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Dy. Commissioner of Income Tax Circle6(2), Mumbai V/s Century Textiles and Industries Ltd. Circle6(2), Mumbai
August, 26th 2014
                  ,   `' 

                  IN THE INCOME TAX APPELLATE TRIBUNAL
                               "C" BENCH, MUMBAI

   .  ,  ,    ,    

      BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
                    SHRI AMIT SHUKLA, JUDICIAL MEMBER


                       . / ITA no. 2036/Mum./2013
                     (  / Assessment Year : 2007­08)

Dy. Commissioner of Income Tax                                .................  /
Circle­6(2), Mumbai                                                           Appellant

                                        v/s

Century Textiles and Industries Ltd.                          ...................  /
Circle­6(2), Mumbai                                                       Respondent
  ./ Permanent Account Number ­ AAACC2659Q



                       . / ITA no. 2181/Mum./2013
                     (  / Assessment Year : 2007­08)

Century Textiles and Industries Ltd.
                                                              .................  /
Century Bhavan, Dr. Annie Besant Road
Worli, Mumbai 400 030                                                         Appellant


                                        v/s

Dy. Commissioner of Income Tax                                ...................  /
Circle­6(2), Mumbai                                                       Respondent
  ./ Permanent Account Number ­ AAACC2659Q


               / Revenue by              : Shri A.K. Kardam
                / Assessee by : Shri Pankaj R. Toprani a/w
                                Ms. Krupa Toprani

     /                                                 /
Date of Hearing ­ 07.08.2014                      Date of Order ­ 22.08.2014
                                                            Century Textiles
                                                          and Industries Ltd.

                                                                          2



                                   / ORDER

 ,     /
PER AMIT SHUKLA, J.M.


     These cross appeals are directed against the impugned order

dated 20th December 2012, passed by the learned Commissioner

(Appeals)­XII, Mumbai, for the quantum of assessment passed under

section 143(3), of the Income Tax Act, 1961 (for short "the Act") for

the assessment year 2007­08.


2.   In assessee's appeal wherein the assessee has challenged the

validity of re­opening of the assessment under section 147, vide

ground no.1. Since this issue goes to the root of the matter and

challenges the impugned assessment proceedings itself, therefore, this

ground is being taken up first.


3.   The brief facts qua the validity of the assessment under section

147, are that the assessee is engaged into manufacturing of cotton

piece goods, denim, yarn, viscose rayon yarn, viscose tyrecord, caustic

soda, carbon­di­sulphide, sulphuric acid, salt and by products, cement,

pulp & paper, etc., and it also renders engineering services and

engaged in floriculture business. It has filed its return of income under

normal provisions of the Act at ` 280,37,62,316 and book profit of `
                                                             Century Textiles
                                                           and Industries Ltd.

                                                                           3




355,48,54,200, under section 115JB, on 31st October 2007, under

section 139(1). The assessee's case was selected for scrutiny and in

pursuance thereof, assessment order under section 143(3), was passed

on 5th May 2009 at an income of ` 311,72,96,159, under normal

provisions. In the return of income, the assessee had claimed

deduction under section 80IC, of ` 33,67,42,837, in respect of paper

and pulp unit on the basis of audit report in form 10CCA. During the

course of the assessment proceedings, the Assessing Officer has raised

specific queries regarding claim made under section 80IC, in response

to which the assessee had filed detail submissions vide letter dated 23 rd

March 2009, and then again on further query the assessee vide letter

dated 30th March 2009, clarified and substantiated its claim. After

considering the entire submissions and material placed on record, the

Assessing Officer partly accepted the assessee's claim and had

disallowed ` 11,49,09,114, from the fatal claim of ` 33,67,42,837,

under section 80IC, besides making other additions / disallowances in

his order dated 5th May 2009, passed under section 143(3). Against the

said assessment order, the assessee preferred an appeal before the

learned Commissioner (Appeals) and also raised the issue of claim of

deduction disallowed by the Assessing Officer under section 80IC. The

learned Commissioner (Appeals), after detail discussion, confirmed the

said disallowance vide order dated 24th March 2010.
                                                               Century Textiles
                                                             and Industries Ltd.

