M/s. Cotton Blossom (India) P Ltd., CHENNAI V. ACIT, Tiruppur

ITA 1724/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61107 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B MURALIKUMAR IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Tangible material; Wrong claim; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 80HHC; 80IB; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS.1723, 1724 & 1725(MDS)/2011 ASSESSMENT YEARS : 2003-04, 2004-05 & 2005-06 M/S. COTTON BLOSSOM(INDIA) PVT. LTD.,189-TEKIC TEA NGR. MUDALIPALAYAM, COIMBATORE. PAN AACFC0694L. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE I, TIRUPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.VIJAYARAGHAV AN, ADVOCATE RESPONDENT BY : SHRI B.MURALIKUMAR, IRS , CIT DATE OF HEARING : 1 ST MAY, 2012 DATE OF PRONOUNCEMENT : 7 TH MAY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THESE THREE APPEALS ARE FILED BY THE ASSESSEE. T HE APPEALS RELATE TO THE ASSESSMENT YEARS 2003-04, 200 4-05 AND 2005-06. THE APPEALS ARE DIRECTED AGAINST THE ORDE RS PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-II AT COIMB ATORE ON - - ITA NOS.1723 TO 1725 OF 2011 2 28-7-2011. THE APPEALS ARISE OUT OF THE ASSESSMENT S COMPLETED UNDER SECTION 143(3), READ WITH SECTION 147 OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF READYMADE KNI TTED GARMENTS. 3. THE ASSESSEE, IN COMPUTING ITS TAXABLE INCOME F OR THESE IMPUGNED ASSESSMENT YEARS, HAD CLAIMED DEDUCT ION UNDER SECTION 80IB OF THE INCOME-TAX ACT, 1961. SE CTION 80IB PROVIDES FOR DEDUCTION IN RESPECT OF PROFITS AND GA INS FROM CERTAIN INDUSTRIAL UNDERTAKINGS. THE LAW THEREIN PROVIDES FOR DEDUCTION FROM PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BU SINESS CARRIED ON BY SUCH INDUSTRIAL UNDERTAKINGS. SUB-SECTION(4) OF SECTION 80IB EXTENDS THE DEDUCTION TO INDUSTRIAL UNDERTAKIN GS SET UP IN AN INDUSTRIALLY BACKWARD STATE, TO THE EXTENT OF HU NDRED PER CENT OF THE PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTA KINGS. IN THE PRESENT CASE, THE ASSESSEE HAS SET UP ITS INDUSTRIA L UNDERTAKING IN A BACKWARD AREA WITHIN THE MEANING OF SECTION 80 IB AND IT IS IN THAT CONTEXT THAT THE ASSESSEE HAS CLAIMED DEDUCTIO N UNDER SECTION 80IB. - - ITA NOS.1723 TO 1725 OF 2011 3 4. THE CLAIM OF DEDUCTION UNDER SECTION 80IB WORKE D OUT BY THE ASSESSEE CONSISTED OF DUTY DRAWBACK REAL ISED BY THE ASSESSEE-COMPANY AGAINST EXPORTS. 5. IN ALL THESE CASES, THE ORIGINAL ASSESSMENTS WE RE COMPLETED UNDER SECTION 143(3) OF THE ACT. THE ASS ESSING OFFICER, AMONG OTHER THINGS, ALSO EXAMINED THE NATU RE OF THE CLAIM MADE BY THE ASSESSEE UNDER SECTION 80IB FOR A LL THE IMPUGNED ASSESSMENT YEARS. THE ASSESSEE HAD ALSO C LAIMED DEDUCTION UNDER SECTION 80HHC OF THE ACT AGAINST EX PORTS. THE QUESTION OF DEDUCTION UNDER SECTION80HHC WAS ALSO C ONSIDERED BY THE ASSESSING OFFICER. THUS THE ORIGINAL SCRUTI NY ASSESSMENTS WERE COMPLETED AFTER CONSIDERING THE RE LEVANT ASPECTS OF THE ASSESSMENTS. 6. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE S TO THE ASSESSEE-COMPANY UNDER SECTION 148, PROPOSING T O REOPEN THE ASSESSMENTS ON THE GROUND THAT INCOME HAS ESCAP ED ASSESSMENTS. THE ASSESSING OFFICER HAS POINTED OUT THAT DEDUCTION UNDER SECTION 80IB, WHICH WAS ALLOWED TO THE ASSESSEE, INCLUDED DUTY DRAWBACK REALISED AGAINST E XPORTS. HE HELD THAT DUTY DRAWBACK, THOUGH FORM PART OF THE PR OFIT AND GAINS - - ITA NOS.1723 TO 1725 OF 2011 4 OF THE BUSINESS, THOSE AMOUNTS WERE DERIVED FROM TH E ACTIVITY OF EXPORTS AND THE IMMEDIATE SOURCE WAS EXPORTS AND NO T THE INDUSTRIAL UNDERTAKING. THEREFORE, DUTY DRAWBACK RE CEIPTS ARE NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB. HE PROP OSED THAT TO THAT EXTENT INCOME HAS ESCAPED ASSESSMENTS FOR THES E IMPUGNED ASSESSMENT YEARS. 7. THE ASSESSEE-COMPANY FILED A DETAILED REPLY BEF ORE THE ASSESSING OFFICER OBJECTING TO THE REOPENING OF THE ASSESSMENTS. THE ASSESSEE EXPLAINED THAT IN THE CA SE OF THE ASSESSMENT YEAR 2003-04, THE REOPENING WAS PROPOSED AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS AND IN VIEW OF THE PROVISO TO SECTION 147, AS THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT, THE PROPOSAL TO REOPEN THE ASSESSMENT W AS AGAINST LAW AND AGAINST THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. FORAMER FRANCE, 264 ITR 566. 8. THE ASSESSEE ALSO OBJECTED TO THE PROPOSITION O F THE ASSESSING OFFICER TO REOPEN THE ASSESSMENTS IN RESP ECT OF ALL THESE ASSESSMENT YEARS, ON THE GROUND THAT THE REOP ENING OF THE ASSESSMENTS WAS BASED MERELY ON A CHANGE OF OPINION , WHICH IS - - ITA NOS.1723 TO 1725 OF 2011 5 AGAINST THE DECISION OF THE HONBLE MADRAS HIGH COU RT IN THE CASE OF APOLLO HOSPITALS ENTERPRISES LTD. VS. CIT, 287 ITR 25. THE ASSESSEE ALSO STATED BEFORE THE ASSESSING OFFIC ER THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RELYING ON T HE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS . JAMEEL LEATHERS & UPPERS, 246 ITR 97, IN COMING TO THE CON CLUSION THAT DUTY DRAWBACK CANNOT BE RECKONED FOR SECTION 80IB D EDUCTION. THIS IS BECAUSE THE SAID DECISION WAS RENDERED BY T HE HONBLE MADRAS HIGH COURT IN THE YEAR 2000 ITSELF, WHEREAS IN THE IMPUGNED CASES THE FIRST ASSESSMENT ITSELF WAS MADE ONLY IN 2005 AND THE ASSESSING OFFICER WAS VERY MUCH AWARE OF THE ABOVE DECISION AT THE TIME OF THE ORIGINAL ASSESSME NTS THEMSELVES. 9. BUT, THE ASSESSING OFFICER REJECTED THE VARIOUS OBJECTIONS RAISED BY THE ASSESSEE AND COMPLETED THE INCOME- ESCAPING ASSESSMENTS AS PROPOSED. THE ASSESSING OF FICER HAS EXCLUDED THE DUTY DRAWBACK RECEIPTS FROM THE COMPUT ATION OF DEDUCTION AVAILABLE UNDER SECTION 80IB. 10. THE REASSESSMENTS WERE TAKEN IN FIRST APPEALS. THE COMMISSIONER OF INCOME-TAX(APPEALS), AFTER CONS IDERING THE - - ITA NOS.1723 TO 1725 OF 2011 6 FACTS AND CIRCUMSTANCES OF THE CASE, AGREED WITH TH E ASSESSING OFFICER THAT INCOME HAD ESCAPED ASSESSMENTS. ACCOR DINGLY, HE UPHELD THE ISSUE OF NOTICES UNDER SECTION 148 AS WE LL AS THE REASSESSMENTS UNDER SECTION 147. THE MAIN GROUND R ELIED ON BY THE COMMISSIONER OF INCOME-TAX(APPEALS) TO UPHOLD T HE ORDERS OF THE ASSESSING AUTHORITY IS THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218, WHEREIN THE HONBLE APEX COURT HAS HELD THAT DUTY DRAWBACK RECEIPTS AND DEPB BENEFITS DO NOT FORM PART OF THE NET PROFIT OF ELIGIBLE INDUSTRIAL UNDERTAKINGS FOR THE PURPOSE OF DEDUCTIO N UNDER SECTION 80-I/80-IA/80-IB OF THE INCOME-TAX ACT,1961 . 11. IT IS AGAINST THE ABOVE ORDERS OF THE COMMISSI ONER OF INCOME-TAX(APPEALS) THAT THE ASSESSEE HAS COME B EFORE US IN THESE SECOND APPEALS. 12. IN ALL THESE CASES THE COMMON GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX(APP EALS) HAS ERRED IN CONFIRMING THE REOPENING OF THE ASSESSMENT S. AS FAR AS THE ASSESSMENT YEAR 2003-04 IS CONCERNED, A MORE SP ECIFIC GROUND OF THE ASSESSEE IS THAT THE REOPENING HAS BE EN MADE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT - - ITA NOS.1723 TO 1725 OF 2011 7 ASSESSMENT YEAR AND, THEREFORE, THE REOPENING IS IN VALID IN VIEW OF THE PROVISO TO SECTION 147. IN ADDITION TO THE ABOVE PARTICULAR GROUND RAISED FOR THE ASSESSMENT YEAR 2003-04, THE COMMON GROUND FOR ALL THESE IMPUGNED ASSESSMENT YEARS IS T HAT THE REOPENING HAS BEEN MADE ONLY ON A MERE CHANGE OF OP INION, WHICH IS AGAINST LAW, AS HELD IN VARIOUS JUDICIAL P RONOUNCEMENTS. 