INANI MARBLES & INDUSTRIES LTD., MUMBAI V. D.C.I.T. CIRCLE 2(2), MUMBAI

ITA 2558/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78787 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 28-04-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JKTLP DH LS SHRI PITAMBAR DAS
• Assessee Lawyers: FUKKZFJRH DH LS SHRI S M BANDI
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 80HHC; 115JB; 80IB; 147; 6; 139

Judgement Text

M/S INANI MARBLES & INDUSTRIES LTD. 1 VK;DJ VIHYH; VF/KDJ.K VKBZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MU MBAI JH JH JH JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL ; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL ; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL ; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K /ITA NO.2558/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2003-04 M/S INANI MARBLES & INDUSTRIES LTD. 501, E GREEN WOODS, M.V. ROAD, ANDHERI KURLA ROAD, ANDHERI (EAST) MUMBAI- 400 093 VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. PAN: - AAACI 1190C APPELLANT RESPONDENT ASSESSEE BY/ FU/KKZFJRH DH VKSJ LS SHRI S.M.BANDI REVENUE BY/ JKTLP DH VKSJ LS SHRI PITAMBAR DAS ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21.3.2012 OF CIT(A) FOR A.Y. 2003-04. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL. I. GROUND NO.1 -CHALLENGING THE VALIDITY REOPENING PROCEEDING U/S. 147 R.W.S. 148 OF THE I.T. ACT,. DATE OF HEARING 28.04.2014 DATE OF PRONOUNCEMENT 30.04.2014 M/S INANI MARBLES & INDUSTRIES LTD. 2 THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ACTION OF THE A.O. BY UPHOLDING THE VALIDITY OF REASSESSME NT PROCEEDING U/S. 147 R.W.S. 148 OF THE I.T. ACT. 2. GROUND NO.2 - REDUCTION OF CLAIM OF DEDUCTION ULS 80 IB THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ACTION OF THE A.O. IN NOT TREATING THE INTEREST RECEIVED O F RS. 13,30,672/- AS PROFIT OR GAINS DERIVED FROM BUSINESS OF AN INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S. 80 LB. 3. GROUND NO.3 - REDUCTION IN THE CLAIM OF DEDUCTION ULS 80HHC (A) THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN ADDING THE EXCISE AND COUNTERVAILING DUTY OF RS. 9,13,5151- WHILE CALCULATING THE ADJUSTED TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTIO N U/S. 80 HHC. (B) THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN GIVING THE DIRECTION TO THE A.O. IN REDUCING THE 90% OF GROSS INTEREST INSTEAD OF 90% OF NET INTEREST WHILE CALCULATING THE DEDUCTION UNDER CLAUSE (BAA) OF SUB-SECTION (4) TO SECTION 80 HHC. (C) THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN THE CONFIRMING THE ACTION OF THE A.O. IN REDUCING THE P ROFITS CALCULATED U/S. 80 IB FROM THE PROFITS OF THE BUSINESS WHILE CALCULATING DEDUCTION U/S. 80 HHC. (D) THE LD. CL T (A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN ENHANCING THE INCOME OF THE APPELLANT, BY WAY OF DIRECTION TO THE A.O. TO REDUCE THE 90% OF GROSS RECEIPTS OF RS. 36,07,1511- RECEIVED FROM THE JOB WORK BUSINESS AS AGAINST A NET INCOME OF RS. 85.042/- FROM JOB WORK ACTIVITY A S CLAIMED BY THE APPELLANT. 4. GROUND NO.4 THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE ACTION OF THE A.O. OF LEVYING INTEREST U/S. 2340 OF THE I.T. ACT. M/S INANI MARBLES & INDUSTRIES LTD. 3 2. GROUND NO. 1 IS REGARDING VALIDITY OF REOPENING OF ASSESSMENT. 3. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSE SSMENT YEAR UNDER CONISDERATION ON 1.12.2003 DECLARING TOTAL INCOME AT RS. 49, 77,189/- UNDER THE NORMAL PROVISIONS AND BOOK PROFIT U/S 115JB AT RS. 80,43,994/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 28.02.2006 DETERMINING THE TOTAL INCOME UNDER NORMAL PROVISINS AT RS. 50,00,950/- AN D BOOK PROFIT U/S 115JB AT RS. 80,67,756/-. SUBSEQUENTLY THE AO REOPENED THE A SSESSMENT BY ISSUING NOTICE U/S 148 OF INCOME TAX ACT ON 31 ST MARCH 2010 ON THREE GROUNDS I.E. (I) THE ASSESSEE IS NOT IN THE ACTIVITY OF MANUFACTURIN G OR PRODUCTION TO QUALIFY FOR DEDUCTION U/S 80IB (II) THE ASSESSEE HAS NOT FURNIS HED FORM NO. 10CCB ALONG WITH RETURN OF INCOME AND, THREREFORE, THE DEDUCTGI ON U/S 80IB FOR THE YEAR UNDER CONSIDERATION IS LIABLE TO BE DISALLOWED (III ) WHILE COMPUTING THE DEDUCTION U/S 80HHC THE PROFIT OF 80IB UNIT WAS NOT REDUCED F ROM THE PROFITS OF BUSINESS WHICH HAS RESULTED IN ALLWOANCE OF DOUBLE DEDUCTION . THE AO COMPLETED THE REASSESSMENT VIDE ORDER DATED 9.11.2010, HOWEVER NO DISALLOWANCE WAS MADE U/S 80IB AND, THEREFORE, THE FIRST TWO GROUNDS ON W HICH THE ASSESSMENT WAS REOPENED WERE FINALLY DECIDED IN FAVOUR OF THE ASSE SSEE BY THE AO. THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING OF ASSESSEEMEN T BEFORE CIT(A) BUT COULD NOT SUCCEED. 4. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE REOPNEING OF ASSESSMENT VIDE NOTICE U/S 148 DATED 31 ST MARCH 2010 IS BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERA TIN, THEREFORE, THE REASSESSMENT IS NOT VALID IN VIEW OF THE PROVISO TO SECTION 147 OF THE INCOME TAX ACT. THE LD. AR HAS POINTED OUT THAT SINCE NO DISAL LOWANCE HAS BEEN MADE BY THE AO IN THE REASSESSMENT PROCEEDINGS U/S 80IB, TH EREFORE, THE FIRST TWO GROUNDS/REASONS FOR REOPENING OF THE ASSESSMENT BEC OMES INFRUCTUOUS. M/S INANI MARBLES & INDUSTRIES LTD. 4 5. AS REGARDS THE POINT NO. (III), THE LD. AR OF TH E ASSESSEE HAS SUBMITTED THAT THE AO HAS RAISED SPECIFIC QUERIES ON THIS I SSUE OF REDUCTION OF PROFITS OF 80IB UNIT FROM THE PROFITS OF BUSINESS WHILE COMPUT ING THE DEDUCTION U/S 80HHC AND AFTER CONSIDERING THE REPLY OF THE ASSES SEE, THE AO ALLOWED THE CLAIM OF THE ASSESSEE IN THE ORIGINAL ASSESSMENT. T HE LD. AR HAS REFERRED PAGE 45 TO 47 OF THE PAPER BOOK AND SUBMITTED THAT IN TH E NOTICE U/S 142(1), THE AO HAS SPECIFICALLY RAISED THE QUERIES ON THIS ISSUE U NDER QUESTION NO. 18. THE ASSESSEE REPLIED THE QUERY OF THE AO VIDE ITS LETTE R DATED 10-6-2005 AT PAGE NO. 49 OF THE PAPER BOOK. THUS THE LD. AR HAS SUBMITTED THAT WHEN THE AO HAS RAISED THE DIRECT QUESTION ON THIS ISSUE WHICH WAS DULY REPLIED AND EXPLAINED BY THE ASSESSEE THEN IT CANNOT BE SAID THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE RELEVA NT FACTS NECESSARY FOR ASSESSMENT OF THE INCOME/ALLOWANCE OF DEDUCTION U/S 80HHC. THE LD. AR HAS THEN REFERRED THE NOTICE U/S 143(2) AND SUBMITTED T HAT THE AO HAS AGAIN RAISED THE QUERY ON THIS ISSUE WHICH WAS DULY REPLIED BY T HE ASSESSEE VIDE LETTER DATED 9-1-2006 AT PAGE 56 OF THE PAPER BOOK. THUS THE LD. AR HAS SUBMITTED THAT THE REOPENING IS BASED ON CHANGE OF OPINION BECAUSE IN THE ORIGINAL ASSESSMENT PASSED U/S 143(3), THE AO HAS EXAMINED THE ISSUE AN D THEN ALLOWED DEDUCTION WHICH CANNOT BE REVIEWED BY INVOKING THE PROVISIONS OF SECTION 147 R.W.S 148 OF THE INCOME TAX ACT. MOREOVER, THERE IS NO TANGIBLE MATERIAL ON THE BASIS OF WHICH THE AO COULD FORM AN OPINION THAT THE ICNOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT AND REOPENED THE ASSESSMENT AFTE R EXPIRY OF FOUR YEARS. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DE CISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LALITHA CH EM INDUSTRIES PVT. LTD VS. DCIT (2013) 86 CCH 177 AND SUBMITTED THAT THE POWER OF REASSESSMENT COULD ONLY BE EXERCISED IF CERTAIN PRE CONDITIONS ARE SAT ISFIED. THE PRIMARY CONDITIONS BEING THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHRAGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS REAS ON TO BELIEVE MUST BE BASED UPON SOME TANGIBLE MATERIAL I.E. IT CANNOT BE A ME RE IPSI DIXIT OF THE ASSESSING OFFICER. A DIFFERENT VIEW ON TANGIBLE MATERIAL AVAI LABLE EARLIER WOULD BE A CHANGE OF OPINION AND NOT AMOUNT TO REASON TO BELLIEVE IN COME CHARGEABLE TO TAX HAS M/S INANI MARBLES & INDUSTRIES LTD. 5 ESCAPED ASSESSMENT. HE HAS ALSO RELIED UPON THE DEC ISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PUROLATOR INDIA LTD. ( 343 ITR 155). THUS THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE REOPENING IS BASED ON CHANGE OF OPINION WITHOUT ANY TANGIBLE MATERIAL OR INFORMATION ON THE BASIS OF WHICH THE AO COULD HAVE FORM THE OPINION THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. 6. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT DURING THE REASSESSMENT, THE AO HAS ALSO DISALLOWED THE DEDUCT ION U/S 80IB IN RESPECT OF THE INTEREST INCOME WHICH WAS COMPLETELY OVERLOOKED BY THE AO IN THE ORIGINAL ASSESSMENT, THEREFORE, WHERE THERE IS A COMPLETE FA ILURE ON THE PART OF THE AO TO APPLY HIS MIND DURING THE ORIGINAL ASSESSMENT PROCE EDINGS TO THE POINT IT CAN BE SAID THAT THERE IS A TANGIBLE MATERIAL AND REASON T O BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSSESSMENT. IN SUPPO RT OF HIS CONTENTION HE HAS RELIED UPON THE DECISIOIN OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD. V S. ADDITIONAL CIT (350 ITR 651). THE LD. DR HAS FURTHER SUBMITTED THAT THE ASS ESSEE DID NOT RAISE THE ISSUE OF CHANGE OF OPINION IN RESPECT OF THE REOPENING OF ASSESSMENT BEFORE CIT(A) AND, THEREFORE, THE ASSESSEE IS NOT PERMITTED TO RAISE T HIS ISSUE FIRST TIME BEFORE THIS TRIBUNAL. THE LD. AR HAS FORCEFULLY CONTENDED THAT THE ISSUE OF CHANGE OF OPINION INVOLVES THE QUESTION OF FACTS AND LAW AND , THEREFORE, IT CANNOT BE RAISED AT THIS STAGE. HE HAS RELIED UPON THE ORDERS OF AUT HORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 1 43(3) AND AFTER EXPIRY OF FOUR YEARS. THE AO HAS REOPENED THE ASSESSMENT VIDE NOTICE U/S 148 ISSUED ON 31 ST MARCH 2010 BY RECORDING THE REASONS FOR REOPENING AS UNDER:- 'DURING THE ASSESSMENT PROCEEDINGS FOR A. Y.200405 , IT IS HELD THAT THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSESSEE IS NOT TANTAMOUNT TO MA NUFACTURE OR PRODUCTION TO QUALIFY FOR DEDUCTION ULS.801B AND ACCORDINGLY, THE DEDUCTION CLAIMED FOR A. Y.2004-05 AMOUNTING TO RS.24,03, 110/- WAS DISALLOWED BY THE ASSESSING OFFICER. M/S INANI MARBLES & INDUSTRIES LTD. 6 AS PER SEC..80IB(3), AN ASSESSEE IS ENTITLED FOR DEDUCTION OF PROFITS DERIVED FROM AN ELIGIBLE UNIT AT A SPECIFIED PERCENTAGE FOR THE SPE CIFIED PERIOD SUBJECT TO FULFILLMENT OF PRESCRIBED CONDITIONS. AS IT IS HELD IN THE A. Y.20 04-05, THE UNDERTAKING IS HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S.801B AND ALSO CONSIDERIN G THAT FORM 10CCB WAS NOT FURNISHED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME, THE C LAIM OF THE ASSESSEE FOR DEDUCTION ULS.801B AMOUNTING TO RS.29,L0,649/- FOR THE YEAR UNDER CONS IDERATION ALSO LIABLE TO BE DISALLOWED. THEREFORE, HAVE REASON TO BELIEVE THAT THE ASSESSEE COMPANY HA S WRONGLY BEEN ALLOWED THE DEDUCTION ULS.80IB OF RS.29,1 0,649/- RESULTING IN EXCESS ALLOWANCE OF DEDUCTION. FURTHER, IT IS ALSO NOTICED THAT WHILE COMPUTING TH E DEDUCTION U/S 80HHC IN THE ASSESSMENT ORDER, THE PROFIT OF 80IB UNIT WAS NOT REDUCED FROM THE PR OFITS OF BUSINESS, WHICH HAS RESULTED IN ALLOWANCE OF DOUBLE DEDUCTION ON THE SAME PROFITS OF THE UNDERTAKING. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T AN INCOME AMOUNTING TO RS.29,10,649/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC.147 OF THE INCOME TAX ACT, 1961. FURTHER, I ALSO HAVE REASON TO BELIEVE THE ASSESSEE HAS BEEN ALLOWED BEN EFIT OF DEDUCTION U/S.80IB AS WELL AS 80HHC, ON THE PROFITS OF THE SAME UNDERTAKING. HENCE, THIS IS A FIT CASE FOR INITIATION OF PROCEEDINGS U/S.147 OF THE INCOME TAX ACT, 1961.' 8. THE FIRST TWO POINTS RECORDED IN THE REASONS BY THE AO ARE REGARDING DEDUCTION U/S 80IB HOWEVER WHILE FRAMING THE REASSE SSMENT THE AO HAS NOT MADE ANY DISALLOWANCE IN RESPECT OF DEDUCTION U/S 8 0IB ALREADY ALLOWED IN THE ORIGINAL ASSESSMENT, THEREFORE, THESE TWO POINTS RE CORDED IN THE REASONS BECOME IRRELEVANT FOR THE PURPOSE OF DECIDING THE ISSUE OF VALIDITY OF REOPENING OF THE ASSESSMENT BEFORE US. MOREOVER, BOTH THE PARTIES HA VE CONCEDED ON THIS ASPECT THAT THE POINT NUMBER 1 AND 2 ARE NOT RELEVANT FOR DECIDING THE ISSUE OF VALIDITY OF REOPENING OF ASSESSMENT. THE ONLY REASON RECORDE D BY THE AO WHICH IS RELEVANT IS THE REDUCTION OF PROFITS OF 80IB UNIT W HILE COMPUTING DEDUCTION U/S 80HHC BY APPLYING THE PROVISIONS OF SECTION 80IA(9) . THEREFORE, THE LIMITED POINT TO BE CONSIDERED FOR DECIDING THE ISSUE OF VALIDITY OF REOPENING IS WHETHER THE REASON FOR REOPENING THAT THE PROFITS OF 80IB UNIT WAS NOT REDUCED FROM THE PROFITS OF BUSINESS WHILE COMPUTING THE DEDUCTION U /S 80HHC IN THE ORIGINAL ASSESSMENT IS SUFFICIENT TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT IN TERMS OF SECTION 147. AT THE OUTSET W E NOTE THAT THE REOPENING UNDER CONSIDERATION IS UNDISPUTEDLY AFTER THE EXPIR Y OF FOUR YEARS FROM THE END M/S INANI MARBLES & INDUSTRIES LTD. 7 OF THE ASSESSMENT YEAR UNDER CONSIDERATION, THEREFO RE, THE PROVISO TO SECTION 147 BECOMES RELEVANT WHICH READS AS UNDER:- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSM ENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECT ION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT, FOR THAT ASSESSMENT YEAR. 9. IN CASE WHERE THE ORIGINAL ASSESSMENT IS COMPLET ED U/S 143(3) THEN THE ASSESSMENT CANNOT BE REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT BY THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT. AS IT IS CLEAR FROM THE REASONS RECORDED THAT THERE IS NO SUCH ALLEGATION B Y THE AO IN THE REASONS THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS RELEVANT FOR ASSESSMENT. FURTHER WE NOTE THAT ON THE ISSUE OF RE DUCTION OF THE PROFIT OF 80IB UNIT FROM THE BUSINESS PROFITS FOR THE PURPOSE OF C OMPUTING THE DEDUCTION U/S 80HHC IN TERMS OF SECTION 80IA(9), THE AO HAD RAISE D THE SPECIFIC QUERIES VIDE NOTICE U/S 142(1) DATED 21.02.2005 AND THE QUESTION NO. 18 IN THE SAID QUESTIONNAIRE READS AS UNDER:- SHOW CAUSE AS TO WHY DEDUCTION U/S 80HHC AS PER TH E PROVISIONS OF SECTION 80IA(13) R.W.S 80IA(9) SHOULD NOT BE DISALLOWED. 10. THE ASSESSEE REPLIED THE QUERY OF THE AO VIDE ITS REPLY DATED 10.6.2005 AS UNDER:- IN OUR LETTER DATED 8/03/2005, WE HAVE FURNISHED ALL THE DETAILS OF OUR ABOVE SAID CLIENT EXCEPT POINT NO 18. UNDER INSTRUCTIONS OF OUR CLIENT WE ARE M/S INANI MARBLES & INDUSTRIES LTD. 8 GIVING THE REPLY POINT NO. 18 OF YOUR NOTICE AS UND ER. SECTION 80IA(9) READS AS UNDER: ' WHERE ANY AMOUNT OF PROFITS AND GAINS OF AN UNDER TAKING OR ' AN ENTERPRISE IN THE CASE OF AN ASSESSMENT YEAR, DEDUC TION TO THE EXTENT OF SUCH PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER A NY OTHER PROVISION OF THIS CHAPTER UNDER THE HEADING 'C-DEDUCTIONS IN RESPECT OF CERTAIN INCOMES', AND SHALL IN NO CASE EXCEED THE PROFITS AND GAINS O F SUCH ELIGIBLE BUSINESS OF UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE.' IN THIS CONNECTION, REFERENCE IS INVITED TO: . 1) THE EXPLANATORY MEMORANDUM (CIRCULAR NO. 772 DATED 23.12.1980) HAD CLARIFIED THAT UNDER CHAPTER VI-A, VARIOUS DEDU CTIONS FROM PROFITS AND GAINS ARE ALLOWED. THE TOTAL DEDUCTION UNDER CH APTER VI-A IS RESTRICTED TO THE GROSS TOTAL INCOME IN RESPECT OF THE ASSESSEE AS A WHOLE. HOWEVER, IN CERTAIN CASES DEDUCTION IS CLAIM ED FOR MORE THAN 100%. WITH A VIEW TO PROVIDE SUITABLE SAFEGUARD AND TO PREVENT THE TAX PAYERS FROM TAKING UNDUE ADVANTAGE, THE ACT IS SUIT ABLY AMENDED. ACCORDINGLY, SUCH PROVISIONS ARE INCORPORATED IN SE CTION 801/A 801B AND 80HHD. HOWEVER, NO SUCH CHANGES ARE MADE IN SEC TION 80HHC. 2) PROVISION OF SECTION 80 I A(9) DO NOT OVERRIDE THE WORKING OF DEDUCTION UNDER SECTION 80HHC AS SECTION 80HHC IS A DEDUCTION ON THE PROFITS OF THE BUSINESS AS A WHOLE, WHEREAS SECTION 80 IA I S ON THE PROFIT OF INDUSTRIAL UNDERTAKING. 3) 'THE BOMBAY HIGH COURT IN SHIRKE CONSTRUCTION EQUIPMENT (SUPRA) HAS STATED THAT THE SECTION 80HHC IS A COMPLETE CODE IN ITSELF. 11. IT IS CLEAR FROM THE REPLY OF THE ASSESSEE THA T THE ASSESSEE HAS MADE THE REFERENCE TO CIRCULAR NO. 772 DATED 23.12.1980 AND CLAIMED THAT WHEN THE DEDUCTION IS CLAIMED FOR MORE THAN 100% ONLY IN SU CH CASES SUITABLE SAFEGUARD IS PROVIDED TO PREVENT UNDUE ADVANTAGE OF DOUBLE D EDUCTION. FURTHER THE AO VIDE ITS NOTICE DATED 3 RD AUGUST 2005 AGAIN RAISED A SIMILAR QUERY WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 9.1.2006. IT IS CLEAR THAT THE AO HAS CONDUCTED THE ENQUIRY ON THIS ISSUE IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE CLA IM OF THE ASSESSEE WAS ALLOWED. IT IS NOT THE CASE OF THE REVENUE THAT THE CLAIM OF DEDUCTION U/S 80HHC AND M/S INANI MARBLES & INDUSTRIES LTD. 9 80IB EXCEEDS 100% OF THE GROSS PROFIT. ONCE THE ISS UE WAS EXAMINED BY THE AO AND TOOK A PARTICULAR VIEW IN THE ORIGINAL ASSESSME NT BY APPLYING ITS MIND THEN THE ASSESSMENT CANNOT BE REOPENED AFTER EXPIRY OF F OUR YEARS IN THE ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THERE IS NO SUCH ALLEGATI ON BY THE AO THAT THE INCOME HAS ESCAPED ASSESSMENT BY ALLOWING THE EXCESS DEDUC TION U/S 80HHC BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. WHEN THE AO WAS SATISFIED WITH THE REPLY OF THE ASSESSEE THAT OVERALL DEDUCTION IN THIS RESPECT DOE S NOT EXCEED 100% OF THE PROFITS THEN THE REOPENING ON THIS ISSUE IS NOTHING BUT BASED ON CHANGE OF OPINION AS THERE WAS NO TANGIBLE MATERIAL OR INFORM ATION CAME TO THE NOTICE OF THE AO TO SHOW THAT THE INCOME ASSESSEABLE TO TAX H AS ESCAPED ASSESSMENT. THE OBJECTIONS OF LD. DR THAT THE ASSESSEE HAS NOT RAIS ED THE ISSUE OF CHANGE OF OPINION BEFORE CIT(A) AND THEREFORE IS NOT PERMITTE D TO RAISE THIS ISSUE AT THIS STAGE IS WITHOUT ANY MERITS. THIS ISSUE OF VALIDITY OF REOPENING IS A SUBJECT MATTER INVOLVING ALL THE LEGAL ASPECTS. THEREFORE, IT IS CLEAR FROM THE RECORD THAT THE ISSUE U/S 80IA(9) HAD BEEN EXAMINED BY THE AO I N THE ORIGINAL ASSESSMENT AND ALLOWED THE CLAIM BY DUE APPLICATION OF MIND T HEN THE QUESTION OF REOPENING ON THE BASIS OF CHANGE OF OPINION IS PART AND PARCEL OF THE MAIN ISSUE OF VALIDITY OF REOPENING OF ASSESSMENT. HENCE SUCH PLEA CAN BE RAISED AT ANY STAGE AS IT DOES NOT REQUIRE ANY INVESTIGATION OF F ACTS. THE DECISION RELIED UPON BY THE LD. DR IN THE CASE OF EXPORT CREDIT GUARANTE E CORPORATION OF INDIA LTD. VS. ADDITIONAL CIT (SUPRA) IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE BECAUSE THE ISSUE OF ALLOWABILITY OF DEDUCTION ON T HE INTEREST INCOME WAS NOT THE REASON FOR REOPENING OF THE ASSESSMENT IN THE CASE OF THE ASSESSEE. THEREFORE, EVEN IF THERE IS A COMPLETE FAILURE ON THE PART OF THE AO TO APPLY IS MIND DURING THE ORIGINAL ASSESSMENT BUT THE SAME POINT IS NOT T HE BASIS OF REOPENING OF ASSESSMENT THEN FOR THE QUESTION OF VALIDITY OF REO PENING, THE DECISION OF THE HONBLE JURISIDICTIONAL HIGH COURT WILL NOT HELP TH E CASE OF THE REVENUE. IN THE CASE OF LALITHA CHEM INDUSTRIES PVT. LTD VS. DCIT (SUPRA), THE HONBLE M/S INANI MARBLES & INDUSTRIES LTD. 10 JURISDICT IONAL HIGH COURT IN PARA 11 HAS OBSERVED AS UNDER: - 11 IT IS A SETTLED POSITION IN LAW THAT UNDER THE A CT, THE ASSESSING OFFICER HAS POWER TO RE-ASSESS BUT HAS NO POWER TO REVIEW AN ASSESSMENT AS SETTLED BY THE APEX COURT IN THE MATTER OF CIT VS. KELVINATOR INDIA 320 ITR 561. THE POWER OF RE-ASSESSMENT COULD ONLY BE EXERCISED IF CERTAIN PRE-CONDITIONS ARE SAT ISFIED. THE PRIMARY CONDITIONS BEING THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELI EVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS REASON TO BELIEVE MUST BE BASED UPON SOME TANGIBLE MATERIAL I.E. IT CANNOT BE A MERE IPSI DIXIT OF THE ASSESSIN G OFFICER. A DIFFERENT VIEW ON TANGIBLE MATERIAL AVAILABLE EARLIER WOULD BE A CHANGE OF OPI NION AND NOT AMOUNT TO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. BESIDES, ONE MORE ADDITIONAL REQUIREMENT TO BE SATISFIED WHERE ASSESS MENT SOUGHT TO BE RE-OPENED IS BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RE LEVANT YEARS, IS THAT THERE MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO TRULY AND FU LLY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. FURTHER, THE OBLIGATION OF AN ASSES SEE IS ONLY TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. IT IS NOT THE JOB OF THE ASESSEE TO DISCLOSE THE LEGAL INFERENCES TO DE DRAWN FROM THOSE FACTS A S HELD BY THE APEX COURT IN CIT V/S CALCUTTA DISCOUNT COMPANY 41 ITR 191. AT THE STAGE OF ISSUING OF A NOTICE TO REOPEN THE ONLY QUESTION TO BE CONSIDERED IS WHETHER THERE IS RELEVANT MATERIAL TO FORM THE REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMEN T AND NOT WHETHER THE MATERIAL IS SUFFICIENT TO PROVE BEYOND DOUBT THAT INCOME HAS IN FACT ESCAPED ASSESSMENT. 12. IT IS CLEAR THAT FOR REOPENING THE ASSESSMENT T HE PRIMARY CONDIDTION TO BE SATISFIED IS THAT THE AO MUST HAVE REASON TO BELIEV E THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THIS REASON TO B ELIEVE MUST BE BASED ON SOME TANGIBLE MATERIAL AND CANNOT BE A MERE ASSERTI ON OF THE AO. IT WAS FURTHER OBSERVED BY THE HONBLE HIGH COURT THAT IN CASES WH ERE THE ASSESSMENT HAS BEEN REOPENED AFTER EXPIRY OF FOUR YEARS. ONE ADDIT IONAL REQUIREMENT TO BE SATISFIED IS THAT THERE MUST BE A FAILURE ON THE PA RT OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT. WE FIND THAT IN THE CASE IN HAND BOTH THE PRIMARY CONDITIONS AS WELL AS ADDITIONAL CONDITION IN CASE OF REOPENING BEYOUND FOUR YEARS ARE ABSENT. ACCORDI NGLY WE HOLD THAT THE REOPENING OF ASSESSMENT AFTER FOUR YEARS FROM THE E ND OF THE ASSESSMENT YEAR IN THE CASE OF THE ASSESSEE IS WITHOUT ANY TANGIBLE MA TERIAL ON THE BASIS OF WHICH THE AO COULD HAVE FORMED THE BELIEF THAT THE INCO ME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT AND FURTHER SINCE THE ASSESSMENT HAS BEEN REOPENED AFTER EXPIRY OF FOUR YEARS, THEREFORE, IN THE ABSENCE OF ANY ALLEGATION THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REA SON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS RELEVATN FOR THE M/S INANI MARBLES & INDUSTRIES LTD. 11 ASSESSMENT, THE REOPENING IS HIT BY THE PROVISO TO SECTION 147. CONSEQUENTLY THE REOPENIGN OF ASSESSMENT IS NOT SUSTAINABLE AND REAS SESMENT IS QUASHED. 14. SINCE THE REOPENING OF ASSESSMENT IS NOT SUSTAI NABLE AND IS QUASHED, THEREFORE, THE OTHER GROUND RAISED ON MERITS BECOM E INFRUCTUOUS AND WE DO NOT PROPOSE TO DISPOSE OFF THE SAME. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 30 -04-2014 SD/- SD/- ( RAJENDRA ) ( VIJAY PAL RAO ) ( ACCOUNTANT MEMBER / YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 30 -04-2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI