Raj Kumar Mahajan, New Delhi V. DCIT, New Delhi

ITA 1792/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3787 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 21-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 20-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Assessee Lawyers: MRS RANO JAIN
• Keywords: Business income; Tangible material; Wrong claim; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings; TDS
• Section: 143(3); 80HHC; 80IB; 80IA; 80HH; 208; 147; 148; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F DELHI) BEFORE SHRI A.D. JAIN AND SHRI R.C. SHARMA ITA NO. 1792(DEL)2010 ASSESSMENT YEAR: 2001-02 RAJ KUMAR MAHAJAN, DY.COM MISSIONER OF INCOME TAX, PROP.M/S.GIRDHARS INTERNATIONAL V. CIRCLE 25(1 ), NEW DELHI. K-2, UDYOG NAGAR, PEERA GARHI, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI VED JAIN, VENKATESH CHAURASI A, CAS & MRS. RANO JAIN, CA RESPONDENT BY: SMT. BANITA DEVI N AOREM, SR. DR ORDER PER A.D. JAIN, J.M. THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 001-02, TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)[CIT (A)] IS BAD, BOTH IN THE EYE OF LAW AND ON THE FACTS. 2.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE PROCEEDINGS UNDER SECTION 147, READ WITH SECTION 148, IGNORING THE FA CT THAT THE SAME WAS BAD IN THE EYE OF LAW AS THE CONDITION AND PROCEDUR E PRESCRIBED UNDER THE STATUTE HAVE NOT BEEN SATISFIED AND COMPLIED WI TH. ITA 1792(DEL)10 2 (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE REASSESSMENT PROCEEDINGS INITIATED BY THE LD. AO ARE BAD IN THE EYE OF LAW AS THE REASONS RECORDED FOR THE ISSUE OF NOTICE UNDER SECT ION 148 ARE BAD IN THE EYE OF LAW AND ARE CONTRARY TO THE FACTS. 3(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJECTING THE C ONTENTION OF THE ASSESSEE THAT THE ORDER PASSED BY LD. AO IS BAD BOT H IN THE EYE OF LAW AND ON FACTS AS THE SAME HAS BEEN REOPENED ON THE B ASIS OF REASONS WITHOUT THERE BEING ANY FAILURE ON PART OF THE ASSE SSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT, AS THE SAME HAS BEEN REOPENED AFTER A PERIOD OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR AND THE ASSESSMENT HAS ALREADY BEEN MADE UNDER SEC. 143(3). (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LEARNED AO IS BAD BOTH IN THE EYE OF LAW AND ON FAC TS, AS THE ASSESSEE HAD ALREADY DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT UNDER SECTION 143(3). 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE A CTION OF THE AO IN MAKING AN ADDITION OF RS. 46,55,572/- ON ACCOUNT OF DIFFERENCE IN CALCULATING DEDUCTION U/S 80 HHC AND U/S 80 IA OF T HE ACT. (II) THAT THE ABOVESAID ADDITIONS HAVE BEEN MADE BY INDULGING IN SURMISES, CONJECTURES AND WITHOUT BRINGING ANY ADVE RSE MATERIAL ON RECORD. 2. THE FIRST EFFECTIVE GRIEVANCE OF THE ASSESSEE [G ROUNDS 3(I) AND 3(II)] IS THAT THE REOPENING OF THE COMPLETED ASSESSMENT IS B AD IN LAW, AS THE COMPLETED ASSESSMENT WAS REOPENED AFTER 4 YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR, WITHOUT THERE BEING ANY F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT, ALL MATERIAL FACTS NECESSARY FOR THE AS SESSMENT HAVING BEEN ITA 1792(DEL)10 3 ALREADY DISCLOSED FULLY AND TRULY IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE I.T. ACT. 3. THE FACTS OF THE CASE IN THIS REGARD ARE THAT TH E ASSESSEE INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION, I.E., ASSTT.YEAR 2001-02, ON 23.10.2001, DECLARING AN INCOME OF RS. 11,33,210/-, CLAIMING DEDUCTION OF RS. 2,35,68,838/- U/S 80HHC OF THE ACT AND OF RS. 61,70,349/- U/S 80 IB THEREOF. THE ASSESSMENT WAS COMPLETED U /S 143(3) AT A TOTAL INCOME OF RS.11,33,210/-, VIDE ASSESSMENT ORDER DAT ED 31.3.03. THE AFORESAID DEDUCTIONS CLAIMED BY THE ASSESSEE WERE A LLOWED BY THE AO. 4. THE SAID COMPLETED ASSESSMENT WAS REOPENED ON 28 .3.2008 BY RECORDING THE FOLLOWING REASONS FOR REOPENING (PAGE 26 OF THE ASSESSEES PAPER BOOK, APB, FOR SHORT): REASONS FOR TAKING ACTION U/S 147/148 IN THE CASE OF SH. RAJ KUMAR MAHAJAN FOR THE ASSESSMENT YEAR 2001- 02 RETURN OF INCOME IN THIS CASE WAS FILED ON 23.10.2 001 DECLARING AN INCOME OF RS. 11,33,210/- AFTER CLAIMING DEDUCTION U/S 80 HHC AT RS. 2,35,68,838/- AND U/S 80 IB AT RS. 61,70,349/-. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3 ) ON 31.03.2003 ON A TOTAL INCOME OF RS. 11,33,210/- AND THE DEDUCT ION AS CLAIMED BY THE ASSESSEE U/S 80 HHC AND U/S 80 IB WERE ALLOWED TO H IM BY THE AO. ON GOING THROUGH THE ASSESSMENT RECORDS OF THE ASS ESSEE, FOR ASSTT.YEAR 2001-02, IT IS SEEN THAT THE ASSESSEE HA S WRONGLY CLAIMED DEDUCTION U/S 80HHC AT RS.2,35,68,838/- BY RESTRICT ING THE DEDUCTION U/S 80 IA AT RS. 61,70,349/-. THIS RESTRICTION OF DEDUCT ION BY THE ASSESSEE HAS BEEN ITA 1792(DEL)10 4 DONE BY REDUCING FROM THE ELIGIBLE PROFITS FOR DEDU CTION U/S 80IA THE DEDUCTION CLAIMED U/S 80HHC. HOWEVER, AS PER LAW T HE ASSESSEE HAS TO CLAIM DEDUCTION U/S 80 IA ON PROFITS WITHOUT ANY RE DUCTION BY TAKING AWAY DEDUCTION U/S 80HHC ON THE SAID PROFITS. FURTHER, THE ASSESSEE HAS WHILE WORKING OUT DEDUCTI ON U/S 80HHC HAS NOT REDUCED THE AMOUNT OF DEDUCTION U/S 80IA FROM T HE PROFITS OF BUSINESS. THIS IS AGAINST THE PROVISIONS OF SECTION 80IA(9). SECONDLY THE ASSESSEE HAS NOT REDUCED INTEREST INCOME EARNED FROM PROFITS WHI LE CALCULATING DEDUCTION U/S 80HHC. THIRDLY, ASSESSEE HAS WRONGLY INCLUDED FDR INTEREST AS PART OF HIS BUSINESS INCOME. DUE TO ALL THE REASONS CITED ABOVE, THE ASSESSEE HA S WRONGLY CLAIMED A HIGHER DEDUCTION U/S 80HHC THEN WHAT HE IS ALLOWE D AS PER LAW. THE DEDUCTION U/S 80HHC ACTUALLY WORKS OUT TO RS. 1,76, 48,818/- AS AGAINST WRONG CLAIM OF DEDUCTION BY THE ASSESSEE AT RS. 2,3 5,68,838/-. THUS EXCESS DEDUCTION CLAIMED BY THE ASSESSEE U/S 80HHC COMES T O RS. 59,20,020/-. HOWEVER, SINCE THE ASSESSEE HAS CLAIMED A LESSER DE DUCTION U/S 80IA OF RS. 61,70,349/- INSTEAD OF RS. 74,34,797/-, THE EXCESS DEDUCTION CLAIMED BY THE ASSESSEE U/S 80HHC AT RS. 59,20,020/- WILL BE REDUC ED BY THE AMOUNT OF SHORT DEDUCTION U/S 80IA OF RS. 12,64,448/-. THUS EXCESS DEDUCTION U/S 80HHC CLAIMED BY THE ASSESSEE WOULD BE RS. 46,55,57 2/-(59,20,020 12,64,448). THUS, THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION U/ S 80HHC AND THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE FOR NOT DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THE ASSTT.YEAR 2001- 02. I HAVE THEREFORE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE BY WAY OF EXCESS DEDUCTION OF RS. 46,55,572/- U/S 80HHC AL LOWED TO THE ASSESSEE HAS ESCAPED ASSESSMENT FOR THE ASSTT.YEAR 2001-02. IT IS, THEREFORE, NECESSARY TO TAKE ACTION U/S 147/148 IN THIS CASE FOR THE SAI D ASSESSMENT YEAR. SD/- ACIT, CIRCLE 25(1), NEW DELHI. ITA 1792(DEL)10 5 5. THE ASSESSEE FILED THE FOLLOWING OBJECTIONS AGAI NST THE ISSUANCE OF THE NOTICE FOR REOPENING THE COMPLETED ASSESSMENT [AO P AGE 1, PARAS (1) TO (4)]: RETURN OF INCOME IN THIS CASE WAS FILED ON 23.10.2 001 DECLARING AN INCOME OF RS. 11,33,210/- AFTER CLAIMING DEDUCTION U/S 80 HHC AT RS. 2,35,68,838/- AND U/S 80 IB AT RS. 61,70,349/-. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143( 3) ON 31.03.2003 ON A TOTAL INCOME OF RS. 11,33,210/- AND THE DEDUCTION AS CLAIMED BY THE ASSESSEE U/S 80HHC AND U/S 80 IB WER E ALLOWED TO HIM BY THE AO. ON GOING THROUGH THE ASSESSMENT RECORDS OF THE ASS ESSEE FOR ASSTT.YEAR 2001-02, IT IS SEEN THAT THE ASSESSEE HA S WRONGLY CLAIMED DEDUCTION U/S 80HHC AT RS. 2,35,68,238/- BY RESTRIC TING THE DEDUCTION U/S 80IB AT RS. 61,70,349/-. SO WHILE CALCULATING DEDUCTION U/S 80HHC THE AMOUNT OF DEDUCTION U/S 80IB WAS TO BE R EDUCED FROM THE PROFIT OF EXPORT BUSINESS IN VIEW OF THE PROVISIONS OF SECTION 80IB(13) READ WITH SECTION 80IA(9) WHICH PROVIDES THAT WHERE AN AMOUNT OF PROFITS AND GAINS OF AN INDUSTRIAL UNDERTAKING IS C LAIMED AND ALLOWED AS DEDUCTION U/S 80IB, THE PROFITS TO THAT EXTENT S HOULD NOT QUALIFY FOR DEDUCTION FOR ANY ASSESSMENT YEAR UNDER ANY OTHER P ROVISIONS OF CHAPTER VIA AND IN NO CASE SHALL EXCEED THE PROFIT OF INDUSTRIAL UNDERTAKING. FURTHER, IT IS ALSO SEEN THAT WHILE COMPUTING PROF IT OF BUSINESS AS WELL AS DEDUCTION FOR SECTION 80HHC THE ASSESSEE HAS WRONGLY TAKEN INTO ACCOUNT 90% OF FDR INTEREST OF RS. 10,47 ,539/- AS BUSINESS INCOME INSTEAD OF TREATING IT AS INCOME FROM OTHER SOURCES AS HELD IN SEVERAL COURT JUDGMENTS IN THIS RESPECT. SO THE W HOLE AMOUNT OF FDR INTEREST OF RS. 10,47,539/- SHOULD HAVE BEEN REDUCE D FROM THE PROFIT OF BUSINESS FOR SECTION 80HHC AND NO AMOUNT OF IT SHOU LD HAVE ALSO ALLOWED FOR DEDUCTION U/S 80HHC OF THE I.T. ACT. I T MAY ALSO BE MENTIONED HERE THAT AS PER CLAUSE (BAA)UNDER EXPLAN ATION TO SEC. 80HHC 90% OF ANY RECEIPTS BY WAY OF BROKERAGE, COMM ISSION, ITA 1792(DEL)10 6 INTEREST, RENT CHARGES OR ANY OTHER RECEIPT OF SIMI LAR NATURE ARE ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION AND NOT UNDER THE HEAD OTHER SOURCES. IN VIEW OF THE ABOVE FACTS THE DEDUCTION U/S 80HHC WORKS OUT TO RS. 1,76,48,818/- AS AGAINST WRONG CLAIM OF THIS DEDUCTION BY THE ASSESSEE AT RS. 2,35,68,838/-. THUS EXCESS DEDUCT ION CLAIM BY THE ASSESSEE COMES TO RS.5,92,20,020/- BUT AS THE ASSES SEE HAS RESTRICTED THE DEDUCTION U/S 80IB AT RS. 61,70,349/- INSTEAD OF RS. 74,34,797/-, THE EXCESS DEDUCTION CLAIMED BY THE ASSESSEE U/S 80 HHC AT RS. 59,20,020/- WILL BE REDUCED BY THE AMOUNT OF SHORT DEDUCTION U/S 80IB OF RS.12,64,448/-. THUS EXCESS DEDUCTION U/S 80HH C CLAIMED BY THE ASSESSEE WOULD BE RS. 46,55,572/- (59,20,020 12,6 4,448/-) BY REASONS OF THE FAILURE ON THE PART OF THE ASSESSEE FOR NOT DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THE ASSTT.YEAR 2001-02. THE THEN AO HAD THEREFORE REA SONS TO BELIEVE THAT INCOME OF THE ASSESSEE BY WAY OF EXCESS DEDUCT ION OF RS. 46,55,572/- U/S 80HHC ALLOWED TO THE ASSESSEE HAD E SCAPED ASSESSMENT FOR ASSTT.YEAR 2001-02. ON THE BASIS OF THE ABOVE FACTS, NECESSARY APPROVA L FOR TAKING ACTION U/S 147/148 FOR ASSTT.YEAR 2001-02 WAS SOUGH T FROM THE COMMISSIONER OF INCOME TAX, DELHI IX, NEW DELHI VID E HIS OFFICE LETTER F.NO. CIT-IX/151(2)/2007-08/3588 DATED 28.3. 2008. THEREFORE, NOTICE U/S 148 DATED 28.3.2008 WAS ISSUE D TO THE ASSESSEE BY THE THEN ACIT, CIRCLE 25(1) , NEW DELHI AFTER RE CORDING REASONS THEREOF ON 28.3.2008 WITH A SATISFACTION NOTE THAT HE HAD REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE BY WAY OF EXCES S DEDUCTION OF RS. 46,55,572/- U/S 80 HHC ALLOWED TO THE ASSESSEE HAD ESCAPED ASSESSMENT FOR ASSTT.YEAR 2001-02 AND IT WAS, THERE FORE, NECESSARY TO TAKE ACTION U/S 147/148 IN THIS CASE FOR THE SAID A SSESSMENT YEAR. IN RESPONSE TO NOTICE ISSUED U/S 148 THE ASSESSEE FILED A LETTER DATED 21.4.2008 SUBMITTING THAT SINCE THE ASSESSEE DOES NOT HAVE ANY ADDITIONAL INCOME TO DISCLOSE, THE ORIGINAL RETURN FILED BY THE ASSESSEE U/S 139 ON 23.10.2001 VIDE ACK.NO. 0190 SHOULD BE T REATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE I.T. ACT , 1961. THE ASSESSEE WOULD ALSO LIKE TO KNOW THE REASONS ON THE BASIS OF WHICH THE SAID NOTICE HAS BEEN ISSUED. HENCE, COPY OF REASONS RE CORDED FOR TAKING ACTION U/S 147/148 FOR ASSTT.YEAR 2001-02 WAS SUPPL IED TO THE ASSESSEE ITA 1792(DEL)10 7 ON 29.4.2008. THEREAFTER THE ASSESSEE FILED A LET TER DATED 23.5.2008 RAISING OBJECTIONS FOR ISSUE OF NOTICE U/S 148 AS U NDER:- 1. THE ORDER U/S 143(3) DATED 31.3.2003 HAS VERY CLEAR LY STATED THAT DETAILED QUESTIONNAIRES WERE ISSUED AND DETAIL ED INFORMATION AS CALLED FOR WAS FILED. 2. IT IS VERY CLEAR THAT THE REASONS ON THE BASIS OF W HICH THE AO WANTS TO TAKE ACTION U/S 147 HAS BEEN MADE OUT OF T HE INFORMATION, FACT AND FIGURES WHICH WERE DISCLOSED BY HIM IN HIS RETURN AND THERE IS NO FAILURE ON HIS PART. 3. AS PER PROVISO TO SECTION 147 NO ACTION CAN BE TAKE N AFTER FOUR YEARS IF ASSESSEE HAS FULLY AND TRULY DISCLOSE D ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T ASSESSMENT YEAR. THIS VIEW IS ALSO SUPPORTED BY T HE FOLLOWING JUDGMENTS. A) PRAFUL CHUNILAL PATEL VASANT CHUNILAL PATEL V. ASSTT.CIT[1999](GUJ); B) ICICI BANK LTD. V. K.J. RAO; C) FENNER (INDIA) LTD. V. DCIT [2000] (MAD); AND D) GRINDWELL NORTON LTD. V. ASSTT. CIT[2004] 267 ITR 673(BOM). 4. IN VIEW OF THE PROVISO OF SECTION 147 AND ABOVE JUD GMENTS AND ALSO CONSIDERING THE FACT THAT THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS IN HIS RETURN AND THERE IS NO FA ILURE ON THE PART OF THE ASSESSEE, IT IS REQUESTED TO DROP THE P ROCEEDINGS AS THE FOUR YEARS PERIOD HAS ALREADY PASSED. 6. THE ASSESSEES ABOVE SUBMISSIONS WERE NOT FOUND BY THE AO TO BE SATISFACTORY. IT WAS OBSERVED THAT IT WAS CLEAR FR OM THE REASONS RECORDED THAT THE ASSESSEE HAD, IN HIS RETURN OF INCOME, CLAIMED EXCESS DEDUCTION U/S 80 HHC AND THAT THERE HAD BEEN A FAILURE ON THE ASSESS EES PART IN NOT ITA 1792(DEL)10 8 DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECES SARY FOR HIS ASSESSMENT FOR THE YEAR. IT WAS FURTHER OBSERVED THAT AFTER THE I NSERTION OF THE EXPLANATION TO SECTION 147 WITH EFFECT FROM ASSESSMENT YEAR 198 9-90, THE POSITION IS THAT SOFAR AS REGARDS THE PRIMARY FACTS, IT IS THE ASSES SEES DUTY TO DISCLOSE ALL THE PRIMARY FACTS, INCLUDING PARTICULAR ENTRIES IN THE BOOKS OF ACCOUNT, PARTICULAR PORTIONS OF DOCUMENTS, AND DOCUMENTS AND OTHER EVID ENCES WHICH COULD HAVE BEEN DISCOVERED BY THE ASSESSING AUTHORITY FRO M THE DOCUMENTS AND OTHER EVIDENCE DISCLOSED. THE ASSESSEES OBJECTIO NS TO THE REOPENING WERE REJECTED IN THIS MANNER AND THE DISALLOWANCE OF RS. 46,55,572/- ON ACCOUNT OF EXCESS DEDUCTION U/S 80 HHC CLAIMED BY AND ALLOW ED TO THE ASSESSEE, WAS ADDED TO THE ASSESSEES INCOME. 