M/s Taurus Exports, New Delhi V. ACIT, New Delhi

ITA 2098/DEL/2011

• Counselvise Citation: 209820114 RSA 2011
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-10-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 28-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROHIT GARG
• Assessee Lawyers: V K GARG
• Keywords: Reopening of assessment; Period of limitation; Retrospective amendment; Wrong claim; Difference of opinion; Procedural lapse; Tax effect; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 28; 139; 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE MS. DIVA SINGH, JM AND SHRI K. D. RA NJAN, AM I. T. APPEAL NO. 2098 (DEL) OF 2011 ASSESSMENT YEAR : 2002-03. M/S. TAURUS EXPORTS, ASSTT. COMMISSIONER OF INCOME-TAX, P 65, SOUTH EXTENSION, PARTII, VS. C I R C L E : 32 (1), N E W D E L H I 110 049. N E W D E L H I. PAN / GIR NO. AAA FT 0012 H. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI V. K. GARG, C. A.; DEPARTMENT BY : SHRI ROHIT GARG, SR. D . R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 02-03 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXVI, NEW DELHI. 2. THE FIRST ISSUE FOR CONSIDERATION RELATES TO ASS UMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. THE RELEVANT GROUNDS OF APPEAL ARE REPROD UCED AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) [LD. CIT (A) HAS ERRED IN SUSTAINING THE REASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER [LD. AO] UNDER SECTION 143(3) / 147. THE REOPENING OF THE A SSESSMENT IS UNLAWFUL AND WITHOUT JURISDICTION AND AS SUCH THE SAME DESERVES TO BE QUASHED; 2. THAT THE REASSESSMENT AS CONFIRMED BY THE LD. CIT (A) IS WITHOUT SANCTION OF THE RELEVANT PROVISIONS OF THE ACT INCLUDING SEC TION 143, 147, 148 AND 149 OF THE ACT. THE REASSESSMENT AS MADE IS WITHOUT AN Y LAWFUL BASIS OR REASONS TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT A ND AS SUCH IS UNLAWFUL AND LIABLE TO BE QUASHED. 2 I. T. APPEAL NO. 2098 (DEL) OF 2011 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME OF RS.1,31,43,480/- ON 30/10/2002 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, BY TAXATION LAWS (AMENDM ENT) ACT, 2005 PROVISIONS OF SECTION 80HHC WERE AMENDED. THE AO AFTER RECORDING REASONS REOPENED THE ASSESSMENT BY ISSUE OF NOTICE UNDER SECTION 148 DATED 26 TH MARCH, 2009. DURING THE ASSESSMENT PROCEEDINGS IT WAS SUBMITTED BY THE ASSESSEE THAT ASSESSEE HAD FILED I TS RETURN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. AS SUCH, NO RE ASSESSMENT ON THE ISSUE INVOLVED CAN BE MADE ON MERE CHANGE OF OPINION. REASSESSMENT IN SUCH CA SES CANNOT BE MADE ON MERE SUSPICION OR WITHOUT PROPER REASONS TO BELIEVE THAT INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT. IT WAS ALSO SUBMITTED THAT AS PER THE DECISION OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF TOPMAN EXPORTS VS. ITO 23 SOT 337 (MUM.) (SB), IT I S ONLY THE PROFIT ELEMENT ON TRANSFER OF DEPB WHICH WAS TO BE CONSIDERED UNDER CLAUSE (IIID) OF SECTION 28 AND NOT SALE PROCEEDS. MOREOVER, CONSTITUTIONAL VALIDITY OF THE SAID AMEND MENT AND APPLICABILITY WITH RETROSPECTIVE EFFECT WAS SUB-JUDICE BEFORE THE APEX COURT IN SERI ES OF WRIT PETITIONS. THE ASSESSEE, THEREFORE, REQUESTED THE ASSESSING OFFICER TO DROP THE PROCEED INGS INITIATED UNDER SECTION 148. 4. THE LD. ASSESSING OFFICER RELYING ON THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 (S C) OBSERVED THAT ACCEPTING RETURN OF INCOME UNDER SECTION 143(1) WAS NOT AN ASSESSMENT AND HENC E THERE WAS NO QUESTION OF CHANGE OF OPINION. THE ASSESSING OFFICER COMPLETED THE ASSES SMENT AFTER ALLOWING DEDUCTION UNDER SECTION 80-HHC KEEPING IN VIEW THE AMENDMENT BROUGHT INTO S TATUTE BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FRO M 1/04/1998. 5. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT IN THE REASONS RECORDED THERE IS NO WHISPER OF ANY PARTICULAR RECEIPT/INCOME WHICH HAD ESCAPED ASSESSMENT. THERE WAS NO FORMATION OF EVEN BELIEF AS TO ESCAPEMENT OF ANY IN COME IN THE REASONS RECORDED. ONLY REASON AS RECORDED IS THAT AMENDED PROVISIONS OF SECTION 80HH C WERE ATTRACTED IN THE CASE OF THE ASSESSEE AS PER WHICH DEDUCTION CLAIMED UNDER SECTION 80HHC WAS EXCESSIVE. THE REASONS RECORDED DO 3 I. T. APPEAL NO. 2098 (DEL) OF 2011 NOT HAVE ANY NEXUS WITH THE REASONS TO BELIEVE THAT ANY INCOME HAD ESCAPED ASSESSMENT. THE REASONS RECORDED BY THE AO WERE HYPOTHETICAL AND WE RE THUS BASED ON ASSUMPTIONS. THE LD. AR OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SIFL STOCK BROKER VS. CIT 325 ITR 285 (DEL.) FOR THE PRO POSITION THAT THERE MUST BE RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A RE QUISITE BELIEF EVEN THOUGH THE MATERIAL NEED NOT CONCLUSIVELY PROVE THE ESCAPEMENT. IN THE CASE OF ASSESSEE THERE WAS NO MENTION AS TO ON WHAT ACCOUNT THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80-HHC WAS EXCESSIVE IN VIEW OF AMENDED PROVISIONS OF SECTION 80-HHC. AS S UCH EVEN THE PRIMA FACIE MATERIAL WAS MISSING IN THE REASONS RECORDED BY THE ASSESSING OF FICER. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JAY BHARAT MARUTI LTD. 324 ITR 289 (DEL). THE LD. CIT (A) REJECTED THE FIRST CONTENTION OF TH E ASSESSEE THAT THERE WAS CHANGE OF OPINION RELYING ON THE JUDGEMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA). AS REGARDS THE CONTENTION OF THE ASSESSEE THAT REASONS RECORDED DO NOT INDICATE AVAILABILITY OF ANY PRIMA FACIE MATERIAL W ITH THE AO WHICH GAVE RISE TO THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT OR WHAT WAS THE BASIS OF TREATING 80HHC DEDUCTION AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME AS EXCESSIV E, THE LD. CIT (APPEALS) OBSERVED THAT INADEQUACY OF REASONS IN THE REOPENING OF ASSESSMEN T WAS NOT TENABLE. IN THE REASONS RECORDED THE AO HAD BROUGHT IN VITAL FACTS CRUCIAL TO FORMIN G THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THE AO HAD RECORDED THAT THE ASSESSEE WAS AN EXPORTER CLAIMING DEDUCTION UNDER SECTION 80-HHC OF THE ACT. THE DEDUCTION AS CLAIME D WAS EXCESSIVE AS THE ASSESSEES TURNOVER WAS MORE THAN RS. 10 CRORES IN VIEW OF AMENDMENT BR OUGHT BY SECTION 80-HHC BY TAXATION LAWS (AMENDMENT) ACT, 2005. THUS BY REFERRING TO / INCLUDING THE AMENDMENT IN SECTION 80-HHC BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 I N THE REASONS RECORDED, THE AO HAS WITHOUT MENTIONING DETAILS INVOKE THE RELEVANT SECT IONS / PROVISIONS / PROVISO BROUGHT ON STATUTE BY THE SAID AMENDMENTS I.E. THIRD PROVISO TO SECTIO N 80-HHC INSERTED BY TAXATION LAWS (AMENDMENT) ACT, 2005 AS APPLICABLE IN THE CASE OF THE ASSESSEE. THE FACT THAT THE ASSESSEES TURNOVER IS MORE THAN RS. 10 CRORE AND THE PROFIT I NCLUDED DEPB SALES WAS CLEARLY BORNE FROM THE RECORD. FROM THE AUDIT REPORT IN FORM NO. 10-CC(AC ), THE COMPUTATION OF DEDUCTION UNDER SECTION 80HHC, THE PROFIT AND LOSS ACCOUNT ETC. AVA ILABLE ON RECORD BEFORE THE AO. IN VIEW OF AMENDMENT IN LAW THE REASONS RECORDED CLEARLY INDIC ATE THE ADEQUACY OF THE MATERIAL WITH THE AO TO FORM BELIEF THAT INCOME HAD ESCAPED ASSESSMEN T. THE REASONS RECORDED BY THE ASSESSING 4 I. T. APPEAL NO. 2098 (DEL) OF 2011 OFFICER COULD NOT BE HELD AS VAGUE OR NON-EXISTENT OR THAT THERE WAS NO RELEVANT MATERIAL BEFORE THE AO. THE REASONS RECORDED BY THE ASSESSING OFFI CER WOULD LEAD A REASONABLE PERSON TO BELIEVE THAT DEDUCTION UNDER SECTION 80HHC HAS BEEN EXCESSI VELY CLAIMED AND AS PER SUB CLAUSE (III) OF EXPLANATION 2(C) TO SECTION 147 IF THE EXCESSIVE RE LIEF HAS BEEN ALLOWED, IT AMOUNTED TO ESCAPEMENT OF INCOME. THE LD. CIT (APPEALS) ALSO N OTED THAT IN OTHER YEARS THE ASSESSEE HAD NOT OBJECTED TO REOPENING OF PROCEEDINGS AND HAS DULY C OMPLIED WITH THE AMENDED PROVISIONS OF SECTION 80HHC OF THE ACT. THEREFORE, WHILE ACCEPTI NG THE PROPOSITION THAT EACH YEAR IS AN INDEPENDENT YEAR, THE ASSESSEE CANNOT ON SAME FACTS ADOPT A SHIFTING STAND ON THE LEGAL ISSUE AS PER HIS OWN CONVENIENCE. THE LD. CIT (APPEALS), TH EREFORE, UPHELD THE REOPENING OF ASSESSMENT AND REJECTED THE OBJECTIONS OF THE LD. COUNSEL OF T HE ASSESSEE ON THE GROUND OF INADEQUACY OF MATERIAL. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT NOTICE UNDER SECTION 148 WAS RECEIVED BEYOND FOUR YEARS, BUT ONLY A WEEK BEFORE THE EXPIR Y OF SIX YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR, THE COPY OF REASONS RECORDED WAS N OT PROVIDED WITH THE NOTICE UNDER SECTION 148 EVEN UPTO THE REASSESSMENT ORDER DATED 8/12/200 9. THE ASSESSEE MADE A REQUEST FOR SUPPLY OF COPY OF REASONS ON 13/05/2009. HOWEVER, THE COP Y OF REASONS WAS PROVIDED IN SEPTEMBER, 2010 AT THE DIRECTIONS OF THE LD. CIT (A). THE REA SONS ARE TO BE SUPPLIED TO THE ASSESSEE BEFORE EXPIRY OF SIX YEARS. THE REASONS RECORDED BEFORE I SSUE OF NOTICE UNDER SECTION 148 ON 26 TH MARCH, 2009 WERE PROVIDED IN SEPTEMBER, 2010 I.E. M UCH BEYOND THE EXPIRY OF SIX YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. AS SUCH, THER E WAS NO VALID SERVICE OF NOTICE, RE-ASSESSMENT WAS, THEREFORE, UNLAWFUL AND DESERVES TO BE QUASHED IN VIEW OF DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. LTD. VS. CIT 308 ITR 38 (DEL.) AND GKN DRIVESHAFT INDIA LTD. VS. ITO 259 ITR 19 (SC). THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT THE REASONS RECORDED ARE VAGUE AND T HERE IS NO ALLEGATION THAT WHAT AMOUNT OF INCOME HAD ESCAPED ASSESSMENT. NOWHERE FROM THE REA SONS IT IS DISCERNIBLE THAT INCOME HAS ESCAPED ASSESSMENT. THE NOTICE UNDER SECTION 148 B EYOND FOUR YEARS CAN BE ISSUED ONLY IF ESCAPED INCOME WAS MORE THAN RS. ONE LAKH. IN THE REASONS RECORDED THERE WAS NO FINDING OF ANY AMOUNT OF ESCAPED INCOME AND TAX EFFECT THEREON . HOW AND ON WHAT ACCOUNT THE CLAIM OF THE ASSESSEE WAS EXCESSIVE AS PER THE AMENDED PROVI SIONS OF SECTION 80HHC BY TAXATION LAWS 5 I. T. APPEAL NO. 2098 (DEL) OF 2011 (AMENDMENT) ACT, 2005 IS NOT BORNE OUT FROM THE REA SONS RECORDED AND AS SUCH, EVEN THE PRIMA FACIE MATERIAL WAS MISSING IN THE REASONS RECORDED. THE VALIDITY OF REOPENING HAS TO BE DECIDED ON THE BASIS OF REASONS RECORDED AND ON THOSE REASO NS ALONE. THEREFORE, NOTICE ISSUED UNDER SECTION 148 IS BASED ON TENUOUS GROUNDS AND, THEREF ORE, THE ASSESSMENT IS TO BE QUASHED IN VIEW OF THE FOLLOWING DECISIONS:- (I) JAY BHARAT MARUTI LTD. VS. CIT 324 ITR 289 (D EL.); (II) PRASHANT S. JOSHI VS. ITO 324 ITR 154 (BOM.); (III) CIT VS. SIFL STOCK BROKING LTD. 325 ITR 285 (DEL.); & (IV) PANCHRATAN CEMENT P. LTD. VS. UNION OF INDIA 317 ITR 259 (GAUHATI). 7. ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THA T SUFFICIENCY OF REASONS CANNOT BE CHALLENGED. THE ASSESSMENT WAS REOPENED ON THE GR OUND THAT AMENDMENT WAS MADE IN THE ACT AND THE ASSESSEE WAS EXPORTER HAVING TURNOVER MORE THAN RS. 10 CRORES. THEREFORE, THE THIRD PROVISO TO SECTION 80-HHC OF THE ACT WAS APPLICABLE . THE LD. SR. DR FURTHER SUBMITTED THAT THERE IS NO DIFFERENCE BETWEEN THE REASONS RECORDED AND COMMUNICATED TO THE ASSESSEE. THE SUM AND SUBSTANCE IS THE SAME. HE FURTHER SUBMITTED TH AT THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. LT D. VS. CIT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. HE PLACED RELIANCE O N THE DECISION BY HONBLE SUPREME COURT IN THE CASE OF PHOOL CHAND BAJARANG LAL 203 ITR 456 (SC) A ND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAYMOND WOOLEN MILLS VS. ITO 236 ITR 34 (SC). 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE RETURN OF INCOME FILED ON 30/10/2002 WAS PROCE SSED UNDER SECTION 143(1) OF THE ACT ON 8/08/2003. IT IS A SETTLED LAW THAT PROCESSING OF RETURN UNDER SECTION 143(1) IS NOT AN ASSESSMENT AS HELD BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 (SC). UNDER SECTION 147 IF THE ASSESSIN G OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY SUBJECT TO PROVISIONS OF SECTION 148 TO 153 ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN 6 I. T. APPEAL NO. 2098 (DEL) OF 2011 THE COURSE OF PROCEEDINGS UNDER THIS SECTION. UNDER PROVISO TO SECTION 147 WHERE AN ASSESSMENT IS MADE UNDER SECTION 143(3) OR U/S 147, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT Y EAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN R ESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. ADMITTEDLY, N O ASSESSMENT UNDER SECTION 143(3) WAS MADE FOR THE YEAR UNDER CONSIDERATION. THEREFORE, THE RE OPENING OF ASSESSMENT IN THE INSTANT CASE FALLS UNDER PROVISIONS OF MAIN SECTION 147 AND NOT UNDER ITS PROVISO. 9. SECTION 148(1) READS AS UNDER: 148. (1) BEFORE MAKING THE ASSESSMENT, REASSESSMEN T OR RECOMPUTATION UNDER SECTION 147, THE ASSESSING OFFICER SHALL SERVE ON T HE ASSESSEE A NOTICE REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD, AS MAY BE SPECI FIED IN THE NOTICE, A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RES PECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR CORRESPONDI NG TO THE RELEVANT ASSESSMENT YEAR, IN THE PRESCRIBED FORM AND VERIFIED IN THE PR ESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SU CH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139. SUB SECTION (2) OF SECTION 148 PROVIDES THAT THE AO SHALL BEFORE ISSUING ANY NOTICE UNDER SECTION 148 RECORD HIS REASONS FOR DOING SO. SECTION 149 O F THE INCOME-TAX ACT, 1961 PRESCRIBES THE TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 148. SECTI ON 149 OF THE ACT READS AS UNDER:- 149. [(1) NO NOTICE UNDER SECTION 148 SHALL BE IS SUED FOR THE RELEVANT ASSESSMENT YEAR, (A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF TH E RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FALLS UNDER CLAUSE (B); 7 I. T. APPEAL NO. 2098 (DEL) OF 2011 (B) IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, H AVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEAB LE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR. EXPLANATION.IN DETERMINING INCOME CHARGEABLE TO TA X WHICH HAS ESCAPED ASSESSMENT FOR THE PURPOSES OF THIS SUB-SECTION, THE PROVISIONS OF EXPLANATION 2 OF SECTION 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSES OF THAT SECTION.] . 10. FROM ABOVE IT IS CLEAR THAT FOR ASSUMPTION OF JURISDICTION UNDER SECTION 147, THE AO IS REQUIRED TO ISSUE NOTICE WITHIN THE TIME LIMIT SPEC IFIED UNDER SECTION 149 OF THE ACT. HOWEVER, PROVISIONS OF SECTION 148(1) MAKE IT MANDATORY TO S ERVE THE NOTICE REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTI CE, A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE U NDER THIS ACT DURING THE PREVIOUS YEAR RELEVANT ASSESSMENT YEAR BEFORE ASSESSMENT OR REASSESSMENT O R RE-COMPUTATION OF INCOME UNDER SECTION 147 OF THE ACT IS MADE. UNDER SECTION 149(1)(A) OF THE ACT, NOTICE UNDER SECTION 148 SHALL NOT BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR, IF FOUR YE ARS HAVE LAPSED FROM THE END OF RELEVANT ASSESSMENT YEAR UNLESS CASE FALLS UNDER CLAUSE (B) OF SECTION 149 OF THE ACT. UNDER CLAUSE (B) THE CASES FALLING WITHIN THE PERIOD OF FOUR YEARS AND S IX YEARS, NO NOTICE CAN BE ISSUED UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT OR IS LIKE LY TO ESCAPE ASSESSMENT RS.1,00,000/- OR MORE. FURTHER SUB SECTION (2) OF SECTION 149 PROVIDES THA T NOTICE UNDER SECTION 148(1) SHALL BE ISSUED SUBJECT TO PROVISIONS OF SECTION 151. SUB SECTION (1) OF SECTION 151 DEALS WITH THE SANCTION OF THE NOTICE IN THE CASES WHERE ASSESSMENT HAS BEEN MADE UNDER SECTION 143(3) OR SECTION 147 OF THE ACT. WHEREAS SUB SECTION (2) OF SECTION 151 DEALS WITH OTHER CASES WHERE NO NOTICE UNDER SECTION 148 SHALL BE ISSUED BY THE ASSESSING OFFICER, WHO I S BELOW THE RANK OF JT. COMMISSIONER OF INCOME-TAX, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE JT. COMMISSIONER IS SATISFIED ON THE REASONS RECORD ED BY THE AO THAT IT IS A FIT CASE FOR ISSUE OF SUCH NOTICE. 11. IN THE CASE BEFORE US THERE IS NO ISSUE OF SAN CTION TO BE OBTAINED BY THE ASSESSING OFFICER BEFORE ISSUE OF NOTICE U/S 148 FROM THE COMPETENT A UTHORITY WHICH IN FACT HAS BEEN OBTAINED BY 8 I. T. APPEAL NO. 2098 (DEL) OF 2011 THE ASSESSING OFFICER. THE CONTENTION OF THE ASSESS EE IS THAT REASONS RECORDED HAVE BEEN SERVED ON THE ASSESSEE MUCH BEYOND THE EXPIRY OF PERIOD OF SI X YEARS. SECTION 148 (1) OF THE ACT PROVIDES THAT BEFORE MAKING THE ASSESSMENT/RE-ASSESSMENT OR RE-COMPUTATION UNDER SECTION 147, THE AO SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD AS MAY BE SPECIFIED IN THE NOTICE, A RETURN OF HIS INCOME, IN THE PRESCRIBED FORM AND VERIFIED IN PRESCRIBED MANNER. HOWEVER, THE PROVISIONS OF SECTION 149 PRE SCRIBE THE TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. FROM PLAIN READING OF PROV ISIONS OF SECTION 148 AND 149 IT IS CLEAR THAT THE LEGISLATURE HAS USED TWO DIFFERENT EXPRESSIONS ISSUE IN SECTION 149 AND SERVE IN SECTION 148. SECTION 149 PRESCRIBES THE TIME LIMIT FOR ISS UE OF NOTICE WHEREAS PROVISIONS OF SECTION 148 REQUIRE THE ASSESSING OFFICER TO SERVE THE NOTICE B EFORE MAKING ASSESSMENT OR REASSESSMENT U/S 147. IN R. K. UPADHYAYA VS. SHANABHAI PATEL 166 IT R 163 (SC) THE ITO ISSUED THE NOTICE OF REASSESSMENT UNDER SECTION 147(B) FOR ASSESSMENT YE AR 1965-66 BY A REGD. POST ON 31 ST MARCH, 1970 AND THE NOTICE WAS RECEIVED BY THE ASSESSEE ON 03 RD APRIL, 1970. THE ISSUE BEFORE HONBLE SUPREME COURT WAS WHETHER NOTICE SERVED BEYOND THE PERIOD OF LIMITATION OF ISSUE OF NOTICE WAS VALID. HONBLE SUPREME COURT OBSERVED THAT THE SCHE ME OF INCOME-TAX ACT, 1961 SO FAR AS NOTICE FOR REASSESSMENT IS CONCERNED IS QUITE DIFFERENT FR OM THAT OF 1922 ACT. A CLEAR DISTINCTION HAS BEEN MADE OUT BETWEEN ISSUE OF NOTICE AND SERVIC E OF NOTICE UNDER THE 1961 ACT. SECTION 149 OF THE 1961 ACT, WHICH PROVIDES THE PERIOD OF L IMITATION, CATEGORICALLY PRESCRIBES THAT NO NOTICE UNDER SECTION 148 SHALL BE ISSUED AFTER THE PERIOD PRESCRIBED HAS LAPSED. ONCE A NOTICE IS ISSUED WITHIN THE PERIOD OF LIMITATION, JURISDICTIO N BECOMES VESTED IN THE INCOME-TAX OFFICER TO PROCEED TO REASSESS. SECTION 148(1) PROVIDES FOR S ERVICE OF NOTICE AS A CONDITION PRECEDENT TO MAKING THE ORDER OF ASSESSMENT. SERVICE OF NOTICE UNDER 1961 ACT IS NOT A CONDITION PRECEDENT TO CONFERMENT OF JURISDICTION ON THE ITO; IT IS A COND ITION PRECEDENT ONLY TO THE MAKING OF THE ORDER OF ASSESSMENT. IT WAS HELD THAT THE NOTICE WAS NOT BARRED BY LIMITATION AND THE ITO HAD JURISDICTION TO COMPLETE THE ASSESSMENT. 12. IN CIT VS. SHEO KUMARI DEBI 157 ITR 13 (PAT.) (FB) HONBLE PATNA HIGH COURT HAS OCCASION TO EXAMINE THE DIFFERENCE BETWEEN THE WORD S ISSUED AND SERVED. THE WORDS ISSUED AND SERVED ARE NOT SYNONYMS. THEIR PLAI N DICTIONARY MEANING RUNS DIRECTLY CONTRARY TO ANY SUCH ASSUMPTION. THE GAP BETWEEN THE TWO MA Y BE WIDE BOTH IN POINT OF TIME AND PLACE. 9 I. T. APPEAL NO. 2098 (DEL) OF 2011 A STATUTE MAY REQUIRE THAT THE ISSUANCE OF A GENERA L ORDER BE CONVEYED BY PUBLICATION IN THE LOCALITY WITHOUT INDIVIDUAL SERVICE. THE WORD ISS UE IS TO BE CONSTRUED IN THE CONTEXT OF SECTION 149, WHICH IS AN EXPRESS LIMITATION PROVISION CREAT ING A PRECISE BAR WITH REGARD TO REOPENING OF ASSESSMENTS. IN SUB SECTION (3) OF SECTION 149 THE WORD EMPLOYED IS SERVED IN THE FIRST LINE WHILE IN THE PENULTIMATE LINE THE WORD EMPLOYED I S ISSUED. THUS IN THE SAME SHORT SUB SECTION, THE LEGISLATURE HAD USED THESE WORDS AS DI STINCT AND SEPARATE. THE HALLMARK OF A LIMITATION PROVISION IS THAT THE SAME MUST HAVE CLE AR-CUT AND FIXED TERMINI AT BOTH ENDS. SECTION 149 FIXED THE TERMINUS A QUO FROM THE END OF THE RE LEVANT ASSESSMENT YEAR I.E. ON THE 31 ST MARCH OF THE SAID YEAR. ON THE OTHER HAND, THE TERMINUS AD QUEM UNDER CLAUSE (A) AND (B) IS FIXED AT 4 YEARS, 8 YEARS AND 16 YEARS FROM THE FIXED DATE OF 31 ST MARCH OF THE RELEVANT ASSESSMENT YEAR. CLEARLY ENOUGH, IF THE TERMINUS A QUO IS FIXED AS T HE RELEVANT ASSESSMENT YEAR, NAMELY, 31 ST MARCH OF THE SAID YEAR THE OTHER TERMINUS MUST EQUA LLY BE FIXED WITH REGARD TO THE FIXED DATE OF ISSUANCE OF THE NOTICE, WHICH IS PRECISE AND PREDIC TABLE. THE PLAIN SCHEME OF SECTION 148 AND 151 IS THAT THE SATISFACTION AND THE SANCTION OF TH E COMMISSIONER OR THE BOARD ON THE REASONS RECORDED BY THE ITO IS NECESSARY BEFORE THE NOTICE UNDER SECTION 148 IS SENT OUT. IF THE WORD ISSUED USED IN BOTH THESE SUB SECTIONS IS READ AS SERVED, IT WILL LEAD TO THE STRANGE PHENOMENON THAT EVEN AFTER THE INCOME-TAX OFFICER H AS RECORDED HIS REASONS AND ISSUED THE NOTICE, THE SANCTION MAY, THEREFORE, BE RECORDED BE FORE ITS SERVICE ON THE ASSESSEE. A DECISION IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES, AND THE QUINTESSENCE THEREOF IS ITS RATIO AND NOT EVERY OBSERVATION FOUND THEREIN NOR WHAT LOGICALLY FOLLOWS FROM VARIOUS OBSERVATIONS MADE IN IT . HONBLE PATNA HIGH COURT IN BANARSI DEVI VS. ITO (1 964) 53 ITR 100 (SC) FURTHER OBSERVED THAT THE HONBLE SUPREME COURT GAVE A STRANGE AND W IDE MEANING OF THE WORD ISSUE IN ORDER TO SAVE THE INCOME-TAX (AMENDMENT) ACT, 1959, FROM BEI NG RENDERED NUGATORY. THEY DID NOT EVEN REMOTELY CONSIDERED SECTION 149 OF THE 1961 ACT. C ONSEQUENTLY, HONBLE PATNA HIGH COURT HAS HELD THAT BANARSI DEVIS CASE IS NO WARRANT FOR THE ABSTRUSE PROPOSITION THAT THE WORD ISSUED DE- HORS ITS CONTEXT MUST ALWAYS MEAN ISSUED AND SERVED IN EVERY STATUTE OR IN SECTION 149 OF THE ACT. 13. THUS FROM THE DECISIONS OF HONBLE SUPREME CO URT IN THE CASE OF R. K. UPADHYAYA VS. SHANABHAI PATEL (SUPRA) AND HONBLE PATNA HIGH COUR T IN THE CASE OF SHEO KUMARI DEBI (SUPRA) 10 I. T. APPEAL NO. 2098 (DEL) OF 2011 THE LAW IS SETTLED THAT TERM ISSUE APPEARING I N SECTION 149 OF THE ACT CANNOT MEAN AS ISSUE AND SERVE. THE JURISDICTION BECOMES VESTED IN THE ASSESSING OFFICER TO ASSESS/REASSESS THE ESCAPED INCOME THE MOMENT THE NOTICE U/S 148 IS ISS UED. SERVICE UNDER THE ACT IS NOT A CONDITION PRECEDENT TO CONFERMENT OF JURISDICTION ON THE ASSE SSING OFFICER BUT A CONDITION PRECEDENT ONLY TO THE MAKING OF THE ORDER OF ASSESSMENT. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT REASONS HAVE NOT BEEN SERVED WITHIN THE PERIOD OF SIX YEARS AND HENCE, REOPENING OF ASSESSMENT IS BAD IN LAW, IN OUR CONSIDERED OPINION, IS NOT CORRECT. WE , THEREFORE, REJECT THIS CONTENTION OF THE ASSESSEE. 14. HONBLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFT INDIA LTD. VS. ITO (SUPRA) HAS HELD THAT WHEN A NOTICE UNDER SECTION 148 IS ISSUED , THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE RETURN AND, IF HE SO DESIRES, TO SEEK REASO NS FOR ISSUING THE NOTICES. THE AO IS BOUND TO FURNISH THE SAME WITHIN A REASONABLE TIME. ON RECE IPT OF REASONS, THE NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE AO IS BOUN D TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. IN THE CASE OF ASSESSEE, THE AO IS SUED NOTICE UNDER SECTION 148 ON 26 TH MARCH, 2009 AND THE ASSESSEE VIDE LETTER DATED 13 TH MAY, 2009 (FILED WITH AO ON 19.05.2009) ASKED THE AO TO PROVIDE REASONS RECORDED UNDER SECTION 148 OF THE ACT FOR ESCAPEMENT OF INCOME. THE ASSESSEE, HOWEVER, FILED A RETURN IN RESPONSE TO NO TICE UNDER SECTION 148, UNDER PROTEST, ON 19 TH MAY, 2009. IT WAS SPECIFICALLY MENTIONED BY THE AS SESSEE IN THE COVERING LETTER TO RETURN OF INCOME THAT THE RETURN FILED UNDER SECTION 148 WAS SUBJECT TO REVISION OF DEDUCTION UNDER SECTION 80-HHC AS PER PREVAILING LEGAL POSITION AS REGARDS RETROSPECTIVE AMENDMENTS IN THE PROVISIONS OF SECTION 80-HHC. FROM THE LETTER DATED 13 TH MAY, 2009 (FILED ON 19 TH MAY, 2009) IT IS CLEAR THAT THE ASSESSEE WAS AWARE OF AMENDMENT BROUGHT IN TO STATUTE WITH RETROSPECTIVE EFFECT AND HAD SPECIFICALLY MENTIONED TO THIS EFFECT IN ITS COVERI NG LETTER. THE INCOME RETURNED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 WAS THE SAME AS ADMITTED IN ORIGINAL RETURN OF INCOME. THE CONDUCT OF THE ASSESSEE IS IN LINE WITH THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT INDIA LTD. VS. ITO (SUPRA). THE AO VIDE LETTER DATED 14/07/2009 INFORMED THE ASSESSEE THE EXTRACT OF REASONS RECORDED AS BELOW:- 11 I. T. APPEAL NO. 2098 (DEL) OF 2011 THE ASSESSING OFFICER WHILE RECORDING REASONS FOR ISSUING NOTICE UNDER SECTION 148 OBSERVED THAT YOUR CLAIM FOR DEDUCTION UNDER SECTION 80-HHC IS EXCESSIVE IN VIEW OF AMENDED PROVISIONS OF SECTION 80-HHC OF I. T. ACT, MADE BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 WITH RETROS PECTIVE EFFECT 1992 AS THE EXPORT TURNOVER OF YOUR BUSINESS IS MORE THAN RS.10 CRORE. 15. THEREAFTER THE ASSESSEE VIDE ITS LETTER DATED 16/11/2009 (FILED ON 1/12/2009), FILED THE REPLY CHALLENGING THE REOPENING OF ASSESSMENT ON LE GAL PLEA THAT THE REOPENING WAS BASED ON CHANGE OF OPINION AS ALSO SUPPORTED HIS CLAIM FOR D EDUCTION UNDER SECTION 80-HHC IN RESPECT OF DEPB RECEIPTS IN THE LIGHT OF AMENDMENT BROUGHT IN TO STATUTE. THE RELIANCE WAS PLACED ON THE DECISION OF SPECIAL BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF TOPMAN EXPORT VS. ITO 23 SOT 337 (MUM.) (SB). THE ASSESSEE ALSO FILED THE C OMPUTATION OF DEDUCTION UNDER SECTION 80HHC RELYING ON THE DECISION OF TOPMAN EXPORT (SUP RA) VIDE LETTER DATED 4 TH DECEMBER, 2009. THE ASSESSING OFFICER TAKING INTO CONSIDERATION THE REPLY SO FILED COMPLETED ASSESSMENT ON 8/12/2009 DEALING WITH THE ISSUE RAISED BY THE ASSE SSEE IN RESPECT OF CHANGE OF OPINION, RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF RAJESH JHAVERI STOCK BROKERS LTD. (SUPRA). IT IS A FACT THAT ASSESSING OFFICER HAD NO T DISPOSED OFF THE OBJECTIONS CHALLENGING REOPENING OF ASSESSMENT BEFORE COMPLETION OF ASSESS MENT. IN THIS REGARD WE WOULD LIKE TO MENTION THAT HONBLE SUPREME COURT IN THE CASE OF G KN DRIVESHAFT P. LTD. (SUPRA) HAD DELIVERED THE JUDGEMENT ON 23 RD MAY, 2007. THEREFORE, AS ON THE DATE ON WHICH NOT ICE U/S 148 WAS ISSUED, THE LAW WAS SETTLED THAT PROCESSING OF RETURN UNDER SECTION 143(1) WOULD NOT AMOUNT TO ASSESSMENT AND HENCE QUESTION OF CHANGE OF OPINI ON WOULD NOT ARISE IN SUCH CASES. THE ASSESSEE BY TAKING THIS PLEA RELYING ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT P. LTD. (SUPRA) IS CONTENDING THAT T HE ASSESSING OFFICER HAD NOT DISPOSED OF THE OBJECTIONS RAISED FOR REOPENING OF ASSESSMENT AND H ENCE, THE ASSESSMENT MADE IS BAD IN LAW. THE OBJECTION RAISED BY THE ASSESSEE IS FOR SAKE OF OBJ ECTION PARTICULARLY WHEN THE LAW IS SETTLED ON THE ISSUE THAT INITIATION OF PROCEEDINGS U/S 147 IN THE CASES WHERE PROCESSING OF RETURN U/S 143(1) WAS DONE, DOES NOT AMOUNT TO FORMATION OF BELIEF AN D HENCE NON DISPOSAL OF THE OBJECTION WOULD NOT BE FATAL TO ASSESSMENT MADE U/S 147/143(3) OF T HE ACT. IT IS A MERE PROCEDURAL LAPSE OR AN IRREGULARITY AND NOT ILLEGALITY MAKING THE ASSESSME NT BAD. SINCE LAW IS SETTLED ON THIS ISSUE, WE 12 I. T. APPEAL NO. 2098 (DEL) OF 2011 ARE UNABLE TO CONCUR WITH ARGUMENTS OF THE LD. COUN SEL FOR THE ASSESSEE THAT NON DISPOSAL OF OBJECTION CHALLENGING INITIATION OF PROCEEDINGS UND ER SECTION 147 BEFORE COMPLETION OF ASSESSMENT WOULD MAKE THE ASSESSMENT BAD IN LAW. 16. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE REASONS RECORDED ARE VAGUE AND THERE IS NO ALLEGATION AS TO WHAT AMOUNT OF INCOME HAD ESCAPED ASSESSMENT. THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON THE BASIS OF REASONS REC ORDED AS BELOW:- M/S. TAURUS EXPORTS P. 65 3 RD FLOOR, SOUTH EXTENSION III, NEW DELHI. PAN AADFT 8762B A.Y. 2002-03 THE ASSESSEES MAIN SOURCE OF INCOME WAS FROM EXPOR T AND CLAIM OF DEDUCTION UNDER SECTION 80-HHC BY THE ASSESSEE DURING THE PER IOD. IT IS HOWEVER FOUND THAT THE CLAIM IS EXCESSIVE IN AS MUCH AS THE ACTUAL CLAIM U NDER SECTION 80-HHC WOULD COME MUCH LOWER, ON ACCOUNT OF THE FACTS THAT THE ASSESS EES TURNOVER IS MORE THAN RS.10 CRORES DURING THE YEAR, THEREBY ATTRACTING AMENDED PROVISIONS OF SECTION 80-HHC OF THE ACT MADE BY THE TAXATION LAWS (AMENDMENT) ACT, 2005 . IN VIEW OF THE ABOVE, NECESSARY APPROVAL IS REQUIRE D UNDER PROVISO APPENDED TO SECTION 151(1) OF THE INCOME TAX ACT FOR ISSUING NO TICE UNDER SECTION 148 OF THE INCOME TAX ACT IN THIS CASE. PUT UP FOR KIND APPROVAL. SD/- 24/3/2009 RAVINDER MAINI ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE : 32 (1), NEW DELHI. 13 I. T. APPEAL NO. 2098 (DEL) OF 2011 ADDL. CIT 32, APPROVED SD/-. 16.1 FROM THE REASONS RECORDED AS ABOVE IT IS CLEAR THAT FOR THE YEAR UNDER CONSIDERATION TURNOVER OF THE ASSESSEE WAS MORE THAN RS.10 CRORES . THE TAXATION LAWS (AMENDMENT) ACT, 2005 INSERTED SECOND, THIRD AND FORTH PROVISOS TO SECTIO N 80HHC(3) WITH EFFECT FROM 1.4.1998 AND FIFTH PROVISO WITH EFFECT FROM 1.4.1992. IN THE CA SE BEFORE US SECOND, THIRD AND FORTH PROVISOS ARE RELEVANT AND ARE REPRODUCED AS BELOW:- PROVIDED FURTHER THAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURN OVER NOT EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEAR, THE PRO FITS COMPUTED UNDER CLAUSE ( A ) OR CLAUSE ( B ) OR CLAUSE ( C ) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO THE FIRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOU NT WHICH BEARS TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE ( IIID ) OR CLAUSE ( IIIE ), AS THE CASE MAY BE, OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE : PROVIDED ALSO THAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURN OVER EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEAR, THE PROFITS COMPUT ED UNDER CLAUSE ( A ) OR CLAUSE ( B ) OR CLAUSE ( C ) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO THE FIRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEAR S TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE ( IIID ) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE, IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO PROVE THAT, ( A ) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBA CK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME; AND ( B ) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE C USTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY ENTITLEMENT PASS BO OK SCHEME, BEING THE DUTY REMISSION SCHEME : PROVIDED ALSO THAT IN THE CASE OF AN ASSESSEE HAVING EXPORT TURN OVER EXCEEDING RUPEES TEN CRORES DURING THE PREVIOUS YEAR, THE PROFITS COMPUT ED UNDER CLAUSE ( A ) OR CLAUSE ( B ) OR CLAUSE ( C ) OF THIS SUB-SECTION OR AFTER GIVING EFFECT TO THE FIRST PROVISO, AS THE CASE MAY BE, SHALL BE FURTHER INCREASED BY THE AMOUNT WHICH BEAR S TO NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSE ( IIIE ) OF SECTION 28, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE, IF THE ASSESSEE HAS NECESSARY AND SUFFICIENT EVIDENCE TO PROVE THAT, ( A ) HE HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAWBA CK OR THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME; AND 14 I. T. APPEAL NO. 2098 (DEL) OF 2011 ( B ) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE C USTOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, RATE OF CREDIT A LLOWABLE MEANS THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY FREE REPLENISHME NT CERTIFICATE, BEING THE DUTY REMISSION SCHEME CALCULATED IN THE MANNER AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT . FROM THE AMENDED PROVISIONS OF SECTION 80-HHC OF TH E ACT IT IS CLEAR THAT SECOND AND THIRD PROVISO WILL BE APPLICABLE IN THE CASE OF ASSESSEE. THERE IS NO DISPUTE ABOUT THE FACT THAT THE AO HAS NOT QUANTIFIED THAT THE AMOUNT OF INCOME ESCAPE D BECAUSE APPLICABILITY OF THE SAID PROVISOS. WE HAVE GONE THROUGH THE COMPUTATION OF INCOME IN W HICH DEDUCTION UNDER SECTION 80-HHC HAS BEEN CLAIMED AT RS.2,93,63,268/-. THE ASSESSEE HAD NOT DISCLOSED DEPB RECEIPTS FALLING IN CLAUSE 28 (IIID) OF THE ACT. THE ASSESSEE HAS GIVE N COMBINED FIGURE OF RECEIPTS UNDER CLAUSE 28(IIIA), 28(IIIB) AND 28(IIIC) AT RS.70,58,351/-. IN THE ABSENCE FULL DETAILS IT WILL BE IMPOSSIBLE TO QUANTIFY THE EXACT ESCAPEMENT OF INCOME WITHIN T HE MEANING OF AMENDED PROVISIONS OF SECTION 80-HHC BY THE TAXATION LAWS (AMENDMENT) ACT, 2005. HOWEVER, THE AO WHILE RECORDING THE REASONS HAS RECORDED THAT THE TURNOVER OF THE ASSES SEE WAS MORE THAN RS.10 CRORES. IN FACT AS PER REPORT IN FORM NO. 10-CCAC THE TOTAL TURNOVER OF TH E BUSINESS AND EXPORT TURNOVER WAS THE SAME I.E. AT RS.16,35,59,369/-. THEREFORE, AMENDED PROV ISIONS OF SECTION 80-HHC WERE APPLICABLE PARTICULARLY THIRD PROVISO TO SECTION 80-HHC(3) WHI CH WAS INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 2005. HONBLE SUPREME COURT IN THE CASE OF PHOOL CHAND BAJRANG LAL VS. ITO 203 ITR 456 (SC) HAS HELD AS UNDER :- SINCE THE BELIEF IS THAT OF THE INCOME-TAX OFFIC ER, THE SUFFICIENCY OF THE REASONS FOR FORMING THE BELIEF IS NOT FOR THE COURT TO JUDG E, BUT IT IS OPEN TO AN ASSESSEE TO ESTABLISH THAT THERE IN FACT EXISTED NO BELIEF OR T HAT THE BELIEF WAS NOT A BONAFIDE ONE OR WAS BASED ON VAGUE, IRRELEVANT AND NON-SPECI FIC INFORMATION. TO THAT LIMITED EXTENT, THE COURT MAY LOOK INTO THE CONCLUS ION ARRIVED AT BY THE INCOME-TAX OFFICER AND EXAMINE WHETHER THERE WAS ANY MATERIAL AVAILABLE ON THE RECORD FROM WHICH THE REQUISITE BELIEF COULD BE FORMED BY THE I NCOME-TAX OFFICER AND FURTHER WHETHER THAT MATERIAL HAD ANY RATIONAL CONNECTION W ITH OR A LIVE LINK FOR THE 15 I. T. APPEAL NO. 2098 (DEL) OF 2011 FORMATION OF THE REQUISITE BELIEF. IT WOULD BE IMM ATERIAL WHETHER THE INCOME-TAX OFFICER, AT THE TIME OF MAKING THE ORIGINAL ASSESSM ENT, COULD OR COULD NOT HAVE FOUND BY FURTHER ENQUIRY OR INVESTIGATION, WHETHER THE TRANSACTION WAS GENUINE OR NOT IF, ON THE BASIS OF SUBSEQUENT INFORMATION, THE INCOME TAX OFFICER ARRIVES AT A CONCLUSION, AFTER SATISFYING THE TWIN CONDITIONS PR ESCRIBED IN SECTION 147(A) THAT THE ASSESSEE HAD NOT MADE A FULL AND TRUE DISCLOSUR E OF THE MATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT AND THEREFORE, INCOME C HARGEABLE TO TAX HAD ESCAPED ASSESSMENT.( PAGE 477-E-H) 17. FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PHOOL CHAND BAJRANG LAL (SUPRA) IT IS CLEAR THAT SUFFICIENCY OF REASONS FOR FORMING THE BELIEF CANNOT BE JUDGED BY THE COURT. THERE SHOULD BE LIVE NEXUS BETWEEN THE REASONS RECO RDED AND ESCAPEMENT OF INCOME. THE ASSESSING OFFICER HAS SPECIFICALLY MENTIONED THAT S INCE THE TURNOVER OF THE ASSESSEE IS MORE THAN RS.10 CRORES, AMENDED PROVISIONS OF SECTION 80-HHC OF THE ACT WILL BE APPLICABLE. THE AMENDED PROVISIONS OF SECTION 80-HHC(3) HAVE RESTRI CTED THE DEDUCTION UNDER SECTION 80-HHC. THEREFORE, THERE IS LIVE NEXUS BETWEEN THE REASONS RECORDED AND ESCAPEMENT OF INCOME. WE MAY LIKE TO MENTION THAT THE AO HAS INITIATED REASSESSM ENT PROCEEDINGS IN OTHER YEARS WHICH HAVE NOT BEEN OBJECTED TO BY THE ASSESSEE. THIS FACT HAS BE EN CLEARLY MENTIONED BY THE LD. CIT (A) IN HIS ORDER WHILE DECIDING THE ISSUE RELATING TO REOPENIN G OF ASSESSMENT. IN VIEW OF THE ABOVE, IN OUR CONSIDERED OPINION, REOPENING OF ASSESSMENT IS JUST IFIED. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (APPEALS) UPH OLDING THE REOPENING OF ASSESSMENT. 18. THE ASSESSEE HAD PLACED RELIANCE ON THE DECISI ON OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. (SUPRA). THE FACTS OF THE ASSESSEES CASE ARE DISTINGUISHABLE TO THE FACTS OF THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. (SUPRA). IN THAT CASE THE CASE FELL UNDER PROVISO TO SECTION 147 WHE REAS ASSESSEES CASE FALLS IN THE MAIN PROVISIONS OF SECTION 147 OF THE ACT. THEREFORE, T HERE IS NO CHANGE OF OPINION IN THE CASE OF THE ASSESSEE. THE LD. AR OF THE ASSESSEE HAS ALSO PLAC ED RELIANCE ON THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF PANCHRATAN CEMENT P. LTD. (SUPRA) THE ASSESSEE, AN INDUSTRIAL UNIT, WAS 16 I. T. APPEAL NO. 2098 (DEL) OF 2011 ENTITLED TO AVAIL OF THE BENEFIT OF TRANSPORT SUBSI DY AND INSURANCE SUBSIDY UNDER CERTAIN SCHEMES. FOR ASSESSMENT YEAR 2004-05, IT AVAILED OF THE SUBS IDIES. ACCORDING TO THE ASSESSEE, SUCH SUBSIDIES HAD CONTRIBUTED TO THE PROFITS AND GAINS IN ITS BUSINESS OF MANUFACTURE AND SALE OF CEMENT. THE ASSESSING OFFICER BY HIS ASSESSMENT OR DER COMPLETED UNDER SECTION 143(3) HAD ALLOWED DEDUCTION OF THE AMOUNTS FROM THE TAXABLE I NCOME OF THE ASSESSEE, BUT SUBSEQUENTLY BY A NOTICE UNDER SECTION 148 SOUGHT TO CONDUCT A REASSE SSMENT ON THE GROUND THAT THE AMOUNTS OF THESE SUBSIDIES HAD, DUE TO ERROR OR LAW, BEEN DEDU CTED FROM THE TAXABLE INCOME OF THE ASSESSEE UNDER SECTION 80-IC THEREBY OCCASIONING ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147. THE ASSESSEE CHALLENGED THE REOPENING OF ASSE SSMENT IN WRIT PETITION. IT WAS HELD THAT INITIATION OF REASSESSMENT PROCEEDINGS WAS WHOLLY S TRUCTURED ON THE LANGUAGE OF SECTION 80-HH AND DECISION OF THE CALCUTTA HIGH COURT. THE REPLY BY THE REVENUE TO THE POINTS OF OBJECTIONS, SUBMITTED BY THE ASSESSEE DID NOT DISCLOSE ANY WEIG HTY OR PERSUASIVE MATERIAL TO ENDORSE THIS SUPPOSITION. WHILE IT WAS LEGALLY PERMISSIBLE TO I NFER THAT IN THE COURSE OF SUCH ASSESSMENT ALL THE RELEVANT ASPECTS REGARDING ELIGIBILITY OR OTHER WISE OF SUCH DEDUCTION MUST HAVE BEEN CONSIDERED ON DUE VERIFICATION, THE REASON FOR COND UCTING A FRESH ASSESSMENT ON THE PREMISE THAT SOME TAXABLE INCOME HAD ESCAPED ASSESSMENT, WAS NOT READILY DISCERNIBLE. THE WORDS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINES S IN SECTION 80-IC HAVING REGARD TO THE PLENITUDE OF EXPANSE WOULD TAKE IN ITS FOLD PROFITS AND GAINS MADE BY ANY ACTIVITY ASSOCIABLE WITH THE BUSINESS IT UNDERTAKES AND WHICH FORMS THE SUBJ ECT MATTER OF ASSESSMENT UNDER THE ACT TO DETERMINE ITS TAX LIABILITY THEREUNDER. THUS, T HE NOTICE INITIATING PROCEEDINGS UNDER SECTION 148 AGAINST THE ASSESSEE WAS NOT IN CONFORMITY WITH THE LEGISLATIVE PRESCRIPTIONS MANDATED IN SECTION 147. THE FACTS OF THE CASE BEFORE US ARE E NTIRELY DIFFERENT FROM THE FACTS OF THE CASE OF PANCHRATAN CEMENT P. LTD. (SUPRA) WHEREIN ORIGIN AL ASSESSMENT WAS MADE U/S 143(3). THEREFORE, THE DECISION RENDERED BY HONBLE GAUHATI HIGH COURT IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 19. ANOTHER DECISION RELIED UPON BY THE ASSESSEE IS IN THE CASE OF JAY BHARAT MARUTI LTD. (SUPRA). IN THIS CASE IT HAS BEEN HELD THAT THE AO CANNOT REOPEN PROCEEDINGS BASED ON A PARTICULAR ITEM AND THEREAFTER PROCEED TO BRING TO TAX ITEMS WHICH ARE NOT CONNECTED WITH WHAT WAS INITIALLY INDICATED IN THE REASONS DISCLOSED UN DER SECTION 148(2) OF THE ACT FOR THE PURPOSE OF 17 I. T. APPEAL NO. 2098 (DEL) OF 2011 ISSUANCE OF NOTICE UNDER SECTION 148(1) OF THE ACT. THE FACTS OF THIS CASE ARE ALSO NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. HENCE, THIS D ECISION IS ALSO NOT APPLICABLE. 20. ANOTHER DECISION RELIED UPON BY THE ASSESSEE IS IN THE CASE OF PRASHANT S. JOSHI (SUPRA). IN THIS CASE IT HAS BEEN HELD THAT THE REASONS WHIC H ARE RECORDED BY THE AO FOR REOPENING AN ASSESSMENT ARE ONLY REASONS WHICH CAN BE CONSIDERED WHEN FORMATION OF BELIEF IS IMPUGNED. THE FACTS OF THIS CASE ARE ALSO DISTINGUISHABLE, HENCE, NOT APPLICABLE. THE ASSESSEE HAD PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF SIFL (SUPRA). IN THIS CASE ASSESSMENT WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING THAT THE ASSESSEE WAS BENEFICIARY OF A BOGUS CLAIM OF LONG T ERM CAPITAL GAINS. HONBLE DELHI HIGH COURT ARRIVED AT THE CONCLUSION THAT IT WAS NOT AT ALL DI SCERNIBLE AS TO WHETHER INCOME TAX OFFICER HAS APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENT LY ARRIVED AT A BELIEF THAT ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM INCOME HAD ESCAPED ASSESSMENT. THE DECISION OF HONBLE DELHI HIGH COURT IS ALSO NOT APPLICABLE TO THE FACT S OF THE ASSESSEES CASE. 21. THE NEXT ISSUE FOR CONSIDERATION RELATES TO COM PUTATION OF DEDUCTION UNDER SECTION 80-HHC OF THE ACT. THE RELEVANT GROUNDS OF APPEALS ARE REPRODUCED AS UNDER :- 3. THAT THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DEDUCTION ALLOWED UNDER SECTION 80-HHC AT RS.2, 45,01,962/- AS AGAINST RS.2,93,63,268/- CLAIMED BY THE ASSESSEE; 4. THAT THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE APPLICABILITY OF AMENDED PROVISIONS OF SECTION 80-HHC AS AMENDED BY TAXATION LAWS (AMENDMENT) ACT, 2005 AND ACCORDINGLY HOLDING THAT 90 PER CENT OF THE ENTIRE AMOUNT OF DEPB OF RS.78,42,612/- HAS TO BE REDUCED FROM THE ELIGIBLE BUSINESS PROFIT WHILE COMPUTING THE DEDUCT ION UNDER SECTION 80-HHC. AS SUCH UNDER THE PROVISIONS OF THE ACT AND RELEVANT C ASE LAW, THE ADDITION AND THE REASSESSMENT AS MADE ARE UNMERITED AND ARE LIABLE T O BE QUASHED. THE RETROSPECTIVE AMENDMENT AS MADE BEING DISCRIMINATOR Y AND BEING SUBJUDICE BEFORE HIGHER COURTS, THE ADDITION AND THE REASSESS MENT AS MADE ARE UNMERITED AND ARE LIABLE TO BE QUASHED. 18 I. T. APPEAL NO. 2098 (DEL) OF 2011 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO COMPUTED DEDUCTION UNDER SECTION 80-HHC BY REDUCING SALE OF DEPB RECEIPT FROM PROFIT S OF BUSINESS AND THEREAFTER COMPUTING DEDUCTION AS PER AMENDED PROVISIONS OF SECTION 80-H HC. ON APPEAL THE LD. CIT (A) FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. KALPTARU COLOURS & CHEMICALS 328 ITR 451 (BOM.) WHICH REVERSED THE DEC ISION OF ITAT SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA), HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE. DURING THE COURSE OF HEARING IT WAS FAIRLY CONCEDED BY THE LD. AR OF THE ASSESSEE THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF KALPATARU COLOURS & CHEMICALS LTD. (SUPRA). WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT (A) UPHOLDING THE COMPUTATION OF DEDUCTION UNDER SECTION 80-HHC RELYI NG ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. KALPTARU COLOURS & C HEMICALS (SUPRA). 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 30 TH NOVEMBER, 2011. SD/- SD/- [ DIVA SINGH ] [ K. D. R ANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : _30 TH NOVEMBER, 2011 . * MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 19 I. T. APPEAL NO. 2098 (DEL) OF 2011