Umedica Laboratories Pvt. Ltd., Vapi. V. The ACIT., Circle1, Vapi.

ITA 2803/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0485 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-11-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 13-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Bad and doubtful debts; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 192; 139(1); 147; 148; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, J.M. AND D. C. AGRAWAL, A.M. ITA NO.2803/AHD/2006 ASST. YEAR: 1998-99 M/S UMEDICA LAB (P), PLOT NO.221, GIDC, VAPI. V/S . ASSTT. CIT, VAPI CIRCLE, VAPI. PAN NO.AACU2966 Q (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. N. SOPARKAR RESPONDENT BY:- SHRI C. K. MISHRA, SR. D.R. O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 21.9.2006 WHEREIN LD. CIT(A) HAS CONFIRMED THE REOP ENING OF ASSESSMENT UNDER SECTION 147/148 AND ALSO PARTLY CONFIRMED THE DISALLOWANCE UNDER SECTION 80 HHC MADE BY A.O. IN RESPECT OF EXPORT EN TITLEMENT I.E. DEPB UTILIZED FOR OWN CONSUMPTION AMOUNTING TO RS.39,12, 763/-, EXPORT PASS BOOK BENEFIT RECEIVED AT RS.41,70,648/- AND DUTY D RAW BACK RECEIVED AT RS.7,825/-. AGAINST THIS ORDER ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 1. THE LD. CIT(A) ERRED IN DISMISSING THE CLAIM OF ASS ESSEE THAT ASSESSMENT CANNOT BE REOPENED UNDER SECTION 147 R.W .S. 148. ITA NO.2803/AHD/2006 AY 1998-99 2 2. AS PER SECOND GROUND OF APPEAL THE LD. CIT(A) ERRED IN DISALLOWING DEDUCTION FOR RS.22,21,089/- CLAIMED UN DER SECTION 80 HHC OF THE ACT WITHOUT CONSIDERING THE FACTS OF THE CASE. 3. AS PER THIRD GROUND OF APPEAL THE LD. CIT(A) ERRED IN NOT CONSIDERING FOLLOWING EXPORT INCENTIVES AS BUSINESS INCOME TO CALCULATE THE DEDUCTION UNDER SECTION 80 HHC OF THE ACT. A. DEPB UTILIZED FOR OWN CONSUMPTION RS.39,12,763/- B. EXPORT PASS BOOK BENEFIT RECEIVED RS.41,70,648/- C. DUTY DRAW BANK RECEIVED RS.7,825/- 2. AT THE OUTSET THE LD. AR FOR THE ASSESSEE CHALLE NGED THE REOPENING OF THE ASSESSMENT AND SUBMITTED THAT MERIT OF THE C ASE MAY BE CONSIDERED ONLY WHEN THE GROUNDS RELATE TO REOPENING IS DECIDE D AGAINST HIM. ACCORDINGLY, WE CONSIDER GROUND NO.1 FOR ADJUDICATI ON. 3. THE FACTS OF THE CASE ARE THAT RETURN OF INCOME WAS FILED BY THE ASSESSEE COMPANY ON 03.11.1998 SHOWING TOTAL INCOME OF RS.2,10,792/- THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED O N 29.12.00 DETERMINING TOTAL INCOME AT RS.1,12,83,287/- AS AGA INST DECLARED INCOME OF RS.2,10,792/- WITHOUT GRANTING DEDUCTION U/S 80 HHC. HOWEVER, WHILE PASSING ORDER U/S 154 DATED 7.3.03 RECTIFYING THE O RDER GIVING EFFECT TO THE CIT(A)S ORDER