7. BEFORE THE LEARNED CIT(A), THE ASSESSEE FILED WR ITTEN SUBMISSIONS, AS SUMMARIZED BY THE CIT(A) (PAGE 4, PARA 3.2 TO PAGE 5 OF THE IMPUGNED ORDER): 1. THE REOPENING OF THE ASSESSMENT IS BAD IN LAW, MADE AFTER EXPIRY OF 4 YEARS AND ALL THE CONDITIONS AS LAID DOWN IN T HE PROVISO OF SECTION 147 FOR REOPENING THE ASSESSMENT ARE NOT APPLICABLE TO THE CIRCUMSTANCES OF THE APPELLANT, INCLUDED THAT THE A PPELLANT HAD FULLY AND TRULY DISCLOSED ALL THE MATERIAL FACTS. THE N OTICE U/S 148 WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS AND HENCE BAR RED BY TIME LIMITATION AS PROVIDED IN SECTION 147. CHANGE OF OPINION CANNOT BE THE BASIS FOR REOPENING THE ASSESSMENT. 2. RETURN WAS FILED ALONG WITH RELEVANT DETAILS EN CLOSING THE DOCUMENTS IN SUPPORT OF VARIOUS CLAIMS MADE, THE AO ALSO EXAMINED ITA 1792(DEL)10 9 THE ALLOWABILITY OF CLAIMS U/S 80HHC AND 80 IB. T HE PHOTOCOPY OF THE AOS NOTICE AND SUBMISSION OF THE ASSESSEE WERE FURNISHED. 3. ALL MATERIAL FACTS REQUIRED FOR MAKING THE ASSE SSMENT WERE DISCLOSED FULLY AND TRULY. HENCE THE ASSESSMENT C ANNOT BE REOPENED AFTER 4 YEARS FROM THE END OF RELEVANT ASSESSMENT Y EAR UNLESS THERE IS FAILURE TO DISCLOSE THE PRIMARY FACTS. HE RELIED O N THE FOLLOWING CASE LAWS: HARYANA ACRYLIC V. CIT, 308 ITR 38(DEL); ONGC V. DCIT, 262 ITR 648 (UTTARANCHAL); ACIT V. RAJESH JHAVERI, 291 ITR 500(SC); AND MCDERMOTT INTL.INC. V. ACIT, 259 ITR 138(UTTARANCH AL). 4. ON THE SAME SET OF FACTS, THE ASSESSEE CANNOT RESORT TO REOPENING BY CHANGING OPINION. HE RELIED ON THE CASE LAW: C IT V. KELVINATOR OF INDIA LTD., 256 ITR 1(DEL). 5. HE FURTHER ARGUED THAT THE HONBLE SUPREME C OURT HAS DISMISSED THE DEPARTMENTAL APPEAL FILED AGAINST THE FULL BENC H JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD., 256 ITR 1(DEL)(FB) VIDE ORDER DATED 19.01.2010. 6. THE LEGAL REQUIREMENTS WERE NOT MET BY THE A O BEFORE CHARTING THE COURSE OF REOPENING OF THE ASSESSMENT. 8. THE CIT(A), HOWEVER, UPHELD THE ACTION OF THE AO IN REOPENING THE COMPLETED ASSESSMENT. HE OBSERVED, INTER ALIA, THA T THE REASSESSMENT PROCEEDINGS WERE INITIATED IN THIS CASE ON THE BASI S OF THE FACT THAT THE ASSESSEE HAD CLAIMED WRONG AND EXCESSIVE RELIEF/DED UCTION UNDER SECTIONS 80HHC AND 80 IA OF THE ACT; THAT THE AO HAD RECORDE D THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT BY THE REASON O F OMISSION OR FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS REGARDING THE CLAIM ITA 1792(DEL)10 10 U/S 80HHC, WHICH WERE NECESSARY FOR THE ASSESSMENT; THAT THUS, THERE WAS ESCAPEMENT OF INCOME OF RS.46,55,572/-; THAT THE T HEN AO, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, HAD UNDISPUTEDLY Q UERIED THE ASSESSEE REGARDING THE CLAIM OF DEDUCTION U/S 80 HHC; THAT I T WAS EVIDENT FROM THE ASSESSEES THEN SUBMISSIONS THAT THE ASSESSEE HAD N OT DISCLOSED THE FULL FACTS ABOUT THE NATURE OF INCOME AND THE CLAIM OF DEDUCTI ON U/S 80 HHC AND IT WAS THIS FAILURE ON THE ASSESSEES PART WHICH HAD R ESULTED INTO ESCAPEMENT OF INCOME; THAT THE INTEREST INCOME DERIVED ON THE FDR S OF THE PROPRIETORY CONCERN HAD BEEN SHOWN AS BUSINESS INCOME AND THE A SSESSEE HAD CLAIMED DEDUCTION U/S 80HHC ON THIS INCOME; THAT IT WAS THU S ESTABLISHED THAT THE ASSESSEE HAD FAILED TO MAKE FULL AND TRUE DISCLOSUR E OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE YEAR; THAT IN THIS CASE, THERE WAS A DIRECT NEXUS BETWEEN THE MATERIAL AVAILABLE WITH THE AO TO FORM A BELIEF OF ESCAPEMENT OF INCOME AND THE BELIEF FORMED BY THE A O; THAT THE ASSESSEE DID NOT DECLARE THE NATURE OF INTEREST INCOME OF RS. 10 ,47,539/- ON FDRS UNDER THE HEAD OTHER SOURCES, THOUGH HE HAD SHOWN THE I NTEREST ON FDRS OF MINORS AS INCOME FROM OTHER SOURCES; THAT EVEN THE AUDIT REPORT WAS SILENT ON THE INTEREST INCOME AND THE TRUE FACTS ABOUT THE EXPORT TURNOVER WERE ALSO NOT REVEALED IN IT; THAT IT WAS, THEREFORE, THAT TH E AOS BELIEF THAT THE ASSESSEE HAD CLAIMED EXCESS RELIEF/DEDUCTION BY SUPPRESSING THE FULL FACTS, WAS ITA 1792(DEL)10 11 REASONABLE AND JUSTIFIED; THAT THERE WERE WRONG CLA IMS AND ACCORDINGLY, THERE WAS ESCAPEMENT OF INCOME; AND THAT THE ASSESSEE HAD NOT EXPLAINED THE EXCESS DEDUCTION U/S 80HHC BY RS. 59,20,020/- AND T HE LESSER DEDUCTION U/S 80 IA BY RS. 12,64,448/-, AS MENTIONED IN THE REASO NS RECORDED FOR REOPENING THE ASSESSMENT. THE CIT(A) UPHELD THE REOPENING OF THE COMPLETED ASSESSMENT. 9. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAD DISCLOSED FULLY AND TRULY, ALL MATERIAL FACTS N ECESSARY FOR THE ASSESSMENT; THAT THIS IS EVIDENT FROM THE ORIGINAL ASSESSMENT O RDER; THAT THE THEN AO, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, HAD PUT TO THE ASSESSEE SPECIFIC QUERIES ABOUT BOTH THE DEDUCTIONS CLAIMED UNDER SEC TIONS 80HHC AND 80 IB, AS WELL AS THE INTEREST; THAT THE ASSESSEE HAD GIVE N DETAILED REPLIES TO ALL SUCH QUERIES, DISCLOSING ALL MATERIAL FACTS WITH REGARD THERETO; THAT THEREFORE, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE; AND THA T AS SUCH, THE REOPENING, HAVING BEEN DONE AFTER FOUR YEARS FROM THE END OF T HE RELEVANT ASSESSMENT YEAR, IS HIT BY THE FIRST PROVISO TO SECTION 147 OF THE ACT AND IS THUS BAD IN LAW. APROPOS THE OBSERVATIONS MADE BY THE CIT(A) I N THE IMPUGNED ORDER, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO MERIT IN THE OBSERVATION THAT MERE PRODUCTION OF BOOKS OF ACCOUN T, ON THE BASIS OF WHICH MATERIAL EVIDENCE COULD HAVE BEEN DISCOVERED BY THE AO, WILL NOT ITA 1792(DEL)10 12 NECESSARILY AMOUNT TO DISCLOSURE; THAT THE PRESENT IS A CASE OF COMPLETE DISCLOSURE; THAT THE ISSUE OF DEDUCTION WAS SPECIFI CALLY EXAMINED AND IT WAS ONLY THEREAFTER, THAT THE DEDUCTION CLAIMED WAS ALL OWED; AND THAT THE COMPLETED ASSESSMENT WAS NOT REOPENED ON THE BASIS OF ANY EXTERNAL INFORMATION OR MATERIAL, RATHER IT WAS REOPENED ONL Y ON THE BASIS OF FACTS DISCLOSED IN THE ORIGINAL ASSESSMENT PROCEEDINGS, W HICH IS IMPERMISSIBLE IN LAW. 10. PER CONTRA, THE LD. DR HAS STRONGLY SUPPORTED T HE ORDER UNDER APPEAL. IT HAS