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September, 03rd 2013

W.P. (C) 7452/2010 Page 1 of 9
Date of decision: 5th August, 2013
+ W.P.(C) 7452/2010
Through Mr. S. Krishnan, Advocate.
..... Respondent
Through Mr. Kamal Sawhney, Sr.
Standing Counsel.

The petitioner has challenged reassessment proceedings initiated
in respect of assessment year 2006-07 vide notice dated 31st March,
2010 issued under Section 148 of the Income Tax Act, 1961 (Act, for

2. Reassessment proceedings have been initiated within four years
from the end of the assessment year and, therefore, the first proviso to
Section 147 is not applicable.

3. The petitioner had filed its return for the assessment year 2006-
07 on 19th October, 2006 and the return was selected for scrutiny.
Assessment order under Section 143(3) of the Act was passed on 25thW.P. (C) 7452/2010 Page 2 of 9
August, 2008.

4. The petitioner had claimed and were allowed deduction under
Section 10B of the Act amounting to Rs.6,72,28,255/- on the ground
that they were 100% export oriented unit and had fulfilled the
conditions of Section 10B. This is an undisputed position.
5. The “reasons to believe” to justify reopening recorded by the
Assessing Officer under Section 147 of the Act read as under:-
“The assessment of M/s Replika Press (P) Ltd. for
the A.Y. 2006-07 was completed after scrutiny on
25.08.2008, determining an income of Rs. 60, 07,205/-.
Thereafter, it was observed that the assessee is engaged
in the business of printing of text books (export as well
as domestic sales) which does not made (sic) it eligible
for claiming deduction u/s 108. It has been made clear
in the case of Addl CIT WB-III, Calcutta Vs. A
Mukherjee & Co. (P) Ltd. (113 ITR 718) that “a
publisher may get the books printed from any printer,
but the printer is a mere contractor and the publisher
carries on the business of manufacturing and processing
goods”. A circular has also been issued by the CBDT
(Circular No.347 dated 07/07/1982) on this matter.
Thus the assessee is not a manufacturer for the purpose
of claiming deduction u/s 10B. This mistake has
resulted in under-assessment of income by

In view of the above facts, I have reason to believe
that income of Rs.6,72,28,255/- has escaped assessment
by virtue of either omission or failure on the part of the
assessee to disclose fully or truly all material facts
necessary for assessment in this year in this case and
the same is to be brought to tax under section 147/148
of the I.T. Act.”

6. A reading of the said reasons makes it apparent and crystal clear W.P. (C) 7452/2010 Page 3 of 9
that the Assessing Officer has referred to the business of the assessee
i.e. printing of textbooks, and has recorded a prima facie opinion that
this activity was not eligible for claiming deduction under Section 10B.
Reliance has been placed upon an earlier decision of the Calcutta High
Court in Additional CIT WB-III, Calcutta Vs. A Mukherjee & Co. (P)
Ltd. (1978) 113 ITR 718 (Calcutta). A portion of the said judgment has
also been quoted.

7. A bare perusal of the original assessment order dated 25th
August, 2008 would indicate that there was no doubt or dispute about
the business activity undertaken i.e. the petitioner was a printer of text
books. The assessment order itself records that business of the
assessee was to print and export books which used to be delivered as
per instructions of the overseas importer to parties situated outside
India as well as in India (i.e. constructive exports). The petitioner had
shown receipts in convertible foreign exchange from
export/transmission of customized electronic data by way of scanning
and type setting charges. The assessee had shown domestic sales as
local turnover. It is clear that the Assessing Officer was fully aware
and conscious of the activities undertaken by the petitioner i.e. printing
of books in India as per instructions of the overseas third parties.
8. The petitioner in objections had submitted that the reassessment
proceedings have been initiated in view of the audit objections. It was a W.P. (C) 7452/2010 Page 4 of 9
case of „change of opinion‟ and the nature and character of the
business activities undertaken by the petitioner were examined at the
first round and the Assessing Officer was satisfied that Section 10B
was applicable to the said activities i.e. the petitioner had carried on
business of manufacture or production.

9. The Assessing Officer in his order dated 28th September, 2010
has referred to the said contention of the petitioner in the objections but
after referring to the judgment of the Supreme Court in CIT Vs. P.V.S.
Beedies (P) Ltd. (1999) 237 ITR 13 (SC) and the Delhi High Court in
New Light Trading Co. Vs. CIT (2001)170 CTR 138, rejected the said
contention recording that the audit objection was in respect of a new
information and not law.

10. It cannot be disputed and questioned that the nature of activities
being undertaken by the assessee were in the knowledge of the
Assessing Officer in the first round. The nature and character of the
said activities i.e. printing of books has been mentioned in the
assessment order itself. It is also recorded that these books were
printed and supplied to different parties as per the instructions of the
overseas importer. Thus, it is incorrect and wrong that any fresh or
new factual information came to the knowledge of the Assessing
Officer after passing of the first assessment order dated 25th August,
2008. No new fact came to the knowledge of the Assessing Officer,W.P. (C) 7452/2010 Page 5 of 9
which made him believe that the petitioner was carrying on another
activity and was not printing books. The audit objections in the present
case reflects and indicates that the auditors were of the opinion that the
Assessing Officer had erred in accepting the legal position that printing
of book amounts to manufacture or production. In the present case, the
Assessing Officer as per the “reasons to believe” had formed an
erroneous legal opinion in the original assessment order. Such cases
cannot be covered and cannot be made subject of reassessment
proceedings under Section 147 of the Act. Appropriate remedy
available to the Revenue was to initiate proceedings under Section 263
of the Act, as it is their stand that the assessment order was erroneous
and was prejudicial to the interest of the Revenue.
11. Learned counsel for the respondent-assessee has drawn our
attention to the full bench decision of this Court in Commissioner of
Income Tax Vs. Usha International Ltd., [2012] 348 ITR 485 (Delhi)
wherein, reference is made to the judgment of the Supreme Court in
ALA Firm Vs. CIT, (1991) 189 ITR 285 (SC). Our attention was
drawn to proposition No.4; that information as required by Section
147(b) can relate to an earlier decision on the point of law but that
information should have come to the knowledge of the Assessing
Officer by his own efforts. Such information may be gathered after
examination of the assessment records. Decision in ALA Firm (supra)W.P. (C) 7452/2010 Page 6 of 9
was referred to in Usha International (supra) in a different context and
purpose. Observations made by the Supreme Court was with reference
to the term “information” and conceptually there is a difference
between the scope and ambit of the reassessment provisions
incorporated with effect from 1st April, 1989. The new statutory
provisions do not refer to the word “information” and nature, type or
character of information. No doubt, the scope and ambit of the
amended reassessment provisions is wider, but what is relevant and
important is that cases of “change of opinion” are not covered or
protected under the re-enacted reopening provisions. In this
connection, it would be appropriate to reproduce paragraphs 15 and 16
of the decision of the Full Bench in Usha International Ltd. (supra):-
“15. Thus where an Assessing Officer incorrectly
or erroneously applies law or comes to a wrong
conclusion and income chargeable to tax has
escaped assessment, resort to Section 263 of the Act
is available and should be resorted to. But initiation
of reassessment proceedings will be invalid on the
ground of change of opinion.

16. Here we must draw a distinction between
erroneous application/ interpretation/understanding
of law and cases where fresh or new factual
information comes to the knowledge of the
Assessing Officer subsequent to the passing of the
assessment order. If new facts, material or
information comes to the knowledge of the
Assessing Officer, which was not on record and
available at the time of the assessment order, the
principle of “change of opinion” will not apply.
The reason is that “opinion” is formed on facts. W.P. (C) 7452/2010 Page 7 of 9
“Opinion” formed or based on wrong and incorrect
facts or which are belied and untrue do not get
protection and cover under the principle of “change
of opinion”. Factual information or material which
was incorrect or was not available with the
Assessing Officer at the time of original assessment
would justify initiation of reassessment proceedings.
The requirement in such cases is that the
information or material available should relate to
material facts. The expression „material facts‟
means those facts which if taken into account would
have an adverse affect on the assessee by a higher
assessment of income than the one actually made.
They should be proximate and not have remote
bearing on the assessment. The omission to disclose
may be deliberate or inadvertent. The question of
concealment is not relevant and is not a precondition
which confers jurisdiction to reopen the
12. After quoting the said paragraphs, the full bench had made
reference to New Light Trading Co. Vs. CIT (supra) and P.V.S.
Beedies (P) Ltd.(supra).
13. We have also examined the judgment of the Calcutta High Court
in A. Mukherjee and Company Private Limited (supra). The said
judgment does not support the Revenue and the Assessing Officer in
the „reasons to believe‟ has quoted one sentence, which in fact is a
misquote and does not state or convey what the Assessing Officer has
understood. The full paragraph in A. Mukherjee and Company
Private Limited (supra) reads:-

“In order that a publisher of books should be a
manufacturer of books it is wholly unnecessary W.P. (C) 7452/2010 Page 8 of 9
for him either to be an owner of a printing press
or to be a book-binder himself. A paper is not a
book, though it is printed on papers. A
publisher may get the books printed from any
printer but the printer is not the manufacturer
but a mere contractor. The findings of the
Tribunal in our opinion conclusively show that
the assessee was carrying on the activity of
manufacturing and also of processing of books
which are also goods.”

14. In the said case, the respondent was a publisher of books but did
not have a printing press. He would procure manuscripts, hit upon a
suitable format, get it printed from third parties under his supervision,
get the book bound and put it out for sale. The Calcutta High Court
dismissed the appeal of the Revenue and held in favour of the assessee
therein that he was engaged in manufacturing and also processing of
books, which were goods. The activity undertaken by the petitioner
herein, as accepted in the original assessment order, is that the
petitioner had printed text books and bound them and as per the
instructions of the importer dispatched them to parties outside India or
within India. The petitioner has set up an undertaking for printing and
production of books.

15. Section 10B applies to 100% export oriented undertaking
engaged in export of articles, things or computer software for a period
of ten consecutive assessment years beginning from the year in which
the undertaking begins to manufacture or produce articles, things or W.P. (C) 7452/2010 Page 9 of 9
computer software. The words “articles” and “things” are wide and by
no stretch it can be said that the petitioner does not produce an article
or a thing. After receipt of manuscripts from abroad, the petitioner has
to do type setting, make/process/print on paper and then bind printed
pages into books. Thus, a new product, distinct and separate from the
bare manuscripts takes shape and gets a physical shape in form of
books. Books are an article or a thing and the process involved is
certainly production, if not manufacture.
16. In view of the aforesaid position, we allow the present writ
petition quashing the reassessment notice and the order dated 28th
September, 2010. No order as to costs.
AUGUST 05, 2013

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