DATED 23.5.2002, DEDUCTION U/S 80 HH C WAS GRANTED TO THE EXTENT OF RS.2221089/-. SUBSEQUENTLY, ON PERUSA L OF THE RECORDS, AO FOUND THAT EXPORT INCENTIVES MAINLY CONSIST OF EXPO RT PASS BOOK BENEFIT OF RS.4170648/- AND SALE OF IMPORT LICENSES OF RS.3912 763/-. AS PER SECTION 80 HHC(3) R.W.S. 28(IIIA), PROFIT ON SALE OF A LICE NSE GRANTED UNDER THE IMPORT (CONTROL) ACT CAN ONLY BE COUNTED FOR DEDUCT ION U/S 80 HHC AND NO PROFIT ON SALE OF LICENSE ACQUIRED FROM ANY OTHE R PERSON CAN BE CONSIDERED FOR DEDUCTION U/S 80 HHC. THEREFORE, NOT ICE U/S 148 WAS ISSUED TO THE ASSESSEE COMPANY ON 28.3.05 WHICH WAS SERVED ON 29.3.05. ITA NO.2803/AHD/2006 AY 1998-99 3 WHILE FRAMING THE REASSESSMENT ORDER, THE LD. A.O. REFERRED TO THE AMENDMENT TO SECTION 80 HHC VIDE TAXATION LAWS (AME NDMENT) ACT, 2005 DATED 29 TH DECEMBER, 2005 ACCORDING TO WHICH FOR GETTING BENE FIT ON PROFIT ON SALE OF DEPB THE FOLLOWING CONDITIONS ARE TO BE SATISFIED:- A) THE EXPORTER HAD AN OPTION TO CHOOSE EITHER DUTY DR AW BACK OR DUTY ENTITLEMENT PASS BOOK SCHEME; AND B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUS TOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DUTY ENTITLEMENT PASS BOOK SCHEME; OR C) THE EXPORTER HAD AN OPTION TO CHOOSE EITHER DUTY DR AW BACK OR DUTY FREE REPLENISHMENT CERTIFICATE; AND D) THE RATE OF DRAW BACK CREDIT ATTRIBUTABLE TO THE CU STOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER DUTY FREE REPLENISHMENT CERTIFICATE. THE AO FURTHER OBSERVED THAT THE ASSESSEE COMPANY C LAIMED THAT IT HAD AN OPTION TO CHOOSE EITHER THE DUTY DRAW BACK OR DUTY ENTITLEMENT PASS BOOK SCHEME, HOWEVER IT DID NOT SUBMIT ANY SUPPORTING EV IDENCE TO SHOW HOW IT HAS EXERCISED THE OPTION. MOREOVER, IT HAS EXPLA INED THAT HOW THE RATE OF DUTY DRAW BACK IS HIGHER THAN THE DEPB, BUT FAIL ED TO SUBSTANTIATE IT WITH EVIDENCE. THEREFORE, THE ENTIRE AMOUNT RECEIVE D BY THE ASSESSEE COMPANY ON PROFIT ON SALE OF EXPORT INCENTIVES WILL BE EXCLUDED WHILE WORKING THE PROFITS AND ELIGIBLE FOR DEDUCTION U/S 80 HHC OF THE ACT. IN VIEW OF THE ABOVE FACTS, THE AO HELD THAT THE ASSES SEE WILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80 HHC ON THE EXPORT INCENTIVES A ND ACCORDINGLY, THE DEDUCTION U/S 80 HHC OF RS.22,21,089/- WAS WITHDRAW N. 4. THE LD. CIT(A) CONFIRMED THE REOPENING OF THE AS SESSMENT BY RELYING ON THE DECISION IN RAYMOND WOOLEN MILLS VS. ITO 236 ITR 34 (SC) FOR THE PROPOSITION THAT IT IS ONLY TO BE SEEN FOR HOLDING THE ITA NO.2803/AHD/2006 AY 1998-99 4 REOPENING AS VALID AS TO WHETHER THERE WAS PRIMA-FA CIE SOME MATERIAL ON THE BASIS OF WHICH DEPARTMENT CAN REOPEN THE CASE. THE LD. CIT(A) DID NOT GO FURTHER AS TO WHETHER OTHER CONDITIONS LAID DOWN UNDER SECTION 147 ARE SATISFIED. 