BEEN CONTENDED THAT THE ASSESSEE DID NOT MAK E EITHER FULL OR TRUE DISCLOSURE OF THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE YEAR; THAT THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTION UNDER SECTIONS 80 HHC AND 80 IA OF THE ACT BY SUPPRESSING FULL FACTS WITH REGARD THERETO, DUE TO WHICH, HIS INCOME HAD ESCAPED ASSESSMENT; THAT IT WAS DUE TO T HIS, THAT THE COMPLETED ASSESSMENT WAS CORRECTLY REOPENED; THAT THE ASSESSE E HAD CLAIMED DEDUCTION UNDER SECTION 80 HHC OF THE ACT ON INTEREST DERIVED ON FDRS OF THE PROPRIETORY CONCERN, WHICH HAD BEEN SHOWN AS BUSINE SS INCOME; THAT THE ASSESSEE DID NOT DECLARE THE NATURE OF INTEREST INC OME OF RS. 10,47,539/- ON FDRS UNDER THE HEAD OF OTHER SOURCES, EVEN THOUGH I NTEREST ON FDRS OF MINORS HAD BEEN DEPICTED AS INCOME FROM OTHER SOURC ES; THAT THE FACT OF THE ASSESSEE HAVING THUS CLAIMED EXCESSIVE DEDUCTION RI GHTLY LED THE AO TO FORM ITA 1792(DEL)10 13 THE BELIEF OF THE ESCAPEMENT OF THE ASSESSEES INCO ME; THAT THE CONDITIONS CONTAINED IN THE FIRST PROVISO TO SECTION 147 OF TH E ACT STOOD FULFILLED; THAT THE ESCAPEMENT OF THE ASSESSEES INCOME CAME ABOUT CLEARLY DUE TO THE FAILURE OF THE ASSESSEE TO DISCLOSE IN THE ORIGINAL ASSESSMENT PROCEEDINGS, FULLY AND TRULY, ALL MATERIAL FACTS NECESSARY FOR H IS ASSESSMENT FOR THE YEAR; THAT IN THESE FACTS, THE LD. CIT(A) CORRECTLY UPHEL D THE ACTION OF THE AO IN REOPENING THE COMPLETED ASSESSMENT; AND THAT THERE THUS BEING NO FORCE IN THE GRIEVANCE SOUGHT TO BE WRONGLY RAISED BY THE AS SESSEE IN THIS REGARD, THE SAME BE REJECTED OUTRIGHT. 11. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE QUESTION PRESENTLY TO BE CONSIDERED IS WHETHER , AS CONTENDED BY THE DEPARTMENT, THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THE YEAR UNDER CONSIDERATION, LEADING TO ESCAPEMENT OF INCOME CHAR GEABLE TO TAX, WHICH FORMED THE BASIS OF THE AOS BELIEF OF SUCH ESCAPEM ENT OF INCOME, JUSTIFYING HIS ACTION OF REOPENING THE COMPLETED ASSESSMENT, W HICH ACTION WAS UPHELD BY THE CIT(A) OR, WHETHER, AS MAINTAINED BY THE ASS ESSEE, THERE WAS NO SUCH FAILURE ON THE PART OF THE ASSESSEE, ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THE YEAR WERE FULLY AND TRULY DISCL OSED BY HIM DURING THE ORIGINAL ASSESSMENT PROCEEDINGS BY GIVING SPECIFIC REPLIES TO POINTED QUERIES ITA 1792(DEL)10 14 RAISED BY THE THEN AO AND THE REOPENING HAD ITS BAS IS ONLY IN SUCH FACTS DISCLOSED BY THE ASSESSEE IN THE ORIGINAL ASSESSMEN T PROCEEDINGS, RATHER THAN IN ANY EXTERNAL INFORMATION OR MATERIAL, RENDERING THE REOPENING BAD IN LAW INASMUCH AS IT FAILS THE REQUIREMENT OF THE PROVISI ONS OF SECTION 147 OF THE ACT. 12. THE COMPLETED ASSESSMENT HAS BEEN REOPENED UNDE R SECTION 147 OF THE ACT. SECTION 147 (MAIN PROVISION RELEVANT PORTI ON) PROVIDES AS FOLLOWS:- 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEV E 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 CHAR GEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION.. 13. THUS, ACCORDING TO SECTION 147, IF THE AO HAS R EASON TO BELIEVE ESCAPEMENT OF INCOME, HE MAY ASSESS OR REASSESS SUC H INCOME . 14. THE FIRST PROVISO (RELEVANT PORTION) TO SECTION 147 STATES: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLES S ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O .DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT, FOR THAT ASSESSMENT YEAR. ITA 1792(DEL)10 15 15. THEREFORE, AS PER THE FIRST PROVISO TO SECTION 147, UNLESS IT IS DUE TO THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT THAT HIS INCOME HAS ESCAPED ASSE SSMENT, AN ASSESSMENT COMPLETED UNDER THE SCRUTINY ASSESSMENT PROCEDURE P RESCRIBED BY THE PROVISIONS OF SECTION 143(3) OF THE ACT CANNOT BE R EOPENED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 16. THE DEPARTMENTS CASE, AS PER THE CIT(A)S OBSE RVATIONS, IS THAT THE ASSESSEE HAD CLAIMED, IN HIS RETURN OF INCOME, EXCE SSIVE DEDUCTION UNDER SECTIONS 80 HHC AND 80 IA OF THE ACT BY WITHHOLDING THE FULL FACTS ABOUT THE NATURE OF INCOME AND CLAIM OF DEDUCTION UNDER SECTI ON 80 HHC; THAT SUCH DEDUCTION WAS CLAIMED ON INTEREST INCOME ON FDRS OF THE ASSESSEES PROPRIETARY CONCERN, WHICH HAD BEEN SHOWN TO BE BUS INESS INCOME, AS EVIDENT FROM THE ASSESSEES REPLY DATED 4.12.02 FI LED BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS; THAT THE ASSESSEE DID NOT DECLARE THE NATURE OF INTEREST INCOME OF RS. 10,47,539/- ON FDRS UNDER THE HEAD OTHER SOURCES, THOUGH HE HAD SHOWN THE INTEREST ON FDRS OF MINORS AS INCOME FROM OTHER SOURCES; THAT IT WAS THIS FAILURE ON THE PART OF THE ASSESSEE WHICH RESULTED IN THE ESCAPEMENT OF THE ASSESSEES INCOME FOR THE YEAR UNDER CONSIDERATION, DUE TO WHICH THE AO RIGHTLY REOPENED THE COMPLETED ASSESSMENT. ITA 1792(DEL)10 16 17. THE ASSESSEE, ON THE OTHER HAND, HAS TAKEN THE STAND THAT THERE WAS NO SUCH FAILURE ON HIS PART; THAT IN THE ORIGINAL ASSE SSMENT PROCEEDINGS, THE THEN AO, HAD ASKED SPECIFIC QUERIES OF THE ASSESSEE, WHI CH WERE DULY REPLIED TO; THAT THE ORIGINAL ASSESSMENT ORDER WAS PASSED BY TH E AO ON DUE APPLICATION OF MIND; AND THAT THE COMPLETED ASSESSMENT WAS REOP ENED ONLY ON THE BASIS OF THE MATERIAL AND EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS IN RESPONSE TO THE POINTED SPECIFIC QUESTIONS PUT BY THE AO. 18. NOW, THE OBJECTION RAISED BY THE CIT(A) IS THAT FROM THE ASSESSEES WRITTEN SUBMISSIONS DATED 4.12.02, FILED IN THE ORI GINAL ASSESSMENT PROCEEDINGS, IT IS EVIDENT THAT THE ASSESSEE HAD NO T DISCLOSED THE FULL FACTS ABOUT THE NATURE OF INCOME AND CLAIM OF DEDUCTION U NDER SECTION 80 HHC, WHICH RESULTED INTO ESCAPEMENT OF INCOME, AND THAT THE DEDUCTION WAS CLAIMED ON INCOME DERIVED ON FDRS OF THE ASSESSEES PROPRIETARY CONCERN, WHICH INCOME WAS SHOWN AS BUSINESS INCOME. 19. THE FOLLOWING IS THE QUESTIONNAIRE (COPY AT APB 17-18) ISSUED TO THE ASSESSEE ON 6.8.02 BY THE AO IN THE ORIGINAL ASSESS MENT PROCEEDINGS: I) A NOTE ON THE NATURE AND BEGINNING OF THIS BUSI NESS. 2) COPY OF BANK STATEMENT SHOWING THAT ALL THE FOREIGN EXCHANGE EARNED ON EXPORT SALE WERE REALIZED BY 30.9.2001. ITA 1792(DEL)10 17 3) COPIES OF BILLS OF LADING SHIPPING BILLS OF EACH EX PORT TRANSACTION SHOWING THE DATE, DESTINATION AND THE VALUE OF EACH TRANSACTION. 4) THE DEDUCTION CLAIMED U/S 80 HHC IS EXCESSIVE AS FD R INTEREST OF RS. 10,47,538/- HAS BEEN TAKEN AS BUSINESS INCOME A ND NOT AS INCOME FROM OTHER SOURCES. IN EFFECT, 10 PER CENT OF THIS INTEREST INCOME AMOUNTING TO RS. 1,04,754/-, HAS ESCAPED TA XATION. PLEASE SHOW CAUSE WHY THIS EXCESS DEDUCTION U/S 80 HHC SHO ULD NOT BE ADDED BACK TO YOUR INCOME. 