                                                                             4



4.   After the aforesaid proceedings, the assessment so completed has

been sought to be re­opened, vide notice dated 15th February 2011,

issued under section 148, on the following "reasons recorded".

     "Return of income for A.Y. 2007­08 has been filed vide
     acknowledgement dt. 31.10.2007 declaring total income under
     normal provisions at ` 2,80,37,62,316 and ` 3,55,48,54,200 u/s
     115JB of the I.T. Act. Assessment u/s 143(3) has been
     completed on 05.05.2009 at total income under normal
     provisions at ` 3,11,72,96,159 and book profit at `
     367,26,75,587.

           Perusal of records shows that in the assessment order u/s
     143(3) dt. 05.05.09 for the A.Y. 2007­08, excess allowance of
     deduction u/s 80IC at ` 4.99 crores has been made by omitting
     to exclude the following receipts / incomes which are not derived
     from the business of the undertaking as per requirement of
     deduction under section 80IC.

              As per Schedule­7
              Rent from property                ` 3,82,878
              Export Benefits                  ` 84,48,875
              Insurance and other claims       ` 45,51,894
              Miscellaneous Income           ` 2,54,29,908
              Provision no longer required      ` 8,00,304
              Total:­                        ` 3,96,13,659
              As per Schedule 10
              Interest received              ` 1,03,02,234
              Gross Total                    ` 4,99,15,893
                                             =========

          I, therefore, have reason to believe that income
     chargeable to tax to the extent of ` 4.99 crores has escaped
     assessment. Issue notice u/s 148 for A.Y. 2007­08."
                                                          Century Textiles
                                                        and Industries Ltd.

                                                                        5

5.   In response to the notice, the assessee filed detail objection

before the Assessing Officer on the ground that the same is based on

"change of opinion", as no new material has come into record with

regard to claim for deduction made under section 80IC and, therefore,

it amounts to review of the earlier assessment order. Various case laws

were also relied upon. However, the Assessing Officer vide letter dated

28th October 2011, has rejected assessee's objection after relying upon

the decision of the Hon'ble Andhra Pradesh High Court in K.C.P. Limited

v/s ITO, [1984] 146 ITR 284 (A.P) and the decision of the Hon'ble Delhi

High Court in Consolidated Photo Finvest Ltd. v/s ACIT, [2006] 281 ITR

394 (Del.). After rejecting the assessee's objection, he proceeded to

complete the assessment after disallowing the claim of deduction under

section 80IC, by further sum of ` 4,99,15,893, vide order dated 22nd

December 2011, passed under section 147 / 143(3). As a result, the

assessed income was enhanced to ` 316,72,12,050, under normal

provision. Again before the learned Commissioner (Appeals), the

assessee challenged the validity of re­assessment on the ground of

"change of opinion" after relying heavily upon the decision of the

Hon'ble Supreme Court in CIT v/s Kelvinator of India Ltd. [2010] 320

ITR 561 (SC). The assessee's submissions in this regard has been

incorporated by the learned Commissioner (Appeals) from Pages­4 to 6

of the appellate order. The learned Commissioner (Appeals) rejected
                                                           Century Textiles
                                                         and Industries Ltd.

                                                                         6

the assessee's contention mainly on the ground that incorrect and

excess deduction has been claimed by the assessee and wrongly

allowed by the Assessing Officer in the original assessment proceedings

and, therefore, the assessment has been re­opened validly under

section 147. While coming to this conclusion, he has heavily relied upon

the Explanation­2 to section 147. He also referred to the decision of

the Hon'ble Punjab & Haryana High Court in Jawand Sons v/s CIT,

[2010] 326 ITR 39 (P&H). His detail finding in this regard has been

dealt from Page­12 to 17 of the appellate order.


6.   Before us, the learned Counsel for the assessee drew our

attention to the computation of income and the claim of deduction

under section 80IC, which was duly supported by an audit report under

section 10CCA. He also drew our attention to the details of other

income which was given in the Balance Sheet of Century Pulp & Paper

unit as given in Schedule­VII. He submitted that not only this, the

Assessing Officer has also raised specific queries with regard to the

claim made under section 80IC and thereafter, has even disallowed

part of the claim, which was also the subject matter of appeal before

the learned Commissioner (Appeals). Once the Assessing Officer in the

original assessment proceedings, has applied his mind on the material

placed on record and then again subject matter of scruting by trhe
                                                           Century Textiles
                                                         and Industries Ltd.

                                                                         7

learned Commissioner (Appeals), then without any fresh material

coming into record re­opening under section 147 cannot be made, as it

amounts to "change of opinion", which is not permissible in law. He

submitted that even from the perusal of the "reasons recorded", it can

be seen that the Assessing Officer has mentioned "perusal of records

shows that in the assessment order under section 143(3) dated

5.5.2009, for A.Y. 2007­08, excess allowance of deduction u/s 80IC at

` 4.99 crores had been made ...........". This goes to show that the

Assessing Officer has sought to re­open the case for reviewing the

earlier assessment order so as to make further disallowance. Such a

review is not permissible as held by the Hon'ble Supreme Court in

Kelvinator of India Ltd. (supra). Thus, he submitted that the entire

proceedings have been rendered void. On the issue of "change of

opinion", he also relied upon the decision of the Hon'ble Jurisdictional

High Court in Asteroids Trading and Investments P. Ltd. v/s DCIT,

[2009] 308 ITR 190 (Bom.).


7.   The learned Departmental Representative, on the other hand,

submitted that in the original assessment order, the Assessing Officer

has wrongly allowed the claim of deduction under section 80IC on

"other income", which is admittedly not allowable in view of the

provisions of section 80IC, as the other income cannot be held to be
                                                           Century Textiles
                                                         and Industries Ltd.

                                                                         8

derived from the industrial undertaking. Once the Assessing Officer has

failed to examine the claim from this perspective, then it cannot be

held that he has formed an opinion on this issue. Such an omission by

the Assessing Officer in the original assessment order cannot preclude

the Assessing Officer for re­opening the assessment under section 147,

if it falls within the period of four years from the end of the relevant

assessment year. He thus strongly relied upon the reasoning given by

the learned Commissioner (Appeals) in the impugned order.


8.   We have heard the rival contentions, perused the relevant

findings of the authorities below and the material available on record

on the issue of validity of re­opening under section 147. Admittedly, in

this case, the assessee along with the return of income, has made a

claim for deduction under section 80IC with regard to its Century Pulp

& Paper unit. Such a claim of deduction under section 80IC, were duly

supported by the audit report under section 10CCA. From the records,

it is evident that during the course of the original assessment

proceedings, the Assessing Officer has raised queries with regard to the

claim of deduction under section 80IC, not once but twice. In an

elaborate manner, the assessee has duly responded to such query and

filed replies before the Assessing Officer as mentioned in the forgoing

paragraph. After considering the entire claim of the assessee, the
                                                          Century Textiles
                                                        and Industries Ltd.

                                                                        9

Assessing Officer has reduced the claim of deduction under section

80IC, by allowing the claim in respect of profits attributable to paper

and the deduction relating to profits attributable to sale of pulp was

denied. Thereafter, the matter had travelled up to the first appellate

authority, wherein the learned Commissioner (Appeals) had upheld the

disallowance of claim of deduction under section 80IC. After having

completed the assessment in the aforesaid manner, the assessment

has been sought to be re­opened for further disallowance of claim of

deduction under section 80IC, on the ground that the claim of

deduction was wrongly allowed on other income relating to the said

unit. From the perusal of the "reasons recorded", it is seen that the

Assessing Officer is referring to the earlier assessment order passed

under section 143(3) dated 5th May 2009. There is no whisper about

any fresh material or information coming on record to show that any

income chargeable to tax has escaped assessment. The entire

"reasons" seems to be based on the premise that the Assessing Officer

has wrongly allowed the claim of deduction under section 801IC. Such

a premise has to be seen from the angle, whether the Assessing Officer

during the course of assessment proceedings has examined the issue of

claim of deduction under section 80IC, or not. As stated above, the

Assessing Officer had raised detail query and also invited assessee's

submissions on the various aspects of claim of deduction under section
                                                          Century Textiles
                                                        and Industries Ltd.

                                                                        10

80IC. Not only this, in the original assessment order, the Assessing

Officer has discussed this issue which is running into five pages and

thereafter has reduced the claim of deduction of ` 11,49,09,114, as

against the assessee's claim for ` 3,36,74,837. Such an order was also

subject matter of the scrutiny by the learned Commissioner (Appeals)

which has been confirmed. Thus, it cannot be held that the Assessing

Officer had not formed any opinion while examining the claim of

deduction under section 80IC.


9.   It is now a trite law that "change of opinion" preclude the

reopening of the assessment, whether within or outside the four years'

limit from the end of the relevant assessment year. The Hon'ble

Supreme Court in Kelvinator of India Ltd. (supra), has held that there

is conceptual difference between power to review and power to re­

assess. The Assessing Officer has though power to re­assess but no

power to review and if the concept of "change of opinion" is removed,

then in the garb of the re­assessment, review of earlier orders would

take place. The "change of opinion" is in­built test to check the abuse

of power by the Assessing Officer. Thus, in such cases, the Assessing

Officer can re­open the case only when there is "tangible material"

coming on record having direct bearing with the escapement of income.

The "reason to believe" must have live link nexus with the formation of
                                                            Century Textiles
                                                          and Industries Ltd.

                                                                          11




the belief. The "reason to believe" as contemplated under section 147,

does not mean to acquire jurisdiction of re­opening the case for

reviewing the earlier order passed by the Assessing Officer, which has

been done after application of his mind and expressing his opinion. The

Assessing Officer, under section 147, cannot sit as a reviewing

authority on the order passed by the earlier Assessing Officer to re­

examine the subject matter which has been duly considered by the

Assessing Officer, de­hors any new material having live link nexus with

the income escaping assessment. The Assessing Officer cannot re­open

the case even though he comes to a conclusion that earlier opinion

expressed by the Assessing Officer was not correct. If in the earlier

order, the Assessing Officer on a particular issue has formed any

opinion, then the main provision of section 147, precludes the re­

opening of the assessment. The reason to believe cannot be for

reviewing of earlier order as it will lead to arbitrary exercise of power

by the Assessing Officer to re­open the case under the grab that the

earlier opinion expressed was not correct view. Thus, on the facts of

the present case, we are of the opinion that the "reasons recorded" by

the Assessing Officer is purely based on "change of opinion" de­hors

any tangible material coming into record. Thus, in view of the law laid

down by the Hon'ble Supreme Court in Kelvinator of India Ltd. (supra),

the notice dated 15th December 2011, under section 148, and
                                                                 Century Textiles
                                                               and Industries Ltd.

                                                                               12

consequent assessment order dated 22nd December 2011, passed

under section 147 / 143(3), is held as void as the "reasons recorded"

are based on "change of opinion" and do not clothe the Assessing

Officer with jurisdiction to re­open the assessment. Consequently, the

assessment order is quashed and the impugned order appealed against

is set aside. Ground no.1, is thus allowed.


10.   Since we have already quashed the assessment being without

jurisdiction under section 147, therefore, other grounds raised by the

assessee have become purely academic. Even the issue raised in the

Departmental appeal have also become academic and, hence, the

departmental appeal is dismissed as infructuous.


11.               

   

10.   In the result, assessee's appeal is allowed and Revenue's appeal
is dismissed.

              19th August 2014   
      Order pronounced in the open Court on 19th August 2014


            Sd/-                                                 Sd/-
      .                                                     
                                                           
  D. KARUNAKARA RAO                                      AMIT SHUKLA
  ACCOUNTANT MEMBER                                    JUDICIAL MEMBER


 MUMBAI,  DATED: 19th August 2014
                                                Century Textiles
                                              and Industries Ltd.

                                                              13



     / Copy of the order forwarded to:

(1)    / The Assessee;
(2)    / The Revenue;
(3)    () / The CIT(A);
(4)     / The CIT, Mumbai City concerned;
(5)    ,   ,  / The DR, ITAT, Mumbai;
(6)     / Guard file.
                                   / True Copy
                                     / By Order
 .  / Pradeep J. Chowdhury
   / Sr. Private Secretary
                           /   / (Dy./Asstt. Registrar)
                           ,   / ITAT, Mumbai

 
 
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