Sagar Drugs & Pharmaceuticals Ltd., Ahmedabad V. The ACIT., Circle-8, Ahmedabad

ITA 412/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9045 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 09-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Depreciation; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 264; 64; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI P.K.BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.412/AHD/2005 ASSESSMENT YEAR:1998-99 DATE OF HEARING:11.8.09 DRAFTED:18.8.09 SAGAR DRUGS &PHARMACEUTICALS LTD., SAGAR, OPP. KAMDHENU COMPLEX, NR. SAHAJANAND COLLEGE, AMBAWADI, AHMEDABAD PAN NO.AADCS9311E V/S . ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-8, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N.SOPARKAR, & SHRI JAIMIN GANDHI AR RESPONDENT BY:- SHRI P.M. SHUKLA, SR. DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD IN APPEAL NO. C IT(A) /XIV/ ACITC.8/57/2004- 05 DATED 29-11-2004. THE ASSESSMENT WAS FRAMED BY THE ACIT, CIRCLE-8, AHMEDABAD U/S.143(3) R.W.S. 147 OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 27-02-2004 FOR T HE ASSESSMENT YEAR 1998-99. ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 2 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) IN CONFIRMING THE RE-OPENING U/S.147 R.W.S. 148 OF THE ACT. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). THE BRIEF FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND EXPORT OF DYE INTERMEDIATES. THE ASSESSEE FILED RETURN OF INCOME ON 30-11-1998 FOR THE RELEVANT ASSESSMENT YEAR 1998 -99 AND CLAIMED DEDUCTION U/S.80HHC OF THE ACT AND THE ORIGINAL ASSESSMENT WA S COMPLETED U/S.143(3) OF THE ACT VIDE ORDER DATED 23-02-2001. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT REDUCED DEPRECIATION FROM THE BUSINESS INCOME FOR THE COMPUTATION OF DEDUCTION U/S.80HHC OF THE ACT AND E VEN IN THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 23-02-2001 THE C LAIM OF DEPRECIATION WAS NOT DISCUSSED BY THE ASSESSING OFFICER. ACCORDINGLY, AO ISSUED NOTICE U/S.148 ON 09-10- 2002. THE ASSESSEE FILED RETURN OF INCOME IN RESPO NSE TO U/S.148 OF THE ACT DECLARING THE ORIGINAL INCOME RETURNED AT RS.1,38,5 5,72/- AFTER CLAIMING DEDUCTION U/S. 80HHC OF THE ACT AND ALSO CLAIMING THE MAT CRE DIT. THE AO INTIMATED THE REASONS RECORDED U/S.148 OF THE ACT ON 09-10-2002 A ND THE RELEVANT REASONS AS SUPPLIED BY THE AO VIDE LETTER DATED 13-11-2003, WH ICH READS AS UNDER:- (A) YOU HAVE NOT DEDUCTED DEPRECIATION OF RS.74,68 ,668/- FROM THE PROFITS OF THE BUSINESS, WHICH RESULTED IN GRANT OF EXCESS DED UCTION U/S.80HHC OF RS.23,81,318/- WHICH HAS CONSEQUENT EFFECT ON THE I NCOME DETERMINED U/S.115JA. (B) DEDUCTION OF RS.155.96 LACS U/S.80HHC WAS WORKE D OUT ON THE BASIS OF EXPORT TURNOVER OF RS.2296.10 LACS. HOWEVER, AS PER DETAILS SUBMITTED BY YOU VIDE LETTER DTD. 19/12/2000, IT IS SEEN THAT THE TO TAL EXPORT REALIZATION FOR THE PERIOD 1.4.97 TO 31.3.98 WAS RS.2101.88 LACS. THUS, DEDUCTION U/S.80HHC WILL HAVE TO RE-COMPUTE. THE ASSESSEE OBJECTED BEFORE THE ASSESSING OFFICER CONTENDING THAT ASSESSEE HAS NOT CLAIMED U/S.32 OF THE ACT ON THE BASIS OF GUJAR AT HIGH COURTS DECISION IN THE CASE OF CIT V. AMURUN TEXTILE 98 CTR 117 (GUJ) AND THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS VIDE LETTER DATED 0 8-11-2002 HAD ENQUIRED ABOUT THE ASSETS PURCHASED DURING THE YEAR AND ALSO INCLU DED SALES TAX, EXCISE DUTY IN THE ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 3 TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DE DUCTION U/S.80HHC OF THE ACT. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S, THE AO CHOSE NOT TO ALLOW THE CLAIM OF DEPRECIATION AND COMPUTED THE DEDUCTION U/ S.80HHC OF THE ACT ACCORDINGLY. IN VIEW OF THESE, THE ASSESSEE OBJECTED THAT THERE IS NO MATERIAL IN THE POSSESSION OF THE AO ON THE BASIS OF WHICH BELIEF COULD BE FORM T HAT THE INCOME HAD ESCAPED ASSESSMENT AND THE AO WAS PLACING HIS RELIANCE ON T HE SAME MATERIAL WHICH WAS THE BASIS OF THE ORIGINAL ASSESSMENT AND IN THAT CA SE, IT WOULD AMOUNT TO CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW. THE AO H AS NOT ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND NOTED THAT IT IS FOUND FROM THE RE CORDS THAT THE ASSESSEE FAILED TO PRODUCE THE DEPRECIATION ALLOWABLE UNDER THE INCOME -TAX RULES, 1962 AND THUS THERE IS FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE T HE CORRECT PICTURE OF ITS PROFITS AND LOSS FROM THE BUSINESS, WHICH LED TO ESCAPEMENT OF INCOME FOR ITS ASSESSMENT. ACCORDINGLY, AFTER DISCUSSING THE PROVISIONS OF SEC TION 147 OF THE ACT, THE AO HELD THAT THE REOPENING IS AS PER THE PROVISIONS. AGGRIE VED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) UPHELD THE REOPENIN G BY GIVING FOLLOWING FINDING IN PARA-2.3 OF HIS APPELLATE ORDER:- 2.3 AFTER GOING THROUGH THE OBSERVATIONS MADE BY T HE AO AND THE SUBMISSIONS OF THE APPELLANT ALONG WITH THE CASE LA WS AS RELIED UPON, I AM OF THE VIEW THAT THE AO IS JUSTIFIED IN REOPENING THE ASSESSEE OF THE APPELLANT. CLAUSE(IV) OF SUB. SEC.(C) TO SEC. 147 READS AS UND ER:- WHERE THE ASSESSMENT HAS BEEN MADE, BUT . (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED IN THE APPELLANTS CASE, IT IS SEEN THAT THE APPELL ANT HAS COMPUTED EXCESS DEDUCTION U/S.80HHC OF THE ACT BY WAY OF NOT CLAIMI NG THE DEPRECIATION. BY RELYING UPON THE DECISION OF HIGH COURT IN THE CASE REPORTED IN 236 ITR 832 AND 243 ITR 482, I AM OF THE VIEW THAT THE A.O IS F ULLY COMPETENT TO REOPEN THE ASSESSMENT. THEREFORE, I CONFIRM THE ACTION OF THE A.O IN THIS RESPECT. AGGRIEVED, NOW ASSESSEE CAME IN SECOND APPEAL BEFOR E US. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE, SHRI S.N. SOPARKAR, FIRST OF ALL, TAKEN US TO THE REASONS RECORDED; HE STATED AS REGA RDS TO THE FIRST REASON OF GRANT OF EXCESS DEDUCTION U/S.80HHC OF THE ACT AMOUNTING TO RS.23,81318/- WHICH HAS CONSEQUENTIAL EFFECTED ON THE INCOME DETERMINED U/S .115JA OF THE ACT. LD. COUNSEL TAKEN US TO THE ORIGINAL ASSESSMENT ORDER DATED 23- 02-2001 PASSED U/S.143(3) OF THE ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 4 ACT AND NARRATED THAT THE ASSESSEE IN ITS RETURN OF INCOME SHOWN INCOME OF RS.1,45,47,260/- AND THE INCOME COMPUTED U/S.115JA OF THE ACT WAS AT RS.22,86,248/-, WHICH WAS LESS THAN THE NORMAL INCO ME, THE TOTAL INCOME WAS TAKEN WHICH WAS MORE THAN NORMAL RETURN OF INCOME AND THE N THE LD. COUNSEL TAKEN US TO DEPRECIATION NOT DEDUCTED AS RS.74,68,668/- AND STA TED THAT IF WE INCLUDE THIS DEPRECIATION IN THE INCOME COMPUTED U/S.115JA OF TH E ACT AT RS.22,86,248/- WHICH COMES TO RS.97,54,916/- WHICH AGAIN LESS THEN THE N ORMAL INCOME COMPUTED. ACCORDINGLY, HE STATED THAT THE FIRST REASON ITSELF IS NOT THE BASIS FOR REOPENING AS THERE IS NO ESCAPEMENT OF ANY INCOME WHICH REQUIRES TO BE BROUGHT TO TAX. AS REGARDS SECOND REASON, THE LD. COUNSEL TAKEN US TO THE COMPUTATION PART OF DEDUCTION OF SECTION 80HHC OF THE ACT, WHERE EXPORT TURNOVER FOR COMPUTATION OF DEDUCTION WAS AT RS.22,96,10,703/- AS PER AO THE EX PORT REALIZATION WAS SHOWN AT RS.2101.88 LAKHS. THE RELEVANT COMPUTATION OF DEDUC TION U/S.80HHC AS COMPUTED BY THE AO DURING THE COURSE OF RE-ASSESSMENT PROCEE DINGS AS UNDER:- DEDUCTION U/S.80HHC 7. THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S.8 0HHC OF RS.4,57,64,662/- DURING THE YEAR UNDER CONSIDERATIO N. FOR WORKING OUT DEDUCTION U/S.80HHC, THE ASSESSEE HAS TAKEN TOTAL T URNOVER AT RS.29,83,88,692/- WHICH IS NOT OFF EXCISE DUTY AND SALES TAX. THE AMOUNT OF SALES TAX AND EXCISE ARE REQUIRED TO BE ADDED IN TH E TOTAL TURNOVER AS EXCISE AND SALES TAX ARE INTEGRAL PART OF THE TOTAL TURNOV ER AS LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF CHOWRAGHEE SALES BUREA U PVT. LD. V/S. CIT 87 ITR 542 AND SINCLARE MURRAY & CO. PVT. VS. CIT 97 I TR 615. EVEN THE AHMEDABAD BENCH OF ITAT HAS HELD THAT SALES TAX AND EXCISE ARE INTEGRAL PAT OF THE TOTAL TURNOVER IN ORDER PASSED BY IT IN ITA NO. 231/AHD/2000 DTD. 24.08.2000 IN THE CASE OF GUJARAT FLURO CHEMICALS L TD. FOR A.Y. 96-97 FOLLOWING THE DECISION OF BRITANIA INDUSTRIES LTD. 71 ITD 14 (CAL) & PONDS (INDIA) LTD. 64 ITD 33 (MUMBAI). THEREFORE THE DEDU CTION U/S.80HHC IS WORKED OUT AS UNDER BY TAKING TOTAL TURNOVER INCLUD ING SALES TAX AND EXCISE: TOTAL TURNOVER 29,83,88,692 ADD: SALES TAX 11,98,197 EXCISE 41,79,169 53,76,366 ----------------------- TOTAL TURNOVER 30,37,85,058 TOTAL EXPORT TURNOVER 22,96,10,703 7(I) THE ASSESSEE HAS WORKED OUT PROFIT OF THE BUSI NESS IN FORM NO.10CCA AS PER NOTE NO.4 ATTACHED WHILED CALCULATING PROFIT OF THE BUSINESS ASSESSEE HAS REDUCED 90% OF IMPORT LINCENCE SALES, D.E.P.B. CRED IT SALES, DUTY DRAW BACK & PACKAGES. BUT THE ASSESSEE COMPANY HAS NOT REDUCED 90% OF SALES. ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 5 SIMILARLY, LD. COUNSEL FURTHER REFERRED TO THE COMP UTATION OF DEDUCTION U/S.80HHC OF THE ACT WHERE EXPORT TURNOVER WAS TAKEN DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AT RS.22,96,10,703/- AND THE RELEVANT C OMPUTATION AS GIVEN IN THE ORIGINAL ASSESSMENT YEAR AT RS. SUBJECT TO THE ABOVE THE DEDUCTION U/S.80HHC IS RE COMPUTED AS UNDER: PROFIT OF THE BUSINESS X EXPORT TURNOVER + DEDUCTIO N U/S. 80HHC = ----------------------------- - TOTAL TURNOVER 90% OF THE EXPORT INCENTIVES X EXPORT TURNOVER ----------------------------- TOTAL TURNOVER = 43836792 X 229610703 + 16483907 X 229610703 ------------------------------- ------------------------------- 30,37,65,058 30,37,65,058 = 3,31,35,466 + 1,24,59,897 = 4,55,95,363 IN VIEW OF THESE FACTS, LD. COUNSEL STATED THAT THE ASSESSING OFFICER HAS ACCEPTED DEDUCTION U/S.80HHC HAS RIGHTLY BEEN COMPUTED BY TH E AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS EVEN DURING THE COURSE OF RE OPENING PROCEEDING, THE SAME DEDUCTION WAS REPEATED TAKING THE SAME EXPORT TURNO VER. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER AFTER CONSIDERING OF TOTAL INCOME AND THE DETAILS FILED AS ABOVE, DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, CHOSE NOT TO ALLOW THE CLAIM OF DEPRECIATION AND CALCULATED DEDUCTION U/S80HHC ON THE BASIS OF EXPORT TURNOVER DISCLOSED IN THE AUDIT REPORT U/S.80HHC AN D NOW, ACCORDING TO THE LD. COUNSEL, THIS ISSUE HAS BEEN CONSIDERED IN THE ORIG INAL ASSESSMENT PROCEEDINGS AND NO NEW MATERIAL HAS COME INTO POSSESSION OF THE ASS ESSING OFFICER ON THE BASIS OF WHICH BELIEF HAS BEEN FORMED THAT THE INCOME HAS ES CAPED ASSESSMENT IN THIS CASE OF THE ASSESSEE. IN VIEW OF THESE ARGUMENTS, LD. C OUNSEL STATED THAT THIS IS MERELY CHANGE OF OPINION ON THE EXISTING FACTS, WHICH IS N OT PERMISSIBLE IN LAW AND HE URGES THE BENCH TO QUASH THE REASSESSMENT PROCEEDING U/S. 147 R.W.S. 148 OF THE ACT. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HEA VILY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND HE FURTHER STATED THAT THE RE OPENING IS MADE BY THE ASSESSING OFFICER IN VIEW OF THE CLAUSE-IV OF CLAUSE-C TO EXP LANATION-2 TO SEC. 147 OF THE ACT. ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 6 HE STATED THAT EVEN THE ISSUE IS SQUARELY COVERED I N FAVOUR OF THE REVENUE BY THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF VAHID PAPERS CONVERTS V. ITO & OTHERS (2006) 98 ITD 165 (SB) (AHD), WHEREBY THE TRIBUN AL HAS CONSIDERED THE ISSUE THAT WHETHER THE DEPRECIATION IS TO BE AL LOWED IN CASE THE ASSESSEE WILL GET DEDUCTION U/S. CHAPTER IV-A OF THE ACT. THE HON'BL E TRIBUNAL HAS HELD AS UNDER:- 68. A QUESTION WAS RAISED BY THE ASSESSEE THAT IF THE DEPRECIATION CAN BE DISCLAIMED IN THE NORMAL COMPUTATION OF INCOME BUT THE SAME HAS TO BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE INCOME F OR THE PURPOSE OF CHAPTER VI- DEDUCTIONS, THEN THERE WOULD BE ANOMALY IN THE AMOUNT OF WDV OF THE ASSETS OF THE UNDERTAKING. IT MAY BE X FI GURE FOR THE PURPOSE OF COMPUTATION OF INCOME UNDER SECTION 29 WHEREAS IT W OULD BE X MINUS DEPRECIATION ALLOWED FOR CHAPTER VI-A DEDUCTIONS. F IRSTLY, THIS IS A SITUATION CREATED BY THE ASSESSEE ITSELF BY DISCLAIMING THE D EPRECIATION IN NORMAL COMPUTATION SECONDLY, THESE SECTIONS 80HH, 80-IA A ND 80-IB CONTEMPLATE THESE SITUATIONS IN PROVIDING FOR DIFFERENT COMPUTA TION FOR CHAPTERVI-A DEDUCTIONS BY PROVIDING EXCEPTIONS REFERRED TO ABOV E; AND THIRDLY, THE ASSESSEE CANNOT BE ALLOWED A HIGHER DEDUCTION BY DI SCLAIMING DEPRECIATION WHICH, IN ACTUALLY, IT IS NOT SURRENDERING THE RIGH T TO CLAIM THE DEPRECIATION BUT POSTPONING THE SAME IN SUBSEQUENT YEARS. ON THE FAC TS OF THESE CASES THE ASSESSEE WANT TO AVAIL BOTH THE BENEFITS AND OPT TO PAY LESSER TAX ULTIMATELY BY RESORTING THIS TYPE OF DISCLAIMER. IN ANY CASE BY VIRTUE OF DEEMING FICTION THAT THE INDUSTRIAL UNDERTAKING WOULD BE THE ONLY S OURCE OF INCOME FOR COMPUTING THE INCOME ON THAT HYPOTHESIS, THERE IS B OUND TO BE DIFFERENCE IN BOTH THE INCOMES AS WELL AS WRITTEN DOWN VALUES FRO M YEAR TO YEAR. AGAIN THE DIFFERENT WRITTEN DOWN VALUES IS FOR COMPUTING THE INCOME FOR THE PURPOSE OF CHAPTER VI-A AND WOULD HAVE NO IMPINGING EFFECT IN DISTURBING WRITTEN DOWN VALUES FOR THE PURPOSE OF SECTION 43(6) IN DETERMIN ING THE INCOME OF THE ASSESSEE UNDER SECTION 29 OF THE ACT. THIS CONTEN TION OF THE ASSESSEES, THEREFORE, HAS NO DECISIVE VALUE FOR DECIDING THE I SSUE BEFORE US. 69. IN VIEW OF THE AFORESAID DISCUSSION WE, THEREFO RE, HOLD THAT THE DEPRECIATION, WHICH IS THOUGH ALLOWABLE BUT NOT CLA IMED IN THE RETURN FOR NORMAL COMPUTATION OF INCOME, HAS TO BE ALLOWED WHI LE COMPUTING THE DEDUCTIONS UNDER CHAPTER VI-A VIZ., SECTIONS 80HJH, 80-IA, 80-IB, ETC. OF AN INDUSTRIAL UNDERTAKING. IN VIEW OF THIS, HE URGES THE BENCH TO CONFIRM THE ACTION OF THE LOWER AUTHORITIES IN UPHOLDING THE REOPENING OF THE ASSESSMENT PROCEEDIN GS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A) INCLUDING THE PAPER BOOK CONTAI NING PAGES 1 TO 47 SUBMITTED BY THE ASSESSEE. WE FIND THAT AS REGARDS TO DEPRECIATI ON THE AO IN HIS ORIGINAL ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 7 ASSESSMENT ORDER HAS MADE THE COMPUTATION, AND COMP UTATION PART OF DEDUCTION OF SECTION 80HHC OF THE ACT, WHERE EXPORT TURNOVER FOR COMPUTATION OF DEDUCTION WAS AT RS.22,96,10,703/- AS PER AO THE EXPORT REALIZATI ON WAS SHOWN AT RS.2101.88 LAKHS. THE RELEVANT COMPUTATION OF DEDUCTION U/S.80 HHC HAS BEEN REPRODUCED AS IT IS FROM THE ASSESSMENT ORDER AT PARA-4 OF THIS ORDER. AS REGARDS TO THE REASONS FOR RE-OPENING IN RESPECT TO COMPUTATION OF MAT PROFIT, EVEN AFTER DEPRECIATION WHICH IS MUCH BELOW THE NORMAL INCOME AS COMPUTED BY THE ASS ESSING OFFICER. WE FIND IN ENTIRETY THAT THE RE-OPENING IS MERELY CHANGE OF OP INION AND NOTING ELSE. WE FIND THAT THIS VIEW OF OURS IS SUPPORTED BY THE DECISION OF T HIS TRIBUNAL IN THE CASE OF PEN DRUGS LTD. V. DCIT IN ITA NO.538/AHD/2001 DATED 04-01-2008, WHEREIN THE TRIBUNAL CONSIDERING THE DECISION OF HON'BLE APEX COURT IN C IT V. FORAMER FRANCE [2003] 264 ITR 566 (SC) AND OF HONBLE DELHI HIGH COURT IN JINDAL PHOTO FILMS LTD V. DY CIT [1998] 234 ITR 170, HELD AS UNDER:- 14.THE PROVISO TO SEC.147 VERY CLEARLY STATES THAT WHERE ASSESSMENT U/S 143(3) HAS BEEN COMPLETED THEN NO AC TION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE REASON OF THE FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. HON'B LE APEX COURT IN CIT V. FORAMER FRANCE [2003] 264 ITR 566 (SC) AF FIRMED THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN FORAMER V. CIT [2001], 247 ITR 436, WHERE THE HONBLE ALLAHABAD HI GH COURT HAS HELD AS UNDER:- IN OUR OPINION, WE HAVE TO SEE THE LAW PREVAILING ON THE DATE OF ISSUE OF THE NOTICE UNDER SECTION 148, I.E NOVEMBER 20, 1998. ADMITTEDLY, BY THAT DATE, THE NEW SECTIO N 147 HAS COME INTO FORCE AND, HENCE, IN OUR OPINION, IT IS T HE NEW SECTION 147 WHICH WILL APPLY TO THE FACTS OF THE PR ESENT CASE. IN THE PRESENT CASE, THERE WAS ADMITTEDLY NO FAILURE ON THE PART OF ASSESSEE TO MAKE A RETURN OR TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. HENCE, THE PROVISO TO THE NEW SECTION 147 SQUARELY APPLIES, AND THE IMPUGNED NOTICES WERE BARRED BY LIMITATION MENTIONED IN THE PROVISO. AND FINALLY THE HONBLE ALLAHABAD HIGH COURT HAS HELD AS UNDER:- ALTHOUGH WE ARE OF THE OPINION THAT THE LAW EXISTI NG ON THE DATE OF THE IMPUGNED NOTICE U/S 147/148 HAS TO BE SEEN, YET EVEN IN THE ALTERNATIVE EVEN IF WE ASSUME THAT THE LAW PRIO R TO THE ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 8 INSERTION OF THE NEW SECTION 147 WILL APPLY EVEN TH EN IT WILL MAKE NO DIFFERENCE SINCE EVEN UNDER THE ORIGINAL SECTION 147 NOTICE FOR REASSESSMENT COULD NOT BE GIVEN ON THE MERE CHANGE OF OPINION AS HELD IN NUMEROUS CASES OF THE SUPREME COURT, SOM E OF WHICH HAVE BEEN MENTIONED ABOVE. SINCE THE TRIBUNAL IN T HE APPEAL RELATING TO THE ASSESSEE COMPANY HAD CONSIDERED THE TRIBUNALS EARLIER DECISION IN BOUDIER CHRISTIANS CASE, IT WI LL OBVIOUSLY AMOUNT TO MERE CHANGE OF OPINION, AND HENCE NOTICE U/S 147/148 WOULD BE ILLEGAL. 15. SIMILARLY HONBLE DELHI HIGH COURT IN THE CASE OF JINDAL PHOTO FILMS LTD V. DY CIT [1998] 234 ITR 170 HAS HE LD THAT IT CANNOT BE DISPUTED THAT DISCOVERY OF NEW AND IMPORT ANT MATTER OR KNOWLEDGE OF FRESH FACTS WHICH WERE NOT PRESENT AT THE TIME OF ORIGINAL ASSESSMENT WOULD CONSTITUTE A REASON TO B ELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WI THIN THE MEANING OF EVEN SEC 147 (OPERATIVE FROM 1-4-1989). HERE ALSO SUCH FACTS WHICH COULD HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER BUT WERE NOT SO DISCOVERED AT THE TIME OF O RIGINAL ASSESSMENT MAY NOT CONSTITUTE A NEW INFORMATION. I N THAT VIEW OF THE MATTER, WHERE THE ASSESSING OFFICER HAS FORMED THE OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT BECAUSE HE H AS ALLOWED THE DEDUCTION UNDER SECTION 80-I WRONGLY AND EVEN T HOUGH IN RECORDING THE REASONS THE ASSESSING OFFICER HAS USE D THE PHRASE REASON TO BELIEVE, BETWEEN THE DATE OF THE ORIGIN AL ORDER OF ASSESSMENT SOUGHT TO BE REOPENED AND THE DATE OF FO RMING OF OPINION BY THE ASSESSING OFFICER, NOTHING NEW HAS H APPENED. THERE IS NO CHANGE OF LAW. NO NEW MATERIAL HAS COM E ON RECORD. NO INFORMATION HAS BEEN RECEIVED. IN SUCH CIRCUMST ANCES, IT CAN BE SAID THAT IT IS MERELY A FRESH APPLICATION OF MI ND BY THE SAME ASSESSING OFFICER TO THE SAME SET OF FACTS. WHAT T HE ASSESSING OFFICER HAS SAID ABOUT THE ORDER OF THE FIRST APPEL LATE AUTHORITY WHILE RECORDING REASONS UNDER SECTION 147 HE COULD HAVE SAID EVEN IN THE ORIGINAL ORDER OF ASSESSMENT BECAUSE SU CH APPELLATE ORDER WAS BEFORE HIM AT THAT TIME. THUS, IT IS A C ASE OF MERE CHANGE OF OPINION WHICH DOES NOT PROVIDE JURISDICTI ON TO THE ASSESSING OFFICER TO INITIATE PROCEEDINGS U/S 147. 16. IN THE PRESENT CASE ALSO, THE ASSESSING OFFICER HAS ENQUIRED ABOUT VALUE OF PRICE VARIATION OF LIABILIT Y OF MEDICINES TO BE EXPORTED AND THE EXPORT PARTICULARS ADOPTED OR N OT, ON ACTUAL BASIS. THE ASSESSEE VIDE LETTER DATED 09.12.93 HAS ALREADY REPLIED EXHAUSTIVELY AND RELEVANT REPLY AS REPRODUC ED IN PARA 12 AT PAGE 10 & 11 OF THIS ORDER. EVEN THE ASSESSING OFFICER WHILE ISSUING SHOW CAUSE NOTICE HAS VERY CLEARLY MENTIONE D IN THE SHOW CAUSE NOTICE DATED 16.03.1998. THE ASSESSING OFFIC ER HAS ALLOWED DEDUCTION ON ACCOUNT OF PROVISION FOR PRICE VARIATION IN RAW MATERIAL FOR EXPORT. IN SHOW CAUSE NOTICE, IT WAS STATED THAT ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 9 WORKING OUT THIS LIABILITY THE EXPORT MARKET PRICE ADOPTED WAS NOT ON ACTUAL BASIS BUT WAS ADOPTED ON ESTIMATED BASIS. ACCORDINGLY, IT WAS AN UNDISPUTED LOSS OF PRICE VARIATION AND TH EREFORE LIABILITY WAS CONTINGENT IN NATURE AND NOT ALLOWABLE IN THE A Y1991-92. THE ASSESSEE HAS ALREADY REPLIED AT THE TIME OF OR IGINAL ASSESSMENT TO THIS QUERY AND THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION FOR CONSIDERING THIS REPLY WHICH IS VE RY MUCH PART OF THE ASSESSMENT RECORD. AS THE LD DEPARTMENTAL REPR ESENTATIVE REPLIED ON EXPLANATION 1 TO SEC147 OF THE ACT, FOR THIS PURPOSE AS PER THE PROVISION OF EXPLANATION 1 TO SEC.147 PRODU CTION BEFORE THE ASSESSING OFFICER ON ACCOUNT BOOKS OR OTHER EVI DENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HA VE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESS ARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO TO SEC.147, IN PUTTING EXPRESSION DISCOVERY BY THE ASSESSING OFFIC ER WITH DUE DILIGENCE IMPLIED ANY EXPRESSION WHICH MEANS FOR CE RTAIN ESTIMATE OR BOOKS OF ACCOUNT OR AGREEMENT AS PRODUC ED BY THE ASSESSEE IN THE COURSE OF HIS ASSESSMENT AND THE AS SESSMENT IS ACTUALLY MADE ON THAT BASIS BY EXPLOITING SUCH DEED OR AGREEMENT TO BE TRUE WITHIN THE REOPENING OF THE ASSESSMENT O N THE GROUND THAT AGREEMENT WAS BOGUS, HAS TO BE MADE WITHIN THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS PRESCRIBED IN THE PROVISO TO SEC.147 OF THE ACT. 17. IN VIEW OF THE ABOVE DISCUSSION OF THE FACTS AS NARRATED IN THE PRESENT CASE, WE FEEL THAT REOPENING U/S 147 DO ES NOTPOSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDINGS UPON HIS MERE CHA NGE OF OPINION AND THAT ALSO BEYOND 4 YEARS. IN THE PRESE NT CASE, THE ASSESSEE VIDE LETTER DATED 9.3.1993, REPLIED TO THE QUERY OF ASSESSING OFFICER, WHEREBY IT WAS NARRATED AS PER I MPORT POLICY OF GOVT. OF INDIA THERE IS A PROVISION FOR ISSUE OF AD VANCE LICENCES FOR IMPORT OF RAW MATERIAL AGAINST THE OBLIGATION B Y THE EXPORTING MANUFACTURER TO EXPORT OUT OF THE COUNTRY THE SPECI FIED GOODS AND HE NARRATED THE DETAILS OF PRICING OF LOCAL AND FOR EIGN MARKET WHEREBY THE DIFFERENCE ARISES AT RS.7,33,388/- EVEN THE ASSESSING OFFICER IN HIS SHOW CAUSE NOTICE DATED 16 .3.1998 HAS ADMITTED THAT THE DEDUCTION OF RS.7,33,388/ ON ACCO UNT OF PROVISION FOR PRICE VARIATION IN RAW MATERIAL FOR E XPORT WAS WRONGLY ALLOWED BY HIM. IT MEANS THAT THE ASSESSING OFFICER WHILE FRAMING ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAS GONE INTO THE DETAILS OF PRICE VARIATION IN RAW MAT ERIAL OF EXPORT AND ALLOWED THE CLAIM OF ASSESSEE. IT HAS DISCLOSE D ALL MATERIAL FACTS FOR ITS ASSESSMENT FOR THIS ASSESSMENT YEAR A ND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. IN VIE W OF THESE FACTS, WHERE THE ASSESSING OFFICER HAS FORMED AN OP INION THAT THE INCOME HAS ESCAPED BECAUSE HE HAS ALLOWED DEDUCTION WRONGLY AND EVEN THOUGH IN RECORDING THE REASONS THE ASSESS ING OFFICER HAS USED THE PHRASE REASON TO BELIEVE, BETWEEN TH E DATE OF ITA NO.412/AHD/2005 A.Y. 1998-99 SAGAR DRUGS & PHARMACEUTICALS LTD. V. ACIT CIR-8, AB D PAGE 10 ORIGINAL ASSESSMENT AND THE DATE OF FORMING OF OPIN ION BY THE ASSESSING OFFICER, NOTHING NEW HAS HAPPENED. ACCOR DINGLY, ASSESSMENT REOPENED U/S 147 R/W SEC.148 IS BAD IN L AW AND HENCE REOPENING IS QUASHED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND DE CISIONS RELIED UPON, WE QUASH THE REASSESSMENT PROCEEDINGS AND ACCORDINGLY THIS A PPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11/09/2009 SD/- SD/- (P.K.BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 11/09/2009 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XIV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD