MADHU GUPTA, MUMBAI V. DCIT CEN CIR-3, MUMBAI

ITA 4431/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8998 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 23-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P VED
• Assessee Lawyers: SAJJAN KUMAR TULSIYAN
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Charitable institution; Question of law; Difference of opinion; Assessment record; Revised return; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 234B; 80IB; 80G; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE SHRI T.R. SOOD, AM AND SHRI SHRI R.S. PADVEK AR, JM I.T.A. NO.4431/MUM/2009 ASSESSMENT YEAR : 2004-05 MADHU GUPTA 42, IRISH PARK, JUHU, MUMBAI-400 049 PAN NO : ADNPG1712D DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRLE-3 & 9 TH FLOOR, OPP. CGO BLDG, ANNEXE M.K. ROAD, MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI SAJJAN KUMAR TULSIYAN RESPONDENT BY : SHRI P. VED ORDER PER T.R. SOOD (AM) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER DATED 29.01.2009 OF COMMISSIONER OF INCOME TAX (APPEALS) CENTRAL- I, MUMBAI AND RELATES TO THE ASSESSMENT YEAR 2004-05. 2. IN THIS APPEAL REVISED GROUNDS HAVE BEEN FILED BY THE ASSESSEE WHILE LETTER DATED 12.04.2010 WHICH ARE BASICALLY S AME TO THE ORIGINAL GROUNDS AND SINCE REVENUE DID NOT RAISE ANY OBJECTION THE R EVISED GROUNDS ARE BEING TAKEN UP FOR ADJUDICATION WHICH ARE AS UNDER:- 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN REJECTING THE CONTENTION OF THE APPELLANT THAT THE LD. A.O. WAS NOT JUSTIFIED IN RE-OPENING HER AS SESSMENT FOR ASSTT. YEAR 2004-05 U/S.147 OF THE I.T. ACT ON A CH ANGE OF OPINION AFTER REAPPRAISAL OF THE MATERIALS ALREADY AVAILABL E ON HER 2 ASSESSMENT RECORD AND CONSEQUENTLY SUCH RE-OPENING WAS BAD IN LAW. 2. THAT, SINCE THE LD. AO ALLOWED THE APPELLANT CL AIM OF DEDUCTION U/S.80IB (4) IN THE COURSE OF HER ORIGINA L ASSESSMENT PROCEEDING OF ASSTT. YEAR 2004-05 ON THE BASIS OF H ONBLE TRIBUNAL DECISION OF EARLIER ASSTT. YEARS IN HER OW N CASE, THE LD. SUCCESSOR AO ERRED IN REOPENING HER ASSESSMENT FOR THE SAID ASSTT. YEAR IN ORDER TO DISALLOW HER SAID CLAIM OF DEDUCTI ON IN VIOLATION OF THE SECOND PROVISIO TO SEC.147 OF THE I.T. ACT. 3. THAT, IN THE COURSE OF RE-ASSESSMENT PROCEEDING U/S.147/143(3) OF THE I.T. ACT DT.10.12.08, THE LD. A.O. ERRED IN ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS.5, 59,24,300/- AS AGAINST HER RETURNED INCOME OF RS.1,18,45,710/- AND THE LD. CIT(A) ERRED IN SUSTAINING HIS ORDER. 4. THAT, THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAI NING THE DISALLOWANCE OF THE APPELLANTS CLAIM OF DEDUCTION OF RS.4,40,78,587/- U/S. 80IB OF THE I.T. ACT BY THE L D. A.O. WHILE COMPLETING HER RE-ASSESSMENT U/S.147/143(3) OF THE I.T. ACT FOR ASSTT. YEAR 2004-05 ON 10.12.08 ALTHOUGH SHE FILED THE AUDIT REPORT IN FORM 10CCB BEFORE THE LD. A.O. IN THE COU RSE OF THE REASSESSMENT PROCEEDING. 5. THAT, THE LD. A.O. ERRED IN CHARGING INTEREST U/ S.234A, 234B AND 234C OF THE I.T. ACT AND THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAME. 3. WE SHALL TAKE UP GROUND NO. 1 AND 2 TOGETHER BE CAUSE SAME RELATES TO THE REOPENING OF THE ASSESSMENT. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) VIDE A SSESSMENT ORDER DATED 11.12.2006 IN WHICH DEDUCTION U/S.80IB WAS ALLOWED AT RS.4,40,78,587/-. LATER ON, AFTER VERIFICATION OF RECORDS IT WAS NOTICED TH AT PRESCRIBED AUDIT REPORT IN FORM NO.10CCB HAD NOT BEEN FURNISHED IN TERMS OF TH E REQUIREMENT OF SECTION 80IB (13) READ WITH SECTION 80IA(7) AND, THEREFORE, DEDUCTION U/S.80IB WAS NOT ALLOWABLE. ON THE BASIS OF THIS OBSERVATION IT WAS CONCLUDED THAT INCOME TO THE EXTENT OF RS.4,40,78,587/- HAS ESCAPED ASSESSMENT A ND, THEREFORE, THE 3 ASSESSMENT WAS REOPENED AND NOTICE U/S.148 WAS ISSU ED ON 28.12.2007. IN RESPONSE TO THE NOTICE A LETTER DATED 26.02.2008 WA S WRITTEN BY THE ASSESSEE THAT RETURN ALREADY FILED FOR A.Y.2005-06 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S.148. DURING REASSESSMENT PROCEEDINGS THE ISSUE RELATING TO NON FILING OF AUDIT REPORT WAS AGAIN TAKEN UP BY THE AO AND IN RESPONSE IT WAS STATED THAT THE AUDIT REPORT HAS ALREADY BEEN FILED ALONG WITH THE REVISED RETURN ON 18.03.2006 AND COPY OF THE AUDIT REPORT HAVE SEPARA TELY BEEN FILED AGAIN VIDE LETTER DATED 26.12.2008. HOWEVER, AO FROM THE LETTE R DATED 18.03.2006 NOTED THE FOLLOWING:- WITH REFERENCE TO THE ABOVE, WE BRING TO YOUR KIND ATTENTION THAT WE HAD FILED REVISED RETURN ON 17.03.2006 FOR ASST. YR. 2004-05, WHEREIN WE FORGOT TO ENCLOSE THE AUDIT REPORT IN FO RM NO.10CCB. THEREFORE, WE SUBMIT HEREWITH THE ORIGINAL COPY OF AUDIT REPORT IN FORM NO.10CCB FOR YOUR RECORD. 