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M/s. Panasonic Energy India Co. Ltd, GIDC, Makarpura, Vadodara, V/s. Income Tax Officer, Ward 4 (1) Baroda
April, 28th 2014
         IN THE INCOME TAX APPELLATE TRIBUNAL
           AHMEDABAD "D" BENCH AHMADABAD
            ,  Û `'
            ,

            Before Shri D.K.Tyagi, Judicial Member and
                   ^ . .×, Û  
              Shri Anil Chaturvedi, Accountant Member
                ^   ,    ¢ 


                    ITA Nos. 1506 & 1507/Ahd/2010
                  Assessm ent Year :1995-06 & 1997-98
M/s. Panasonic Energy India Co. V/s . Income Tax Officer,
Ltd, GIDC, Makarpura,                 W ard 4 (1)
Vadodara,                             Baroda
                       PAN No. AAACL33 32K
           (Appellant)           ..           (Respondent)


         / By Appellant                 Sri Milin Mehta, A.R.
     ×   /By Respondent                 Shri K. C. Mathews, Sr.D.R
       /Date of Hearing                 15.04.2014
       /Date of Pronouncement           24.04.2014




                               ORDER

PER : Shri D.K. Tyagi, Judicial Member
      These are assessee's appeals against the separate orders of Ld.
CIT(A)-III, Baroda dated. 30-12-2009 & 31-12-2009.




2.    Since facts in both the years are similar, both were heard and are
being disposed off by passing a consolidated order by taking the facts for
assessment year 1995-96. The assessee has taken following grounds:-

      "1. The learned Commissioner of Income Tax (Appeal) erred
      in fact and in law in confirming the action of AO of reopening
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 2

        the assessment by invoking the provisions of section 147 of
        the Income Tax Act, 1961 and completing the assessment,
        commenced under invalid exercise of powers u/s 147 of the
        Act despite the fact that assessment u/s 143(3) was framed
        in the case of Appellant on 16.02.1998.

        2.    The learned Commissioner of Income Tax (Appeal)
        erred in fact and in law in confirming the action of AO in
        reopening the assessment on the basis of change in opinion
        relying on the papers already filed with the Return of Income
        and available at the time of original assessment u/s 143(3). It
        may be mentioned that reopening of assessment based on
        change of opinion is invalid.

        3.    The learned Commissioner of Income Tax (Appeal)
        erred in fact and in law in confirming the action of AO in
        allocating indirect expenses of Rs. 20,98,86,000/- instead
        expenses of Rs. 4,66,81,001/- to export of trading goods as
        done by the appellant, for the purpose of computing
        deduction u/s. 80HHC of the Income Tax Act, 1961.

        4.    The learned Commissioner of Income (Appeal) erred
        in fact and in law in confirming the action of AO in charging
        interest u/s. 234B of the Income Tax Act, 1961.

        5.   The learned Commissioner of Income Tax (Appeal)
        erred in fact and in law in confirming the action of the AO
        in recovering interest u/s. 244A of the Income Tax Act,
        1961."

3.      First two grounds relate to reopening of the assessment by the AO.

4.      Brief facts of the case are that assessment u/s. 143(3) of the Act
was finalized on 16-02-1998 and income was determined at Rs.
7,08,79,848/-. Thereafter a notice u/s. 148 of the Act was issued on 29-
03-2000.        In response, the assessee requested to treat its return of
income filed u/s. 139(2) in compliance of notice u/s. 148 of the Act. The
assessee objected to the reopening of the case. The AO dismissed the
objection of the assessee on the ground that while computing the
deduction u/s. 80HHC on the export of trading goods the assessee has
not allocated the entire indirect cost of business for the purpose of working
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                              Page 3

out deduction u/s. 80HHC. Instead the assessee had allocated only the
cost of Baroda unit on the plea that the entire export activity of trading
goods was carried out from Baroda. The AO found the submission of the
assessee not satisfactory and reduced the assessee's claim of deduction
u/s. 80HHC from Rs. 39,60,973/- to Rs. 20,99,054/-.