5) RS. 81,70,349/- HAS BEEN CLAIMED AS DEDUCTION U/S 8 0 IA. PLEASE FURNISH DOCUMENTARY PROOF IN SUPPORT OF THIS CLAIM. 6) DETAILS OF EACH PURCHASE ABOVE RS. 5,00,000/- MAY B E FURNISHED. 7) PLEASE PROVIDE A LIST OF THE PARTIES FROM WHOM PACK ING MATERIAL HAS BEEN PURCHASED AND THE AMOUNT PAID TO EACH ONE OF THEM. 8) PLEASE FURNISH DETAILS OF EACH ADMINISTRATIVE AND S ELLING EXPENSE THAT EXCEEDS RS. 1,00,000/-. 9) SUNDRY CREDITORS AMOUNT TO RS. 11,25,324/-. PLEAS E FURNISH A DETAILED BREAK UP OF OPENING BALANCE PURCHASES DURI NG THE YEAR AND CLOSING BALANCE AS ALL SUCH CASES WHERE THE OU TSTANDING AMOUNT IS MORE THAN RS. 1,00,000/-. 10) A COPY OF BANK STATEMENT MAY BE FURNISHED WITH EXPL ANATIONS FOR EACH CREDIT ENTRY OF MORE THAN RS. 5,00,000/-. 11) PLEASE EXPLAIN UNDER WHAT CIRCUMSTANCES YOU DEPOSIT ED RS.5,00,000/- AS SELF ASSESSMENT TAX IN JULY 2001 W HEN YOU HAVE CLAIMED A REFUND OF RS. 22,25,928/- IN YOUR RETURN FILED ON 23.10.2001. 12) INTEREST INCOME HAS BEEN SHOWN AS RS. 10,47,538.76 WHEREAS AS PER TDS CERTIFICATES THE INTEREST RECEIVED IS AROU ND RS. 15,00,000/-. THIS DIFFERENCE MAY BE EXPLAINED. ITA 1792(DEL)10 18 13) ADDITIONS TO FIXED ASSETS DURING THE YEAR AMOUNT TO RS. 34,37,987/-. PLEASE FURNISH DOCUMENTARY PROOF OF T HE PURCHASES MADE. 20. THE ASSESSEE FILED THE FOLLOWING REPLY (APB-19) DATED 4.12.02 JUSTIFYING HIS ELIGIBILITY FOR DEDUCTION CLAIMED UN DER SECTION 80IB OF THE ACT: 1. CONFIRMATION OF M/S. PAMPOSH PRINTERS & M/S. DE E KAY PACKERS IS ENCLOSED. 2. REGARDING THE ELIGIBILITY U/S 80 IA/IB IT IS SUBMIT TED THAT THE ASSESSEE IS SATISFYING ALL THE FOLLOWING CONDITIONS . A) IT SHOULD BE A NEW UNDERTAKING. IT IS A NEW UNDERT AKING AND IT IS NOT FORMED BY SPLITTING UP OR THE RECONSTRUCT ION OF AN EXISTING UNIT. B) IT SHOULD NOT BE FORMED BY TRANSFER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. ALL THE MACHINER Y USED IN THIS UNDERTAKING HAS BEEN PURCHASED FROM MACHINERY SUPPLIERS AND NOT FROM ANY EXISTING INDUSTRIAL UNDE RTAKING. C) IT SHOULD NOT MANUFACTURE OR PRODUCE ARTICLES SPECI FIED IN THE ELEVENTH SCHEDULE. THE ASSESSEE IS MANUFACTURI NG CANDLES FOR EXPORT, WHICH IS NOT MENTIONED IN ELEVE NTH SCHEDULE. D) IT BEGINS TO MANUFACTURE BEFORE MARCH 31, 2002. E) IT SHOULD EMPLOY MORE THAN 10/20 WORKERS. THE ASS ESSEE WAS EMPLOYING 85 PERSONS AS PER THE COPY OF ESI RET URN FOR THE HALF YEAR ENDED 31.3.02. COPY OF THE RETURNS E NCLOSED. 21. THE CONTENTS OF THE ASSESSEES REPLY (APB 20-21 ) DATED 4.12.02, CONCERNING THE DEDUCTION CLAIMED UNDER SECTION 80HH C OF THE ACT ARE THUS: ITA 1792(DEL)10 19 1. COPIES OF THE BILLS FOR ADDITION IN FIXED ASSET S TOTALING RS. 34,37,987/- DURING THE FINANCIAL YEAR 2000-01 ARE E NCLOSED. 2. REGARDING THE DEDUCTION U/S 80HHC IT IS SUBMITT ED THAT DURING THE A.Y. 00-01 80% OF THE EXPORT PROFIT WAS EXEMPTED FR OM PROFIT. AS PER EXPLANATION (BAA) OF THIS SECTION PROFIT OF THE BUS INESS MEANS THE PROFIT OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS REDUCED BY- A) NINETY PERCENT OF ANY SUM REFERRED TO IN CLAUSE (II IA), (IIIB) AND (IIIC) OF SECTION 28 OROF ANY RECEIPTS BY WAY O F A BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT OF SIMILAR NATURE INCLUDED IN SUCH PROFIT; AND B) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATE OUTSIDE INDIA . IT IS VERY CLEAR FROM THE PLAIN READING OF THIS SEC TION THAT EVEN 10% OF THE INTEREST, RENT AND OTHER RECEIPTS WOULD BE ELIG IBLE FOR DEDUCTION U/S 80HHC. 3. DETAILS OF EACH PURCHASE ABOVE RS. 5,00,000/- A LONG WITH COPIES OF BILLS ARE ENCLOSED. 4. LIST OF PARTIES FROM WHOM PACKING MATERIAL HAS BEEN PURCHASED AND AMOUNT PAID TO EACH ONE OF THEM IS ALSO ENCLOSE D. 5. DETAIL OF EACH ADMINISTRATIVE AND SELLING EXPEN SES THAT EXCEEDS RS. 1,00,000/- IS ENCLOSED. 6. LIST OF SUNDRY CREDITORS IS ENCLOSED WITH BALANCE S HEET. 7. A COPY OF BANK STATEMENT WITH EXPLANATION FOR E ACH AND EVERY ENTRY IS ENCLOSED. 22. IN THE QUESTIONNAIRE, THE AO HAD PUT A SPECIFIC QUESTION TO THE ASSESSEE REGARDING THE DEDUCTION CLAIMED UNDER SECT ION 80 HHC: ITA 1792(DEL)10 20 4. THE DEDUCTION CLAIMED U/S 80 HHC IS EXCESSIVE A S FDR INTEREST OF RS. 10,47,538/- HAS BEEN TAKEN AS BUSINESS INCOME A ND NOT AS INCOME FROM OTHER SOURCES. IN EFFECT, 10 PER CENT OF THI S INTEREST INCOME, AMOUNTING TO RS. 1,04,754/-, HAS ESCAPED TAXATION. PLEASE SHOW CAUSE WHY THIS EXCESS DEDUCTION U/S 80HHC SHOULD NO T BE ADDED BACK TO YOUR INCOME. 23. IN RESPONSE, VIDE REPLY AT APB 20-21(SUPRA), TH E ASSESSEE STATED THAT DURING A.Y.00-01 (SIC.-THE IMMEDIATELY PRECEDING AS SESSMENT YEAR), 80% OF THE EXPORT PROFIT WAS EXEMPTED FROM PROFIT; AND AS PER EXPLANATION(BAA) TO SECTION 80 HHC, PROFIT OF THE BUSINESS MEANS THE PR OFIT OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION AS REDUCED BY NINETY PERCENT OF ANY SUM REFERRED TO IN SECTIONS 28(IIIA), (IIIB) AND (IIIC), OR OF ANY RECEIPT BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATURE INCL UDED IN SUCH PROFIT, AND THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTH ER ESTABLISHMENT OF THE ASSESSEE OUTSIDE INDIA. THE ASSESSEE CONTENDED TH AT AS SUCH, EVEN 10% OF THE INTEREST, RENT AND OTHER RECEIPTS WOULD BE ELIG IBLE FOR DEDUCTION UNDER SECTION 80HHC. WITH THE REPLY, THE ASSESSEE ENCLO SED: 1. DETAILS OF EACH PURCHASE ABOVE RS. 5,00,000/- ALONG WITH COPIES OF BILLS. 2. LIST OF PARTIES FROM WHOM PACKING MATERIAL HAD BEEN PURCHASED AND DETAILS OF AMOUNT PAID TO EACH ONE OF THEM. 3. DETAIL OF EACH ADMINISTRATIVE AND SELLING EXPENSE T HAT EXCEEDED RS. 1,00,000/- AND ITA 1792(DEL)10 21 4. A COPY OF BANK STATEMENT WITH EXPLANATION FOR EACH AND EVERY ENTRY. 24. A LIST OF SUNDRY CREDITORS WAS STATED TO HAVE B EEN FILED EARLIER ALONGWITH THE BALANCE SHEET. THE AUDIT REPORT (APB -10), MENTIONING THE DEDUCTION CLAIMED UNDER SECTION 80 HHC, WAS ALREADY WITH THE AO, UNDISPUTEDLY. REPORT UNDER SECTION 80HHC (APB 12- 13) WAS ALSO WITH THE AO. 25. THE LD. CIT(A) HAS OBSERVED THAT MERE PRODUCTIO N OF BOOKS OF ACCOUNT, ON THE BASIS OF WHICH, MATERIAL EVIDENCE C OULD HAVE BEEN DISCOVERED BY THE AO, WILL NOT NECESSARILY AMOUNT T O DISCLOSURE. 