASSESSEE AND THE VALIDITY OF THE ASSESSMENT MADE BY THE AO U/S 143(3) R.W. 147 OF THE ACT CANNOT BE CHALLENGED ON THIS GROUND. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THI S PRELIMINARY ISSUE AND ALSO RELEVANT RECORD AVAILABLE ON RECORD. THE VALIDITY OF THE REASSESSMENT MADE BY AO U/S 143(3) R.W. S. 147 OF THE ACT HAS BEEN CHALLENGED BY THE LD. COUNSEL FOR THE ASSESSEE MAINLY ON THE GROUND THAT INITIATION OF RE-ASSESSME NT PROCEEDINGS ITSELF WAS BAD IN LAW BEING BASED ON A MERE CHANGE OF OPINION AS THERE WA S NO NEW MATERIAL OR INFORMATION WHICH HAD COME TO THE POSSESSION OF THE AO AFTER CO MPLETION OF ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT. IN SUPPORT OF THIS CONTENTI ON, SHE INTER-ALIA HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD (SUPRA) AND THE DECISION OF FULL BENCH OF HONBLE DELHI HIGH COURT IN THE CASE OF USHA INTERNATIONAL LIMITED(SUPRA). 11. THE LD. DR, ON THE OTHER HAND, HAS SUPPORTED T HE IMPUGNED ORDER OF LD. CIT(A) UPHOLDING THE VALIDITY OF THE ASSESSMENT BY AO U/S 143(3) READ WITH SECTION 147 OF THE ACT ON THE GROUND THAT THERE WAS A MISTAKE IN THE A SSESSMENT ORIGINALLY MADE U/S 143(3) BY THE AO IN COMPUTING THE PROFIT OF THE KANPUR UNIT OF THE ASSESSEE COMPANY I.T.A.NO.1524/MUM/2007 7 RESULTING IN EXCESS ALLOWANCE OF DEDUCTION U/S 80I A AND THE ASSESSMENT THEREFORE WAS RIGHTLY REOPENED BY THE AO TO CORRECT THE SAID M ISTAKE. 12. IN ORDER TO APPRECIATE THE STAND OF BOTH SIDES ON THE PRELIMINARY ISSUE, IT WOULD BE WORTHWHILE TO REFER TO THE REASONS RECORDED BY THE AO WHICH, AS GIVEN AT PAGE 3 OF THE IMPUGNED APPELLATE ORDER, ARE EXTRACTED BELOW: THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2002 DECLARING TOTAL INCOME OF RS.29,83,85,660/-. THE RETURN WAS PROCESSED U/S 143 (1) ON 28.2.2003, IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS CLAIMED DED UCTION U/ 80IA OF RS.9,89,72,231/-. IN THE ORDER PASSED U/S 143(3) D ATED 7.3.2005, THE CLAIM OF THE ASSESSEE U/S 80IA WAS RESTRICTED TO RS.8,53,74, 497/- ON FURTHER PERUSAL OF RECORDS, IT IS SEEN THAT THE ASSESSEE WHILE COMPUTING THE DEDUCTION U/S 80IA HAS NOT APPORTIONED THE FIXED AND VARIABLE OVERHEADS ON THE BASIS OF SALES TURNOVER CORRECTLY IN RESPECT OF KANPUR FACTORY. THE TOTAL SALES TURNOVER OF THE ASSESSEE IS RS.66104.92 LAKH S AND THAT OF KANPUR UNIT IS RS.22142.24 LAKHS. ON THE BASIS OF SALES TURNOVER, THE FIXED AND VARIABLE EXPENSES TO BE APPORTIONED ARE UNDER : TOTAL ACTUAL AS PER ASSESSMENT ORDER DIFFERENCE FIXED OVERHEAD VARIABLE 8,040.79 2,693.30 2,537.77 135.53 VARIABLE EXPENSES 4,207.17 1,409.22 1,338.30 70.92 206.45 IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT THERE IS AN EXCESS ALLOWANCE OF DEDUCTION U/S 80IA OF RS.61.93 LAKHS. HENCE, A N INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT; THEREFORE, I AM SATISFIED THAT THIS A FIT CASE TO BE REOPENED U/S 147 OF THE IT ACT, 1961, AND ACCORDINGLY NOTICE U/S 148 IS ISSUE D. 13. THE PERUSAL OF THE ABOVE REASONS RECORDED BY T HE AO CLEARLY SHOWS THAT THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) WAS REOP ENED BY HIM WITHOUT THERE BEING ANY NEW INFORMATION OR MATERIAL COMING TO HIS POSSE SSION AFTER COMPLETION OF THE SAID ASSESSMENT AND THIS POSITION CLEARLY EVIDENT FROM T HE REASONS RECORDED BY THE AO IS NOT DISPUTED EVEN BY THE LD. DR AT THE TIME OF HEARING BEFORE US. HE, HOWEVER, HAS CONTENDED THAT THE REOPENING OF ASSESSMENT TO CORRE CT THE MISTAKE COMMITTED BY AO IN THE ORIGINAL ASSESSMENT RESULTING INTO EXCESS ALLO WANCE OF DEDUCTION U/S 80IA OF THE I.T.A.NO.1524/MUM/2007 8 ACT WAS IN ACCORDANCE WITH LAW. BEFORE WE DEAL WI TH THIS CONTENTION OF THE LD. DR, IT WOULD BE RELEVANT FIRST TO APPRECIATE THE CASE OF L D. COUNSEL FOR THE ASSESSEE CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT ON THE GRO UND THAT THE SAME WAS MERELY BASED ON CHANGE OF OPINION. AS HELD BY THE HONBLE DELHI HIGH COURT (FULL BENCH) IN THE CASE OF USHA INTERNATIONAL LTD.(SUPRA), THE EXPRE SSION CHANGE OF OPINION POSTULATES THE FORMATION OF OPINION AND THEN CHANGE THEREOF. IT WAS HELD THAT WHAT IT IMPLIES IN THE CONTEXT OF SECTION 147 IS THAT THE AO SHOULD HAVE FORMED HIS OPINION AT THE FIRST INSTANCE I.E. IN THE PROCEEDINGS U/S 143(3) AND TH EREAFTER BY INITIATING REASSESSMENT PROCEEDINGS U/S 147, THE AO PROPOSED TO TAKE DIFFER ENT VIEW. IN THE CASE OF KELVINATOR OF INDIA LTD.(SUPRA), IT WAS HELD BY THE HONBLE SU PREME COURT THAT FULFILMENT OF ONLY CONDITION VIZ, THAT THE AO SHOULD HAVE REASON TO BE LIEVE THAT INCOME HAS ESCAPED ASSESSMENT CONFERS JURISDICTION TO REOPEN THE AS SESSMENT. IT WAS HELD THAT ALTHOUGH THE POWER TO REOPEN THE ASSESSMENT IS MUCH WIDER POST 1 ST APRIL 1989, ONE NEEDS TO GIVE SCHEMATIC INTERPRETATION TO THE WORDS REASO N TO BELIEVE FAILING WHICH, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPE N ASSESSMENT ON THE BASIS OF MERE CHANGE OF OPINION WHICH CANNOT BE PER SE REASON TO REOPEN. EXPLAINING FURTHER, THE HONBLE SUPREME COURT OBSERVED THAT THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS SHOULD ALSO TO BE KE PT IN MIND AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. IT WAS HELD THAT ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO AND HENCE, THE AO HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO C OME TO THE CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FROM THE ASSESSMENT. 14. IN THE PRESENT CASE, THE ISSUE RELATING DEDU CTION ALLOWABLE TO THE ASSESSEE U/S 80IA WAS EXAMINED BY THE AO DURING THE COURSE OF AS SESSMENT PROCEEDINGS ORIGINALLY COMPLETED U/S 143(3) AND AS EXPLAINED BY THE LD. CO UNSEL FOR THE ASSESSEE FROM THE RELEVANT SUBMISSIONS MADE BEFORE THE AO AS WELL AS THE ASSESSMENT PASSED U/S 143(3), I.T.A.NO.1524/MUM/2007 9 THE DEDUCTION CLAIMED BY THE ASSESSEE US/ 80IA WAS RECOMPUTED BY THE AO BY REJECTING THE BASIS ADOPTED BY THE ASSESSEE FOR APPORTIONMEN T OF OVERHEAD OF HEAD OFFICE AND SALES DEPOTS TO THE KANPUR UNIT AND TAKING TURNOVE R AS BASIS FOR SUCH APPORTIONMENT. THIS ISSUE THUS WAS EXAMINED AND DECIDED BY THE AO ON APPLICATION OF MIND AND IN THE ABSENCE OF ANY TANGIBLE MATERIAL COMING TO HIS PO SSESSION AFTER COMPLETION OF ORIGINAL ASSESSMENT, THE REOPENING OF THE SAID ASSESSMENT BY THE AO ON RECOMPUTE THE DEDUCTION ELIGIBLE TO THE ASSESSEE U/S 80IA, IN OUR OPINION, WAS CLEARLY BASED ON A MERE CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW AS HELD INTERALIA BY THE HONBLE SUPREME COURT IN KELVINATOR OF INDIA LTD., (SUPRA). 15. AS REGARDS THE CONTENTION OF LD. DR THAT REOPEN ING OF ASSESSMENT U/S 147 R.W. S. 148 OF THE ACT TO CORRECT THE MISTAKE WHICH RESULTE D IN ALLOWING EXCESS DEDUCTION IS PERMISSIBLE, WE MAY USEFULLY REFER TO DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DAMODAR H SHAH V/S ACIT (2000) 245 ITR 77 4, WHEREIN IT WAS HELD BY THEIR LORDSHIPS THAT THE NATURE OF POWER OF REOPENING AS SESSMENT UNDER SECTION 147 IS DIFFERENT FROM THAT OF THE POWER UNDER SECTION 154 FOR RECTIFYING ANY MISTAKE, WHICH IS APPARENT FROM THE RECORD OF THE PROCEEDINGS IN WHIC H AN ORDER IS MADE. IT WAS HELD THAT PROCESS OF ASSESSMENT, REASSESSMENT AND RE-COMPUTAT ION U/S 147 IS MUCH MORE ONEROUS TO THE ASSESSEE THAN THE PROCESS OF RECTIFI CATION/S 154 OF THE ACT. IT WAS HELD THAT IN CASE OF MISTAKE RESULTING IN ESCAPEMENT, W HICH IS THE AREA WHERE BOTH THE PROVISIONS WOULD BECOME RELEVANT, THE AO WILL HAVE TO CONSIDER WHETHER HE WAS REQUIRED BY THE NATURE OF ESCAPEMENT TO PROCEED TO REOPEN THE ASSESSMENT BECAUSE THAT POWER CANNOT BE INVOKED WHEN THERE IS ONLY A MERE CHANGE OF OPINION. IT WAS HELD THAT IT WOULD BE NECESSARY FOR THE AO TO HAV E REASONS TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT WARRANTING THE RE-OPENING OF THE ASSESSMENT U/S 147 OF THE ACT AND IT WOULD NOT BE OPEN TO THE AO TO ARBITRAR ILY RESORT TO THE PROVISIONS OF SECTION 147 OF THE ACT. IT IS THUS CLEAR THAT EVEN IN CASE S OF MISTAKE RESULTING IN ESCAPEMENT OF INCOME LIKE THE ONE IN HAND, THE REOPENING OF AS SESSMENT U/S 147 CAN BE RESORTED BY I.T.A.NO.1524/MUM/2007 10 AO ONLY IF HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THIS POWER COULD NOT BE EXERCISED WHERE THERE IS ONLY A MERE CHANGE OF OPINION. AS ALREADY HELD BY US, THE RE-OPENING OF ASSESSMENT BY THE A O IN THE ABSENCE OF ANY TANGIBLE MATERIAL COMING TO HIS POSSESSION AFTER THE CONC LUSION OF THE ORIGINAL ASSESSMENT WAS BASED MERELY ON THE CHANGE OF OPINION AND THE I NITIATION OF RE-ASSESSMENT PROCEEDINGS THUS, ITSELF WAS BAD IN LAW. WE, THER EFORE, CANCEL THE ASSESSMENT MADE BY AO U/S 143(3) R.W.S. 147 OF THE ACT IN PURSUAN CE OF SUCH INVALID INITIATION AND ALLOW GROUND NO.1 OF THE ASSESSEES APPEAL. 16. KEEPING IN VIEW OUR DECISION RENDERED ON THE PR ELIMINARY ISSUE RAISED IN GROUND NO.1 OF THE ASSESSEES APPEAL CANCELLING THE ASSESS MENT MADE BY AO U/S 143(3) R.W.S. 147 OF THE ACT THE OTHER GROUNDS RAISED BY THE AS SESSEE IN THIS APPEAL CHALLENGING THE ADDITION MADE BY AO IN THE SAID ASSESSMENT AND F URTHER ENHANCED BY THE LD. CIT(A) HAVE BECOME ACADEMIC AND WE DO NOT CONSIDER IT EXPE DIENT TO ADJUDICATE UPON THE SAME. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS T REATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2014 ( / 0 23 RD MAY, 2014 ( SD SD ( , / SANJAY GARG ) ( . . / P.M.JAGTAP) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 23RD DAY OF MAY, 2014 . . ./ SRL , SR. PS I.T.A.NO.1524/MUM/2007 11 ' #$&' (' / COPY OF THE ORDER FORWARDED TO : 1. $ / THE APPELLANT /APPLICANT 2. %&$ / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. < %> , + > , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) + > , /ITAT, MUMBAI