5. THE LD. AR SUBMITTED THAT THE ASSESSMENT WAS COM PLETED UNDER SECTION 143(3). IT IS SOUGHT TO BE REOPENED ON 29.3 .2005 I.E. AFTER EXPIRY OF 4 YEARS FROM THE END OF ASSESSMENT YEAR I.E. 199 8-99. HE REFERRED TO FOLLOWING REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT :- IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143 (3) ON 29/12/2000, DETERMINING THE TOTAL INCOME AT RS.1128 3287/- WITHOUT GRANTING DEDUCTION U/S 80HHC. HOWEVER, WHILE PASSIN G ORDER U/S 154 DATED 7/3/2003, RECTIFYING THE ORDER GIVING EFF ECT TO THE CIT(A)S ORDER DTD.23.5.2002, DEDUCTION U/S 80 HHC HAS BEEN GRANTED TO THE EXTENT OF RS.2221089/- ON 90% OF EXP ORT INCENTIVES. HOWEVER, ON VERIFICATION OF THE RETURN OF INCOME IT IS SEEN THAT EXPORT INCENTIVES ARE MAINLY CONSIST OF EXPORT PASS BOOK BENEFIT OF RS.4170648/- AND SALE OF IMPORT LICENCES OF RS.3912 763/- TOTALING TO RS.8083411/-. HOWEVER, AS PER SECTION 80 HHC(3) R.W.S. 28(IIIA) PROFIT ON SALE OF A LICENCE GRANTED UNDER THE IMPOR T (CONTROL) ACT, 1947 CAN ONLY BE COUNTED FOR DEDUCTION U/S 80 HHC A ND NO PROFIT ON SALE OF LICENCE ACQUIRED FROM ANY OTHER PERSON C AN BE CONSIDERED FOR DEDUCTION U/S 80 HHC. SO FAR AS SALE OF DEPB IS CONSIDERED, SAME HAS BEEN CLARIFIED VIDE PRESS RELE ASE IN BOMBAY CHARTERED ACCOUNTANT JOURNAL, DECEMBER, 2004, AND S UCH PROFIT IS NOT QUALIFIED FOR DEDUCTION U/S 80 HHC. I HAVE THER EFORE, REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.2221089/- H AS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC.147 OF THE IT ACT, 1961. AFTER GOING THROUGH THE REASONS LD. AR POINTED OUT THAT AO HAS NOT CHARGED ANY OMISSION OR FAILURE TO DISCLOSE ANY MAT ERIAL FACTS NECESSARY FOR ASSESSMENT WHICH IS PRE-CONDITION FOR ACQUIRING JURISDICTION TO REOPENING THE ASSESSMENT AFTER 4 YEARS. IN FACT ACC ORDING TO HIM ALL THE FACTS ARE DISCLOSED IN THE ORIGINAL RETURN AND COMP UTATION OF DEDUCTION UNDER SECTION 80 HHC WAS MADE. THE DETAILS OF EXPOR T INCENTIVE WERE ITA NO.2803/AHD/2006 AY 1998-99 5 ALSO DECLARED AS PER PAGES 2 AND 3 OF THE PAPER BOO K FILED. HE ALSO DREW OUR ATTENTION TO ORIGINAL ASSESSMENT ORDER DATED 29 .12.00 WHEREIN THE DISCUSSION ON DEDUCTION UNDER SECTION 80 HHC IS STA RTED FROM PAGE 49 AND CONTINUED TO PAGE 54. THE CALCULATION OF DEDUCT ION UNDER SECTION 80 HHC WAS CARRIED OUT BY THE AO AS PER SEPARATE WORKI NG SHEET ENCLOSED WITH THE ASSESSMENT ORDER SEPARATELY WHICH SHOWED T HAT EXPORT INCENTIVE AMOUNTING TO RS.12736475/- WERE INCLUDED FOR DEDUCT ION. ACCORDINGLY THERE WAS NO OMISSION