26. NOW, THERE CANNOT BE ANY POSSIBLE DENIAL TO THE ABOVE PROPOSITION. HOWEVER, A PERUSAL OF THE ASSESSEES REPLY SHOWS TH AT THE PRESENT IS NOT A CASE WHERE THE ASSESSEE HAD MERELY PRODUCED BOOKS O F ACCOUNT, ON THE BASIS OF WHICH, MATERIAL EVIDENCE COULD HAVE BEEN DISCOVE RED BY THE AO. AS DISCUSSED, THE ASSESSEE, IN HIS REPLY, MADE FULL A ND TRUE DISCLOSURE OF MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, INCLUD ING FURNISHING OF DETAILS OF EACH PURCHASE OF ABOVE FIVE LAKH RUPEES, ALONGWITH COPIES OF BILLS, A LIST OF PARTIES FROM WHOM PACKING MATERIAL HAD BEEN PURCHAS ED, THE DETAIL OF AMOUNTS PAID TO EACH OF SUCH PARTIES, DETAIL OF EAC H ADMINISTRATIVE AND SELLING EXPENSE EXCEEDING ONE LAKH RUPEES, AS ALSO A COPY OF BANK STATEMENT ITA 1792(DEL)10 22 WITH EXPLANATION FOR EACH AND EVERY ENTRY. IT WAS ON CONSIDERING THE SAID EXPLANATION OFFERED BY THE ASSESSEE IN ITS ENTIRETY , THAT THE DEDUCTION CLAIMED UNDER SECTION 80HHC OF THE ACT WAS ALLOWED IN THE O RIGINAL ASSESSMENT PROCEEDINGS. 27. THE RETURN OF INCOME FILED BY THE ASSESSEE, IN THE COMPUTATION OF INCOME (APB-1), MENTIONED AT ITEM NO. 22(B), THE CL AIM OF DEDUCTION UNDER SECTION 80HHC AT RS. 2,35,68,838/-. 28. BESIDES THE ASSESSEES REPLY, THE AO ALSO HAD B EFORE HIM, THE AUDIT REPORT (APB-10), MENTIONING THE DEDUCTION UNDER SEC TION 80HHC AND THE REPORT UNDER SECTION 80HHC (APB-12-13). AS PER TH E AUDIT REPORT: 26. SECTION-WISE DETAILS OF DEDUCTIONS, IF ANY, A DMISSIBLE UNDER CHAPTER VI A- 80HHC 2,35,68,838/- 29. ACCORDING TO THE FORM NO. 10CCAC, I.E., THE REP ORT UNDER SECTION 80HHC(4) OF THE I.T. ACT (APB 12-13), THE CHARTERED ACCOUNTANT OF THE ASSESSEE HAD CERTIFIED THAT: 2. I CERTIFY THAT THE DEDUCTION TO BE CLAIMED BY T HE ASSESSEE UNDER SUB-SECTION (1) OF SECTION 80HHC OF THE INCOME TAX ACT, 1961 IN RESPECT OF ASSESSMENT YEAR 01-02 IS RS.2,35,68,838/ - WHICH HAS BEEN DETERMINED ON THE BASIS OF THE SALE PROCEEDS RECEIV ED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE . THE AMOUNT HAS BEEN WORKED OUT ON THE BASIS OF THE DETAILS IN ANNEXURE A TO THIS F ORM. 3. I, THEREFORE, CERTIFY THAT THE TOTAL DEDUCTION TO BE CLAIMED BY THE ASSESSEE UNDER SECTION 80HHC IN RESPECT OF THE ASSE SSMENT YEAR 01- 02 IS RS. 2,35,68,838/-. ITA 1792(DEL)10 23 30. THE DETAILS OF THE CLAIM OF THE ASSESSEE OF DED UCTION UNDER SECTION 80HHC OF THE ACT, AS PER ANNEXURE A(APB-13) TO FORM 10CCAC(SUPRA), ARE AS FOLLOWS: 1. NAME OF THE ASSESSEE : RAJ KUMAR MAHAJAN , PROP. GIRDHARS INTERNATIONAL 2. ASSESSMENT YEAR : 2001-02 3. TOTAL TURNOVER OF THE BUSINESS : 9,12,09,20 6 4. TOTAL EXPORT TURNOVER : 9,02, 14,006 5. TOTAL PROFITS OF THE BUSINESS : 3,07,86, 726 6. EXPORT TURNOVER IN RESPECT OF TRADING GOODS : NIL 7. DIRECT COST OF TRADING GOODS EXPORTER : N.A. 8. INDIRECT COST ATTRIBUTABLE TO TRADING GOODS EXPORTED : N.A. 9. TOTAL OF 7&8 : NIL 10.PROFITS FROM EXPORT OF TRADING GOODS (6 MINUS 9) : NIL 11.ADJUSTED TOTAL TURNOVER (3 MINUS 6) : 9,12,09,206 12.ADJUSTED EXPORT TURNOVER (4 MINUS 6) : 9 ,02,14,006 13.ADJUSTED PROFITS OF THE BUSINESS ITA 1792(DEL)10 24 (5 MINUS 10) : 3, 07,86,726 14.PROFIT DERIVED BY ASSESSEE FROM EXPORT OF GOODS OR MERCHANDISE TO WHICH SECTION 80 HHC APPLIES, COMPUTED UNDER SUB-SEC.(3)OF SECTION 80 HHC : 2,35,68,838 15. EXPORT TURNOVER, DEDUCTION IN RESPECT OF WHICH WILL BE CLAIMED BY A SUPPORTING MANUFACTURER IN ACCORDANCE WITH PROVISO TO SUB-SECTION (1)OF SEC.80HHC : NIL 16. PROFITS FROM THE EXPORT TURNOVER MENTIONED IN ITEM 15 ABOVE, CALCULATED IN ACCORDANCE WITH PROVISO TO SUB-SEC.(1)OF SEC. 80HHC. : NIL 17.DEDUCTION U/S 80HHC TO WHICH THE ASSESSEE IS ENTITLED(ITEM 14 MINUS 16) : 2,35,68,838 18.REMARKS, IF ANY : NIL 31. THUS, ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSEES ASSESSMENT WERE DULY DISCLOSED BY HIM FULLY AND TRULY IN THE ORIGIN AL ASSESSMENT PROCEEDINGS. IN THE ORIGINAL ASSESSMENT ORDER (APB 22), THE AO O BSERVED, INTER ALIA: IN RESPONSE SHRI S.K. DHINGRA, FCA AND AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, ATTENDED FROM TIME TO TIME AND F ILED THE DETAILED INFORMATION AS CALLED FOR. ITA 1792(DEL)10 25 32. THEREFORE, THE ORIGINAL ASSESSING OFFICER, WHIL E PASSING THE ORIGINAL ASSESSMENT ORDER, WAS WELL SEIZED OF THE FULL AND T RUE DISCLOSURE BY THE ASSESSEE, OF THE MATERIAL FACTS NECESSARY FOR THE A SSESSEES ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. IT WAS ONLY ON CONSIDERA TION OF SUCH FULL AND TRUE DISCLOSURE, THAT THE ORIGINAL ASSESSMENT ORDER WAS PASSED, GRANTING THE DEDUCTION CLAIMED BY THE ASSESSEE. 33. HENCE, ON THE BASIS OF THE ABOVE, WE DO NOT FIN D OURSELVES IN AGREEMENT WITH THIS OBJECTION OF THE LD. CIT(A). 34. THE LD. CIT(A) HAS OBSERVED THAT THERE BEING A LIVE NEXUS BETWEEN THE AOS REASON TO BELIEVE THE ESCAPEMENT OF INCOME AND THE ALLEGED ACTUAL FACTUM OF SUCH ESCAPEMENT OF INCOME, THE REOPENING OF THE COMPLETED ASSESSMENT IS VALID. WOULD THAT IT WERE SO! THEN MATTERS WOULD HAVE BEEN SIMPLER. HOWEVER, FROM THE REASONS RECORDED FOR RE OPENING THE COMPLETED ASSESSMENT, AS REPRODUCED HEREINBEFORE, IT IS APPAR ENT THAT THERE WAS NO FRESH EXTERNAL MATERIAL AVAILABLE WITH THE AO SO AS TO EN ABLE HIM TO FORM THE BELIEF OF ESCAPEMENT OF THE ASSESSEES INCOME. TH E MATERIAL WHICH FORMED THE VERY RAISON DETRE OF THE AOS REASONS FOR REOP ENING THE COMPLETED ASSESSMENT IS THE VERY MATERIAL FORMING THE SUBJECT -MATTER OF THE QUESTIONNAIRE (SUPRA) ISSUED TO THE ASSESSEE BY THE THEN AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. THE SAID QUESTIO NNAIRE, AS NOTED, WAS ITA 1792(DEL)10 26 ADEQUATELY RESPONDED TO BY THE ASSESSEE WITH COGENT AND VOLUMINOUS DOCUMENTARY EVIDENCE. THAT BEING SO, LINK, IF ANY BETWEEN THE REASON FOR REOPENING THE COMPLETED ASSESSMENT AND THE ALLEGED ESCAPEMENT OF INCOME, IS NOT A LINK AT ALL, MUCHLESS A LIVE LINK, AT THAT . THE DEPARTMENT HAS REMAINED AT PAINS TO BUTTRESS ITS STAND THAT IT WAS FOR THE ASSESSEES FAILURE TO DISCLOSE THE FULL AND TRUE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, THAT HIS INCOME ESCAPED ASSESSMENT, NECESSITATING A VALID RE OPENING OF HIS COMPLETED ASSESSMENT. BUT, IT HAS FAILED TO DO SO. AS DELI BERATED UPON, THE ASSESSEE DID MAKE FULL AND TRUE DISCLOSURE OF MATEIAL FACTS RELEVANT FOR HIS ASSESSMENT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. 35. THE REASONS RECORDED FOR REOPENING THE COMPLET ED ASSESSMENT DO NOT, THEREFORE, MEET THE RATIO OF CIT V. KELVINATOR OF INDIA LTD. 256 ITR 1(SC), AS PER WHICH, IF THE FACTS ARE ON RECORD, REOPENING ON A MERE CHANGE OF OPINION IS NOT PERMISSIBLE EVEN WITHIN FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN THE PRESENT CASE, ONC E, ON BEING POINTEDLY QUERIED BY THE AO IN THE ORIGINAL ASSESSMENT PROCEE DINGS, THE ASSESSEE HAD DISCLOSED FULL AND TRUE MATERIAL FACTS NECESSARY FO R HIS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR, THE SUBSEQUENT REOPENING OF THE COMPLETED ASSESSMENT ON THE SAME SET OF FACTS, WITHOUT EITHER REFERENCE OR RECOURSE TO ANY EXTERNAL MATERIAL, WAS INDEED A MERE CHANGE OF OPINION BY THE ITA 1792(DEL)10 27 SUBSEQUENT AO, FROM THAT OF THE AO WHO PASSED THE O RIGINAL ASSESSMENT ORDER. SUCH A COURSE IS IMPERMISSIBLE AND ENTIREL Y NOT IN ACCORDANCE WITH THE LAW AS LAID DOWN BY THE HONBLE SUPREME COURT I N KELVINATOR(SUPRA). THE HONBLE DELHI HIGH COURT FULL BENCH DECISION [A S UPHELD BY THE HONBLE SUPREME COURT IN KELVINATOR(SUPRA)] IN K ELVINATOR 256 ITR 1(DEL) HAS BEEN REFERRED TO IN EICHER LTD. 294 I TR 310(DEL), HOLDING THAT IT WOULD NOT BE CORRECT TO OVERLOOK THE FULL BENCH DECISION OF THE HONBLE DELHI HIGH COURT IN KELVINATOR (SUPRA). WHILE D OING SO, KLM ROYAL DUTCH AIRLINES V. ASSTT.DIRECTOR OF INCOME TAX 292 ITR 49(DEL) WAS FOLLOWED. 36. AS PER THE REASONS RECORDED BY THE AO FOR THE R EOPENING OF THE COMPLETED ASSESSMENT, THE ASSESSEE HAD WRONGLY CLAI MED DEDUCTION UNDER SECTION 80HHC OF THE ACT AT RS.2,35,68,838/- BY RES TRICTING THE DEDUCTION UNDER SECTION 80 IA AT RS. 61,70,349/-; THAT THIS R ESTRICTION OF DEDUCTION BY THE ASSESSEE HAD BEEN DONE BY REDUCING FROM THE ELI GIBLE PROFITS FOR DEDUCTION UNDER SECTION 80 IA, THE DEDUCTION CLAIME D UNDER SECTION 80HHC; THAT HOWEVER, AS PER LAW, THE ASSESSEE HAD TO CLAIM DEDUCTION UNDER SECTION 80 IA ON PROFITS WITHOUT ANY REDUCTION BY TAKING AW AY THE DEDUCTION UNDER SECTION 80HHC ON THE SAID PROFITS; THAT FURTHER, TH E ASSESSEE HAD, WHILE WORKING OUT DEDUCTION UNDER SECTION 80HHC, NOT REDU CED THE AMOUNT OF ITA 1792(DEL)10 28 DEDUCTION UNDER SECTION 80 IA FROM THE PROFITS OF B USINESS, WHICH WAS AGAINST THE PROVISIONS OF SECTION 80 IA(9); THAT TH E ASSESSEE ALSO DID NOT REDUCE, WHILE CALCULATING THE DEDUCTION UNDER SECTI ON 80 HHC, THE INTEREST INCOME EARNED FROM PROFITS; AND THAT THE ASSESSEE W RONGLY INCLUDED THE FDR INTEREST AS PART OF THE BUSINESS INCOME. 37. APROPOS THE DEDUCTION CLAIMED BY THE ASSESSEE U NDER SECTION 80 IA ALSO, THE POSITION REMAINS MUCH THE SAME AS WITH RE GARD TO THE CLAIM OF DEDUCTION UNDER SECTION 80HHC. IN THE QUESTIONNAIR E (SUPRA), THE AO QUERIED: 5. RS. 61,70,349/- HAS BEEN CLAIMED AS DEDUCTION U /S 80IA. PLEASE FURNISH DOCUMENTARY PROOF IN SUPPORT OF THIS CLAIM. 38. THE ASSESSEE RESPONDED (APB-19): 1. CONFIRMATION OF M/S. PAMPOSH PRINTERS & M/S. DE E KAY PACKERS IS ENCLOSED. 2. REGARDING THE ELIGIBILITY U/S 80 IA/IB IT IS SU BMITTED THAT THE ASSESSEE IS SATISFYING ALL THE FOLLOWING CONDITIONS : A) IT SHOULD BE A NEW UNDERTAKING:- IT IS A NEW UNDER TAKING AND IT IS NOT FORMED BY SPLITTING UP OR THE RECONSTRUCT ION OF AN EXISTING UNIT. B) IT SHOULD NOT BE FORMED BY TRANSFER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE:- ALL THE MACHINE RY USED IN THIS UNDERTAKING HAS BEEN PURCHASED FROM MACHINE RY SUPPLIERS AND NOT FROM ANY EXISTING INDUSTRIAL UNDE RTAKING. ITA 1792(DEL)10 29 C) IT SHOULD NOT MANUFACTURE OR PRODUCE ARTICLES SPECI FIED IN THE ELEVENTH SCHEDULE:- THE ASSESSEE IS MANUFACTURING CANDLES FOR EXPORT, WHICH IS NOT MENTIONED IN ELEVENTH SCHE DULE. D) IT BEGINS TO MANUFACTURE BEFORE MARCH 31, 2002. E) IT SHOULD EMPLOY MORE THAN 10/20 WORKERS:-THE ASSES SEE WAS EMPLOYING 85 PERSONS AS PER THE COPY OF ESI RET URN FOR THE HALF YEAR ENDED 31.3.02. COPY OF THE RETURN IS ENCLOSED. 39. THE AO HAD BEFORE HIM THE AUDIT REPORT(APB-10) MENTIONING THE DEDUCTION UNDER SECTION 80 IA AND THE REPORT UNDER SECTION 80IA(APB-15- 16). 40. AS PER THE TAX AUDIT REPORT (SUPRA): 26. SECTION-WISE DETAILS OF DEDUCTIONS, IF ANY, AD MISSIBLE UNDER CHAPTER VIA 80 IA - 61,70,349. 41. ACCORDING TO THE REPORT UNDER SECTION 80IA, I.E ., FORM NO. 10CCB(SUPRA): FORM NO. 10CCB [SEE RULE 18BBB] AUDIT REPORT UNDER SECTION 80-I/80IA/80IB OF THE IN COME TAX ACT, 1961. I/WE HAVE EXAMINED THE BALANCE SHEET OF THE INDUST RIAL UNDERTAKING M/S. GIRDHARS INTERNATIONAL PROP. MR. RAJ KUMAR MAHAJAN, PAN AEKPM0668L AS AT 31 ST MARCH, 2001 AND THE PROFIT AND LOSS ACCOUNT OF THE SAID INDUSTRIAL UNDERTAKING FOR THE YEAR ENDED ON T HAT DATE WHICH ARE IN ITA 1792(DEL)10 30 AGREEMENT WITH THE BOOKS OF ACCOUNT MAINTAINED AT T HE HEAD OFFICE AT K- 2,UDHOG NAGAR,PEERA GARHI, NEW DELHI-110 041. *I/WE HAVE OBTAINED ALL THE INFORMATIONS WHICH TO T HE BEST OF *MY/OUR KNOWLEDGE AND BELIEF WERE NECESSARY FOR THE PURPOSE S OF THE AUDIT. IN *MY/OUR OPINION, PROPER BOOKS OF ACCOUNT HAVE BEEN KEPT BY THE HEAD OFFICE AND THE BRANCHES OF THE INDUSTRIAL UNDERTAKING AFOR ESAID VISITED BY *ME/US SOFAR AS APPEARS FROM *MY/OUR EXAMINATION OF BOOKS, AND PROPER RETURNS ADEQUATE FOR THE PURPOSES OF AUDIT HAVE RECEIVED FR OM BRANCHES NOT VISITED BY *ME/US, SUBJECT OF THE COMMENTS GIVEN BELOW:- .NIL.. IN *MY/OUR OPINION AND TO THE BEST OF *MY/OUR INFOR MATION AND ACCORDING TO EXPLANATIONS GIVEN TO *ME/US, THE SAID ACCOUNTS GIV E A TRUE AND FAIR VIEW- (1) IN THE CASE OF THE BALANCE SHEET OF THE STATE OF A FFAIRS OF THE ABOVE- NAMED INDUSTRIAL UNDERTAKING AS AT 31 ST MARCH, 2001 AND (2) IN THE CASE OF THE PROFIT AND LOSS ACCOUNT, OR THE PROFIT OR LOSS OF THE INDUSTRIAL UNDERTAKING FOR THE ACCOUNTING YEAR ENDI NG ON 31 ST MARCH,2001. PLACE: NEW DELHI FOR S.K. DHINGRA & CO. CHARTERED ACCOUNTANTS DATE: 15 TH OCTOBER, 01. SD/- S.K. DHINGRA M.N.-83398 CALCULATION OF DEDUCTION U/S 80IA/IB PROFIT AS PER PROFIT AND LOSS ACCOUNT 3,07,86,726 LESS INTEREST INCLUDED IN ABOVE PROFIT 10,47,539 ______________ ELIGIBLE PROFIT OF INDUSTRIAL UNDERTAKING 2,97,39,187 DEDUCTION U/S 80 IA-25% OF ABOVE 74,34,797 ITA 1792(DEL)10 31 DEDUCTION ALLOWED AS PER NOTE BELOW 61,70,349 AS PER CLAUSE 9A OF SECTION 80IA, TOTAL DEDUCTION U NDER THIS SECTION & UNDER ANY OTHER PROVISIONS OF THE ACT, WOULD BE RESTRICTE D TO THE PROFIT AND GAINS OF THE UNDERTAKING. PROFITS OF THE UNDERTAKING ARE RS . 2,97,39,187 & DEDUCTIONS U/S 80 HHC HAS BEEN CLAIMED FOR RS. 2,35 ,68,838 THEREFORE DEDUCTION U/S 80IA WOULD BE RESTRICTED TO 2,97,39,1 87 LESS 2,35,57,987 = 61,70,349. REBATE IS AVAILABLE TO THE ASSESSEE FROM A.Y. 98-99 FOR TEN YEARS. 42. THE ASSESSEES RETURN OF INCOME, IN THE COMPUTA TION OF INCOME (APB- 1), AT ITEM NO. 22(B) MENTIONED CLAIM OF DEDUCTION UNDER SECTION 80 IA AT RS. 61,70,349/-. 43. HENCE, WITH REGARD TO THE CLAIM OF DEDUCTION UN DER SECTION 80IA TOO, THE ASSESSEE, IN THE ORIGINAL ASSESSMENT PROCEEDING S, HAD MADE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS ONLY O N SUCH DISCLOSURE THAT THE DEDUCTION CLAIMED WAS ALLOWED BY THE THEN AO TO THE ASSESSEE. 44. AS SUCH, ON THIS SCORE ALSO, THE REOPENING OF T HE COMPLETED ASSESSMENT WAS DONE NOT ON THE BASIS OF ANY EXTERNAL MATERIAL, BUT BASED ON THE VERY DISCLOSURE MADE BY THE ASSESSEE IN THE ORIGINAL ASS ESSMENT PROCEEDINGS. 45. IN TANNA BUILDERS(P)LTD. V. NEELA KRISHNAN AND ANR., 283 ITR 448(BOM), WHERE THE REOPENING OF THE COMPLETED ASSE SSMENT WAS BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, SUCH REOPENING WAS HELD TO BE UNSUSTAINABLE IN THE ABSENCE OF ANY MATE RIAL TO SHOW ANY FAILURE ITA 1792(DEL)10 32 ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE RELEVANT YEAR. 46. IN ORIENT BEVERAGES LTD. V. INCOME TAX OFFICER & ORS., 208 ITR 509(CAL), IT WAS HELD THAT SINCE THE NOTICE UNDER S ECTION 148 OF THE ACT HAD BEEN ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE AO HAD NO JURISDICTION TO ISSU E SUCH NOTICE IN THE ABSENCE OF ANY MATERIAL SHOWING OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ITS ASSESSMENT. 47. IN CIT V. EICHER LTD. 294 ITR 310(DEL), IT HA S BEEN HELD THAT REASSESSMENT IS NOT PERMISSIBLE ON A CHANGE OF OPIN ION; THAT WHERE ALL MATERIAL FACTS ARE DISCLOSED AND THE AO APPLIES HIS MIND, FAILURE TO RECORD A FINDING IN THE ASSESSMENT ORDER DOES NOT MEAN THAT INCOME HAS ESCAPED ASSESSMENT. 48. IN HARYANA ACRYLIC MANUFACTURING CO. V. CIT AN D ANOTHER 308 ITR 38(DEL), IT WAS HELD THAT WHERE THE REASSESSMEN T NOTICE WAS ISSUED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THERE WAS NO INDICATION IN THE REASONS RECORDED ABOUT THE FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ITS ASSESSMENT AND THE REGULAR ASSESSMENT ORDER STATED SPECIFIC INFORMATION AS ITA 1792(DEL)10 33 REQUIRED HAVING BEEN FILED AND VERIFIED, THE NOTICE AND ALL PROCEEDINGS PURSUANT THERETO WERE TO BE SPECIFIED. 49. IN WEL INTERTRADE P.LTD. AND ANOTHER V. ITO 3 08 ITR 22(DEL), IT HAS BEEN HELD THAT IF THE ASSESSEE HAS DISCLOSED FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, ACTION U/S 147 OF THE ACT CANNOT BE TAKEN AFTER EXPIRY OF FOUR YEARS FROM THE RELEVANT ASSESS MENT YEAR ON THE BASIS OF MERE CHANGE OF OPINION OF THE AO. 50. IN TEXMACO LTD. V. ITO [1992] TAX CR 788(CAL) , IT HAS BEEN HELD THAT THE FIRST PROVISO TO SECTION 147 OF THE ACT IS ONLY A LAW OF LIMITATION AND AS SUCH IT DOES NOT APPROVE OF A WRONG CLAIM OR WRO NG DONE BY THE ASSESSEE, BUT BECAUSE OF THE LAW OF LIMITATION, SUCH INCOME C ANNOT BE ADDED OR REASSESSED. 51. IN CARLTON OVERSEAS PVT. LTD. V. ITO AND OTHER S 318 ITR 295(DEL), IT WAS HELD THAT WHERE THERE WAS NO NEW OR FRESH MA TERIAL BEFORE THE AO EXCEPT THE OPINION OF THE REVENUE AUDIT PARTY WITH REGARD TO THE NON- AVAILABILITY OF DEDUCTION UNDER SECTIONS 80IA AND 8 0HHC OF THE ACT, THE OPINION OF THE REVENUE AUDIT PARTY BEING MERELY AN OPINION DIFFERENT FROM THAT TAKEN BY THE ASSESSING OFFICER IN THE ASSESSME NT PROCEEDINGS, SUCH A MERE CHANGE OF OPINION COULD NOT FORM THE BASIS FOR ISSUING OF A NOTICE UNDER SECTIONS 147/148 OF THE ACT AND THAT, THEREFO RE, SUCH A NOTICE WAS ITA 1792(DEL)10 34 LIABLE TO BE QUASHED. FACTS HEREIN ARE FOUND TO BE SQUARELY COVERED BY CARLTON(SUPRA). 52. SOFAR AS REGARDS THE CIT(A)S RELIANCE ON SHY AM BANSAL V. ACIT 296 ITR 25(ALL), FOR THE PROPOSITION THAT THE REOPE NING OF THE ASSESSMENT IS POSSIBLE TO THE ASSESSMENT COMPLETED U/S 143(3) OF THE I.T. ACT WHERE THERE IS NO DISCUSSION ON THE ISSUE IN QUESTION, WE DO NO T FIND SUCH RELIANCE TO BE APPROPRIATE. IN SHYAM BANSAL (SUPRA), THEIR LOR DSHIPS OF THE HONBLE HIGH COURT HELD THAT THERE WAS NO ASSESSMENT IN THE ASSESSMENT ORDER WITH REGARD TO THE ISSUE AT HAND BEFORE THEM AND THAT TH E AO HAD FAILED TO EXAMINE THAT ISSUE IN THE COURSE OF ASSESSMENT PROC EEDINGS BEFORE HIM. THE FACTUAL POSITION IN THE CASE BEFORE US, ON THE OTHE R HAND, IS ENTIRELY DIFFERENT. HERE, THE ASSESSEE HAS BEEN ABLE TO WELL DEMONSTRAT E THAT A DETAILED QUESTIONNAIRE WAS ISSUED TO HIM WITH REGARD TO DED UCTIONS CLAIMED UNDER SECTIONS 80 HHC AND 80 IA AND THAT HE HAD MADE FULL DISCLOSURE WITH REGARD TO THE MATERIAL FACTS FULLY AND TRULY, PERTAINING T O BOTH THESE CLAIMS, AS WAS NECESSARY FOR HIS ASSESSMENT FOR THE YEAR UNDER CON SIDERATION. AN ASSESSMENT ON THESE CLAIMS WAS INDEED MADE AND THE CLAIMS WERE ALLOWED, AS AVAILABLE FROM THE ASSESSMENT ORDER. NOW, AS T O HOW AN ASSESSMENT ORDER IS DRAFTED IS NOT IN THE HANDS OF THE ASSESSE E. HOWEVER, THE ASSESSMENT ORDER DOES EVINCE THAT DETAILED INFORMATION AS CALL ED FOR, WAS FILED. IT WAS ITA 1792(DEL)10 35 ONLY ON CONSIDERING THE SAME, THAT THE CLAIMS WERE ALLOWED. IN THESE FACTS, SHYAM BANSAL (SUPRA) IS NOT APPLICABLE. IT CANN OT BE SAID THAT IN THE PRESENT CASE, THE AO FAILED TO EXAMINE THIS ISSUE I N THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. MOREOVER, IN KEEPING WITH EICHER LTD.(SUPRA), THE FAILURE TO RECORD A FINDING, WHERE ALL MATERIAL FACTS HAVE BEEN DISCLOSED AND THE AO HAS APPLIED HIS MIND, DOES NOT MEAN INCO ME ESCAPED ASSESSMENT. 53. IN KELVINATOR(SUPRA). THE HONBLE SUPREME COU RT HAS HELD THAT THE AO HAS POWER TO REOPEN THE COMPLETED ASSESSMENT U/S 147 WHERE THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT TH ERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT AND THAT THE REASON TO BELIE VE ESCAPEMENT OF INCOME MUST HAVE A LIVE-LINK WITH THE FORMATION OF BELIEF. THE REOPENING IN THE PRESENT CASE, WE FIND, AS DISCUSSED HEREINBEFOR E, IS ENTIRELY AT VARIANCE WITH KELVINATOR(SUPRA). HERE, THERE WAS NO TANG IBLE MATERIAL AVAILABLE WITH THE AO TO FORM THE BELIEF OF ESCAPEMENT OF INC OME BUT FOR THE VERY DISCLOSURE MADE BY THE ASSESSEE. MOREOVER, THE RE ASON FOR REOPENING DID NOT HAVE ANY LINK, MUCH LESS ANY LIVE-LINK WITH THE FORMATION OF THE BELIEF. 54. IN VIEW OF THE ABOVE, THE GRIEVANCE SOUGHT TO B E RAISED BY THE ASSESSEE WITH REGARD TO THE ISSUE OF REOPENING IS FOUND TO B E JUSTIFIED AND IS ACCEPTED AS SUCH. ACCORDINGLY, THE REOPENING OF THE COMPL ETED ASSESSMENT, FOR THE ITA 1792(DEL)10 36 PRECEDING DETAILED DISCUSSION, IS HELD TO BE BAD IN LAW AND IS QUASHED AS SUCH. 55. SINCE THE ISSUE OF REOPENING THE COMPLETED ASSE SSMENT HAS BEEN THUS DECIDED IN FAVOUR OF THE ASSESSEE, AT THIS STAGE W E DO NOT DEEM IT NECESSARY TO GO INTO THE MERITS OF THE CASE AS RAISED IN THE REMAINING GROUNDS. 56. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.06.2010. SD/- SD/- (R.C. SHARMA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21.06.2010 *RM COPY FORWARDED TO: 1. RAJ KUMAR MAHAJAN, PROP.M/S.GIRDHARS INTERNATIONAL K-2, UDYOG NAGAR, PEERA GARHI, NEW DELHI. 2. DCIT, CIRCLE 25(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR