M/s. LUPINLABORATORIES LTD., MUMBAI V. JT. CIT SPL. Rg. - 6, MUMBAI

ITA 4951/MUM/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7218 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 08-02-2010
• Assessment Year: 1993-1994
• Appeal Filed On: 08-07-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Keywords: Reopening of assessment; Depreciation; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings; Set aside
• Section: 43B; 143(3); 80HHC; 37(1); 195; 80IA; 80HH; 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4951/MUM/2005 (ASSESSMENT YEAR: 1993-94) M./S. LUPIN LABORATORIES LTD. JCIT, SPECIAL RANGE 6 (NOW KNOWN AS LUPIN LTD.) MUMBAI 159, CST ROAD, SANTACRUZ (E) VS. KALINA, MUMBAI 400098 PAN - AAACL 1121 E APPELLANT RESPONDENT ITA NO. 4906/MUM/2005 (ASSESSMENT YEAR: 1993-94) ACIT 10(1) M./S. LUPIN LABORATORIES LTD. ROOM NO. 455, AAYAKAR BHAVAN (NOW KNOWN AS LUPIN LT D.) M.K. ROAD, MUMBAI 400020 VS. 159, CST ROAD, SANTACRUZ (E) KALINA, MUMBAI 400098 PAN - AAACL 1121 E APPELLANT RESPONDENT ASSESSEE BY: MS. VASANTI PATEL REVENUE BY: MS. VANDANA SAGAR O R D E R PER B. RAMAKOTAIAH, A.M. THESE CROSS APPEALS ARE BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE CIT(A) X, MUMBAI DATED 09.05.2005. 2. ASSESSEE COMPANY HAS SINCE MERGED WITH LUPIN CHEMIC ALS LTD. AND NOW KNOWN AS LUPIN LTD. THE ASSESSEE HAS FILED RETU RN OF INCOME FOR ASSESSMENT YEAR 1993-94 ON 16.08.1994 WHICH WAS PRO CESSED UNDER SECTION 143(1A) ON 18.10.1995. THE ASSESSMENT UNDER SECTION 143(3) WAS DONE ON 18.03.1996 ASSESSING THE TOTAL INCOME AT RS.1,21,47 5/- . WHILE DOING SO THE A.O. HAS RECOMPUTED THE DEDUCTION UNDER SECTION 80H HC AND 80_I AND MADE VARIOUS DISALLOWANCES OF EXPENDITURE AND DEPRE CIATION BUT ALLOWED THE DEDUCTION UNDER SECTION 80HHC AS CLAIMED BY THE ASS ESSEE AT RS.1,04,56,000/-. THE A.O. ALSO INITIATED PENALTY P ROCEEDINGS UNDER SECTION ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 2 271B FOR FILING TAX AUDIT REPORT LATE ALONG WITH TH E RETURN ON 16.08.1994. PROCEEDINGS UNDER SECTION 148 WAS INITIATED BY RECO RDING THE FOLLOWING REASONS FOR REOPENING: - ON PERUSAL OF RECORDS IT IS SEEN THAT 80HHC DEDUCT ION WAS WRONGLY BEEN COMPUTED AS THE TOTAL INCOME OF BUSINESS IS NO T TAKEN BUT ONLY PROFIT OF UNITS ARE TAKEN. HENCE, DEDUCTION UNDER S EC. 80HHC IS WRONGLY CLAIMED AND IS IN EXCESS OF WHAT IS ADMISSIBLE. HEN CE, INCOME OF THE YEAR HAS ESCAPED ASSESSMENT UNDER SEC. 147, EXPLANA TION (C) (III) AND (IV) OF THE INCOME TAX ACT. 3. SUBSEQUENTLY THE NOTICE UNDER SECTION 148 WAS ISSUE D ON 06.10.1997 AND REVISED RETURN WAS FILED ON 24.10.1997 AND REAS SESSMENT WAS COMPLETED ON 22010.1999. THE REVISED INCOME WAS ASS ESSED AT RS.172.77 LAKHS. ASSESSEE HAS CHALLENGED THE REOPENING OF ASS ESSMENT AS WELL AS VARIOUS OTHER DISALLOWANCES OR ADJUSTMENTS MADE BY THE A.O. IN THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING THE ACTION OF THE ASSESSING OFFICER IN RE-OPENING THE ASSESSME NT UNDER SECTION 147 OF THE INCOME TAX ACT. 2. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER (APP EALS) OUGHT TO HAVE APPRECIATED THAT THE REASSESSMENT ORDER UNDER SECTION 147 WAS BAD IN LAW AS THE LEARNED ASSESSING OFFICER HAD NOT DISPOSED OF THE OBJECTIONS OF THE APPELLANT BY A SPEAKING OR DER BEFORE PROCEEDINGS WITH THE ASSESSMENT. 3. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT SINCE NOTICES UNDER SECTION 143(2) IN RESPECT OF RE TURN FILED IN PURSUANCE TO NOTICE UNDER SECTION 148 WERE ISSUED A FTER THE EXPIRY OF TIME PRESCRIBED UNDER SECTION 143(2), THE ASSESS MENT UNDER SECTION 143(3) R.W.S. 147 WAS BAD IN LAW AND THEREF ORE OUGHT TO BE QUASHED. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLD ING THAT THE PROVISIONS OF SECTION 143(2) ARE NOT APPLICABLE TO THE RETURNS FILED IN PURSUANCE TO NOTICE UNDER SECTION 148. 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE DISALLOWANCE OF AMORTISATION OF LEASEHOLD LAND OF R S.2,11,000. 6. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER (APP EALS) OUGHT TO HAVE APPRECIATED THAT AMORTISATION OF LEASEHOLD LAN D OF RS.2,11,000 WAS NOT THE SUBJECT MATTER FOR RE-OPENING OF THE AS SESSMENT UNDER SECTION 147 AND THEREFORE THE DISALLOWANCE OF AMORT ISATION OF LEASEHOLD LAND OF RS.2,11,000 OUGHT NOT TO BE MADE. 7. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT COMPUTATION OF DEDUCTION UNDER SECTION 80HH, 80I AD DITION 80IA WERE NOT THE SUBJECT MATTER FOR RE-OPENING OF THE A SSESSMENT UNDER ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 3 SECTION 147 AND THEREFORE THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE HELD THAT RECOMPUTATION OF DEDUCTION UNDER SECTION 80HH AND SECTION 80I AND 80IA OUGHT NOT TO HAVE BEE N MADE. 8. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE DEDUCTION UNDER SECTION 80HHC ON THE BASIS OF THE COMPANY AS A WHOLE AS AGA INST ON THE BASIS OF EACH BUSINESS UNIT SEPARATELY AS COMPUTED BY THE APPELLANT. 9. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE HELD THAT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC( 3), THE LOSS UNDER SECTION 80HHC(3)(A)/(B)/(C) ARE TO BE IGNORED AND THE APPELLANT WAS ENTITLED TO DEDUCTION UNDER SECTION 8 0HHC ON 90 PER CENT OF EXPORT INCENTIVES. 10. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAV E DIRECTED THE ASSESSING OFFICER NOT TO EXCLUDE 90 PER CENT OF THE FOLLOWING ITEMS FROM THE PROFITS OF THE BUSINESS UNDER EXPLANATION (BAA) OF SECTION 80HHC: A. EXPENSES RECOVERED RS.125.69 LAKHS B. EXCESS RECOVERY FROM SUNDRY DEBTORS RS.111.70 L AKHS C. INSURANCE RS. 11.45 LAKHS D. IDBI INTEREST REBATE RS. 5.72 LAKHS E. PROVISION WRITTEN BACK RS. 3.14 LAKHS 11. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO CONSIDER NET INTEREST INCOME A ND NOT GROSS INTEREST INCOME RECEIVED FROM DEBTORS OF RS.33.08 L AKHS FOR THE PURPOSE OF EXPLANATION (BAA) TO SECTION 80HHC. 12. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DELETING THE INTEREST UNDER SECTION 234B. 13. EACH OF THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO THE OTHER. 4. REVENUE IS ALSO AGGRIEVED ON CERTAIN RELIEFS GRANTE D BY THE CIT(A) AND HAS RAISED GROUND NOS. 1 TO 11AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER THAT ON INTEREST FROM IDBI, INCOME FROM SERVICES AND INTERE ST RECEIVED FROM BANK DEPOSIT, 80IA SHOULD BE ALLOWED, WITHOUT APPRE CIATING THE FACT THAT DEDUCTION U/S. 80IA IS ADMISSIBLE ON INCOME DE RIVED FROM INDUSTRIAL UNDERTAKING AND NOT INCOME ATTRIBUTABLE TO INDUSTRIAL UNDERTAKING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S. 80HH AND 80I IN RESPECT OF INTEREST RECEIVED FROM CUSTOMERS FOR DELAYED PAYMENTS AND EXCESS RECOVERY RECEIVED FROM DEBTORS WITHOUT APPRECIATING THE FACT THAT THIS INC OME CANNOT BE TERMED AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKIN G. ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 4 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER THAT BENEFIT OF 80I HAS TO BE GRANTED ON THE GROSS TOTAL INCOME AND NOT ON THE INCOME REDUCED BY THE AMOUNT OF DEDUCTION ALLOW ED U/S. 80HH WITHOUT TAKING INTO ACCOUNT SECTION 80IA(9). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE EXCISE DUTY AND SALES TAX FROM THE TOTA L AMOUNT OF TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S . 80HHC. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER THAT RECEIPTS LIKE EXPENSES RECOVERED, IDBI INTEREST REB ATE, INTEREST INCOME, ONLY 90% OF THE NET AND NOT GROSS AMOUNT OF INTEREST IS TO BE EXCLUDED FROM THE PROFITS OF THE BUSINESS WHILE CAL CULATING DEDUCTION U/S. 80HHC WITHOUT APPRECIATING THE FACT THAT ONLY THOSE EXPENSES CAN BE REDUCED FROM INTEREST INCOME WHICH HAS NEXUS WITH THE EARNING OF THE INCOME. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER THAT INTEREST INCOME RECEIVED FROM THE CUSTOMERS FOR DEL AYED PAYMENT OF SALE CONSIDERATION AND EXCESS RECOVERY FROM DEBTORS SHOULD BE CONSIDERED FOR ALLOWANCE OF DEDUCTION U/S. 80HHC AF TER ALLOWING THE NETTING OF EXPENSES, WITHOUT APPRECIATING THE F ACT THAT NETTING OF EXPENSES IS PERMITTED ONLY WHERE THE EXPENSES (LIKE INTEREST) HAVE NEXUS WITH THE EARNING OF THE INCOME. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE U/S. 41(1) BY THE ASSESSING OFFICER IN RESPECT OF INSURANCE CL AIM RECEIVED WITHOUT APPRECIATING THE FACT THAT SUCH RECEIPTS SH ALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS AND PROFESSION AND ACCORDINGLY CHARGEABLE TO TAX AS INCOME OF THAT PREVIOUS YEAR I N WHICH SUCH AN AMOUNT IS RECEIVED. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER THAT PROCESSING CHARGE RECEIPTS CANNOT BE EXCLUDED FROM THE PROFITS OF THE BUSINESS UNDER EXPLANATION (BAA) OF SECTION 80H HC WITHOUT APPRECIATING THE FACT THAT INCOME FROM PROCESSING C HARGES IS NOT INCOME ON EXPORT BUSINESS AND HENCE 90% IS REQUIRED TO BE EXCLUDED FROM THE PROFITS OF THE BUSINESS. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.4,27,374/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES . 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.61,000/- MADE U/S. 43B IN RESPECT OF LATE PAYMEN T OF PF CONTRIBUTION. ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 5 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF ENTERTAINMENT EXPENSES OF RS.10,32,947/-. 5. ASSESSEES COUNSEL HAS NOT PRESSED GROUND NOS. 2, 7 , 9, 10 & 11 IN THEIR APPEAL IN VIEW OF THE CHANGE OF LAW. ACCORDI NGLY THESE GROUNDS ARE CONSIDERED WITHDRAWN. 6. THE MAIN ISSUE OF CONTENTION IN ASSESSEE APPEAL APA RT FROM MERITS IS ON THE REOPENING OF THE ASSESSMENT UNDER SECTION 14 7 COVERED BY GROUND NO. 1. GROUND NOS. 3 & 4 DOES NOT REQUIRE ADJUDICAT ION IN VIEW OF THE AMENDMENT TO THE ACT BROUGHT TO SECTION 148 BY THE FINANCE ACT 2006 RETROSPECTIVELY W.E.F. 01.10.1991. 7. ISSUE OF REOPENING: - AS STATED BRIEFLY ABOVE THE ASSESSMENT IN THIS CASE WAS ORIGINALLY COMPLETED UNDER SECTION 143(3) AND WITHIN 4 YEARS THE REASSESSMENT PROCEEDINGS WERE INITIATED IN TERMS OF EXPLANATION (C)(III) & (IV) OF SECTION 147 WITH REFERENCE TO EXCESS ALLOWANCE O F 80HHC DEDUCTION. THE ASSESSEE HAS CONTESTED THE SAME BEFORE THE CIT(A) A ND THE CIT(A) HAS REJECTED THE CONTENTIONS AND HELD THAT REOPENING WA S CORRECT AFTER DISCUSSING VARIOUS JUDICIAL PRINCIPLES FROM PAGE 2 TO 16 FOR ASSESSMENT YEARS 1993-94, 1994-95 AND 1996-97. ALL THE THREE ASSESSM ENTS WERE REOPENED ON SIMILAR LINES AND THE CIT(A) HAS CONSIDERED IN THE COMMON ORDER. THE LEARNED COUNSEL REFERRING TO THE ORDER OF THE CIT(A ) CONTENTIONS SUBMITTED THAT THE A.O. HAS FAILED TO CONSIDER THAT THE ASSES SEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS ON THE ISSUE OF ALLOWABILI TY OF DEDUCTION UNDER SECTION 80HH, 80I AND 80HHC AND THUS THE PROCEEDINGS UNDER SECTION 148 WERE BAD IN LAW. IT WAS FURTHER SUBMITTED THAT THE ASSES SEE HAD MADE FULL DISCLOSURE OF ALL MATERIAL FACTS AND ENCLOSED AUDIT REPORT AND THE A.O. DULY VERIFIED AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) AND SINCE THE ASSESSEE HAS DISCHARGED THE ONUS CAST UPON IT THE A .O. SHOULD NOT HAVE SOUGHT TO REOPEN THE ASSESSMENT ON WRONG INTERPRETA TION OF LAW AND THE SAME WILL NOT BE PERMISSIBLE. IT WAS FURTHER SUBMIT TED THAT THE FACTS DISCLOSED BY THE ASSESSEE IN CLAUSE 18 OF ANNEXURE- A TO FROM NO. 10CCA, NOTE 5 TO THE COMPUTATION OF TOTAL INCOME AND ON TH E BASIS OF DETAILED ENQUIRY MADE IN RESPECT OF DEBENTURE ISSUE EXPENSE S, DEDUCTION UNDER SECTION 80HHC, 80HH AND 80I AND 37(1) ARE ALLOWED. IT WAS SUBMITTED THAT ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 6 THE A.O. WAS NOT EMPOWERED TO REOPEN THE ASSESSMENT ON THE GROUND THAT DEDUCTION UNDER SECTION 80HHC WAS ERRONEOUSLY OR EX CESSIVELY ALLOWED ON THE LEGAL INFERENCES DRAWN IN ORIGINAL ASSESSMENT. IT IS FURTHER SUBMITTED THAT THE ORIGINAL ASSESSMENT FOR THE YEAR UNDER CON SIDERATION WAS COMPLETED UNDER SECTION 143(3), THUS PRESUMPTIONS CAN BE RAIS ED THAT SUCH AN ORDER HAS BEEN MADE AFTER APPLICATION OF MIND. 8. THE LEARNED COUNSEL REFERRED TO THE REASONS FOR REO PENING AND SUBMITTED THAT THE ENTIRE BASIS FOR REOPENING IS TH E PERUSAL OF RECORD WHERE THE ENTIRE INFORMATION HAS BEEN FILED AND SEC.80HHC DEDUCTION WAS ORIGINALLY ALLOWED AFTER FULL DISCLOSURE OF ALL MAT ERIAL FACTS. THE FORMATION OF OPINION SUBSEQUENTLY THAT DEDUCTION UNDER SECTION 8 0HHC WAS EXCESSIVELY ALLOWED CAN ONLY BE CONSIDERED AS A CHANGE OF OPINI ON AS A.O. ORIGINALLY HAD CONSIDERED ALL MATERIAL ON RECORD AND EXPLANATION O FFERED AND ARRIVED AT A CONCLUSION THAT THE ASSESSEE WAS ENTITLED TO DEDUCT ION AS CLAIMED. THEN ON THE BASIS OF THE VERY SAME MATERIAL HE CANNOT FORM A PRIMA FACIE OPINION THAT THE DEDUCTION IS NOT ALLOWABLE AND, HENCE, REO PENING OF THE ASSESSMENT IS BAD IN LAW IN VIEW OF THE DECISIONS OF THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF SIEMENS INFORMATION SYSTEMS LTD. 295 IT R 333 AND ASIAN PAINTS LTD. 308 ITR 195. FURTHER THE HON'BLE SUPREME COURT DECISION IN THE CASE OF KELVINATOR OF INDIA LTD. 320 ITR 561 ALSO SUPPORTS THE CONTENTIONS WHEREIN IT WAS HELD THAT THE ASSESSMENT CANNOT REOPEN ON TH E BASIS OF MERE CHANGE OF OPINION. WITH REFERENCE TO THE MERITS ON THE BAS IS FOR REOPENING THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS CLA IMED DEDUCTION UNDER SECTION 80HHC ON THE PROFITS OF THE UNITS DIFFERENT LY LOCATED FOR WHICH BOOKS WERE SEPARATELY MAINTAINED, ON THE BASIS OF VARIOUS CASE LAWS AVAILABLE AT THAT POINT OF TIME AND THE ASSESSEES STAND WAS ACC EPTED BY THE ITAT ALSO IN VARIOUS ORDERS WHICH ARE PLACED ON RECORD FROM A.Y. 1988-89 ONWARDS. IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT THE ISSUE WHETHER THE DEDUCTION UNDER SECTION 80HHC IS TO BE ALLOWED QUA ASSESSEE OR QUA BUSINESS AND REFERRED TO THE ORDERS OF THE ITAT WHE REIN THE ASSESSEE SUCCEEDED IN GETTING THE DEDUCTION AS CLAIMED ON TH E BASIS OF QUA BUSINESS, I.E. FOR SEPARATE UNIT FOR WHICH BOOKS OF ACCOUNTS ARE MAINTAINED INDEPENDENTLY. IT WAS SUBMITTED THAT IN VIEW OF THE ORDERS OF THE ITAT ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 7 ALLOWING ASSESSEES CONTENTION IN EARLIER YEARS THE RE IS NO CASE FOR REOPENING THE ASSESSMENT ON MERITS ON THE OPINION THAT EXCESS DEDUCTION WAS ALLOWED. SINCE THE A.O. ORIGINALLY HAS CONSIDERED THE ISSUE CORRECTLY, EVEN ON MERITS, THERE IS NO CASE FOR REOPENING. 9. THE LEARNED D.R., HOWEVER, WHILE ADMITTING THAT THE ISSUE OF REOPENING ON MERITS WAS HELD AGAINST THE REVENUE IN EARLIER Y EARS CONTESTED THAT PROVISIONS OF SECTION 147, MORE SO EXPLANATION 2(C) WILL PERMIT REOPENING OF ASSESSMENT WITHIN 4 YEARS AND THE A.O. HAS RECORDED HIS REASONS SPECIFICALLY INVOKING EXPLANATION C(III) AND C(IV), HENCE, REOPENING IS CORRECT. HE ALSO RELIED ON VARIOUS CASE LAWS TO SUBMIT THAT REOPENING WITHIN 4 YEARS IS CORRECT ON THE BASIS OF THE PROVISIONS OF THE AC T. 10. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE ORDE RS THE ONLY REASON FOR REOPENING IS THE WRONG COMPUTATION OF 80HHC DED UCTION. IT WAS THE OPINION OF THE A.O. THAT 80HHC DEDUCTION HAS WRONGL Y BEEN COMPUTED AS THE TOTAL INCOME OF THE BUSINESS WAS NOT TAKEN, BUT ONLY PROFITS OF UNITS ARE TAKEN. HENCE, DEDUCTION UNDER SECTION 80HHC WAS WRO NGLY CLAIMED AND IS EXCESS OF WHAT IS ADMISSIBLE. ON THIS ISSUE, AS SUB MITTED, THE ASSESSEE WAS SUCCESSFUL IN ALL THE EARLIER YEARS AS FAR AS THE C LAIM OF 80HHC IS CONCERNED. THE ORDERS OF THE ITAT IN ITA NO. 3314/MUM/2005 FOR A.Y. 2000-01 DATED 23.09.2008 ARE AS UNDER: - 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES ALONG WITH THE JUDGEMENTS REL IED UPON BY THE PARTIES. FROM THE PERUSAL OF THE JUDGMENT IN THE CA SE OF M GANI & CO. (SUPRA), WE FIND THAT THE ASSESSEE IS ENTITLED TO T HE ALLOWABILITY OF DEDUCTION U/S 80HHC WITH THE TURNOVER OF QUA ASSESS EE AND NOT THE QUA BUSINESS, WHEN ASSESSEE HAVING MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR DIFFERENT BUSINESS WHICH IS THE CASE IN THE INS TANT CASE ALSO. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E CIT(A) ORDER IS SET ASIDE ON THIS ISSUE AND AO IS DIRECTED TO RECOMPUTE ALLOWABILITY OF DEDUCTION U/S 80HHC QUA BUSINESS AND NOT QUA ASSESS EE AS SEPARATE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE FOR BU LK DRUGS, FORMULAS, EXPORT DIVISIONS ETC. THE MERGER OF ACCOUNTS AT THE HEAD OFFICE FOR MAKING OF SINGLE PROFIT AND LOSS ACCOUNT WILL NOT COME IN THE WAY, AS SUCH MERGER IS ONLY FOR THE LIMITED PURPOSE OF MAKING T HE FINANCIAL STATEMENTS AS BOOKS OF ACCOUNTS IS ALLOWABLE. ACCORDINGLY, GROUND 3 IS ALLOWED. 11. FOLLOWING THIS ORDER, THE ITAT IN ITA NO. 2445/MUM/ 2005 FOR A.Y. 1996-97 ALSO ALLOWED THE CLAIM OF THE ASSESSEE. HEN CE, ON MERITS THE ISSUE ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 8 IS IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE OPIN ION FORMED BY THE A.O. ORIGINALLY ALLOWING DEDUCTION AS CLAIMED CANNOT BE STATED TO BE WRONG AS NO EXCESS DEDUCTION WAS ALLOWED. SINCE, THERE IS NO NE W MATERIAL AVAILABLE FROM THE TIME ORIGINAL ASSESSMENT HAS BEEN COMPLETED AND THE TIME TILL THE REOPENING THE OPINION EXPRESSED BY THE LATER OFFICE R AT THE TIME OF RECORDING REASONS CAN ONLY BE CONSIDERED AS MERE CHANGE OF OP INION. IN THE CASE OF SIEMENS INFORMATION SYSTEMS LTD. 295 ITR 333 THE HO N'BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE FACTS AND DECIDED THE ISSUE THAT MERE CHANGE OF OPINION IS NOT SUFFICIENT IF, IN ORIGINAL ASSESS MENT DEDUCTION UNDER SECTION 10A WAS ALLOWED. IN THE SAID CASE IT WAS HELD THAT IN ORDER TO ISSUE A NOTICE OF REASSESSMENT THE ASSESSING OFFICER MUST HAVE REA SON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. WH EN CHALLENGE IS MADE TO A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT , WHAT THE COURT IS REQUIRED TO EXAMINE IS WHETHER MATERIAL EXISTS ON R ECORD FOR THE ASSESSING OFFICER TO FORM THE REQUISITE BELIEF. A MERE CHANGE OF OPINION ON THE INTERPRETATION OF A PROVISION BY ITSELF WITHOUT ANY THING MORE, CANNOT GIVE RISE TO REASON TO BELIEVE. 12. SIMILARLY IN THE CASE OF ASIAN PAINTS LTD. 308 ITR 195 (BOM) FOLLOWING THE DECISION OF THE DELHI FULL BENCH IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 1,IT WAS CONSIDERED AND DECIDED AS UN DER: - HELD, ALLOWING THE PETITION, THAT INITIATION OF RE ASSESSMENT PROCEEDINGS WOULD AMOUNT TO CHANGE OF OPINION OF THE ASSESSING OFFICER AS IT WAS MERELY A FRESH APPLICATION OF MIND BY THE ASSESSING OFFICER TO THE SAME SET OF FACTS. SINCE THE ASSESSING OFFICER HAD FAILE D TO APPLY HIS MIND TO THE RELEVANT MATERIAL WHILE FRAMING THE ASSESSMENT ORDER, HE COULD NOT TAKE ADVANTAGE OF HIS OWN WRONG AND REOPEN THE ASSE SSMENT UNDER SECTION 147 OF THE ACT. 13. SIMILAR VIEW IS ALSO EXPRESSED BY THE HON'BLE BOMBA Y HIGH COURT IN THE CASE OF ASTEROIDS TRADING AND INVESTMENTS P. LT D. VS. DCIT 308 ITR 190 WHEREIN IT WAS HELD AS UNDER: - THE POWER CONFERRED UNDER SECTION 147 OF THE INCOM E-TAX ACT, 1961, CANNOT BE USED LIKE THE POWER OF REVIEW TO REOPEN T HE ASSESSMENT. UNDER SECTION 147 OF THE ACT, ASSESSMENTS CANNOT BE REOPE NED ON A MERE CHANGE OF OPINION. THE ASSESSEE-COMPANY CLAIMED DEDUCTION UNDER SECTIO N 80M OF THE INCOME-TAX ACT, 1961, IN RESPECT OF THE DIVIDENDS D ECLARED BY IT AGAINST ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 9 THE DIVIDENDS RECEIVED BY IT FOR THE ASSESSMENT YEA R 2003-04. THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFIC ER IN THE REGULAR ASSESSMENT ORDER. THEREAFTER, A NOTICE UNDER SECTIO N 148 OF THE ACT WAS ISSUED TO THE ASSESSEE-COMPANY STATING THAT THE DEP UTY COMMISSIONER OF INCOME-TAX HAD REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR 2003-04 HAD ESCAPED ASSESSMENT. THE OBJECTION FILED BY THE ASSESSEE-COMPANY TO THE ISSUE OF NOTIC E WAS REJECTED. ON A WRITE PETITION: HELD, ALLOWING THE PETITION, THAT THE ASSESSEE-COMP ANY HAD FULLY DISCLOSED MATERIAL FACTS NECESSARY FOR CLAIMING DED UCTION UNDER SECTION 80M OF THE ACT AND THERE WAS APPLICATION OF MIND BY THE ASSESSING OFFICER IN ALLOWING THE DEDUCTION CLAIMED BY THE AS SESSEE IN THE ASSESSMENT ORDER. THOUGH THE NOTICE UNDER SECTION 1 48 WAS ISSUED ON THE GROUND THAT THERE WAS REASON TO BELIEVE THAT IN COME HAD ESCAPED ASSESSMENT THERE WAS NEITHER ANY CHANGE OF LAW NOR HAD ANY NEW MATERIAL BEEN BROUGHT ON RECORD BETWEEN THE DATE OF THE ASSESSMENT ORDER AND THE DATE OF FORMATION OF OPINION BY THE D EPUTY COMMISSIONER OF INCOME-TAX. IT WAS MERELY A FRESH APPLICATION OF MIND BY THE OFFICER TO THE SAME SET OF FACTS AND THE REASSESSMENT PROCEEDI NGS WERE INITIATED BASED ON THE CHANGE OF OPINION OF THE OFFICER. 14. THE SPECIAL BENCH DECISION OF THE HON'BLE DELHI HIG H COURT IN THE CASE OF KELVINATOR OF INDIA LTD. 256 ITR 1 WAS UPH ELD BY THE HON'BLE SUPREME COURT 320 ITR 561 WHEREIN IT WAS HELD THAT THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION O F SECTION 147 OF THE INCOME-TAX ACT, 1961, BY THE DIRECT TAX LAWS (AMEND MENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSESSING OFFICER HA S TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, BUT THI S DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON M ERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AFTER APRIL 1, 1989 , THE ASSESSING OFFICER HAS POWER TO REOPEN THE ASSESSMENT, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMAT ION OF THE BELIEF. 15. IN ALL THE ABOVE REFERRED DECISIONS THE PROVISIONS OF EXPLANATION 2 TO SEC.148 WAS ALSO CONSIDERED. SINCE IN THIS CASE THE DEDUCTION UNDER SECTION 80HHC WAS ORIGINALLY CONSIDERED AND ALLOWED, WE SEE NO REASON TO COME TO A CONCLUSION THAT IT IS NOT A CHANGE OF OPINION. AS A LREADY DISCUSSED THE ISSUE ON MERITS IN EARLIER YEARS IS IN FAVOUR OF ASSESSEE . ON THE BASIS OF THE FACTS ITA NO. 4951 & 4906/MUM/2005 M./S. LUPIN LABORATORIES LTD. 10 AVAILABLE ON RECORD THE A.O. COULD NOT HAVE COME TO A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND WE ARE OF THE OPI NION THAT IT IS A MERE CHANGE OF OPINION BY THE SUBSEQUENT AO WHICH LED TO THE REASSESSMENT PROCEEDINGS. IN VIEW OF THE DECISIONS OF THE JURISD ICTIONAL HIGH COURT AS WELL AS THE HON'BLE SUPREME COURT IN THE ABOVE REFERRED CASES, WE ARE OF THE VIEW THAT THE ASSESSEE HAS TO SUCCEED ON THE FACTS OF TH E CASE AS NO CASE WAS MADE OUT BY THE REVENUE FOR REOPENING OF THE ASSESS MENT WITH PROPER REASONS. IT IS HELD THAT REASSESSMENT PROCEEDINGS A RE BAD IN LAW. ACCORDINGLY GROUND NO. 1 IS CONSIDERED ALLOWED. AS THE LEGAL ISSUE OF GROUND NO. 1 IS ALLOWED, THE OTHER ISSUES CONTESTED BY THE ASSESSEE AS WELL AS REVENUE BECOME ACADEMIC IN NATURE. SINCE THE VERY B ASIS OF THIS REASSESSMENT HAS BEEN CONSIDERED BAD IN LAW, SUBSEQ UENT ORDERS BECOME NONEST . IN VIEW OF THIS THERE IS NO NEED TO CONSIDER THE OTHER GROUNDS RAISED BY THE ASSESSEE AS WELL REVENUE IN RESPECTIVE APPEA LS ON MERITS OF THE ADDITIONS IN THE REASSESSMENT ORDER. 16. IN THE RESULT, ASSESSEES APPEAL IN ITA NO. 4951/MU M/2005 IS CONSIDERED ALLOWED AND REVENUES APPEAL IN ITA NO. 4906/MUM/2005 IS CONSIDERED DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH 2010. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 23 RD MARCH 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) X, MUMBAI 4. THE CIT X, MUMBAI CITY 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.