13. WE HEARD SHRI R.VIJAYARAGHAVAN, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE AND SHRI B.MURAL IKUMAR, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR TH E REVENUE. 14. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE FIRSTLY ARGUED ON THE APPEAL FOR THE ASSESSMENT YEA R 2003-04. HE EXPLAINED THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WAS ORIGINALLY MADE UNDER SECTION 143(3) ON 13-9-2005. THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESS MENT YEAR EXPIRED ON 31-3-2008. NOTICE UNDER SECTION 148 WAS ISSUED ON 27-3-2009. THE SAID NOTICE WAS, THEREFORE, ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. THE PROVISO TO SECTION 147 NECESSITATES A FA ILURE 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 - - ITA NOS.1723 TO 1725 OF 2011 8 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL M ATERIAL FACTS NECESSARY FOR THE ASSESSMENT, IF NOTICE UNDER SECTI ON 148 HAS TO BE ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE E ND OF THE RELEVANT ASSESSMENT YEAR. READING OUT FROM THE ORI GINAL ASSESSMENT ORDER DATED 13-9-2005, THE LEARNED COUNS EL EXPLAINED THAT THE ASSESSING OFFICER HAS CONSIDERED THE ISSUE OF DEDUCTION UNDER SECTION 80IB IN A DETAILED MANNER I N PARAGRAPHS 19, 20, 21 AND 22 OF HIS ORDER IN THE LIGHT OF THE RELEVANT MATERIALS PLACED BEFORE HIM. HE, THEREFORE, SUBMIT TED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT. HE FURTHER ARGUED THAT FAILURE ON THE PART OF THE ASSESSEE NEE DS TO BE DEMONSTRATED BY THE ASSESSING OFFICER WHILE POINTIN G OUT THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSME NT. THE ASSESSING OFFICER HAS TO POINT OUT THE NATURE OF FA ILURE MADE BY THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL THE MATERIAL FACTS. THE LEARNED COUNSEL RELIED ON THE DECISION OF THE H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. A.V.THOMAS EXPORTS LTD., 296 ITR 603, AND THE DECISION OF THE HONBLE DELHI HIGH - - ITA NOS.1723 TO 1725 OF 2011 9 COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. VS. CIT, 308 ITR 38, IN SUPPORT OF THE ABOVE PROPOSITION. 15. NOW, COMING TO THE COMMON ARGUMENT APPLICABLE TO ALL THE ASSESSMENT YEARS, THE LEARNED COUNSEL CONTE NDED THAT THE REASON TO REOPEN THE ASSESSMENTS IS A MERE CHAN GE OF OPINION. HE STATED THAT THE ORIGINAL ASSESSMENTS F OR ALL THESE THREE ASSESSMENT YEARS UNDER SECTION 143(3) HAVE BE EN MADE IN THE YEAR 2005 AND THEREAFTER. AT THE TIME OF MA KING THESE SCRUTINY ASSESSMENTS, THE DECISION OF THE HONBLE G UJARAT HIGH COURT IN THE CASE OF CIT VS. INDIA GELATINE AND CHE MICALS LTD., 275 ITR 284, WAS AVAILABLE ON THE SUBJECT MATTER OF SECTION 80IB. IN THE JUDGMENT DATED 7 TH APRIL, 2004 THE HONBLE GUJARAT HIGH COURT HAS HELD THAT DUTY DRAWBACK IS IN THE NA TURE OF INCOME DERIVED FROM INDUSTRIAL UNDERTAKING AND, THE REFORE, ELIGIBLE FOR SPECIAL DEDUCTION. THE COURT HAS HELD THAT DUTY DRAWBACK IS AN INTEGRAL PART OF THE PRICING OF THE GOODS AND, THEREFORE, PART OF THE COST OF PRODUCTION OF THE IN DUSTRIAL UNDERTAKING AND, THEREFORE, DUTY DRAWBACK HAS TO BE TREATED AS DERIVED FROM THE INDUSTRIAL UNDERTAKING. LIKEWISE, THE INCOME- TAX APPELLATE TRIBUNAL, C-BENCH, DELHI, IN THE CASE OF DCIT VS. - - ITA NOS.1723 TO 1725 OF 2011 10 ELEK SGS (P) LTD., 10 SOT 178, HAS HELD THAT DUTY D RAWBACK RECEIVED BY AN ASSESSEE IS INCOME DERIVED FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING AND THEREFORE ENTITLED FOR T HE DEDUCTION AVAILABLE UNDER SECTION 80IB. THE TRIBUNAL HAS HEL D THAT DUTY DRAWBACK HAS DIRECT NEXUS WITH THE ESSENTIAL AND VI TAL ACTIVITIES REQUIRED TO BE CARRIED OUT FOR RUNNING OF THE INDUS TRIAL UNDERTAKING AND, THEREFORE, THE SAME WOULD FORM PART OF THE PRO FITS FOR COMPUTING THE AMOUNT OF DEDUCTION UNDER SECTION 80I B. THE LEARNED COUNSEL SUBMITTED THAT, THEREFORE, AT THE T IME OF PASSING THE ORIGINAL ASSESSMENT ORDERS UNDER SECTION 143(3) , THERE WAS AN ESTABLISHED VIEW THAT DUTY DRAWBACK RECEIPTS ARE ELIGIBLE FOR DEDUCTION AVAILABLE UNDER SECTION 80IB. IT IS AFTE R CONSIDERING ALL THE FACTS OF THE CASE AND THE NECESSARY DETAILS FUR NISHED BY THE ASSESSEE AND THE RELEVANT JUDICIAL PRONOUNCEMENTS A VAILABLE AT THAT POINT OF TIME, THAT THE ASSESSING OFFICER HAS GRANTED THE DEDUCTION UNDER SECTION 80IB AS CLAIMED BY THE ASSE SSEE. 16. NOW, AS POINTED OUT BY THE LEARNED COMMISSIONE R OF INCOME-TAX, THE ANCHOR OF THE ARGUMENTS OF THE R EVENUE TO JUSTIFY THE REOPENING OF THE ASSESSMENTS IS THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 - - ITA NOS.1723 TO 1725 OF 2011 11 ITR 218. IN THE SAID DECISION THE HONBLE SUPREME COURT HAS HELD THAT DUTY DRAWBACK RECEIPTS AND DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDE RTAKINGS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IB. THE SAID JUDGMENT OF THE HONBLE SUPREME COURT HAS BEEN DELIVERED ONLY O N 31-8-2009. THE DECISION OF THE HONBLE SUPREME COU RT WAS NOT AVAILABLE AT THE TIME OF PASSING THE ORIGINAL ASSES SMENT ORDERS UNDER SECTION 143(3). THEREFORE, THE REVENUE IS JU STIFYING ITS STAND ON THE BASIS OF THE JUDGMENT OF THE HONBLE S UPREME COURT. THE JUDGMENT OF THE HONBLE SUPREME COURT I S AGAINST THE ASSESSEE ON THE MERIT OF THE ISSUE. BUT, AS FA R AS THE REOPENING IS CONCERNED, THE SUPREME COURT JUDGMENT IS ONLY A PROVOCATION TO CHANGE THE EARLIER OPINION. 17. THE LEARNED COUNSEL EXPLAINED THAT THE CHANGE OF OPINION PROVOKED EVEN ON THE BASIS OF THE SUPREME C OURT JUDGMENT WILL NOT JUSTIFY THE REOPENING OF THE ASSE SSMENTS, AS HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AUSTIN ENGINEERING CO. LTD. VS. JCIT, 312 ITR 70. IN THAT CASE THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ALLOW ING THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80H HC IN - - ITA NOS.1723 TO 1725 OF 2011 12 RESPECT OF EXPORT INCENTIVE BENEFITS. THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE UND ER SECTION 148 ON A CHANGE OF OPINION IN THE LIGHT OF A SUBSEQ UENT DECISION OF THE HONBLE SUPREME COURT. THE HONBLE HIGH COU RT HELD THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL THE MATERIAL FACTS, AS THE ASSESSING O FFICER HAD FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE A CT, ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION. THE LEARN ED COUNSEL FOR THE ASSESSEE FURTHER RELIED ON A FULL BENCH DECISIO N OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KEL VINATOR OF INDIA LTD., 256 ITR 1 AND THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LT D., 320 ITR 561. HE ARGUED THAT IN BOTH THE CASES IT HAS BEEN HELD T HAT REOPENING OF ASSESSMENT IS NOT JUSTIFIED ON THE GROUND OF CHA NGE OF OPINION. 18. HE, THEREFORE, SUBMITTED THAT ALL THESE THREE IMPUGNED REASSESSMENTS ARE LIABLE TO BE QUASHED ON THE GROUND OF JURISDICTION. 19. SHRI B.MURALIKUMAR, THE LEARNED COMMISSIONER O F INCOME-TAX APPEARING FOR THE REVENUE, ON THE OTHER HAND, - - ITA NOS.1723 TO 1725 OF 2011 13 CONTENDED THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS FAIRLY CONCEDED THAT THE ISSUE OF DEDUCTION UNDER SECTION 80IB IN THE HANDS OF THE ASSESSEE IS CONCLUDED AGAINST THE ASSE SSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F LIBERTY INDIA VS. CIT, 317 ITR 218. HE EXPLAINED THAT THIS POSITION ITSELF JUSTIFIES THE IMPUGNED REOPENED ASSESSMENTS. 20. THE LEARNED COMMISSIONER OF INCOME-TAX, COUNTERING THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04, CONTENDED THAT THE PROVISO TO SECTION 147, RELIED ON BY THE ASSESSEE, IS ALWAYS SUBJECT TO THE EXPLANATION 1 PROVIDED THEREUNDER. THE EXPLANATION PROVIDES THAT PRODUCTION BEFORE THE ASS ESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE, FROM WH ICH MATERIAL EVIDENCE COULD, WITH DUE DILIGENCE, HAVE BEEN DISCO VERED BY THE ASSESSING OFFICER, WILL NOT NECESSARILY AMOUNT TO D ISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. THE L EARNED COMMISSIONER OF INCOME-TAX EXPLAINED THAT IT IS IN THE LIGHT OF THIS EXPLANATION THAT LAW HAS CAST A DUTY ON THE ASSESSE E TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT. THE LEARNED COMMISSIONER OF INCOME-TAX HAS REITERAT ED THAT - - ITA NOS.1723 TO 1725 OF 2011 14 MERE DISCLOSURE IS NOT SUFFICIENT AND EMPHASIS SHOU LD BE GIVEN TO THE EXPRESSION FULLY AND TRULY. 21. IN THE PRESENT CASE, EVEN THOUGH THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) AND E VEN THOUGH THE ASSESSEE HAS GIVEN THE DETAILS OF 80IB M ATTER, BY CLAIMING AN INELIGIBLE DEDUCTION, THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY THE MATERIALS RELEVANT FOR MAKING THE ASSESSMENTS. THE WRONG CLAIM OF DEDUCTION MADE BY THE ASSESSEE ESTABLISHES THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A FULL AND TRUE DISCLOSURE OF THE MATERIALS. THEREFORE, IN THE LIGHT OF THE EXPRESSION FULLY AND TRULY AND A LSO IN THE LIGHT OF THE EXPLANATION THEREUNDER, IT IS NECESSARY TO BE S EEN THAT THE ASSESSING OFFICER HAS RIGHTFULLY ISSUED NOTICES UND ER SECTION 148 EVEN AFTER THE EXPIRY OF THE PERIOD OF FOUR YEARS, IN THE CASE OF THE ASSESSMENT YEAR 2003-04. 22. REGARDING THE CHANGE OF OPINION, THE LEARNED COMMISSIONER CONTENDED THAT THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 WAS DELIVERED ONLY ON 31-8-2009 AND THE INCOME-ESCA PING ASSESSMENTS IN ALL THESE CASES HAVE BEEN COMPLETED WELL BEFORE - - ITA NOS.1723 TO 1725 OF 2011 15 THE DELIVERY OF THE JUDGMENT, I.E. ON 27 TH MARCH, 2009 AND, THEREFORE, THERE IS NO REASON TO ARGUE THAT THE SUB SEQUENT JUDGMENT OF THE HONBLE SUPREME COURT HAS PROVOKED A CHANGE OF OPINION. HE EXPLAINED THAT THE INTERPRETATION O F LAW PROVIDED UNDER SECTION 80IB WAS DEVELOPING AT THAT POINT OF TIME WITH DECISIONS COMING OUT FROM VARIOUS HIGH COURTS. THE RE WAS NO FINALITY ON THE ISSUE AT THAT POINT OF TIME. THERE FORE, THERE IS NO PROVOCATION FOR THE ASSESSING OFFICER TO CHANGE HIS OPINION IN THE LIGHT OF ANY DECISION. AFTER COMPLETION OF THE ASS ESSMENTS, THE ASSESSING OFFICER HIMSELF HAS EXAMINED THE RECORDS OF THE CASE AND FOUND THAT THERE IS NO REASON TO BELIEVE THAT I NCOME HAS ESCAPED ASSESSMENTS FOR THESE THREE ASSESSMENT YEAR S FOR THE REASON THAT THE ASSESSEE HAS CLAIMED AN INELIGIBLE DEDUCTION. THEREFORE, THERE IS NO BASIS FOR THE ARGUMENT OF TH E ASSESSEE THAT THE REOPENING WAS CAUSED BECAUSE OF CHANGE OF OPINION. 23. THE ASSESSING OFFICER HAS EXAMINED THE FACTS O F THE CASE IN A DETAILED MANNER AND HAS RECORDED THE REAS ON RELIED ON BY HIM TO BELIEVE THE ESCAPEMENT OF INCOME IN A PRE CISE AND SPECIFIC MANNER POINTING TOWARDS EXACTLY INELIGIBLE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB. - - ITA NOS.1723 TO 1725 OF 2011 16 24. THE LEARNED COMMISSIONER OF INCOME-TAX, THEREFORE, CONCLUDED THAT THERE IS NO BASIS IN THE ARGUMENT OF THE ASSESSEE THAT THE REASSESSMENTS WERE MADE ON ACCOUN T OF CHANGE OF OPINION. HE ARGUED THAT THE ORDERS OF TH E LOWER AUTHORITIES MAY BE UPHELD. 25. IN REPLY TO THE ARGUMENTS OF THE LEARNED COMMISSIONER OF INCOME-TAX, SHRI R.VIJAYARAGHAVAN, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE, EXPLAINED SOMET HING MORE ON THE EXPLANATION 1 PROVIDED UNDER SECTION 147. R EFERRING TO THE ORIGINAL ASSESSMENT ORDERS, THE LEARNED COUNSEL STATED THAT THE QUESTION OF 80IB DEDUCTION WAS METICULOUSLY CON SIDERED BY THE ASSESSING OFFICER, WHICH IS EVIDENT FROM THE LO NG DISCUSSION ON THE SUBJECT REFLECTED IN THE ASSESSMENT ORDERS. THE ASSESSEE HAS PROVIDED ALL THE RELEVANT MATERIALS CO NCERNING THE SAID DEDUCTION UNDER SECTION 80IB. THE ASSESSEE HA S FLED THE AUDITED STATEMENT OF ACCOUNTS AND STATEMENT OF TAX AUDIT PLUS THE STATUTORY CERTIFICATE ISSUED BY THE CHARTERED A CCOUNTANT TO MAKE SUCH A CLAIM. THEREFORE, THE EXPLANATION RELI ED ON BY THE LEARNED COMMISSIONER OF INCOME-TAX DOES NOT APPLY T O THE CASE OF THE ASSESSEE. HE RELIED ON THE DECISION OF THE HONBLE - - ITA NOS.1723 TO 1725 OF 2011 17 MADRAS HIGH COURT IN THE CASE OF CIT VS. BAER SHOES (INDIA) PVT. LTD., 331 ITR 435, WHERE THE COURT HAS EXAMINED THE SCOPE OF EXPLANATION 1. THE COURT HAS HELD THAT EXPLANATION 1 APPLIES ONLY TO A CASE WHERE THERE WAS ONLY MERE PRODUCTION OF RECORDS AND OTHER EVIDENCE. THE COURT HELD THAT IT WOULD N OT BE APPLICABLE TO A CASE OF FILING OF A RETURN WITH ADE QUATE PARTICULARS FULLY DISCLOSING ALL THE MATERIALS FOR THE PURPOSE OF ASSESSMENT. 26. WE HEARD BOTH SIDES IN DETAIL AND CONSIDERED T HE ISSUE. 27. FIRST WE WILL CONSIDER THE SPECIFIC GROUND RAI SED FOR THE ASSESSMENT YEAR 2003-04. THE ARGUMENT OF THE A SSESSEE FOR THE ASSESSMENT YEAR 2003-04 IS THAT THE REOPENI NG WAS MADE AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR; THAT THE ASSESSEE HAD DIS CLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE WH ATSOEVER AND, THEREFORE, THE REOPENING WAS BAD IN LAW. THE CONDI TION EMBEDDED IN THE PROVISO TO SECTION 147 IS THAT THE ASSESSMENT CAN BE REOPENED ONLY IF THERE IS A FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY - - ITA NOS.1723 TO 1725 OF 2011 18 FOR THE ASSESSMENT. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. A.V.THOMAS EXPORTS LTD., 296 ITR 603, HA S CONSIDERED THE LAW ON THIS SUBJECT. THE COURT HAS HELD THAT IT IS NECESSARY ON THE PART OF THE ASSESSING OFFICER TO G IVE A CATEGORICAL FINDING FOR THE PURPOSE OF INITIATING R EASSESSMENT UNDER THE PROVISO TO SECTION 147 THAT WHAT WAS THE FAILURE ON THE PART OF THE ASSESSEE IN NOT DISCLOSING FULLY AND TR ULY THE RELEVANT MATERIALS. IF THE ASSESSING OFFICER HAS NOT ARRIVE D AT SUCH A FINDING, THE REOPENING WOULD BE INVALID. THE VERY SAME VIEW WAS AGAIN EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. VS. CIT, 308 ITR 38. THE COURT HELD THAT WHERE THERE IS NO INDICATION IN REA SONS RECORDED ABOUT FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT, IT IS NOT POSSIBLE FOR THE ASSESSING OFFICER TO REOPEN THE AS SESSMENT BEYOND THE PERIOD OF FOUR YEARS. 28. AS FAR AS THE FACTS OF THE ASSESSMENT YEAR 200 3-04 ARE CONCERNED, THE ORIGINAL ASSESSMENT WAS COMPLETE D UNDER SECTION 143(3). IN THE ORIGINAL ASSESSMENT ORDER T HE ASSESSING OFFICER HAS CONSIDERED THE ISSUE OF DEDUCTION UNDER SECTION 80IB - - ITA NOS.1723 TO 1725 OF 2011 19 VIS-A-VIS DUTY DRAWBACK RECEIPTS IN A MORE DETAILED MANNER. THE ASSESSEE HAS FURNISHED ALL THE NECESSARY DETAILS TO ARRIVE AT A FAIR CONCLUSION. THE ASSESSEE HAS FURNISHED THE PR OFIT AND LOSS ACCOUNT, THE BALANCE SHEET AND THE OTHER AUDITED ST ATEMENTS AND REPORTS AS REQUIRED UNDER SECTION 44AB OF THE INCOM E-TAX ACT, 1961. IT HAS FURNISHED THE DETAILS OF DUTY DRAWBAC K RECEIPTS VIS- -VIS THE DETAILS OF THE EXPORTS MADE BY THE ASSESS EE. THE ASSESSEE HAS ALSO FILED THE STATUTORY CERTIFICATE I SSUED BY THE CHARTERED ACCOUNTANT TO CLAIM THE DEDUCTION UNDER S ECTION 80IB. THEREFORE, IT IS OBVIOUS THAT THE ASSESSEE HAS NOT FAILED IN ANY WAY IN SUPPORTING ITS CLAIM FOR THE DEDUCTION UNDER SECTION 80IB. SO ALSO THE ASSESSING OFFICER HAS NOT POINTED OUT T HE NATURE OF FAILURE ON THE PART OF THE ASSESSEE IN THE REASONS RECORDED BY HIM TO ISSUE NOTICE UNDER SECTION 148. 29. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, WE FIND THAT THE REOPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 IS AGAINST THE LAW STATED I N THE PROVISO TO SECTION 147 AND, THEREFORE, THE SAME CANNOT BE U PHELD IN LAW. 30. NEXT WE WILL CONSIDER THE COMMON GROUND APPLICABLE TO THESE IMPUGNED ASSESSMENT YEARS RELAT ING TO THE - - ITA NOS.1723 TO 1725 OF 2011 20 CHANGE OF OPINION. WHEN THE ORIGINAL ASSESSMENTS W ERE MADE, THE MATTER WAS NOT FINALLY DECLARED BY THE APEX COU RT. A NUMBER OF DECISIONS WERE AVAILABLE IN SUPPORT OF THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE UNDER SECTION 80IB. THE HONB LE GUJARAT HIGH COURT IN THE CASE OF CIT VS. INDIA GELATINE AN D CHEMICALS LTD., 275 ITR 284, HAS HELD THAT DUTY DRAW BACK REC EIPTS ARE PART OF THE ELIGIBLE PROFITS AND, THEREFORE, ENTITLED FO R DEDUCTION UNDER SECTION 80IB. THE INCOME-TAX APPELLATE TRIBUNAL, D ELHI C-BENCH IN THE CASE OF DCIT VS. ELTEK SGS(P) LTD., 10 SOT 1 78, HAS HELD THAT DUTY DRAWBACK HAS DIRECT NEXUS WITH THE ESSENT IAL AND VITAL ACTIVITIES REQUIRED TO BE CARRIED OUT FOR RUNNING O F THE INDUSTRIAL UNDERTAKING AND THE SAME WOULD FORM PART OF THE PRO FITS FOR COMPUTING THE DEDUCTION UNDER SECTION 80IB. THE AS SESSEE HAS FURNISHED ALL THE NECESSARY DETAILS REQUIRED BY THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE FOR DE DUCTION UNDER SECTION 80IB. JUDICIAL PRONOUNCEMENTS ALSO WERE AV AILABLE AT THAT POINT OF TIME TO SUPPORT THE CLAIM OF THE ASSE SSEE. IT IS AFTER APPLYING HIS MIND ON ALL THESE VITAL ASPECTS THAT T HE ASSESSING OFFICER HAS FINALLY CONCLUDED THAT THE ASSESSEE WAS ENTITLED FOR - - ITA NOS.1723 TO 1725 OF 2011 21 DEDUCTION UNDER SECTION 80IB EVEN IN RESPECT OF DUT Y DRAWBACK RECEIPTS. 31. THEREAFTER, WHEN THE ASSESSING OFFICER PROPOSE D TO REOPEN THE ASSESSMENTS, NO FRESH FACTS HAVE COME TO THE SCENE OR LAW HAS BEEN DECLARED TO MAKE A REASON TO BELIEV E THAT INCOME HAD ESCAPED ASSESSMENT. WHEN THE ASSESSING OFFICER PROPOSED TO REOPEN THE ASSESSMENTS, NO ADDITIONAL M ATERIALS, EITHER ON FACTS OR ON LAW, WERE AVAILABLE TO SHOW T HAT BY CLAIMING THE DEDUCTION UNDER SECTION 80IB WITH REFERENCE TO DUTY DRAWBACK RECEIPTS, INCOME CHARGEABLE TO TAX HAD ESC APED ASSESSMENTS. IN SUCH CIRCUMSTANCES, WHEN THE ASSES SING AUTHORITY IS PROPOSING TO REOPEN THE ASSESSMENTS, I T IS ONLY A JUSTIFIABLE ARGUMENT ON THE PART OF THE ASSESSEE TH AT THE REOPENING WAS MADE BY THE ASSESSING AUTHORITY ON A CHANGE OF OPINION. THE HONBLE GUJARAT HIGH COURT IN THE CAS E OF AUSTIN ENGINEERING CO. LTD. VS. JCIT, 312 ITR 70, HAS HELD THAT EVEN A CHANGE OF OPINION ON THE STRENGTH OF A SUBSEQUENT S UPREME COURT JUDGMENT IS NOT SUFFICIENT TO REOPEN AN ASSES SMENT FOR THE REASON THAT A CHANGE OF OPINION IS NOT JUSTIFIED ON ANY GROUND. AS IN THAT CASE CONSIDERED BY THE HONBLE GUJARAT H IGH COURT, IN - - ITA NOS.1723 TO 1725 OF 2011 22 THE PRESENT CASE ALSO THERE WAS NO FAILURE ON THE P ART OF THE ASSESSEE. 32. THE SUBJECT MATTER OF CHANGE OF OPINION IN THE CONTEXT OF REOPENING OF AN ASSESSMENT HAS BEEN DISC USSED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KE LVINATOR OF INDIA LTD., 320 ITR 561. THE HONBLE SUPREME COURT WAS UPHOLDING THE JUDGMENT DELIVERED BY A FULL BENCH OF THE HONBLE DELHI HIGH COURT. THE HONBLE SUPREME COURT FOUND THAT EARLIER OPINION AND REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT NEED TO BE RECORDED BEFORE ISSUING NOTIC E FOR REASSESSMENT. AFTER THE AMENDMENT IN 1989, ONLY ON E CONDITION REMAINED THAT THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IS TO BE RECORDED IN WRITING. THE HONB LE SUPREME COURT HELD THAT TO COME TO SUCH A BELIEF, THERE MUS T BE TANGIBLE MATERIAL AND THEN ONLY A SUSTAINABLE BELIEF COULD B E FORMED BY THE ASSESSING AUTHORITY. THE COURT OBSERVED THAT TH E CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OF FICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFT ER THE SUBSTITUTION OF SECTION 147 OF THE INCOME-TAX ACT,1 961, BY THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. A FTER THE - - ITA NOS.1723 TO 1725 OF 2011 23 AMENDMENT THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THIS DOES N OT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE COURT EMPHATICALLY OBSERVED THAT THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS A N INBUILT TEST TO CHECK THE ABUSE OF POWER. THEREFORE, THE HONBL E APEX COURT HAS HELD THAT AFTER APRIL 1, 1989 AN ASSESSING OFFI CER CAN REOPEN AN ASSESSMENT ONLY IF THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE PRINCIPLE DECLARED BY THE HONBLE SUPREME COURT IS THAT THE REASON MUST HAVE A LINK WITH THE FORMATION OF BELIEF. 33. IN FACT, THE PRINCIPLE OF CHANGE OF OPINION HA S BEEN REITERATED BY THE HONBLE SUPREME COURT EVEN EARLIE R IN THE DECISION IN THE CASE OF CALCUTTA DISCOUNT CO. LTD. VS. ITO, 41 ITR 191. INSPITE OF AMENDMENTS BROUGHT THEREAFTER, STILL THE BASIC RULE REGARDING THE CHANGE OF OPINION IS CONSI STENTLY UPHELD BY THE APEX COURT SO THAT ANY REASSESSMENT PROCEEDI NG SHOULD NOT BE INITIATED WITHOUT RECORDING REASON BASED ON TANGIBLE MATERIALS AVAILABLE ON RECORD. - - ITA NOS.1723 TO 1725 OF 2011 24 34. AS FAR AS THE PRESENT APPEALS ARE CONCERNED, W E HAVE COME TO A CONCLUSION THAT THE ASSESSING OFFICE R HAS REOPENED THE ASSESSMENTS ON A CHANGE OF OPINION. W E HAVE ALSO DISCUSSED THE JUDGMENTS OF THE HONBLE SUPREME COURT TO HOLD THAT REASSESSMENTS ARE NOT PERMITTED ON CHANGE OF OPINION. 35. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, WE HAVE TO HOLD THAT THE IMPUGNED REASSESSMEN TS FOR ALL THESE THREE ASSESSMENT YEARS ARE NOT SUSTAINABLE IN LAW. ACCORDINGLY THEY ARE VACATED. 36. IN RESULT, THESE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 07 TH OF MAY, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (D R. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 7 TH MAY, 2012. V.A.P. COPY TO: (1) APPELLA NT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.