5.      Before Ld. CIT(A) the assessee's contention was that re-opening of
the assessment u/s. 147 of the Act was not proper since AO had already
framed regular assessment u/s. 143(3) of the Act. It was further submitted
that the reopening was done on the issues which were already considered
at the time of finalizing regular assessment u/s. 143(3) of the Act. To
substantiate his claim attention of the Ld. CIT(A) was drawn to the fact that
the issue of allocation of indirect cost to export of trading cost was
elaborately considered at the time of framing of assessment finalized u/s.
143(3) of the Act. Lengthy discussion had taken place and assessee had
also filed written reply clarifying its claim of depreciation.                           The AO
deliberated upon the issue of allocation of indirect cost to export of trading
goods for the purpose of working out the admissible deduction u/s.
80HHC. Since the issue raised by the AO in reassessment proceedings
was the same as considered by him at the time of finalizing the original
assessment, it amounts to change of opinion only.                               Therefore, placing
reliance on the following decisions:-




- Startronic Investment Consultants Pvt. Ltd vs. DCIT (ITA No.
2196/A/2002) ITAT, Ahd

- Asteroids Trading and Investments (P) Ltd. v. DCIT 308 ITR 190 (Bom)

- Garden Silk Mills (P) Ltd v DCIT & Anr. 237 ITR 668 (Guj)

- Dy. CIT v. Smithkline Beecham Consumer Brands Ltd. 126 Taxman 104
(Chd) (Mag)

- M P Rajya Van Vikas Nigam v. Dy. CIT 70 TTJ 927 (Ind.)
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 4

- Gruh Finance Ltd. v. Joint CIT(Assessment) 243 ITR 482 (Guj)

- Techspan India Pvt. Ltd v. ITO 283 ITR 1 (Del)

- CIT v. Kelvinator of India Ltd. 256 ITR 1 (Del). (FB)

it was submitted that reopening in this case has wrongly been done and
the same should be held to be abinitio void.

6.      Ld. CIT(A) however confirmed the action of the AO by observing as
under:-

        "4.2 I have considered the facts of the case, submissions made and
        the provisions of law. The case was reopened by the AO on the ground
        that the excess allowance under section 80 HHC on account: of
        incorrect working of indirect cost was given in the original assessment.
        From the records, it is apparent that the AO had examined this issue at
        the time of assessment and appellant's contention that the AO had
        allowed the deduction after looking into the issue is correct. From the
        reasons recorded it is also seen that at the time of reopening the case,
        the AO did not have the benefit of any fresh information. Thus, there
        was difference of opinion regarding the interpretation of law and facts.
        It is on this basis that the appellant has objected to reopening stating
        that reopening was based on merely change of opinion. The appellant
        has relied upon various case laws to the effect that a mere change of
        opinion is not sufficient for reopening of an assessment.

                Thus,       the        question   involved   here is whether the
        reopening is based             merely on some fanciful change of opinion or
        there is some thing more to it. In this case, the AO has reopened the
        case on the ground that excess relief was allowed under section
        80HHC. This is as per Section 147 Explanation 2(c)(iii) which reads
        as follows: " C ..............
        (iii) such income has been made the subject of excessive relief under
        this Act; or ............... "


               A bare reading of the above would show that this clause covers
        the situation where excess relief has been allowed after scrutiny
        assessment. That is, if after passing of the order u/s 143(3), the AO
        has reason to believe that excess relief has been allowed, he can
        reopen the case. In other words, even after application of mind, (the
        scrutiny assessment presupposes application of mind), excess relief is
        allowed, the same can be reopened. To put it differently, the legislature
        has envisaged a situation where even after application of mind, there is
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 5