OR FAILURE ON THE PART OF ASS ESSEE TO DISCLOSE ANY MATERIAL FACT AND AO WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT. 6. LTD. AR REFERRED TO THE DECISION OF HONBLE PUNJ AB & HARYANA HIGH COURT IN DULICHAND SINGHANIA VS. ACIT (2004) 269 ITR 192 FOR THE PROPOSITION THAT NOTICE UNDER SECTION 148 ISSUED ON THE GROUND THAT EXCESS DEDUCTIONS HAVE BEEN GRANTED UNDER SEC.80O IN A C ASE WHERE NOTICE WAS ISSUED AFTER 4 YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR WOULD BE INVALID. 7. ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDER S OF AUTHORITIES BELOW . 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND CONS IDERING THE MATERIAL ON RECORD, WE ARE OF THE CONSIDERED VIEW T HAT REOPENING OF THE ASSESSMENT IS NOT JUSTIFIED. THE REASONS ARE THAT A SSESSMENT IS SOUGHT TO BE REOPENED AFTER FOUR YEARS FROM THE END OF RELEVA NT ASSESSMENT YEAR WHERE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTI ON 143(3). ACCORDINGLY PROVISO TO SECTION 147 WOULD BE APPLICA BLE ACCORDING TO WHICH WHERE AN ASSESSMENT IS COMPLETED UNDER SECTIO N 143(3) OR UNDER SECTION 147 THEN NO ACTION FOR REOPENING OF THE ASS ESSMENT CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE RELEVANT AY UNLESS ANY INCOME ITA NO.2803/AHD/2006 AY 1998-99 6 CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SST. YEAR BY REASON OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASST. Y EAR. THEREFORE, IT IS NECESSARY FOR THE AO TO SPECIFICALLY MENTION AS TO WHAT MATERIAL FACTS, THE ASSESSEE WAS REQUIRED TO DISCLOSE AND WHICH HAS NOT BEEN DISCLOSED AND FURTHER THAT SUCH FACTS WERE NECESSARY FOR DISCLOSU RE IN THE REGULAR ASSESSMENT. IN FACT THE AO HAS CARRIED OUT DETAILED INVESTIGATION AND THE DISCUSSION HAS RUN INTO SEVERAL PAGES IN THE ASSESS MENT ORDER. A SEPARATE CALCULATION SHEET HAS BEEN ANNEXED WITH THE ASSESSM ENT ORDER SHOWING HOW DEDUCTION UNDER SECTION 80 HHC IS WORKED OUT TH EN THERE IS NO REASON TO REOPEN THE ASSESSMENT WHEN THERE IS NO OM ISSION OR FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING ANY RELEVANT MATERIAL FACT. IN FACT THE AO HAD CONSIDERED THE EXPORT INCENTIVE BEING EXPORT PASS BOOK BENEFIT, DEPB AND SALE OF IMPORT LICENCE WHILE CARRYING OUT COMPUTATION OF DEDUCTION UNDER SECTION 80 HHC. THE DECISION OF HON BLE PUNJAB & HARYANA HIGH COURT IN DULICHAND SINGHANIA VS. ACIT (SUPRA) IS FULLY APPLICABLE ON THE FACTS OF THE CASE AND ASSESSMENT CANNOT BE REOPENED MERELY ON THE GROUND THAT EXCESS DEDUCTIONS HAVE BE EN GRANTED UNDER SECTION 80 O IN THAT CASE. HONBLE CALCUTTA HIGH COURT IN PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. VS. DCIT & OR S.