4. IT TRANSPIRED THAT ASSESSEE HAD NOT FILED REVIS ED RETURN ON 18.03.2006 BUT ACTUALLY THE REVISED RETURN WAS FILE D ON 27.03.2006. IN THIS BACKGROUND IT WAS CONCLUDED THAT ASSESSEE HAD NOT F ILED THE COPY OF AUDIT REPORT AS REQUIRED U/S.80IB(13) READ WITH SECTION 80 IA(7) WHILE FILING THE ORIGINAL RETURN OR REVISED RETURN AND, THEREFORE, CLAIM OF D EDUCTION U/S.80 IB WAS REJECTED. 5. BEFORE THE LEARNED CIT (APPEALS) IT WAS MAINLY CONTENTED THAT ASSESSMENT COULD NOT BE REOPENED ON THE BASIS OF SA ME MATERIAL WHICH WAS ALREADY ON RECORD AND RELIANCE WAS PLACED ON THE DE CISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CARTINI INDIA LTD. VS. AD DL. CIT 314 ITR 275. THE LEARNED CIT (APPEALS) AFTER EXAMINING THE SUBMISSIO N DID NOT AGREE WITH THE SAME AND OBSERVED THAT FILING OF THE AUDIT REPORT W AS MANDATORY REQUIREMENT. THOUGH HE MENTIONED THERE WAS A REFERENCE IN THE OF FICE NOTE TO THE ASSESSMENT 4 ORDER THAT SINCE HONBLE ITAT HAS ALLOWED THE CLAIM OF APPELLANT FOR DEDUCTION U/S.80IB AND DEPARTMENT IS NOT FILING FURTHER APPEA L, THE AO IS ALLOWING THE DEDUCTION. BUT ACCORDING TO THE LEARNED CIT (APPEAL S) SINCE THE MANDATORY REQUIREMENT HAS NOT BEEN COMPLIED AND, THEREFORE, H E CONFIRMED THE ACTION OF AO IN DENYING THE DEDUCTION U/S.80IB. 6. BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE S UBMITTED THAT ORIGINAL DEDUCTION U/S.80IB WAS CLAIMED IN ASSESSME NT YEAR 2001-02 AS ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHO TOGRAPHIC FILMS. THE DEDUCTION WAS NOT ALLOWED BY THE REVENUE AUTHORITIE S AND THE MATTER WENT TO THE TRIBUNAL WHEREIN ULTIMATELY DEDUCTION WAS HELD TO B E ALLOWABLE IN ITA NO.8504/MUM/2004 WHICH WAS PUBLISHED IN 8 SOT 691 ( MUM) (COPY OF THE ORDER FILED ON RECORD). HE POINTED OUT THAT NO APPE AL WAS FILED AGAINST THIS ORDER BY THE DEPARTMENT TO THE HIGH COURT AND, THEREFORE, ISSUE BECAME FINAL. ON THE BASIS OF THIS DECISION DEDUCTION WAS ALLOWED IN ASS ESSMENT ORDER PASSED U/S.143(3)ON 11.12.2006 AND THIS FACT BECOME CLEAR FROM THE REFERENCE MADE BY THE LEARNED CIT (APPEALS) IN HIS ORDER AT PAGE.11 W HEREIN IT IS CLEARLY STATED AS UNDER :- THERE IS REFERENCE IN THE OFFICE NOTE TO ASSTT. OR DER THAT SINCE THE HONBLE ITAT HAS ALLOWED THE CLAIM OF APPELLANT FOR DEDUCTION U/S.80IB AND THE DEPARTMENT NOT FILING FURTHER APPE AL, THE AO IS ALLOWING THE DEDUCTION. LATER ON EXAMINATION OF THE RECORDS THE ASSESSMENT WAS REOPENED BY OBSERVING THAT AUDIT REPORT IN THE FORM NO. 10CCB WAS NOT FIL ED AND IN THIS REGARD HE REFERRED TO THE LETTER WRITTEN BY DEPUTY CIT TO THE ASSESSEE ON 01.09.2008, WHEREIN THE REASONS FOR REOPENING HAVE BEEN GIVEN. HE SUBMITTED FROM THE REASONS, IT BECOMES CLEAR THAT ASSESSMENT HAS BEEN REOPENED AFTER VERIFICATION OF THE SAME RECORDS AND THE SAME IS NOT PERMITTED UNDE R THE LAW AS IT AMOUNTS TO 5 CHANGE OF OPINION. IN THIS REGARD, HE REFERRED TO T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SATNAM OVERSEAS LTD. & AN R VS. ADDL. COMMISSIONER OF INCOME TAX 33 DTR 81, WHEREIN IT WA S CLEARLY HELD THAT WHEN THE ASSESSMENT IS REOPENED ON PERUSAL OF ASSES SMENT RECORDS THE SAME IS NOT PERMISSIBLE BECAUSE THIS WOULD ONLY MEAN CHANGE OF OPINION. HE ARGUED THAT SAME VIEW HAS BEEN TAKEN BY HONBLE SUPREME CO URT IN CASE OF CIT VS. KELVINATOR OF INDIA LTD. 34 DTR 049. HE POINTED OUT THAT FACTS HAVE NOT BEEN DISCUSSED BY HONBLE SUPREME COURT WHICH CAN BE SEE M FROM THE FULL BENCH DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 001. IN THAT CASE WHILE COMPLETING THE ORIGINAL ASSESSMENT U/S.143(3) GUEST HOUSE EXPENSES AND CLUB EXPENSES W ERE ALLOWED AND IN THE REASONS RECORDED FOR REOPENING IT WAS STATED THAT T HESE EXPENSES WERE NOT ALLOWABLE AS PER TAX AUDIT REPORT. FURTHER THE CLAI M OF INTEREST AMOUNTING TO RS.41.28 LAKHS WHICH PERTAIN TO THE EARLIER ASSESSM ENT YEAR WAS ALSO WRONGLY ALLOWED. IN THE REASSESSMENT PROCEEDINGS ADDITIONS IN RESPECT OF THESE ITEMS WAS MADE AND WHEN THE ISSUE REGARDING REOPENING WAS CHALLENGED BEFORE THE LEARNED CIT(APPEALS) HE ANNULLED THE REASSESSMENT B Y HOLDING THAT NO NEW FACTS OR MATERIAL WAS AVAILABLE FOR REOPENING THE A SSESSMENT AND IT WAS A MERE CASE OF CHANGE OF OPINION. THIS DECISION OF THE LEA RNED CIT(APPEALS) WAS CONFIRMED BY THE TRIBUNAL AS WELL AS HONBLE DELHI HIGH COURT BY REFERRING TO THE CIRCULAR NO.549 DATED 31.10.1989 WHICH CLARIFIE S HOW THE PROVISION REGARDING REOPENING OF ASSESSMENT WAS AMENDED. THE HONBLE HIGH COURT OBSERVED THAT WHEN ORDER PASSED U/S.143(3) THEN UNL ESS AND UNTIL NEW MATERIAL OR INFORMATION COME INTO POSSESSION OF ASSESSING AU THORITY THE SAME CANNOT BE REOPENED. THIS DECISION OF HONBLE DELHI HIGH COURT WAS LATER CONFIRMED BY HONBLE SUPREME COURT. 7. THEN HE AGAIN REFERRED TO THE REASONS AND POINT ED OUT THAT THE REASONS ITSELF CLEARLY STATES THAT ASSESSMENT IS BE ING REOPENED ON VERIFICATION OF 6 THE RECORD ITSELF, WHICH CLEARLY SHOWS THAT NO NEW MATERIAL IS COME INTO THE POSSESSION OF AO. 8. THE LEARNED COUNSEL ALSO POINTED THAT RELIANCE PLACED BY THE LEARNED CIT (APPEALS) ON THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF ACIT VS. RAJESH JAVERI STOCK BROKERS PVT. LTD. 291 ITR 500 IS TOTALLY OUT OF PLACE BECAUSE IN THAT CASE THE ISSUE INVOLVED WAS R EOPENING OF ASSESSMENT IN A CASE WHERE ONLY INTIMATION U/S.143(1)(A) WAS ISSUED AND THE HONBLE SUPREME COURT HELD THAT HERE ONLY AN INTIMATION HAS BEEN IS SUED AND IT CANNOT BE SAID THAT ANY OPINION HAS BEEN FORMED. SIMILARLY, THE RE LIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SH IVANAND ELECTRONICS 209 ITR 063 WAS WRONGLY PLACED. IN THAT CASE THE ISSUE WAS THAT THE AO HAD ALLOWED DEDUCTION U/S.80J AND THIS ASSESSMENT ORDER WAS REVISED U/S.263 BY THE LEARNED CIT BY HOLDING THAT SINCE IT HAD NOT FILED THE AUDIT REPORT, THE DEDUCTION COULD NOT HAVE BEEN ALLOWED. IN THE APPEAL AGAINST THE ORDER PASSED U/S.263 THE TRIBUNAL DIRECTED THE LEARNED CIT TO ALLOW AN OPPOR TUNITY TO THE ASSESSEE TO FILE THE REQUIRED AUDIT REPORT. WHEN THIS MATER CAME UP BEFORE THE HONBLE HIGH COURT, THE COURT HELD THAT IT WAS ASSESSEES DUTY T O FILE THE REPORT IF HE WANTED TO CLAIM DEDUCTION U/S.80J AND AO HAD NO RESPONSIBILIT Y TO REMIND THE ASSESSEE. THEREFORE, IN THIS CASE THE ISSUE RELATING TO REOPE NING AND CHANGE OF OPINION IN A CASE WHERE ASSESSMENT HAVE ALREADY BEEN COMPLETED U /S.143(3) WAS NEVER BEFORE THE COURT AND, THEREFORE, THIS DECISION COUL D NOT HAVE BEEN RELIED BY THE LEARNED CIT (APPEALS) TO CONFIRM THE ACTION OF REOP ENING. 9. WHILE CONCLUDING THE ARGUMENT ON THIS ISSUE, HE AGAIN REITERATED THAT DEDUCTION HAS ALREADY BEEN ALLOWED IN THE ASSE SSMENT ORDER PASSED U/S.143(3) ON THE BASIS OF THE DECISION OF TRIBUNAL IN THE EARLIER YEARS. THEREFORE, LATER ON IF AUDIT REPORT WAS FOUND TO BE MISSING, THE ASSESSMENT COULD 7 NOT BE REOPENED MERELY ON VERIFICATION OF THE RECOR DS BECAUSE THAT WOULD AMOUNT OF CHANGE OF OPINION. 10. ON THE OTHER HAND THE LEARNED DR SUBMITTED THA T AS PER THE REQUIREMENT OF SECTION 80IB (13) READ WITH SECTION 80IA(7) ASSESSEE WAS DUTY BOUND TO FILE THE AUDIT REPORT IN THE PRESCRIBED FO RM FOR CLAIMING THE DEDUCTION U/S.80IB. SINCE NO SUCH AUDIT REPORT WAS FILED BEFO RE THE COMPLETION OF ORIGINAL ASSESSMENT SUCH DEDUCTION WAS NOT ALLOWABLE AND, TH EREFORE, ASSESSMENT WAS CORRECTLY REOPENED. HE ALSO ARGUED THAT EVEN WHEN T HE FACTUAL ERROR IS POINTED OUT BY THE INTERNAL AUDIT PARTY THEN SUCH REOPENING WAS HELD TO BE VALID BY HONBLE SUPREME COURT IN CASE OF CIT VS. P.V.S. BEE DIES PVT LTD. 237 ITR 13. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION CAREFU LLY. ADMITTEDLY THE DEDUCTION U/S.80IB AMOUNTING TO RS.4,40,78,587/- WA S ALLOWED IN THE ASSESSMENT ORDER PASSED U/S.143(3) ON 11.12.2006. F URTHER FROM THE ORDER OF THE LEARNED CIT (APPEALS) IT BECOMES CLEAR THAT THE OFF ICE NOTE WAS APPENDED BY THE AO STATING AS UNDER :- THERE IS REFERENCE IN THE OFFICE NOTE TO ASSTT. OR DER THAT SINCE THE HONBLE ITAT HAS ALLOWED THE CLAIM OF APPELLANT FOR DEDUCTION U/S.80IB AND THE DEPARTMENT NOT FILING FURTHER APPE AL, THE AO IS ALLOWING THE DEDUCTION. 12. FROM THE ABOVE IT IS CLEAR THE DEDUCTION WAS A LLOWED ON THE BASIS OF DECISION OF TRIBUNAL IN EARLIER YEARS WHERE DEDU CTION U/S.80IB WAS HELD TO BE ALLOWABLE IN THE CASE OF ASSESSEE IN ITA NO. 8504/M UM/2004 WHICH WAS PUBLISHED IN 8 SOT 691 (MUM). WE FURTHER FIND THAT REASONS FOR REOPENING ARE CONTAINED IN THE LETTER DATED 01.09.2008 WRITTEN BY DEPUTY CIT, CENTRAL CIRCLE- 3, MUMBAI TO THE ASSESSEE WHICH IS AS UNDER :- 8 TO, SMT. MADHU GUPTA 42, IRISH PARK, JUHU, MUMBAI 400 049 MADAM, SUB : ASSESSMENT PROCEEDINGS U/S. 147 R.W.S. 143 F OR THE A.Y. 04-05 REGARDING SHOW CAUSE NOTICE. THE ASSESSMENT U/S. 143(3) FOR THE YEAR 2004-05 WA S COMPLETED ON 11/12/2006 DETERMINING THE TOTAL INCOME AT RS.1,18, 45,710/-. THE DEDUCTION U/S.80IB OF THE ACT AMOUNTING TO RS.4,40,78,587/- W AS ALLOWED. AFTER THE VERIFICATION OF CASE RECORDS, IT IS FOUND THAT YOU HAD NOT FURNISHED THE PRESCRIBED AUDIT REPORT IN THE FORM N O.10CCB DULY SIGNED AND VERIFIED BY THE CHARTERED ACCOUNTANT ALONG WITH THE RETURN. THIS PRESCRIBED AUDIT REPORT WAS ALSO NOT FURNISHED BEFORE THE COMP LETION OF ASSESSMENT PROCEEDINGS. AS PER THE PROVISIONS OF SECTION 80IB (130 R.W.S. 80IB (7) OF THE I.T. ACT, THE ASSESSEE IS REQUIRED TO FURNISH THE P RESCRIBED AUDIT REPORT IN THE FORM NO.10CCB (RULE 18BBB) ALONG WITH THE INCOME TA X RETURN TO AVAIL THE DEDUCTION CLAIMED U/S.80IB OF THE I>T. ACT. AS YOU HAVE NOT FURNISHED THE PRESCRIBED AUDIT REPORT, THE DEDUCTION U/S.80IB CAN NOT BE ALLOWED TO YOU. IN VIEW OF THESE FACTS, THE ASSESSMENT FOR THE A.Y. 2004-05 WAS REOPENED U/S.147 OF THE I.T. ACT AS THE INCOME TO THE EXTENT OF RS. 4,40,78,587/- CHARGEABLE TO THE TAX HAS BEEN ESCAPED FROM ASSESSM ENT. THEREFORE, YOU ARE REQUIRED TO EXPLAIN WHY THE DEDUCTION ALLOWED IN TH E ASSESSMENT COMPLETED U/S.143(3) SHOULD NOT BE DISALLOWED AS THE STATUTOR Y REQUIREMENT AS PER THE PROVISIONS OF SECTION 80IB HAVE NOT BEEN FULFILLED. YOUR EXPLANATION SHOULD REACH THIS OFFICE ON OR BEFORE 10/9/2008. IF YOU FA IL TO FURNISH THE REPLY ON OR BEFORE THIS DATE NO FURTHER OPPORTUNITY WILL BE GIV EN AND THE ASSESSMENT WILL BE COMPLETED ACCORDINGLY. 13. THE PARA TWO OF THE ABOVE LETTER STARTS WITH AFTER THE VERIFICATION OF CASE RECORDS CLEARLY SHOWS THAT ACTION OF REOPENING HAS BEEN INITIATED ON THE BASIS OF VERIFICATION OF EXIS TING RECORDS AND NO NEW MATERIAL HAS COME INTO THE POSSESSION OF AO. WE AGR EE WITH THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT REOPENING ON THE VERIFICATION OF ASSESSMENT RECORDS WHEN THE ORIGINAL ASSESSMENT HA S BEEN COMPLETED 9 U/S.143(3) WOULD ONLY AMOUNT TO CHANGE OF THE OPINI ON. THIS ISSUE CAME UP BEFORE FULL BENCH OF THE HONBLE DELHI HIGH COURT I N CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA). IN THAT CASE ASSESSEE ORIGIN ALLY DID NOT CLAIM VARIOUS EXPENDITURE IN THE FORM OF RENT EXPENSES, DEPRECIAT ION ON VARIOUS GUEST HOUSES. LATER ON, RENT ON SUCH GUEST HOUSE AS WELL AS DEPRE CIATION WAS CLAIMED THROUGH REVISED RETURN AND RELIANCE WAS PLACED ON THE DECIS ION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHASE BRIGHT STEEL LTD . 177 ITR 124. HOWEVER, NO CLAIM WAS MADE INRESPECT OF GUEST HOUSE MAINTENANCE EXPENSES. THE ASSESSMENT U/S.143(3) WAS FRAMED IN WHICH SUCH EXPE NSES WERE ALLOWED AND THUS DISALLOWANCE WAS MADE ONLY IN RESPECT OF GUEST HOUSE MAINTENANCE EXPENSES. LATER ON THE ASSESSMENT WAS REOPENED AND NOTICE U/S.148 WAS ISSUED, IN WHICH IT WAS STATED AS UNDER :- KELVINATOR OF INDIA LTD. ASSESSMENT YEAR 1987-88. ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON NO VEMBER 12, 1989, ON INCOME OF RS.6,34,225. THE PERUSAL OF THE RECORD SHOWS THAT THE ASSESSEE MAINTAINS THE BOOKS ON MERCANTILE BASIS. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED INTE REST OF RS.41.28 LAKHS WHICH IN FACT PERTAINS TO THE EARLIER ASSESSM ENT YEARS (SECTION 140B P(C-3) PAGE 21 OF PRINTED BALANCE-SHE ET). THIS WAS NOT ALLOWABLE EXPENDITURE IN THIS YEAR. FURTHER, TA X AUDIT REPORT SHOWS THAT THE FOLLOWING ITEMS WERE DISALLOWABLE: DISALLOWANCE DISALLOWED LESS DISALLOWABLE 1. GUEST HOUSE EXPENSES 2,67,485 91,485 1,76,000 2. UNDER RULE 6B 1,74,098 90,795 83,303 3. CLUB EXPENDITURE 5,329 1,029 4,300 TOTAL 2,63,603 TOTAL UNDERASSESSMENT IS TO THE TUNE OF RS.43,91,60 3/-. THE CASE IS COVERED UNDER SECTION 147. NOTICE UNDER SECTION 148 IS ISSUED. 10 14. ULTIMATELY IN THE REASSESSMENT ORDER RENT ON G UEST HOUSES AND DEPRECIATION WAS ADDED TO THE INCOME OF THE ASSESSE E. THE ASSESSEE CHALLENGED THE MATTER OF REOPENING AND THE LEARNED CIT (APPEAL S) ANNULLED THE REASSESSMENT PROCEEDINGS BY OBSERVING THAT NO NEW F ACT OR MATERIAL WAS AVAILABLE WITH THE AO WHICH CAN COME WITHIN THE PUR VIEW OF INFORMATION AND IT WAS HELD TO BE A CASE OF MERE CHANGE OF OPINION. T HE ORDER OF LEARNED CIT (APPEALS) WAS CONFIRMED BY THE TRIBUNAL. 15. ON FURTHER APPEAL BY THE REVENUE THE HONBLE H IGH COURT CONSIDERED THE OLD AS WELL AS NEW PROVISIONS FOR RE OPENING OF THE ASSESSMENT AS WELL AS RELEVANT CASE LAWS AND CIRCULAR NO.549 DATE D 31.10.1989 THROUGH WHICH SCOPE OF EFFECT OF NEWLY SUBSTITUTED SECTION 147 WI TH EFFECT FROM 01.04.1989 WAS CONSIDERED. ULTIMATELY THE COURT OBSERVED THAT THE CHANGE OF OPINION WAS STILL A VALID CONCEPT UNDER THE NEW PROVISION AND A SSESSMENT ALREADY COMPLETED U/S.143(3) COULD NOT BE REOPENED MERELY ON THE BASI S OF CHANGE OF OPINION. IN FACT THE FOLLOWING OBSERVATIONS OF THE HIGH COURT A RE RELEVANT:- FROM A PERUSAL OF CLAUSE 7.2 OF THE SAID CIRCULAR IT WOULD APPEAL THAT IN NO UNCERTAIN TERMS IT WAS STATED AS TO UNDE R WHAT CIRCUMSTANCES THE AMENDMENTS HAD BEEN CARRIED OUT, I.E., ONLY WITH A VIEW TO ALLAY FEARS THAT THE OMISSION OF THE EXPR ESSION REASON TO BELIEVE FROM SECTION 147 WOULD GIVE ARBITRARY POWE RS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON ERE CHANGE OF OPINION. IT IS THEREFORE, EVIDENT THAT EVEN ACCORDING TO THE CENTRAL BOARD OF DIRECT TAXES A MERE CHANGE OF OPINION CANNOT FORM T HE BASIS FOR REOPENING A COMPLETED ASSESSMENT. THE SUBMISSION OF MR. JOLLY TO THE EFFECT THAT THE SAID CIRCULAR CANNOT BE CONSTRUCTED IN SUCH A MANNER WHEREBY THE JURISDICTION OF THE STATUTORY AUTHORITY WOULD BE TAKEN AWAY IS NOT APPOSITE FOR THE PURPOSE OF THIS CASE. IN UNION OF INDIAS CASE, AIR 1996 SC 849 : [1996] 11 SCC 701, WHEREUPON MR. JOLLY HAD PLACED S TRONG RELIANCE, THE APEX COURT WAS DEALING WITH ADMINISTR ATIVE 11 INSTRUCTIONS WHEREBY NO RIGHT WAS CONFERRED UPON TH E RESPONDENTS TO HAVE THE HOUSE RENT AMOUNT INCLUDED IN THEIR EMO LUMENTS FOR THE PURPOSE OF COMPUTING OVERTIME ALLOWANCE. THE APEX C OURT HELD THAT OTHERWISE ALSO THE GOVERNMENTS INSTRUCTIONS H AVE TO BE READ IN CONFORMITY WITH THE PROVISIONS OF THE ACT. THERE IN THE APEX COURT WAS NOT CONCERNED WITH THE STATUTORY POWERS OF A ST ATUTORY AUTHORITY TO ISSUE BINDING CIRCULARS. ANOTHER ASPECT OF THE MATTER ALSO CANNOT BE LOST SI GHT OF A. STATUTE CONFERRING AN ARBITRARY POWER MAY BE HELD TO BE ULT RA VIRES ARTICLE 14 OF THE CONSTITUTION OF INDIA. IF TWO INTERPRETAT IONS ARE POSSIBLE, THE INTERPRETATION WHICH UPHOLDS CONSTITUTIONALITY, IT IS TRITE, SHOULD BE FAVOURED. IN THE EVENT IT IS HELD THAT BY REASON OF SECTION 1 47 IF THE INCOME TAX OFFICER EXERCISES HIS JURISDICTION FOR IMITATIN G A PROCEEDING FOR REASSESSMENT ONLY UPON A MERE CHANGE OF OPINION, TH E SAME MAY BE HELD TO BE UNCONSTITUTIONAL. WE ARE THEREFORE OF THE OPINION THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMEN T OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROC EEDINGS UPON HIS MERE CHANGE OF OPINION. WE, HOWEVER, MAY HASTEN TO ADD THAT IF REASON TO B ELIEVE OF THE ASSESSING OFFICER IS FOUNDED ON AN INFORMATION WHIC H MIGHT HAVE BEEN RECEIVED BY THE ASSESSING OFFICER AFTER THE CO MPLETION OF ASSESSMENT, IT MAY BE A SOUND FOUNDATION FOR EXERCI SING THE POWER UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT. WE ARE UNABLE TO AGREE WITH THE SUBMISSION OF MR. J OLLY TO EFFECT THAT THE IMPUGNED ORDER OF REASSESSMENT CANNOT BE F AULTED AS THE SAME WAS BASED ON INFORMATION DERIVED FROM THE TAX AUDIT REPORT. THE TAX AUDIT REPORT HAD ALREADY BEEN SUBMITTED BY THE ASSESSEE. IT IS ONE THING TO SAY THAT THE ASSESSING OFFICER HAD RECEIVED INFORMATION FORM AN AUDIT REPORT WHICH WAS NOT BEFO RE THE INCOME- TAX OFFICER, BUT IT IS ANOTHER THING TO SAY THAT SU CH INFORMATION CAN BE DERIVED BY THE MATERIAL WHICH HAD BEEN SUPPLIED BY THE ASSESSEE HIMSELF. WE ALSO CANNOT ACCEPT THE SUBMISSION OF MR. JOLLY T O THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REAS ON HAVE NOT BEEN RECORDED AN ANALYSIS OF THE MATERIALS ON THE R ECORD BY ITSELF MAY JUSTIFY THE ASSESSING OFFICER TO INITIATE A PRO CEEDING UNDER SECTION 147 OF THE ACT. THE SAID SUBMISSION IS FALL ACIOUS. AN ORDER 12 OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB- SECTION (1) OF SECTION 143 OR SUBSECTION (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SAID SUB-SE CTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH A N ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOW N THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT I N TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT JUDIC IAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD T HAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATI ON OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITH OUT ANYTHING FURTHER, TH E SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISI NG QUASI- JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 16. WHEN THE MATTER TRAVELLED TO HONBLE SUPREME C OURT THE DECISION OF HONBLE DELHI HIGH COURT WAS CONFIRMED AS REPORT ED IN CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561. THE FOLLOWING OBSERVATIO NS OF HONBLE SUPREME COURT ARE RELEVANT:- ON GOING THOROUGH THE CHARGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO THE DIRECT T AX LAWS (AMENDMENT ) ACT, 1987, REOPENING COULD BE DONE UND ER THE ABOVE TWO CONDITIONS AND FULFILMENT OF THE SAID CONDITION S ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT (WITH EFF ECT FROM 1 ST APRIL, 1989) THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFICER HAS REASON T O BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST -1 ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAI LING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING G OFFICER TO REOPEN ASSESSMENTS ON THE BA SIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON T O REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BE TWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSE SSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRECONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSE SSMENT, REVIEW 13 WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CH ANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWE R BY THE ASSESSING OFFICER. HENCE, AFTER 1 ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS TAN GIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS REASON TO BELIEVE BUT ALSO INSERTED THE WORD OPI NION IN SECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPR ESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS REASON TO BELIEVE, PARLIAMENT REINTRODUCED THE SAID EXPRESSION AND DEL ETED THE WORD OPINION ON THE GROUND THAT IT WOULD VEST ARBITRAR Y POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREIN BELOW THE RELEVA NT PORTION OF CIRCULAR NO.549 DATED OCTOBER 31, 1989 (1990) 182 ( ST.) 1, 29), WHICH READS AS FOLLOWS : 7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO R EINTRODUCE THE EXPRESSION REASON TO BELIEVE IN SECTION 147. A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS REASON TO BELIEVE FROM SECTION 147 AND THEIR SUBS TITUTION BY THE OPINION OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, REASON TO BELIEVE HAS BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WE LL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWE RS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MER E CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 19 89, HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION HAS REASON TO BELIEVE IN PLACE OF THE WORDS FOR REASONS TO BE R ECORDED BY HIM IN WRITING, IS OF THE OPINION. OTHER PROVISIONS OF TH E NEW SECTION 147, HOWEVER, REMAIN THE SAME. FOR THE AFORESTATED REASONS, WE SEE NO MERIT IN THE SE CIVIL APPEALS FILED BY THE DEPARTMENT, HENCE, DISMISSED WITH NO O RDER AS TO COSTS. 17. HONBLE BOMBAY HIGH COURT ALSO HAD OCCASION TO CONSIDER THE IDENTICAL ISSUE IN CASE OF CARTINI INDIA LTD. VS. ADDL. CIT (SUPRA). IN THAT CASE ASSESSEE FILED RETURN DECLARING LOSS IN WHICH ASSES SEE HAD CLAIMED DEDUCTION OF THE ENTIRE PROJECT LAUNCH EXPENSES INCURRED DURIN G THE PREVIOUS YEAR AS 14 REVENUE EXPENDITURE THOUGH THE SAME WAS SHOWN AS DE FERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS AND THE CLAIM WAS SPREAD OVER FOR A PERIOD OF 3 YEARS AND FURTHER THE CLAIM IN RESPECT OF TOOL S AND DIES ON THE BASIS OF REMAINING BALANCE USEFUL LIFE ON THE LAST DAY OF TH E PREVIOUS YEAR. THESE CLAIMS WERE ALLOWED IN THE ASSESSMENT ORDER PASSED U/S.143 (3). LATER ON INITIAL NOTICE U/S.154 WAS ISSUED ON THE GROUND THAT IN VIEW TO RE CTIFY ASSESSMENT ORDER ON THE GROUND THAT TAX RELIEF HAD BEEN GRANTED TO THE ASSE SSEE IN RESPECT OF THESE TWO CLAIMS. WITHOUT PASSING ANY ORDER U/S.154 ASSESSMEN TS WERE REOPENED AND NOTICE U/S.148 WAS ISSUED. 18. ON THE BASIS OF THE ABOVE FACTS THE REASSESSME NT PROCEEDINGS WERE QUASHED BY THE HONBLE BOMBAY HIGH COURT. THE HEAD NOTE OF THE DECISION READS AS UNDER :- REASSESSMENT- CHANGE OF OPINION-DIFFERENT VIEW ON SAME FACTS AND MATERIAL DURING THE ASSESSMENT PROCEEDINGS TH E AO WAS INITIALLY OF THE OPINION THAT THE DEDUCTION IN RESP ECT OF A CLAIM FOR TWO ITEMS WERE NOT ALLOWABLE AND HAD CALLED UPON TH E ASSESSEE TO EXPLAIN AS TO WHY DEDUCTION OF THE TWO ITEMS SHOULD NOT BE DISALLOWED-AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE AO HAD ALLOWED DEDUCTION OF BOTH THE ITEMS IN THE A SSESSMENT ORDER PASSED UNDER S.143(3) ONCE THE AO ENTERTAIN S A PRIMA FACIE BELIEF AT THE TIME OF ORIGINAL ASSESSMENT THA T CERTAIN DEDUCTION CANNOT BE ALLOWED IN VIEW OF THE ACCOUNTI NG SYSTEM ADOPTED BY THE ASSESSEE BUT DEEMS IT FIT TO ALLOW T HE DEDUCTION AS CLAIMED, BY PASSING AN ASSESSMENT ORDER UNDER S.143 (3) AFTER CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, IT IS NOT OPEN TO THE AO TO FORM A CONTRARY OPINION ON THE BASIS OF V ERY SAME MATERIAL AND REOPEN THE ASSESSMENT-WHAT S.147 CONTE MPLATES IS THE EXISTENCE OF MATERIAL ON RECORD ON THE BASIS OF WHICH A PRIMA FACIE OPINION CAN BE FORMED BY THE AO THAT ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND NOT THE MATERIAL ON RECORD ON THE BASIS OF WHICH A FINAL DECISION HAS ALREADY BEE N TAKEN AT THE TIME OF ASSESSMENT UNDER S.143(3) REOPENING OF AS SESSMENT BASED ON MATERIAL ALREADY CONSIDERED AND ADJUDICATE D WOULD AMOUNT TO REVIEWING THE ASSESSMENT ORDER BY DEPRECI ATING THE 15 MATERIAL ON RECORD WHICH IS NOT CONTEMPLATED UNDER S.147- IT IS NOT THE CASE OF THE REVENUE THAT THE REOPENING OF THE A SSESSMENT IS COVERED UNDER EXPLN.2 (C) TO S.147 BASED ON ANY MAT ERIAL OTHER THAN THE MATERIAL CONSIDERED BY THE AO AT THE TIME OF ASSESSMENT UNDER S.143(3)-THEREFORE, THE REOPENING OF THE ASSE SSMENT IS BASED ON MERE CHANGE OF OPINION AND CANNOT BE SUSTAINED-I MPUGNED NOTICE UNDER S.148 AS WELL AS THE ORDER PASSED BY T HE AO REJECTING THE OBJECTIONS RAISED BY THE ASSESSEE TO THE REOPEN ING OF THE ASSESSMENT ARE QUASHED AND SET ASIDE. 19. THUS FROM THE ABOVE IT BECOMES CLEAR THAT ASSE SSMENT CAN NOT BE REOPENED MERELY ON THE CHANGE OF OPINION. AS NOTIC ED ABOVE IN THE CASE BEFORE US THE ASSESSMENT IS MERELY REOPENED ON THE BASIS O F VERIFICATION OF RECORDS WHICH SHOWS THAT NO FRESH MATERIAL OR INFORMATION H AS CAME TO THE POSSESSION OF AO FOR FORMING THE REASON TO BELIEVE THAT INCOME HA S ESCAPED ASSESSMENT. SINCE THE DEDUCTION U/S.80IB WAS ALLOWED IN THE ORI GINAL ASSESSMENT U/S.143(3) THEREFORE, IT IS MERE CASE OF CHANGE OF OPINION. TH E DECISION IN THE CASE OF ACIT VS. RAJESH JAVERI STOCK BROKERS PVT. LTD RELIED ON BY THE LEARNED CIT (APPEALS) IS CLEARLY DISTINGUISHABLE BECAUSE IN THAT CASE ORI GINALLY THE RETURN WAS PROCESSED U/S.143(1) AND THE HONBLE SUPREME COURT HELD THAT IN SUCH CASE IT CANNOT BE SAID THAT ANY VIEW HAS BEEN FORMED. SIMIL ARLY THE DECISION IN THE CASE OF CIT VS. SHIVANAND ELECTRONICS (SUPRA) IS ALSO DI STINGUISHABLE BECAUSE THAT DECISION WAS RENDERED U/S.263 AND, THEREFORE, CONCE PT OF CHANGE OF OPINION IS NOT THERE. AS FAR AS THE DECISION OF HONBLE SUPREM E COURT IN CASE OF CIT VS. P.V.S BEEDIES PVT. LTD. CITED BY THE LEARNED CIT (A PPEALS) IS CONCERNED IN THAT CASE THE FACTS WERE AS UNDER :- FOR THE ASSESSMENT YEARS 1974-75 AND 1975-76, THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED BY THE INCOME TAX OFFICE R BY GRANTING DEDUCTION UNDER SECTION 80G OF THE INCOME-TAX ACT, 1961, ON ACCOUNT OF DONATION TO A CHARITABLE TRUST. THE INCO ME TAX OFFICER REOPENED THE ASSESSMENT UNDER SECTION 147(B) OF THE ACT ON THE GROUND THAT SUBSEQUENTLY IT WAS POINTED OUT BY THE INTERNAL AUDIT PARTY THAT THE RECOGNITION WHICH HAD BEEN GRANTED T O THE CHARITABLE 16 TRUST HAD EXPIRED ON SEPTEMBER 22, 1972, AND THEREF ORE, IN THE RELEVANT YEARS OF ACCOUNT THE TRUST WAS NOT A RECOG NISED CHARITABLE TRUST AND THAT THE DONATION MADE TO THE CHARITABLE TRUST DID NOT QUALIFY FOR DEDUCTION UNDER SECTION 80G OF THE ACT, AS A DONATION MADE TO A RECOGNISED CHARITY. THE TRIBUNAL HELD THA T THE INFORMATION GIVEN BY THE INTERNAL AUDIT PARTY COULD NOT BE TREATED AS INFORMATION WITHIN THE MEANING OF SECTION 147(B) OF THE ACT. ON A REFERENCE, THE HIGH COURT AFFIRMED THE ORDER OF T HE TRIBUNAL. ON APPEAL OF THE SUPREME COURT : 20. ON THE ABOVE FACTS THE HONBLE SUPREME COURT H ELD AS UNDER : HELD, ALLOWING THE APPEAL OF THE DEPARTMENT, THAT THE INTERNAL AUDIT PARTY HAD MERELY POINTED OUT A FACT WHICH HAD BEEN OVERLOOKED BY THE INCOME-TAX OFFICER IN THE ASSESSM ENT. THE FACT THAT THE RECOGNITION GRANTED TO THE CHARITABLE TRUS T HAD EXPIRE ON SEPTEMBER 22, 1972, WAS NOT NOTICED BY THE INCOME T AX OFFICER. THIS WAS NOT A CASE OF INFORMATION ON A QUESTION OF LAW. THE INTERNAL AUDIT PARTY WAS ENTITLED TO POINT OUT A FA CTUAL ERROR OR OMISSION IN THE ASSESSMENT. REOPENING OF A CASE ON THE BASIS OF A FACTUAL ERROR POINTED OUT BY THE AUDIT PARTY WAS PE RMISSIBLE UNDER LAW. THEREFORE, THE REOPENING OF THE ASSESSMENT WAS VALID. 21. THUS FROM THE ABOVE IT IS CLEAR THAT ASSESSMEN T CAN BE REOPENED WHEN SOME FACTUAL ERROR IS POINTED OUT BY THE INTER NAL AUDIT PARTY OF THE DEPARTMENT. THOUGH THIS DECISION WAS RENDERED UNDER THE OLD PROVISION OF SECTION 147 WHERE THERE WHERE TWO LIMBS OR CONDITIO NS REQUIRED FOR REOPENING OF THE ASSESSMENT. THE RELEVANT PROVISION AS STOOD THEN READS AS UNDER :- 147 A) THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT, BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE ASSESSING OFFICER OR TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR, OR B) NOTWITHSTANDING THAT HERE HAS BEEN NO OMISSION O R FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE , THE ASSESSING OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS PO SSESSION REASON 17 TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT FOR ANY ASSESSMENT YEAR 22. THUS UNDER CLAUSE (B) EVEN IF THERE WAS NO OMI SSION OR FAILURE TO DISCLOSE MATERIAL FACTS BUT AO IN CONSEQUENCE OF IN FORMATION IN HIS POSSESSION COULD STILL REOPEN THE ASSESSMENT. THE HONBLE SUPR EME COURT HELD THAT U/S.147(B) THE INFORMATION GIVEN IN RESPECT OF FACT UAL ERROR BY THE INTERNAL AUDIT WING OF THE DEPARTMENT WOULD CONSTITUTE THE INFORMA TION FOR REOPENING OF THE ASSESSMENT. IN THIS CASE THERE WAS NO OCCASION TO D EAL WITH THE ISSUE REGARDING CHANGE OF OPINION. IN ANY CASE, IN THE CASE BEFORE US THE ASSESSMENT HAS BEEN REOPENED ON THE VERIFICATION OF THE RECORDS WHICH W AS ALREADY AVAILABLE WITH THE AO AND NOT ON THE BASIS OF ANY INFORMATION RECEIVED FROM INTERNAL AUDIT. THEREFORE, THIS CASE IS NOT RELEVANT FOR THE ISSUE BEFORE US. THEREFORE, IN OUR VIEW IN THE CASE BEFORE US THE ASSESSMENT HAS BEEN WRONGLY REOPENED MERELY ON THE BASIS OF CHANGE OF OPINION AND ACCORDINGLY, WE ANNUL THE REASSESSMENT PROCEEDINGS. 23. IN RESPECT OF GROUND NO.3 & 4 THE LEARNED COUN SEL OF THE ASSESSEE SUBMITTED THAT EVEN ON MERITS THE CLAIM WAS ALLOWAB LE BECAUSE IN ANY CASE THE AUDIT REPORT WAS FILED DURING THE REASSESSMENT PROC EEDINGS PARTICULARLY VIDE LETTER DATED 26.02.2008. HE ARGUED THAT WITHOUT GET TING INTO THE CONTROVERSY REGARDING FILING OF RETURN ON 18.03.2006 OR 27.03.2 006 THE FACT REMAINS THAT EVEN DURING REASSESSMENT PROCEEDINGS THE AUDIT REPO RT WAS DULY FILED AND THIS FACT HAD BEEN ADMITTED EVEN BY THE LEARNED CIT (APP EALS) AT PAGE 3 OF HIS ORDER. THE AO SHOULD HAVE ALLOWED THE DEDUCTION U/S .80IB BECAUSE SIMILAR DEDUCTION IN ANY CASE HAD BEEN ALLOWED BY THE TRIBU NAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 IN ITA NO.8504/MUM/2004 WHICH WAS PUBLISHED IN 8 SOT 691 (MUM) AND DEPARTMENT HAD NOT FILED ANY APPEAL A GAINST THAT ORDER. IN ANY CASE VARIOUS HIGH COURTS HAVE ALREADY HELD THAT FI LING OF THE AUDIT REPORT FOR 18 CLAIMING THE DEDUCTION UNDER VARIOUS SECTIONS OF CH APTER VI IS NOT MANDATORY AND IN THIS REGARD HE RELIED ON THE FOLLOWING DECIS IONS :- 1) MURALI EXPORT HOUSE & OTHERS VS. CIT (1999) 238 I TR 257 (CAL) 2) CIT VS. CONTIMETERS ELECTRICALS (P) LTD 317 ITR 249 (DEL) 3) CIT VS. MAGNUM EXPORT (P) LTD. 262 ITR 10 (CAL) 4) CIT VS. ACE MULTITAXES SYSTEMS PVT LTD 317 ITR 207 (KAR) 5) VISHWANATH PRODUCTS VS. DCIT 117 TTJ 0549(LUCK) 24. ON THE OTHER HAND LEARNED DR RELIED ON THE ORD ER OF THE LEARNED CIT (APPEALS). 25. WE HAVE CONSIDERED THE RIVAL SUBMISSION CAREFU LLY. IT HAS NOT BEEN DENIED BEFORE US THAT AUDIT REPORT WAS SUBMITTED DU RING REASSESSMENT PROCEEDINGS IN FACT THE LEARNED CIT (APPEALS) HIMSE LF HAD MENTIONED AT PAGE 3 OF HIS ORDER THAT APPELLANT HAD FILED AUDIT REPORT DURING REASSESSMENT PROCEEDINGS. THEREFORE, THE AUDIT REPORT WAS AVAILA BLE DURING THE REASSESSMENT PROCEEDINGS THEN THE DEDUCTION U/S.80IB SHOULD HAVE BEEN ALLOWED BECAUSE ON MERIT IT HAD ALREADY BEEN HELD TO BE ALLOWABLE FOR A.Y. 2001-02 BY THE TRIBUNAL AND REVENUE HAD NOT FILED ANY APPEAL AGAINST THAT O RDER. FURTHER IT HAS BEEN HELD BY VARIOUS HIGH COURTS THAT FILING OF SUCH AUDIT RE PORTS IS NOT MANDATORY AND THE SAME CAN BE FILED AT ANY STAGE OF THE PROCEEDINGS. IN FACT HONBLE CALCUTTA HIGH COURT IN THE CASE OF MURALI EXPORT HOUSE & OTHERS VS. CIT (1999) 238 ITR 257, HONBLE DELHI HIGH COURT IN CASE OF CIT VS. C ONTIMETERS ELECTRICALS (P) LTD 317 ITR 249 AND HONBLE KARNATAKA HIGH COURT I N CASE OF CIT VS. ACE MULTITAXES SYSTEMS PVT LTD 317 ITR 207 ALSO HELD TH E SAME. THUS EVEN IF THE AUDIT REPORT WAS FILED DURING THE REASSESSMENT PROC EEDINGS EVEN THEN THE DEDUCTION SHOULD HAVE BEEN ALLOWED. THEREFORE, IN O UR VIEW EVEN ON MERIT THE DEDUCTION SHOULD HAVE BEEN ALLOWED DURING THE REASS ESSMENT PROCEEDINGS AND WE ACCORDINGLY, SET ASIDE THE ORDER OF THE LEARNED CIT (APPEALS) AND DIRECT THE AO TO ALLOW THE DEDUCTION U/S.80IB. 19 26. GROUND NO. 5 IS REGARDING LEVYING INTEREST U/S .234A, 234B AND 234C OF THE I.T. ACT WHICH IS OF CONSEQUENCE NATURE AND ACCORDINGLY, AO DIRECT TO LEVY INTEREST AS PER THE PROVISION OF THE SECTIO N. 27. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED ON THIS 7 TH DAY OF JANUARY, 2011. SD/- SD/- (R. S. PADVEKAR) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 07.01.2011. COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B- BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI FIT FOR PUBLICATION (J.M.) (A.M.)