        possibility of an under assessment. To plug this, the above referred
        provision of law was brought to statute book. There is no doubt that
        such situation to a large extent involves difference of opinion. Thus a
        reopening cannot be held invalid only because there has been
        difference of opinion, provided the difference of opinion is bona fide. In
        other wards reopening cannot be struck down by merely saying that
        there is a ' change of opinion'. This is not a magic ward. One has to be
        very careful and if change of opinion is based on bona fide belief of the
        AO, reopening has to be held to be valid even if at a later stage,
        additions made on such reopening may not be sustained. The
        argument that if excess relief has been allowed after scrutiny, the
        same cannot be reopened as it is always based on change of opinion
        is against the express provisions of law. Further, the argument that
        under assessment due to excess relief cannot be corrected under
        section 147 of the Act unless new facts or outside information is
        received is also to be rejected. Courts have held that a mere change of
        opinion without any basis would not be sufficient to invoke the
        provisions of section 147 of the Act. This is to safeguard against the
        review of the case without any basis. The Courts have not approved a
        change of opinion when it is for the purpose of review. But ion the
        present case, reopening is not for the purpose of review but the AO
        had come to a bona fide belief regarding exact amount of assessment.
        These safeguards laid down by the Courts should not be used to
        reframe the provisions of law itself. If change in the opinion that there
        is under assessment, is bona fide then reopening has to be held to be
        valid.'. In the present case, the AO has recorded the reasons as
        follows:

        "REASONS RECORFDED FOR THE ISSUE OF NOTICE UNDER
        SECTION 148 OF THE IT ACT.

        In the instant case, assessment is completed under section
        143(3) on 16.02.1998 on a total income-of Rs.7,08,79,848/-.
        On verification of the case records, it is seen that the assessee has
        been granted excess deduction under section 80HHC to the extent of
        Rs.10,04,848/-. Deduction under section 80HHC in respect of goods
        exported out of India is allowable in respect of trading goods exported
        and manufactured goods exported. As regard trading goods export the
        profit derived from such export means the export turn over of trading
        goods as reducted by the direct and indirect cost attributable to export
        of such trading foods, for this purpose direct cost means cost directly
        attributable to the trading goods exported out of India including the
        purchase price of such goods and indirect cost means cost not being
        direct cost allocated in the ratio of the export turn over in respect of
        trading goods to the total turn over. It has not been done in the case of
        the assessee at the time of assessment. From the details of
        expenditure incurred by the assessee during the r relevant year that
        the indirect expenditure which were allocable proportionately to export
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                              Page 6

        of trading goods total upto Rs. 18,89,97,000. The excess deduction
        allowed to the assessee is worked out as under:
        Total turn over as per AO                        RS.1,60,98,86,603
        Total export turnover of trading goods           Rs. 1,20,58,519
        Total direct of                                                         Rs. 92,26,547

        Total indirect cost 188997000 x 12058519
        1509886603              Rs. 15,08,285

        Thus, total direct and indirect cost allocable to export of trading goods
        would be (9226547 + 1508285)
                                                       Rs1,07,34,832
        Total trading goods export                           Rs1,20,58,519/-
        Less: Cost.                                          Rs1,07,34,832
        Deduction admissible                                 Rs13,23,687
        Less: Deduction allowed.                             Rs23,28,535
        Excess deduction allowed                             Rs. 10,04,848

        On the basis of above method of working, the assessee has been granted
        excess deduction under section 80HHC to the extent of Rs.10,04,848/-
        which resulted in under assessment to this extent. I have therefore reason
        to believe that an amount of Rs.10,04,848/- is excess allowed to the
        assessee and the same required to be withdrawn. The matter was
        referred to the CIT, Baroda vide this office letter No.
        DCIT(A)/SR.2/Rev.Audit/98-99, dated 19.01.1999. The CIT, Baroda has
        approved action u/s 147 vide letter No. BRD/DC(Jud)/185-3(1218)799-
        2000 dated 22.03.2000.

        In the light of the above issue notice under section 148 of the Act for
        A.Y.1995-96. "

               From the above, it is apparent that the AO had come to a bona
        fide belief that the income was under assessed. He has worked out
        specific amount of excess allowance. One may or may not agree with
        him but it cannot be said that he did not have a bona fide belief that
        income was under assessed. And this is the only requirement under
        the law to see whether reopening is valid or not. In view of the above
        discussion, it has to be held that the case was validly reopened.
        Therefore, this ground of appeal is rejected.

                The Id. Counsel has relied upon various decisions in support of
        the contention that reopening is not valid on mere change support of
        the contention that reopening is not valid on mere change of opinion.
        The learned CIT(A) in his order dated 26.11.2002 has discussed some
        of the decisions and found them not relevant, to the facts of this case.
        In any case, it has already been held as above that in the instant case,
        it was not merely a change of opinion. On the other hand, the
        jurisdictional High Court decision in the case of Inductotherm (India)
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 7

        Pvt Ltd. Vs. James Kurian ACIT (294 ITR 341) had an occasion to
        examine a case where in the original assessment order excess relief
        under section 80HHC was allowed. Later the AO reopened the case on
        the ground that excessive deduction was allowed under section
        80HHC in the original assessment. On identical facts, it was observed
        by the Hon'ble Court as follows.

                  " The AO has categorically found from the record that in place of
                  disallowance of Rs.1,44,038/-, in the original assessment order
                  .only on amount of Rs.3,544 has been disallowed and in
                  calculation for allowance under section 80HHC Rs.50,37,685/-
                  were allowed in the original assessment order. In fact it should
                  be Rs.49,75,667/-.

        For the purpose of allowance under section 80HHC some type of
        income has also not been excluded, which is referred in the reasons
        recorded/. Rs.2,59,521/- were also required to be disallowed under
        section 43B and in some matters like unpaid sales commission and
        provisions for expenses and also where the amount of more than Rs.l
        crore debt became really bad. It requires verification, but that has not
        been done by the AO. Therefore, considering the reasons given for
        reopening of the assessment, it cannot be said that AO has no reason
        to believe that some income has escaped assessment before issuance
        of notice under section 148.

        The Honorable High Court further quoted with approval observations
        made in its earlier decisions in the case of Praful Chunilal Patel (236
        ITR 832) (Guj) which needs reproduction:


                  " ..On a proper interpretation of Sec.147 of the Act, it would
                  appear that the power to make assessment or reassessment
                  within four years of the end of the relevant assessment year
                  would be attracted even in cases where there has been a
                  complete disclosure of all relevant facts upon which a correct
                  assessment might have been based in the first instance and
                  whether it is an error of fact of law that has been discovered or
                  found out justifying the belief required to initiate the proceedings
                  In our view, the words ' escaped assessment' where the return is
                  filed are apt to cover the case of a discovery of a mistake in the
                  assessment caused by either an erroneous construction of the
                  transaction or due to its non consideration or caused by a
                  mistake of law applicable to such transfer or transaction even
                  where there has been a complete disclosure of all relevant fact
                  upon which a correct assessment could have been based ".

                   "As noted above, the provision of Sec. 147 requires that the AO
                  should have reason to believe that any income chargeable to tax
                  has escaped assessment. The word ' reason' in the phrase '
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 8

                  reason to believe' would mean cause or justification. If the AO
                  has a cause or justification to think or suppose that income had
                  escaped assessment, he can be said to have a reason to
                  believe that such income had escaped assessment. The words '
                  reason to believe' cannot mean that the AO should have finally
                  ascertained the facts by legal evidence. They only mean that he
                  forms a belief from the examination he makes and if he likes
                  from any information that he receives. If he discovers or finds or
                  satisfies himself that the taxable income has escaped
                  assessment, it would amount to saying that he had reason to
                  believe that such income had escaped assessment. The
                  justification of his belief is not to be judged from the standards of
                  proof required for coming to a final decision. A belief is not to be
                  judged from the standards of proof required for coming to a final
                  decision. A belief though justified for the purpose of initiation of
                  the proceedings under section 147 may ultimately stand altered
                  after the hearing and while reaching the final conclusion on the
                  basis of intervening enquiry. At the stage where he finds a
                  cause or justification to believe that such income has escaped
                  assessment. The AO is not required to base his belief on any
                  final adjudication of the mater. "

        Another decision on identical fact which bear mention is the Hon'ble
        Delhi high Court decision in the case of Consolidated Photo & finvest
        Ltd Vs. ACIT (281 ITR 394) (Delhi), in this case, it was held as follows:

                  "The AO had not received any additional information from any
                  outside source or quarter but the fact that there was no such
                  information did not make any material difference. Action under
                  section 147 was permissible even if the AO gathered his
                  reasons to believe from the very same record as had been the
                  subject matter of the completed assessment proceedings. The
                  proviso to Sec. 147 envisages action in the ordinary course
                  within a period of four years from the end of the relevant
                  assessment year that limitation does not, however, apply to
                  cases where income chargeable to tax has escaped assessment
                  on account inter alia of the failure of the assessee to disclose
                  fully and truly all material facts. The argument that production of
                  the account books and other documentary evidence relevant for
                  assessment must apply a full and true disclosure of all material
                  facts must be rejected out of hand in the light of the provisions of
                  Explanation.1, according to which mere production of the books
                  of account or other evidence from which the AO could have, with
                  due diligence, discovered the material evidence does not
                  necessarily amount to a disclosure within the meaning of the
                  provision. "
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 9

         The above decisions have considered the allegation of change of
         opinion in proper legal perspective."

7.       Aggrieved by this order of Ld CIT(A) now the assessee is in appeal
before us.

8.       At the time of hearing learned counsel of the assessee reiterated
the submission made before the Ld. CIT(A) placing reliance on the
following decisions:-

- ACIT v Fag Bearings India Ltd ITA No. 4564/Ahd/2007

- CIT v. M/s. Usha International Ltd [2002] 348 ITR 485 (Delhi) (FB)

- Gujarat Power Corporation Ltd v. ACIT (2002) 26 taxnabb, com 51 (Guj)

Ld. DR on the other hand relied on the orders of lower authorities and the
following case laws:

     i) Gala Gymkhana (P) Ltd vs. ACIT [2012] 27 taxmann.com 294 (Guj)

     ii) Sun Pharmaceutical Industries Ltd vs. DCIT [2012] 25 taxmann.com
             509 (Guj)

     iii) Sun Pharmaceutical Industries Ltd vs. DCIT [2013] 29 taxmann.com
             262 (Guj)

     iv) Jeans Knit (P) Ltd vs. DCIT [2013] 38 taxmann.com 112(Karnataka)

     v) Sri Sakthi Textiles Ltd vs. JCIT [2010] 193 Taxman 216 (MAD)

     vi) Export Credit Guarantee Corporation of India Ltd vs. ACIT [2013] 30
             taxmann.com 211(Bombay)

     vii) CIT vs. Usha International Ltd [2012] 25 taxmann.com 200 (Delhi)
             (FB)

     viii)   Bharat V. Patel vs. Union of India [2004] 134Taxman 178 (Guj)
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 10

    ix) JCIT vs. S.C. Chemicals [2006] ITD 41 (AHD).

    x) Jawand Sons vs. CIT(A)-II [2010] taxman 144 (Punj. & Har)

    9. After hearing both the parties and perusing the record, we find that
    there is no dispute that reopening of assessment in this case has been
    done within 4 years. We further find that AO while allowing claim of the
    assessee u/s. 80HHC amounting to Rs. 23,28,535/- on traded goods
    has observed as under while passing his original order:-

        "15.              Deduction u/s. 80HHC:

                  Assessee company has claimed the deduction u/s. 80HHC of
        Rs. 39,60,973/- in respect of export of traded goods and export of
        goods manufactured by itself. Both the deductions are worked out
        separately after considering the following:

        (a)               Deduction u/s. 80HHC on traded goods

              To calculate the profit earned on export of trading goods
        assessee has excluded indirect expenses such as factory
        overheads, non-receivables sales-tax, advertisement, sales
        promotion, discount, freight outwards and royalty on domestic sales.
        It was contended by the assessee that as these expenses pertain to
        domestic sales, they should be excluded from indirect expensed for
        working out the deduction u/s. 80HHC on trading goods exports.
        Assessee was asked to explain why all the other expenses which
        were not directly attributable to export of trading goods should not
        be considered as indirect cost and be apportioned accordingly.

               In its reply dated 9-2-98, assessee stated that entire export of
        trading goods were carried out from Baroda Office only and as per
        sub-section 3 of section 80HHC "the profit derived from such export
        shall be export turnover in respect of such trading goods as reduced
        by the direct costs and indirect costs attributable to such exports". It
        can also argued by the assessee that it was clearly able to correlate
        and identify the trading goods exported from Baroda as against
        Pithampur Office and Depot Office expenses.                 Assessee's
        contentions are verified in depth and it is found to be correct in view
        of the fact that assessee is able to identify and correlate every
        export with specific purchases made from Baroda Office. In view of
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 11

        these facts assessee's claim u/s. 80HHC amounting to Rs.
        23,28,535/- on export of trading goods is hereby allowed."






It is clear from the above that while allowing the claim of the assessee u/s.
80HHC detailed inquiry was made as to why all the other expenses which
were not directly attributable to export of trading goods should not be
considered as indirect cost and be apportioned accordingly and only after
verifying the assessee's contention which was found to be correct as the
assessee was able to identify and co-relate every export with specific
purchases made from Baroda office, AO allowed the claim of the
assessee. In view of these undisputed facts of this case, we are of the
considered opinion that reopening of the assessment on the part of the AO
was nothing but a case of change of opinion which is not sustainable in
law. This view of ours get support from judgment of Hon'ble Gujarat High
Court in the case of Gujarat Power Corporation Ltd vs. ACIT wherein on
similar facts Hon'ble court held as under:

        "51. In our opinion, any such reopening would be based on a
        mere change of opinion. In the reasons, the Assessing Officer
        started with the words, 'from the records, it can be seen that
        .....". Entire information and the material that the Assessing
        Officer, therefore, had at his command was reflected from the
        record itself. This coupled with the fact that in the original
        assessment, the Assessing Officer examined such claims in
        detail, would convince us that any reopening of the assessment
        of same claims on the basis of same material amounts to a
        mere change of opinion. The fact that the Assessing Officer did
        not record reasons for making no disallowance on such claim
        of exemption, would he of no consequence.

        52. In the result, we are of the opinion that the notice was
        issued without jurisdiction. The same, therefore, requires to be
        and is hereby quashed. Rule is made absolute accordingly with
        no order as to costs."
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                           Page 12

and the decision of ITAT, Ahmedad in ITA No. 4564/Ahd/2007 in the case
of ACIT vs M/s Fag Bearing India Ltd dated 06-07-2012                               in which on
similar facts Hon'ble ITAT has found re-opening of the assessment as
bad in law by placing reliance on various judicial pronouncements on the
issue by observing as under:-

        "9. Heard both the parties and perused the record. We find that the
        assessee is engaged in the business of manufacturing and trading of ball
        and rollers bearing having two units; one which is in existence since 1962
        and the other unit set up as 100% export oriented unit in 1966-67. The
        original assessment was completed by the A.O. without making any
        adjustment in the profit of EOU. This assessment has been reopened
        after recording the reasons to the effect that during the assessment
        proceedings for assessment year 2003-04 it was found that allocation of
        expenses between the DTA and EOU unit has not been properly done
        and expenses are to be charged to the EOU also and in order to compute
        the benefit u/s 10B in the ratio of turn over of EOU and the DTA because
        these expenses are relatable to the EOU also. The assessee's case is
        that the question of such claim was subject matter of enquiry at the stage
        of original assessment proceedings with a questionnaire dated
        18.03.2004 in which vide para 13 of this letter the A.O. specifically
        required the assessee to furnish certified copy of the profit and loss
        accounts and the balance sheet of the unit EOU claiming exemption of
        income u/s 10B of the Act and to furnish the same along with the detail of
        sales/purchases, other income and major expenses. In case of failure it
        was proposed to disallow the claim and consider the same as taxable
        income of the assessee (page 67 of the paper book). The assessee vide
        its letter dated 25.03.2004 furnished the detail at para 11 by stating that
        required details are enclosed along with working of profit and loss
        accounts for the year ending 31.03.2001 for EOU unit. These details also
        included allocation of common expenses along with the basis of allocation
        incurred for the said EOU. Complete break up of the profit and loss
        accounts, as per schedule-VI of the Companies Act, showing separately
        for EOU and other units was also furnished. These details are available at
        pages 76 and 78 to 80 of assessee's paper book. After considering these
        detailed submissions of the assessee the A.O. had accepted the
        assessee's claim, though this fact was not recorded in the body of the
        assessment proceedings. Since the assessment order is sought to be
        reopened within the period of four years, the only ground on which the
        assessee has challenged the reopening is that in as much as the A.O.
        had, during the course of original assessment proceedings, examined the
        matter and if the second view is taken now, it is case of change of opinion
        and therefore impermissible. After going through the paper book we find
        force in the contention of the assessee that on the basis of same material
        the A.O. cannot reopen the assessment even within the period of four
        years.
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 13

        10. In the case of CIT Vs. Kelvinator of India Ltd. reported in 320 ITR 561
        (SC) Hon'ble Supreme Court has held as under:-

                  "The concept of "change of opinion" on the part of the Assessing
                  Officer to reopen an assessment does not stand obliterated after
                  the substitution of section 147 of the Income-tax Act, 1961, by the
                  Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the
                  amendment, the Assessing Officer has to have reason to believe
                  that income has escaped assessment, but this does not imply that
                  the Assessing Officer can reopen an assessment on mere change
                  of opinion. The concept of "change of opinion" must be treated as
                  an inbuilt test to check the abuse of power. Hence after April l,
                  1989, the Assessing Officer has power to reopen an 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 formation of the belief."

        11. The fact that in the body of original assessment order the A.O. did not
        give any specific finding accepting the claim of the claim of the assessee
        makes no difference if the issue was processed at the time of original
        assessment proceedings. It is well settled that if the entire material has
        been placed by the assessee before the A.O. at the time when the original
        assessment was made and the A.O. applied his mind to that material and
        accepted the view taken by the assessee. Merely because he did not
        express this in the assessment order that by itself would not come as a
        ground to a conclude that assessee has escaped assessment and
        therefore, the assessment needed to be reopened. On the other hand, if
        the A.O. did not apply his mind and omitted a lapse, there is no reason
        why the assessee should be made to suffer the consequence of that
        lapse. In the case of M/s Startronic Investment Consultants Pvt. Ltd. Vs.
        ITO in ITA No.2196/Ahd/2002, on identical facts Hon'ble ITAT,
        Ahmedabad placing reliance on the decision of jurisdictional High Court
        has held as under:-

                  'We have heard the parties and considered the submissions. It is
                  true that the assessment has been reopened within four years from
                  the end of the assessment year and in view of the decision of the
                  Gujarat High Court in the case of Prafful Chunilal Pate! [236 ITR
                  832] wherein it was held that assessment can be reopened even in
                  cases where there has been complete disclosure of all the relevant
                  facts necessary for assessment and the words "escaped
                  assessment" are apt to cover the case of discovery of a mistake in
                  the assessment caused by either an erroneous construction of the
                  transaction or due to its non-consideration or caused by a mistake
                  of law applicable to such transfer or transaction. But in the present,
                  in our opinion, is not a one of that type. Here, the Assessing Officer
                  has specifically asked for the details and the assessee had
                  submitted the details of payments and only thereafter the
                  assessment has been completed In these circumstances, to say
                  that there was no conscious decision has been taken in the
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 14

                  assessment order may not be proper. The case, in our opinion,
                  would fall within the garb of another decision of Gujarat High Court
                  in the case of Garden Silk Mills (P) Ltd. Vs. DCIT (151 CTR 533]
                  wherein the Court quashed the reopening where in the original
                  assessment, the assessee's claim was accepted. In that case, it
                  seems that the Assessing Officer has accepted the claim of the
                  assessee after considering the decision rendered by the Gujarat
                  High Court in another case and thereafter the assessment was
                  reopened as the claim was not rightly allowed. In view of this fact,
                  the CIT(A) concluded that the Assessing Officer consciously
                  applied his mind in the original assessment and that was the
                  reason for quashing the reassessment. But in the present case,
                  according to him, the assessee had furnished information about the
                  impugned payment before the Assessing Officer (without giving
                  any reasons regarding its allow/ability as revenue expenditure) and
                  considers that after conscious application of mind, the Assessing
                  Officer has accepted the claim. The Court in the case of Garden
                  Silk Mills (P) Ltd. (supra) clearly stated that "the consistent view is
                  that even after amendment of Sec. 147 mere change of opinion
                  does not confer jurisdiction on the ITO to initiate proceedings for
                  reassessment merely by resorting to Explanation 1 on the basis of
                  change of opinion. The Assessing Officer made inquiry about the
                  claim of the assessee and asked for the details, which were
                  furnished. Therefore, in these circumstances, in our opinion, it
                  cannot be stated that it was not a conscious decision of the
                  Assessing Officer to allow the claim of the assessee. Similarly, the
                  Delhi High Court in the case of Jindal Photo Films Ltd, Vs. DCIT
                  [234 ITR 170] held that where a claim has been considered in the
                  original assessment without any further material on record. It
                  cannot be reopened and it would amount to change of opinion,
                  which is not permissible even after the amendment and the case
                  falls within the four years time limit. We, therefore, hold that
                  reopening was not proper and quash the same. Even otherwise,
                  we find that the expenditure on membership fees paid to Vadodara
                  Stock Exchange is covered by the Madras High Court in the case
                  of CIT Vs. S. Venkatasubramaniam [207 CTR (Mad) 88] wherein
                  the Court held that the payment of admission fees as well as
                  contribution to infrastructure development fund to acquire the
                  membership of Coimbatore Stock Exchange and to carry on the
                  business at the terminal of the Stock Exchange is revenue
                  expenditure. In view of this also the reopening does not seem to be
                  justified. We, accordingly, hold that reopening of assessment was
                  invalid and cancel the assessment."

        12. The case law of Hon'ble Apex Court, relied upon by the Revenue in
        the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd, (supra) is not
        applicable to the facts of this case because in that case no scrutiny
        assessment u/s 143(3) of the Act was done in the first place and the
        return filed by the assessee was processed u/s 143(l)(a) of the Act and in
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                        Page 15

        view of this reassessment proceedings u/s 147 of the Act were held to be
        valid by the Hon'ble Apex Court."

Interestingly judgment of Hon'ble Delhi High Court in the case of Usha
International Ltd relied by the DR also support the case of assessee as in
this case Hon'ble Court held that reassessment proceedings will be invalid
in case issue or query is raised and answered by assessee in original
assessment proceedings and AO does not make any addition in
assessment order.




9.1     In none of the case laws relied by revenue AO made such inquiries
as has been done in this case in the original assessment proceedings and
allowed the claim of assessee by giving clear finding in assessee's
faavour in respect of the issue which was the subject matter of reopening
of assessment.           Facts being entirely different in those cases, the Hon'ble
courts held in those cases that it cannot be said that AO form any opinion
in the original proceedings and therefore reopening was held to be valid




9.2     In view of the above discussion order passed by AO u/s. 143(3)
read with section 147 is not sustainable in law and the same is hereby
quashed.




10.     In the result, both these grounds of assessee are allowed.




11.     In view of our above decision quashing the assessment order
passed by AO, other grounds taken by the assessee do not require any
adjudication.
IT A No s . 1 506 & 15 07 / A hd /2 0 10         A . Y . 1 9 95- 96 & 1 997 - 9 8
M/ s . P a na s o nic E ner g y I ndi a Co . L td v s. I T O                             Page 16




12.     In the result, both the appeals of the assessee are allowed.

 This Order pronounced in open Court on 24.04.2014



           Sd/-                                                                        Sd/-
   (Anil Chaturvedi)                                                              (D.K.Tyagi)
  Accountant Member                                                             Judicial Member
a.k.

     / Copy of Order Forwarded to:-
1.  / Appellant
2. × / Respondent
3.    / Concerned CIT
4.  -  / CIT (A)
5.  ,   ,  / DR, ITAT, Ahmedabad
6. [  / Guard file.




                                                                                    By order/  ,


                                                                                    / 
                                                             ,  

 
 
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