(2005) 273 ITR 16 (CAL) HELD THAT AN ASSESSMENT CANNOT BE REOPENE D AFTER EXPIRY OF 4 YEARS ON THE BASIS OF OBSERVATIONS OF HONBLE SUPRE ME COURT AS THERE IS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE. 9. HONBLE GUJARAT HIGH COURT IN ARVIND MILLS LTD. VS. DCIT (2000) 242 ITR 173 (GUJ) HELD THAT IMPORT OF PROVIS O TO SECTION 147 OF IT ACT, 1961 WHERE THERE IS NO DEFAULT ON THE PART OF THE ASSESSEE IN FILING THE RETURN AS REQUIRED UNDER THE ACT EITHER UNDER SECTI ON 139(1) OR IN RESPONSE TO NOTICE UNDER SECTION 142(1) OR 148(1) OR THERE I S NO FAILURE ON THE PART ITA NO.2803/AHD/2006 AY 1998-99 7 OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ASSESSMENT, THEN ACTION COULD NOT BE TAKEN FOR REOP ENING THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS NOTWITHSTANDING THE FACT THAT REASONS FOR ESCAPEMENT OF INCOME FROM ASSESSMENT EXISTED. IN TH IS CASE AO SOUGHT TO REOPEN THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS ON THE BASIS OF DECISION OF HONBLE ALLAHABAD HIGH COURT IN SWARUP VEGETABL E PRODUCTS INDUS. LTD. VS. CIT (1991) 187 ITR 412 BY HOLDING THAT HI S DECISION EARLIER WAS ERRONEOUS AND BECAUSE OF WHICH INCOME HAS ESCAPED A SSESSMENT. SIMILAR VIEW WAS HELD BY HONBLE GUJARAT HIGH COURT IN SHRE E THARAD JAIN YUVAK MANDAL AND ANOTHER VS. ITO (2000) 242 ITR 612 (GUJ) WHEREIN ASSESSMENT WAS SOUGHT TO BE REOPENED AFTER EXPIRY O F FOUR YEARS ON THE BASIS OF OBJECTION OF AUDIT PARTY WHICH POINTED OUT THAT THE TRUST HAD NOT OBTAINED PERMISSION OF THE AO UNDER SECTION 11(3A) OF THE ACT AND, THEREFORE, ASSESSEE TRUST WAS NOT ELIGIBLE FOR EXEM PTION. ON THIS BASIS NOTICE UNDER SECTION 148 WAS ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASST. YEAR. ON WRIT PETITION PARTNE R OF THE ASSESSEE TRUST IT WAS HELD THAT WHERE ASSESSEE HAS DISCLOSED ALL THE PROBABLE FACTS AND AO FAILED TO DRAW LEGAL INFERENCE FOR THE PURPOSES OF APPLYING THE LAW THEN THERE IS NO FAILURE ON THE PART OF ASSESSEE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND ACCORDI NGLY COULD NOT HAVE ASSUMED JURISDICTION FOR REASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASST. YEAR. HONBLE GUJARAT HIGH CO URT FURTHER HELD THE SIMILAR VIEW IN VARELI WEAVES (P) LTD. VS. DCIT (19 99) 240 ITR 77 (GUJ) WHERE ASSESSMENT WAS SOUGHT TO BE REOPENED ON THE GROUND OF NON- EXERCISE OF DUE DILIGENCE BY A.O. THE REASONS DID N OT ATTRIBUTE ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FA CTS TRULY AND FULLY WHICH COULD HAVE RESULTED IN ESCAPEMENT OF INCOME. HONBL E GUJARAT HIGH COURT IN GOVIND CHHAPABHAI PATEL VS. DCIT (1999) 24 0 ITR 628 (GUJ) DECLARED THE REASSESSMENT PROCEEDINGS INVALID WHEN THEY WERE SOUGHT TO ITA NO.2803/AHD/2006 AY 1998-99 8 BE INITIATED AFTER EXPIRY OF FOUR YEARS FROM THE EN D OF RELEVANT ASST. YEAR IN RESPECT OF ASSESSMENT COMPLETED UNDER SECTION 14 3(3) BUT ON THE GROUND THAT INTEREST PAID TOWARDS A LOAN TAKEN FOR PURCHASE OF SILVER COULD NOT BE INCLUDED IN THE PRICE OF SILVER/COST OF SILV ER. IT WAS HELD THAT IT IS MERELY A CHANGE OF OPINION BECAUSE EARLIER THE AO C ONSIDERED THE CAPITALIZATION OF THE AMOUNT OF INTEREST IN COMPUTI NG THE LOSS BUT NOW ON THE BASIS OF SAME MATERIAL SUCCEEDING OFFICER HAS T AKEN A DIFFERENT VIEW WHICH IS NOTHING BUT A CHANGE OF OPINION. IN HYNOOP FOOD AND OIL INDUSTRIES VS. ACIT (2008) 307 ITR 115 (GUJ) HONBL E GUJARAT HIGH COURT HELD THAT NOTICE ISSUED AFTER EXPIRY OF FOUR YEARS TO WITHDRAW ESPECIAL DEDUCTION ALLOWED EARLIER UNDER SECTION 80 HH AND 80I WAS NOT VALID WHEN THERE WAS NO FAILURE OR OMISSION ON THE PART OF ASSESSEE TO DISCLOSE TRULY AND FULLY ANY MATERIAL FACTS NECESSA RY FOR ASSESSMENT. IN THAT CASE WHILE EXAMINING A SUBSEQUENT ASSESSMENT Y EAR THE AO HAD FOUND THAT THE ACTIVITIES CARRIED ON BY THE ASSESSE E IN REFINING OF VEGETABLE OIL DID NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ARTICLE AS WAS REQUIRED FOR ALLOWING DEDUCTION UNDER SECTION 80 HH AND UNDE R SECTION 80I. ON THE BASIS OF THIS OBSERVATION IN SUBSEQUENT YEAR TH E AO HAD SOUGHT TO REOPEN ASSESSMENT OF AN EARLIER YEAR WHICH WAS NOT PERMITTED BY HONBLE GUJARAT HIGH COURT. ITAT DELHI BENCH IN M.M.T.C. LT D. VS. DCIT (2009) 309/(AT) 361 FOUND THAT ASSESSMENT WAS EARLI ER MADE ALLOWING DEDUCTION UNDER SECTION 80 HHC WITH NO DISCOVERY OF ANY BOGUS TRANSACTION. SUBSEQUENTLY AFTER EXPIRY OF FOUR YEAR S FROM THE END OF RELEVANT ASST. YEAR ASSESSMENT WAS SOUGHT TO BE REO PENED TO TAX INTEREST AND DIVIDEND INCOME AS INCOME FROM OTHER SOURCES AN D WITHDRAW DEDUCTION ON THE GROUND THAT BUSINESS PROFIT WAS AC CORDINGLY A NEGATIVE FIGURE. IT WAS HELD THAT IT WAS NO A CASE WHERE BOG US TRANSACTION WAS ENTERED BY THE ASSESSEE WHICH WERE SUBSEQUENTLY DIS COVERED , NO NEW MATERIAL HAS COME TO THE NOTICE OF THE A.O. AFTER F RAMING ORIGINAL ITA NO.2803/AHD/2006 AY 1998-99 9 ASSESSMENT. AS THE AO HAD FORMED AN OPINION IN ORIG INAL ASSESSMENT ORDER THAN SUBSEQUENT REOPENING WOULD BE BASED ON A MERE CHANGE OF OPINION. IN DCIT VS. TATA MOTORS LTD.(2009) 312 IT R (AT) 180 (MUM) IT WAS FOUND THAT ASSESSMENT WAS SOUGHT TO BE REOPE NED AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASST. YEAR ON T HE GROUND OF NON- INCLUSION OF CUSTOMS DUTY IN THE VALUATION OF CLOSI NG STOCK, OMISSION OF SALES TAX AND COMPENSATION RECEIVED FROM TERMINATIO N OF AGREEMENT FROM THE PROFIT OF BUSINESS FOR ALLOWING DEDUCTION UNDER SECTION 80HHC, FURTHER PROVISION FOR INTEREST AND DOUBTFUL DEBTS A ND OTHER ITEMS OF EXPENDITURE WAS DEBITED IN THE PROFIT AND LOSS ACCO UNT. THE AO RECOMPUTED THE INCOME AND DEDUCTION UNDER SECTION 8 0 HHC. IT WAS HELD THAT AO DID NOT ESTABLISH THAT SUCH ESCAPEMENT OF I NCOME WAS ONLY DUE TO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HONBLE CALCUTTA HIGH COU RT IN THE CASE OF SIMPLEX CONCRETE PILES (INDIA) LTD. & ORS. VS. DCIT (2003) 262 ITR 605 (CAL) FOUND THAT ASSESSMENT WAS SOUGHT TO BE RE OPENED AFTER EXPIRY OF FOUR YEARS ON THE BASIS OF A SUPREME COURT DECISION . IT WAS HELD THAT THERE WAS NO FAILURE TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. HONBLE GUJARAT HIGH COURT IN AUSTIN ENGINEERING CO . LTD. VS. JCIT (2009) 312 ITR 70 (GUJ) FOUND THAT AO HAD ALLOWED D EDUCTION UNDER SECTION 80 HHC ON EXPORT INCENTIVE BENEFIT IN AN OR DER PASSED UNDER SECTION 143(3) THEN AO SOUGHT TO DISALLOW PART OF T HE DEDUCTION ON THE BASIS OF A SUBSEQUENT DECISION OF HON/BLE SUPREME C OURT. IT WAS HELD THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT AND, THEREFORE, ISSUANCE O F NOTICE UNDER SECTION 148 WAS INVALID. 10. IN THE PRESENT CASE THE AO HAD SOUGHT TO REOPEN THE ASSESSMENT AND WITHDRAW DEDUCTION UNDER SECTION 80 HCC ON THE BASI S OF SUBSEQUENT ITA NO.2803/AHD/2006 AY 1998-99 10 AMENDMENT VIDE TAXATION LAW (AMENDMENT) ACT, 2005, DATED 29 TH DECEMBER, 2005. CLEARLY WHEN ASSESSEE HAD CLAIMED T HIS DEDUCTION IN THE RETURN FILED AND AO ALLOWED THE SAME THE CHANGED LA W DID NOT EXIST AND ACCORDINGLY NO OMISSION OR FAILURE COULD BE IMPUTED TO THE ASSESSEE IN DISCLOSING ANY MATERIAL FACT FOR ASSESSMENT EVEN TH OUGH THE AMENDED LAW HAS RESULTED IN ESCAPEMENT OF INCOME IN THE ASSTT. YEAR IN QUESTION BUT THIS ESCAPEMENT IS NOT BECAUSE OF FAILURE ON THE PA RT OF THE ASSESSEE IN DISCLOSING MATERIAL FACTS NECESSARY FOR ASSESSMENT. 11.. AS A RESULT, WE HOLD THAT REOPENING OF ASSESSM ENT IS NOT JUSTIFIED AS THERE IS NO ALLEGATION OF ANY OMISSION OR FAILURE O N THE PART OF ASSESSEE IN DISCLOSING ANY MATERIAL FACT NECESSARY FOR ASSESSME NT. ACCORDINGLY THIS GROUND OF ASSESSEE IS ALLOWED. THE ISSUES ON MERITS ARE ACCORDINGLY NOT REQUIRED FOR DISCUSSION AND, THEREFORE, GROUND RELA TING TO THEM BECOMES OF ACADEMIC INTEREST ONLY. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13 /11 /2009 SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED :13/11/2009 MAHATA/- ITA NO.2803/AHD/2006 AY 1998-99 11 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD