M/s Choice Sanitare Industries, RAJKOT-GUJARAT V. The Assistant Commissioner of IncomeTax, Circle-2, RAJKOT-GUJARAT

ITA 316/RJT/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0152 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Keywords: Audit objection; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 80IB; 263

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBUNAL: RAJKOT BENCH: RAJKOT . .. . . . . . . .. . . . . . # # # # BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTA VA AM ITA NO. 316/RJT/2011 / ASSESSMENT YEAR 2005-06 CHOICE SANITARYWARE INDUSTRIES V. ACIT, CIR- 2 CREATIVE CHAMBERS RAJKOT KANAK ROAD, RAJKOT PAN: AACFC0736D DATE OF HEARING: 29.09.2012 DATE OF PRONOUNCEMENT: 30.10.2012 FOR THE ASSESSEE: SANJAY R SHAH, FCA FOR THE REVENUE: AVINASH KUMAR, DR / // / ORDER . .. . . . . . /D. K. SRIVASTAVA: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) ON 07-06-2011, ON THE FOLLOWING GROUNDS: 1. THE ORDER U/S. 143(3) R.W.S. 147 IS BAD IN LAW. 2. THE REOPENING OF THE ASSESSMENT IS BAD IN LAW. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE R EOPENING OF THE ASSESSMENT. 3. THE REASSESSMENT IS BAD IN LAW IN VIEW OF SECOND PROVISIO TO SECTION 147. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE REASSESSMENT DESPITE THE SAME BEING IMPERMISSIB LE UNDER SECOND PROVISO. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW A S WELL AS ON FACTS IN DENYING DEDUCTION U/S.80IB ON DEPB/DFRC. THE LD. CI T (A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE SAME. 2. APROPOS GROUND NO.4, THE LD. AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE ISSUE WAS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN LIBERTY INDIA V. CIT 317 ITR 218 (SC) IN WHICH THE HONBLE SUPREME COURT HAS HELD THAT DUTY DRAWBACK RECEIPTS/DEPB BENEFITS DO NOT FORM PART NE T PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF THE SS. 80I/80IA/80 IB OF THE ACT. IN THIS VIEW OF THE MATTER, GROUND NO.4 TAKEN BY THE ASSESSEE IS DISMIS SED. 2 ITA 316/RJT/2011 3. HAVING REALIZED THAT THE ASSESSEE IS NOT GOING T O SUCCEED ON THE MERITS OF THE CASE AS THE ISSUE STOOD COVERED AGAINST IT BY T HE AFORESAID JUDGMENT, THE ASSESSEE TURNED TO CHALLENGE THE VALIDITY OF VERY I NITIATION OF NOTICE ISSUED BY THE AO U/S 147/148 PURSUANT TO WHICH ORDER OF RE-ASSESSMEN T HAS BEEN PASSED REJECTING THE CLAIM OF THE ASSESSEE FOR INCLUSION OF DUTY DRA WBACK RECEIPTS/DEPB BENEFITS FOR COMPUTING RELIEF U/S 80IB. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME ON 30-10-2005 U/S.139 RETURNING TOTAL INCOME AT RS.12, 69,086/- AS AGAINST WHICH TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS.1,11,32,2 60/- IN THE ORDER OF ASSESSMENT PASSED BY THE AO U/S 143 (3) OF THE INCO ME-TAX ACT, 1961 ON 27-12- 2007. THE ASSESSING OFFICER THEREAFTER ISSUED NOTIC E U/S 147/148 ON 23-03-2010 AFTER RECORDING THE FOLLOWING REASONS:- THE ASSESSMENT OF A FIRM FOR A.Y. 2005-06 WAS COMP LETED IN SCRUTINY MANNER ON 27.12.2007 ASSESSING THE INCOME OF RS.1,1 1,32,260/-. ON SCRUTINY OF THE RECORDS IT WAS REVEALED THAT IN DED UCTION U/S.80IB OF RS.4,17,036/- CLAIMED BY THE ASSESSEE WAS DISALLOWE D FOR THE REASON THAT SPIRIT OF SECTION 80IB WAS VIOLATED IN AS MUCH AS P RODUCTION OBTAINED FROM PREVIOUSLY USED MACHINERY AND COMBINED PRODUCTION W AS OBTAINED FROM ELIGIBLE AND NON ELIGIBLE UNIT. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE CIT (A) DELETED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF DED.U/S.80IB AND DECIDED IN FAVOUR OF THE ASSESS EE. ON SCRUTINY OF ASSESSMENT RECORDS FOUND THAT IN COMPUTATION OF DEC .U/S.80IB, OTHER INCOME FROM SALE OF DEPB/DFRC LICENCE OF RS.20,19,688/- WA S NOT EXCLUDED AS PROVIDED IN SEC.80IB AND SCS DECISION IN THE CASE OF STERLING FOODS LTD. [237 ITR 579] . IN VIEW OF THIS, IF THIS INCOME OF RS.20,19,688/- IS EXCLUDED FROM THE INCOME RS.16,68,142/- WHICH IS CONSIDERED ELIGIBLE FOR 80IB, THERE WILL BE NEGATIVE INCOME AND DEDUCTION U/S.80IB WOUL D NOT BE ADMISSIBLE. THIS HAS RESULTED IN UNDERASSESSMENT OF INCOME TO T HE EXTENT OF DEDUCTION ALLOWED U/S.80IB OF RS.4,17,036/- INVOLVING SHORT L EVY OF TAX OF RS.2,02,963/-. I AM, THEREFORE, SATISFIED THAT THIS IS A FIT CASE FOR ISSUE OF NOTICE U/S.148 OF THE I.T. ACT AS THE ASSESSEES INCOME HAS ESCAPED T HE ASSESSMENT TO THAT EXTENT. ISSUE NOTICE U/S.148 OF THE I.T. ACT, 1961 . 5. PURSUANT TO THE AFORESAID PROCEEDINGS INITIATED BY THE AO, ORDER OF RE- ASSESSMENT WAS PASSED ON 30-08-2010 U/S.143(3) R.W. S. 147 IN WHICH THE CLAIM OF THE ASSESSEE FOR INCLUSION OF DEPB/DFRC BENEFITS IN THE PROFITS OF INDUSTRIAL UNDERTAKING WAS REJECTED WITH THE FOLLOWING REASONS :- THE REOPENING WAS DONE CITING THE CASE OF STERLING FOODS LTD. [237 ITR 579] IN WHICH THE APEX COURT HAD STATED THAT INCOME TO BE ELIGIBLE FOR EXEMPTION SHOULD BE INCOME FROM, AND NO ATTRIBUT ABLE TO THE UNDERTAKING. 3 ITA 316/RJT/2011 THE CASES CITED BY ASSESSEE ARE AFTER THE DATE OF P RONOUNCEMENT OF JUDGMENT IN STERLING FOODS LTD., WHEREIN THE ADJUDI CATING COURTS HAVE ALLOWED DEDUCTION U/S.80IB ON DEPB AFTER CONSIDERIN G THE CASE OF STERLING FOODS. IT IS TO BE KEPT IN MIND THAT THE COURTS IN THE ABOVE CASES HAVE DISTINGUISHED THE CASE OF STERLING FOODS FROM CASE IN DISPUTE BEFORE THEM ON FOLLOWING GROUNDS:- I). THAT STERLING FOODS CASE DEALT WITH S. 80HH OF THE ACT WHICH IS MATERIALLY DIFFERENT FROM THE LANGUAGE USED IN S.80 IB OF THE ACT. II) THAT THE JUDGMENT REPORTED IN STERLING FOODS IS OF THE YEAR 1999, AT WHICH TIME, THE NEWLY ADDED PROVISION OF CL.(III D) TO SC.28 DID NOT EXIST, WHICH HAS BEEN INSERTED, IN THE YEAR 2005, W .E.F. 1 ST APRIL, 1998. HOWEVER WITHOUT GOING INTO THE FACTS AND MERIT OF T HE ABOVE TWO CASES AS CITED BY ASSESSEE OR THE CASE OF STERLING FOODS, IT IS SUBMITTED THAT THE HONBLE SUPREME COURT HAS IN ITS RECENT DECISION IN THE CASE OF M/S. LIBERTY INDIA VERSUS COMMISSIONER OF INCOME TAX, APPEAL NO. : CIVIL APPEAL NO. OF 2009 (ARISING OUT OF S.L.P.(C) NO.5827/07) , HAS CATEGORICALLY PUT TO REST THE ABOVE CONTROVERSY BY HOLDING THAT IN THE CIRCUMSTANCES WE HOLD, THAT DUTY DRAWBACK R ECEIPTS/DEPB BENEFITS DO NOT FORM PART OF NET PROFITS OF ELIGIBL E UNDERTAKING FOR THE PURPOSE OF SECTION 80I/80IA/IB OF THE 1961 ACT. THUS, IT IS BEYOND ANY DOUBT THAT DEPB/DRFC LICENCE OF RS.20,19,688 CANNOT BE CLAIMED AS DEDUCTION U/S.80IB, IN LIGHT O F THE JUDGMENT IN CASE OF M/S. LIBERTY INDIA, WHICH LAYS DOWN THE CORRECT LEG AL POSITION ON THIS SUBJECT AND IS THE LAW OF THE LAND, BEING PRONOUNCED BY THE APEX COURT ITSELF. 6. AS STATED EARLIER, THE ASSESSEE-COMPANY ITSELF C ONCEDES THAT IT HAS NO CASE FOR CLAIMING RELIEF U/S.80IB WITH REFERENCE TO DEPB /DFRC BENEFITS IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN LIBERTY IN DIA (SUPRA). 7. AS REGARDS THE VALIDITY OF INITIATION OF THE PRO CEEDINGS U/S.147/148, IT WAS CONTENDED BY THE ASSESSEE BEFORE THE CIT(A) THAT IN ITIATION OF PROCEEDINGS U/S.147/148 BY THE AO WAS INVALID FOR THREE PRINCIP AL REASONS. ONE, THE ASSESSING OFFICER HAD NO FRESH MATERIAL IN HIS POSSESSION TO WARRANT INITIATION OF PROCEEDINGS U/S.147/148. TWO, ALL THE RELEVANT FACTS WERE ALREA DY AVAILABLE BEFORE THE AO AND THEREFORE INITIATION OF PROCEEDINGS U/S.147/148 WAS BASED ON CHANGE OF OPINION. THREE, THE ASSESSING OFFICER HAD DENIED DEDUCTION U /S.80IB IN THE ORIGINAL ORDER OF ASSESSMENT ALSO WHICH WAS SUBJECT MATTER OF APPEAL FIRSTLY BEFORE THE CIT(A) AND THEREAFTER BEFORE THIS TRIBUNAL AND THEREFORE THE O RIGINAL ORDER OF ASSESSMENT WITH REGARD TO DEDUCTION U/S.80IB STOOD MERGED IN THE OR DER OF THIS TRIBUNAL AND WAS THUS OUTSIDE THE SCOPE OF SEC.147/148 OF THE INCOME -TAX ACT. AFTER CAREFUL 4 ITA 316/RJT/2011 CONSIDERATION OF ALL THE SUBMISSIONS MADE BY THE AS SESSEE, THE LD. CIT (A) DECIDED THE ISSUE AGAINST THE ASSESSEE FOR THE DETAILED REA SONS GIVEN BY HIM IN HIS APPELLATE ORDER, WHICH, FOR THE SAKE OF BREVITY, IS NOT BEING REPRODUCED HERE. 8. AGGRIEVED BY THE ORDER PASSED BY THE CIT (A), TH E ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. THE SUBMISSIONS WHICH WERE EA RLIER MADE BEFORE THE CIT (A) WERE REITERATED BEFORE US ALSO AT THE TIME OF HEARI NG. COPY OF THE WRITTEN SUBMISSION FILED BY THE ASSESSEE BEFORE THE CIT (A) WAS ALSO F ILED BEFORE US AND THE SUBMISSIONS MADE THEREIN WERE ALSO REITERATED. THEY ARE AS UNDER:- 1. AT THE TIME WHEN NOTICE U/S.148 WAS ISSUED FOR PARTIAL WITHDRAWAL OF DEDUCTION U/S.80IB, THE ISSUE OF ENTIRE DEDUCTION U /S.80IB WAS SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL AND HENCE BY VIRTUE O F SECOND PROVISO TO SECTION 147, REASSESSMENT WAS NOT PERMISSIBLE. THE SAID PROVISO READS AS UNDER: PROVIDED FURTHER THAT THE ASSESSING OFFICER MAY AS SESS OR RE- ASSESSEE SUCH INCOME, OTHER THAN THE INCOME INVOLVI NG MATTERS WHICH ARE SUBJECT MATTER OF ANY APPEAL, REFERENCE OR REVI SION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. THE ABOVE PROVISO WAS INTRODUCED BY THE FINANCE ACT , 2008 AS CLARIFICATORY AMENDMENT AS PER MEMORANDUM EXPLAININ G THE PROVISIONS. 2. IT IS CLEAR FROM THE ABOVE PROVISO THAT THE ISS UES WHICH ARE SUBJECT TO ANY APPEAL OR REFERENCE OR REVISION CAN NOT BE SUBJ ECT MATTER OF REASSESSMENT AT THE SAME TIME. 3. IN THE APPELLANTS CASE, WHEN THE A.O. ISSUED NO TICE U/S.148 FOR PARTIAL WITHDRAWAL OF DEDUCTION U/S.80IB, THE ALLOWANCE OF ENTIRE DEDUCTION U/S.80IB WAS SUBJECT MATTER FOR APPEAL BEFORE THE TRIBUNAL. HENCE, BY VIRTUE OF THE SECOND PROVISO, THE REASSESSMENT WAS NOT PERMISSIBL E. 4. WE RELY UPON THE FOLLOWING JUDGMENTS WHEREIN THE REASSESSMENT WAS HELD TO BE INVALID ON THE GROUND THAT THE ISSUE OF THE REASSESSMENT WAS SUBJECT MATTER OF APPEAL. BOMBAY HIGH COURT IN CASE OF PRASHANT PROJECTS LTD. 42 DTR 257 BOMBAY HIGH COURT IN CASE OF INDIAN OIL CORPORATION 327 ITR 272 MUMBAI ITAT IN THE CASE OF CHIKA OVERSEAS (P) LTD.- 50 DTR 426 MUMBAI ITAT IN THE CASE OF RELIANCE ENERGY LTD. 4 0 SOT 314 5. FURTHER, THE IDENTICAL MATTER WAS RECENTLY CAME UP BEFORE THE HONBLE GUJARAT HC IN CASE OF NIRMA CHEMICALS WORKS (P) LTD . (309 ITR 67) IN THE 5 ITA 316/RJT/2011 CONTEXT OF REVISION U/S.263. THE HONBLE HIGH COURT REFERRING TO EXPLANATION(C) OF SECTION 263 WHICH PUTS IDENTICAL RESTRICTION ON EXERCISE OF POWER U/S.263 WHEN THE ISSUE IS SUBJECT MATTER OF A PPEAL AS IN CASE OF SECOND PROVISO TO SECTION 147, HELD THAT REVISION W AS NOT PERMISSIBLE. 6. SECONDLY, THE FACT THAT APPELLANT HAD CLAIMED DE DUCTION U/S.80IB ON DEPB/DFRC WAS EVIDENT FROM THE AUDITED ACCOUNTS AND AUDIT REPORT IN FORM NO.10CCB PLACED ON RECORD. HENCE, THE A.O. HAS CON SCIOUSLY ALLOWED THE SAME. THEREFORE, THE PRESENT REASSESSMENT IS BASED SIMPLY ON CHANGE OF OPINION ON THE PART OF THE SUCCESSOR A.O. IT CAN B E OBSERVED FROM THE REASONS OF THE REASSESSMENT THAT NO NEW MATERIAL HA S COME ON RECORD AFTER COMPLETION OF ORIGINAL ASSESSMENT WHICH CAN JUSTIFY THE REOPENING. THE JUDGMENT OF SUPREME COURT IN CASE OF STERLING FOODS (237 ITR 579) WAS ALSO AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT. THE DECISION OF THE A.O. OF ALLOWING THE BENEFIT OF DEDUCTION U/S.80IB ON DEPB/ DFRC IN THE ORIGINAL ASSESSMENT WAS NOT LEGALLY UNSUSTAINABLE AT THE REL EVANT TIME AS THERE WERE DECISIONS HOLDING THE VIEW THAT EXPORT INCENTIVES L IKE DEPB/DUTY DRAWBACK ARE ELIGIBLE FOR DEDUCTIONS. SOME OF THEM WHICH WE RE HOLDING THE FIELD ARE CITED HEREUNDER GUJARAT HC IN THE CASE OF INDIA GELATINE & CHEMICA LS LTD. 275 ITR 284 THIS JUDGMENT OF JURISDICTIONAL HC WA S RENDERED AFTER CONSIDERING THE APEX COURT JUDGMENT IN CASE O F STERLING FOODS. CHANDIGADH ITAT IN THE CASE OF PARAMOUNT INDUSTRIA L CORPORATION 109 TTJ 295 HERE ALSO THE SC JUDGME NT IN CASE OF STERLING FOODS WAS CONSIDERED. JAIPUR ITAT IN THE CASE OF VIJAY INDUSTRIES 112 TTJ 353 HERE ALSO THE SC JUDGMENT IN CASE OF STERLING FOODS WAS CONS IDERED. MUMBAI ITAT IN THE CASE OF SHAH ORIGINALS 112 TT J 754 DELHI ITAT IN CASE OF ELTAK SGS PVT. LTD. 10 SOT 178 HERE ALSO THE SC JUDGMENT IN CASE OF STERLING FOODS WAS CONSIDERED. 7. IN THE CONTEXT OF REASSESSMENT, THE HONBLE SUPR EME COURT HELD AS UNDER IN THE CASE OF KELVINATOR OF INDIA LTD. (320 ITR 561): AFTER 1 ST APRIL, 1989, AO HAS POWER TO REOPEN THE ASSESSMENT UNDER S.147 PROVIDED AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND THERE IS TANGIBLE MATERIAL TO COME T O THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME; MERE CHANGE OF OPINION CANNOT PER SE BE REASON TO REOPEN. 8. REFERRING TO THE ABOVE SC JUDGMENT, THE BOMBAY H C HAS HELD IN FOLLOWING TWO RECENT JUDGMENTS THAT IN THE ABSENCE OF ANY TANGIBLE MATERIALS, 6 ITA 316/RJT/2011 THE REASSESSMENT CANNOT BE INITIATED SIMPLY ON THE BASIS OF CHANGE OF OPINION ON SAME SET OF FACTS. IOT INFRASTRUCTURE & ENERGY SERVICES LTD. V. ACIT 41 DTR 122 RALLIS INDIA LTD. V. ACIT 323 ITR 54 9. SINCE THE DECISION TAKEN IN THE ORIGINAL ASSESSM ENT WAS IN ACCORDANCE WITH THE LAW PREVAILING AT THAT TIME AND NO NEW MATERIAL HAS COME ON RECORD THEREAFTER, THE REASSESSMENT BEING B ASED ON CHANGE OF OPINION WAS NOT IN ACCORDANCE WITH THE LAW. 10. THIRDLY, IT SEEMS THAT THE A.O. PRIMARILY OBJE CT TO THE AUDIT OBJECTION RAISED BY AUDIT PARTY UNDER WHICH CIRCUMSTANCES IT CAN NOT BE SAID THAT HE HAD REASON TO BELIEVE THAT THE INCOME HAD ESCAPED T HE ASSESSMENT IN VIEW OF FOLLOWING JUDGMENTS: GUJARAT HC IN CASE OF ADANI EXPORTS 240 ITR 224 BOMBAY HC IN CASE OF IL&FS INVESTMENT MANAGERS LT D. 298 ITR 32. 11. THE APPELLANT HAD NOT BEEN ALLOWED COPY OF COR RESPONDENCE BETWEEN THE A.O. AND AUDIT PARTY IN SPITE OF SPECIFIC REQUE ST AND PLEA IN THIS REGARD. THE RECORDS MAY PLEASE BE CALLED FOR TO VERIFY THE ABOVE AND ASCERTAIN WHETHER THE A.O. HAS REASONS TO BELIEVE OR NOT. 9. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE HAS RELIED UPON THE FOLLOWING DECISIONS IN SUPPORT OF HIS SUBMISSIONS. BOMBAY HIGH COURT IN CASE OF PRASHANT PROJECTS LTD . 42 DTR 257 BOMBAY HIGH COURT IN CASE OF INDIAN OIL CORPORATIO N 327 ITR 272 MUMBAI ITAT IN THE CASE OF CHIKA OVERSEAS (P) LTD. -50 DTR 426 MUMBAI ITAT IN THE CASE OF RELIANCE ENERGY LTD. 40 SOT 314 SUPREME COURT JUDGMENT IN THE CASE OF KELVINATOR O F INDIA LTD. 320 ITR 561 BOMBAY HC JUDGMENT IN CASE OF IOT INFRASTRUCTURE & ENERGY SERVICES LTD. V. ACIT 41 DTR 122 BOMBAY HC JUDGMENT IN THE CASE OF RALLIS INDIA LTD . V. ACIT 323 ITR 54 GUJARAT HC JUDGMENT IN CASE OF ADANI EXPORTS 240 ITR 224 BOMBAY HC JUDGMENT IN CASE OF IL&FS INVESTMENT MAN AGERS LTD. 298 ITR 32 AHMEDABAD ITAT JUDGMENT IN CASE OF NATIONAL DAIRY DEVELOPMENT BOARD 114 TTJ 145 7 ITA 316/RJT/2011 GUJARAT HC JUDGMENT IN CASE OF NATIONAL DAIRY DEVE LOPMENT BOARD 54 DTR 217 BOMBAY HC JUDGMENT IN SAKSERIA COTTON MILLS LTD. 124 ITR 570 GUJARAT HC JUDGMENT IN CASE OF CADILA HEALTHCARE L TD. - 65 DTR 385 SUPREME COURT JUDGMENT IN CASE OF STERLING FOODS 237 ITR 579 10. IN REPLY, THE LD. DEPARTMENTAL REPRESENTATIVE S UPPORTED THE ORDER PASSED BY THE CIT (A). 11. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CO NSIDERED THEIR SUBMISSIONS. NOTICE FOR REASSESSMENT WAS ISSUED BY THE AO U/S 14 7/148 BEFORE THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR UNDER APP EAL. THEREFORE, THE VALIDITY OF THE IMPUGNED NOTICE NEEDS TO BE DECIDED WITH REFERE NCE TO THE REQUIREMENTS OF THE MAIN PROVISIONS OF SECTION 147. THE ASSESSING OFFIC ER IS AUTHORIZED TO ISSUE NOTICE UNDER THE MAIN PROVISIONS OF SECTION 147 WITHIN FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF HE HAS REASON TO BELIEV E THAT INCOME CHARGEABLE TO INCOME-TAX HAS ESCAPED ASSESSMENT. IN THE CASE BEFO RE US, THERE IS NO DOUBT THAT DUTY DRAWBACK RECEIPTS/ DEPB BENEFITS DO NOT FORM P ART OF THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF COMPUTIN G RELIEF U/S.80IB AND THEREFORE THERE HAS BEEN UNDER-ASSESSMENT TO THAT EXTENT. THE ACTION OF THE AO COMPLETING THE ORIGINAL ASSESSMENT IN INCLUDING DUTY DRAWBACK RECEIPTS/DEPB BENEFITS IN THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR COMPUTING RELIEF U/S.80IB IN THE ORIGINAL ORDER OF ASSESSMENT HAS INDISPUTABLY LED T O ESCAPEMENT OF INCOME FROM TAX AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T. IN OUR VIEW, THE REQUIREMENTS OF THE MAIN PROVISIONS OF SECTION 147 ARE FULLY SATISFIED AND THEREFORE THE AO IS HELD TO BE JUSTIFIED IN ISSUING THE IMPUG NED NOTICE. IN ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 (SC), THE HONBLE SUPREME COURT HAS HELD THAT IF THE ASSESSING OFFICER FOR WHATEVER RE ASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTI ON TO REOPEN THE REASSESSMENT. THE PRINCIPLES LAID DOWN BY THE HON BLE SUPREME COURT IN THE AFORESAID JUDGMENT SQUARELY COVER THE ISSUE UNDER A PPEAL AGAINST THE ASSESSEE. 12. WE SHALL NOW TAKE-UP THE SUBMISSIONS MADE ON BE HALF OF THE ASSESSEE BEFORE US. FIRST SUBMISSION OF THE ASSESSEE IS THA T THE ORIGINAL ORDER OF ASSESSMENT IN WHICH THE ISSUE OF DEDUCTION U/S.80IB WAS CONSID ERED, STOOD MERGED WITH THE ORDER OF THE CIT (A)/TRIBUNAL AND THEREFORE THE IMP UGNED NOTICE ISSUED BY THE AO IS INVALID. WE HAVE PERUSED THE ORIGINAL ORDER OF ASSE SSMENT PASSED BY THE AO ON 27- 12-2007 IN WHICH THE AO HAS DEALT WITH THE ISSUE OF DEDUCTION U/S.80IB AS UNDER: THE SUBMISSION OF THE ASSESSEE HAS BEEN EXAMINED A ND IT HAS BEEN FOUND THAT THE SPIRIT OF SECTION 80IB HAS BEEN VIOLATED A S THE SECTION PROVIDES DEDUCTION FOR PROFIT MADE FROM PRODUCTION OBTAINED FROM NEW MACHINERY OR 8 ITA 316/RJT/2011 PLANT NOT USED PREVIOUSLY FOR ANY PURPOSE. BY COMB INING THE PRODUCTION OF ELIGIBLE UNIT AND NON ELIGIBLE UNIT, THE ASSESSEE H AS ALSO TRIED TO CLAIM DEDUCTION IN RESPECT OF PRODUCTION OBTAINED FROM TH E OLD PLANT AND MACHINERY USED IN NON ELIGIBLE UNIT. MOREOVER, FOR CLAIMING DEDUCTION U/S.80IB, THE ELIG IBLE UNIT ARE REQUIRED TO CALCULATE THE INCOME ONLY IN RESPECT OF ELIGIBLE BUSINESS AS PER THE PROVISIONS OF SECTION 80IA R.W.S.80IB(13). IN VIEW OF THE ABOVE DISCUSSION IT IS APPARENT THAT THE ASSESSEE BY NOT MAINTAINING SEPARATE ACCOUNT FOR THE ELIGIBLE BUSIN ESS AND BY UTILIZING THE OLD MACHINERY FOR PRODUCTION IS NOT ELIGIBLE FOR DEDUCT ION U/S.80IB, HENCE, DEDUCTION CLAIMED BY THE ASSESSEE U/S.80IB IS HEREB Y DISALLOWED. 13. IT IS QUITE EVIDENT THAT THE ISSUE OF EXCLUSION OF DEPB BENEFIT FROM THE NET PROFITS OF THE ELIGIBLE INDUSTRIAL UNDERTAKING FOR COMPUTING RELIEF U/S.80IB WAS NEITHER CONSIDERED NOR ADJUDICATED UPON IN THE ORIGINAL ORD ER OF ASSESSMENT. IN FACT, THIS ISSUE HAS NOT AT ALL BEEN TOUCHED UPON IN THE ORIGI NAL ORDER OF ASSESSMENT AND THEREFORE THERE WOULD BE NO MERGER OF THE SAID ISSU E IN THE ORDER PASSED BY THE CIT(A) AND THIS TRIBUNAL. IT HAS BEEN HELD IN STATE OF MADRAS V. MADURAI MILLS CO. LTD., AIR 1967 SC 681 THAT THE DOCTRINE OF MERGER I S NOT A DOCTRINE OF RIGID AND UNIVERSAL APPLICATION AND IT CANNOT BE SAID THAT WH EREVER THERE ARE TWO ORDERS, ONE BY THE INFERIOR AUTHORITY AND THE OTHER BY A SUPERI OR AUTHORITY/TRIBUNAL, PASSED IN AN APPEAL OR REVISION, THERE IS A FUSION OR MERGER OF TWO ORDERS IRRESPECTIVE OF THE SUBJECT MATTER OF THE APPELLATE ORDER OR REVISIONAL ORDER AND THE SCOPE OF THE APPEAL OR REVISION CONTEMPLATED BY THE PARTICULAR STATUTE. THE AFORESAID PRINCIPLE SQUARELY COVERS THE ISSUE BEFORE US. THE ISSUE OF EXCLUSION OF DEPB BENEFITS FROM THE NET PROFITS FOR THE PURPOSES OF WORKING OUT RELIEF U/S. 80IB WAS NOT CONSIDERED BY THE AO IN THE ORIGINAL ORDER OF ASSESSMENT AND THEREFORE T HE DOCTRINE OF MERGER WOULD HAVE NO APPLICATION WITH REGARD TO THE ISSUE BEFORE US. 14. SECOND SUBMISSION OF THE ASSESSEE WAS THAT ALL THE FACTS WERE PLACED BEFORE THE AO AND THE AO HAD THEREAFTER INCLUDED THE DEPB BENEFITS IN THE NET PROFITS FOR THE PURPOSES OF COMPUTING RELIEF U/S.80IB AND THERE FORE THE ACTION OF THE AO IN ISSUING THE IMPUGNED NOTICE FOR WITHDRAWING THE AFO RESAID RELIEF WAS BASED ON MERE CHANGE OF OPINION. WE ARE UNABLE TO ACCEPT THE AFOR ESAID SUBMISSION OF THE ASSESSEE ALSO FOR THE REASON THAT THERE IS NO MATER IAL ON RECORD TO HOLD THAT THE AO HAD EITHER EXAMINED THE ISSUE OR FORMED ANY OPINION IN THAT BEHALF IN THE ORIGINAL ORDER OF ASSESSMENT. THERE IS NOTHING IN THE ORIGIN AL ORDER OF ASSESSMENT TO SUGGEST THAT THE ISSUE OF EXCLUSION OF DEPB BENEFIT S FROM THE PROFITS OF INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF COMPUTING RELIEF U/ S.80IB WAS AT ALL CONSIDERED BY THE AO IN THE LIGHT OF THE APPLICABLE LAW. IT IS A CASE WHERE THE AO HAS NEITHER CONSIDERED THE ISSUE NOR FORMED ANY OPINION IN THAT BEHALF WHILE PASSING THE ORIGINAL ORDER OF ASSESSMENT. IT CANNOT THEREFORE BE SAID TH AT THE INITIATION OF THE 9 ITA 316/RJT/2011 PROCEEDINGS U/S.147/148 IS BASED ON CHANGE OF OPINI ON. THE VIEW THAT WE ARE TAKING IN THE MATTER IS FULLY SUPPORTED BY THE JUDG MENT OF FULL BENCH OF THE HONBLE DELHI HIGH COURT IN CIT V. USHA INTERNATIONAL LTD., 25 TAXMANN.COM 200. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT, THE PLEA OF THE ASSESSEE IN THIS BEHALF IS REJECTED. 15. THIRD SUBMISSION OF THE ASSESSEE WAS THAT THERE WAS NO FRESH MATERIAL IN THE POSSESSION OF THE AO WARRANTING INITIATION OF PROCE EDINGS U/S.147/148 OF THE INCOME-TAX ACT. AS EXPLAINED IN ACIT V. RAJESH JHAV ERI STOCK BROKERS P. LTD. (SUPRA), THE ASSESSING OFFICER WOULD HAVE JURISDICT ION TO REOPEN THE ASSESSMENT IF HE HAS FOR WHATEVER REASON HAS REASON TO BELIEVE T HAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN KALYAJI MAVJI & CO. V. CIT, 102 ITR 287 (SC), IT HAS BEEN HELD THAT INFORMATION CAN BE OBTAINED EVEN FROM THE RECORD OF THE ORIGINAL ASSESSMENT FROM THE INVESTIGATION OF THE MATERIALS ON THE RECORD, OR THE FACTS DISCLOSED THEREBY OR OTHER INQUIRY OR RESEARCH INTO FACTS OR LAW. REFERRING TO THE AFORESAID OBSERVATIONS IN KALYAJI MAVJI & CO., THE HONBLE SUPREME COURT HAS HELD IN A. L. A. FIRM V. CIT 189 ITR 285 AS UNDER: AGAIN, SUPPOSE AN INCOME-TAX OFFICER ACCEPTS THEN PLEA OF AN ASSESSEE THAT A PARTICULAR RECEIPT IS NOT INCOME LIABLE TO TAX. B UT, ON FURTHER RESEARCH INTO LAW, HE FINDS THAT THERE WAS A DIRECT DECISION HOLD ING THAT CATEGORY OF RECEIPT TO BE AN INCOME RECEIPT. HE WOULD BE ENTITLED TO RE OPEN THE ASSESSMENT UNDER SECTION 147(B) BY VIRTUE OF PROPOSITION (4) O F KALYAJI MAVJI [1976] 102 ITR 287 (SC). 16. THE FACTS AS THEY ARE AVAILABLE ON RECORD ARE Q UITE CLEAR THAT THE ASSESSING OFFICER DID NOT CONSIDER THE ISSUE OF EXCLUSION OF DEPB BENEFITS FROM THE NET PROFITS FOR THE PURPOSES OF COMPUTING RELIEF U/S.80IB AT TH E TIME OF ORIGINAL ASSESSMENT. HE LATER ON REALIZED THAT HE OUGHT TO HAVE EXAMINED TH AT ISSUE ACCORDING TO THE APPLICABLE LAW AND CONSEQUENTLY EXCLUDED THE DEPB B ENEFITS FROM THE NET PROFITS FOR THE PURPOSES OF COMPUTING RELIEF U/S.80IB. THE FACT THAT THE ASSESSEE HIMSELF AGREES THAT DEPB BENEFITS CANNOT BE INCLUDED IN THE PROFITS FOR THE PURPOSES OF COMPUTING RELIEF U/S.80IB PROVES BEYOND DOUBT THAT THE ASSESSING OFFICER DID NOT APPLY HIS MIND TO THIS ASPECT OF THE CASE WHILE COM PLETING THE ORIGINAL ASSESSMENT. THE AO CANNOT THEREFORE BE SAID TO HAVE FORMED ANY OPINION IN THIS BEHALF WHILE PASSING THE ORIGINAL ORDER OF ASSESSMENT. ON THE MA TERIALS AVAILABLE ON RECORD INCLUDING THE JUDGMENT OF THE HONBLE SUPREME COURT IN LIBERTY INDIA (SUPRA), THERE CAN BE NO DISPUTE THAT THE ASSESSING OFFICER WAS PE RFECTLY JUSTIFIED IN FORMING THE BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT. 17. IN VIEW OF THE FOREGOING, THE ORDER OF THE CIT IN THIS BEHALF IS CONFIRMED. GROUND NOS.1 TO 3 TAKEN BY THE ASSESSEE ARE RESULTA NTLY DISMISSED. 18. THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 10 ITA 316/RJT/2011 ( * 30.10.2012 ( ORDER PRONOUNCED ON 30.10-2012 SD/- SD/- ( . . / T. K. SHARMA) ( .. / D. K. SRIVASTAVA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /RAJKOT: 30-10-2012 NVA/- ( (( ( -. -. -. -. /. /. /. /. / COPY OF ORDER FORWARDED TO:- 1.2 / APPELLANT-CHOICE SANITARYWARE INDUSTRIES, RAJKO T 2 -42 / RESPONDENT- THE ASSTT. COMMISSIONER OF INCOME-TA X, CIR-2, RAJKOT 3. 8 / CONCERNED CIT-II, RAJKOT 4. 8- / CIT (A)-III, RAJKOT 5. . -, , / DR, ITAT, RAJKOT 6. / GUARD FILE / BY ORDER TRUE COPY. SENIOR PRIVATE SECRETARY, ITAT , RAJKOT