, `'
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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