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
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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
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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.)
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- 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
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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
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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)
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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 '
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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. "
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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)
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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
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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."
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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.
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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
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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
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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.
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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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