ELPEE CHEMICALS P. LTD, MUMBAI v. DCIT 9(i), MUMBAI

ITA 1183/MUM/2011 | 2003-2004
Pronouncement Date: 23-10-2013 | Result: Allowed

Appeal Details

RSA Number 118319914 RSA 2011
Assessee PAN AAACE1427E
Bench Mumbai
Appeal Number ITA 1183/MUM/2011
Duration Of Justice 2 year(s) 8 month(s) 14 day(s)
Appellant ELPEE CHEMICALS P. LTD, MUMBAI
Respondent DCIT 9(i), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 23-10-2013
Date Of Final Hearing 30-09-2013
Next Hearing Date 30-09-2013
Assessment Year 2003-2004
Appeal Filed On 09-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI P.M.JAGTAP AM AND SHRI AMIT SHUKLA JM ITA NO. 1183 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 200 3 - 200 4 ) ELPEE CHEMICALS PVT. LTD. 601 BHARAT SHREE NR. FLIMI STAN STUDIO UNNAT NAGAR - II GOREGAON (W) MUM - 62 VS. DCIT 9(1) MUMBAI PAN/GIR NO . : AA ACE 1 427 E ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 2818 /MUM/2011 ( ASSESSMENT YEAR : 200 4 - 200 5 ) ELPEE CHEMICALS PVT. LTD. 601 BHARAT SHREE NR. FLIMI STAN STUDIO UNNAT NAGAR - II GOREGAON (W) MUM - 62 VS. DCIT 9(1) MUMBAI PAN/GIR NO . : AAACE 1427 E ( APPELLANT ) .. ( RESPONDENT ) / ASSESSEE BY : MR. KESHAV B. BHUJ LE / REVENUE BY : SMT. JOTHILAKSHM I NAYAK DATE OF HEARING : 30 TH SEPT 201 3 DATE OF PRONOUNCEMENT : 23 RD OCT. 201 3 O R D E R PER AMIT SHUKLA J M : TH E AFORESAID APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS DATED 111 - 2010 AND 27 - 1 - 2011 PASSED BY THE CIT(A) - 19 ITA NO S . 1183 & 2818 /20 1 1 2 MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143 (3) R.W.S. 147 FOR THE ASSESSMENT YEAR 200 3 - 04 & 2004 - 05 RESPECTIVELY. 2 . IN ITA NO.1183/M/2011 FILED FOR THE ASSESSMENT YEAR 2003 - 04 THE ASSESSEE HAS RAISED ADDITIONAL GROUND S OF APPEAL WHEREIN VALIDITY OF ASSESSMENT UNDER SECTION 147 AND NOTICE UNDER SECTION 148 HAS BEEN CHALLENGED MAINLY ON THE GROUND THAT THERE IS A CHANGE OF OPINION AND THERE IS NO VALID REASON TO ENTERTAIN A BELIE F THAT INCOME CHARGEABLE TO TAX AS ESCAPED ASSESSMENT. 3 . THE FACTS IN CONCISE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CONTRACTUAL MANUFACTURING OF BULK DRUGS AND CHEMICALS AND ALSO EXPORTING THE SAME. IN THE AUDITED ACCOUNTS THE A SSESSEE HAS CLAIMED DEDUCTION OF RS. 63 45 381/ - UNDER SECTION 80HHC. AFTER CLAIMING THIS DEDUCTION RETURN OF INCOME WAS FILED AT AN INCOME OF RS. 87 49 280/ - . SUCH A RETURN OF INCOME WAS SUBJECT TO SCRUTINY PROCEEDINGS UNDER SECTION 143(3) BY THE DCIT - 9(1) MUMBAI . IN THE ASSESSMENT ORDER THE AO AFTER CALLING FOR ALL THE DETAILS AND ALSO WORKING OF THE PROFITS AND DEDUCTION U/S80HHC IN FORM 10CCAC FURNISHED ALONG WITH THE RETURN OF INCOME EXAMINED THE SAID CLAIM FOR DEDUCTION UNDER SECTION 80HHC AND RESTR ICTED THE CLAIM OF DEDUCTION AT RS. 62 89 552/ - . THE DETAIL WORKING OF THE DEDUCTION WAS GIVEN IN ANNEXURE - A OF THE ASSESSMENT ORDER WHICH WAS COMPLETED ON 22 - 2 - ITA NO S . 1183 & 2818 /20 1 1 3 2006. THEREAFTER ON 17 - 4 - 2007 SUCH AN ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE UNDER SECTIO N 148 ON FOLLOWING REASONS RECORDED : - IN THIS CASE THE RETURN OF INCOME FILED ON 15 - 10 - 2003 DECLARING THE TOTAL INCOME OF RS. 87 49 280/ - . THE ASSESSMENT U/S.143(3) WAS COMPLETED ON 22.02.2006 AND THE TOTAL INCOME WAS ASSESSED AT RS.88 64 410/ - . 2. PER USAL OF RECORD REVEALS THE FOLLOWING FACTS : AS PER THE PROVISIONS CONTAINED IN SECTION 80HHC WHILE COMPUTING PROFITS ELIGIBLE FOR DEDUCTION UNDER THIS SECTION 90% OF OTHER INCOMES INCLUDED IN THE PROFIT & LOSS A/C IS REQUIRED TO BE REDUCED FROM THE BUS INESS PROFIT. RETURN FILED BY ASSESSEE FOR A.Y.2003 - 04 WAS ASSESSED U/S.143(3) DATED 20.02.2006. WHILE COMPUTING TAXABLE INCOME ASSESSEE WAS ALLOWED A DEDUCTION OF RS.62 89 552/ - U/S.80HHC. IT IS SEEN FROM PROFIT & LOSS A/C THAT ASSESSEE HAD RECEIVED EXCISE REFUND OF RS. 22 71 462/ - . HOWEVER WHILE COMPUTING ELIGIBLE EXPORT PROFIT 90% OF EXCISE REFUND AMOUNT HAS NOT BEEN REDUCED. THIS HAD RESULTED IN EXCESS GRANT OF DEDUCTION AMOUNTING TO RS. 8 63 024/ - U/S.80HHC INVOLVING SHORT LEVY OF TAX OF RS. 3 17 1 61/ - . 3. IN VIEW OF THE ABOVE FACTS I HAVE REASONS TO BELIEF THAT INCOME IN THIS CASE HAS ESCAPED ASSESSMENT AND REQUIRED TO BE BROUGHT TO TAX AND THEREFORE NOTICE U/S.148 IS BEING ISSUED. 3.1 THUS IN THE REASONS RECORDED MAIN ALLEGATION WAS THAT 90% OF THE EXCISE REFUND OF RS. 22 71 462/ - SHOULD BE REDUCED FROM THE BUSINESS PROFITS. BEFORE THE AO THE ASSESSEE SUBMITTED THAT THE SAME SHOULD NOT BE REDUCED AS IT DOES NOT FALL WITHIN THE SCOPE OF EXPLANATION (BAA) TO SECTION 80HHC AND ALSO THE EXPORT S SALE IS NOT SUBJECT TO EXCISE DUTY BUT HAS TO BE PAID ON CLEARANCE OF GOODS AND REFUND IS CLAIMED THEREAFTER . THE EXCISE REFUND IS SET UP AGAINST THE EXCISE DUTY PAID AND NOT ON THE INCOME WHICH ACCRUES TO THE ASSESSEE. HOWEVER THE AO REJECTED THE ASSES SEES CONTENTION AND FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF K.RAVINDRANATHAN ITA NO S . 1183 & 2818 /20 1 1 4 NAIR REPORTED IN 298 ITR 228 HELD THAT SUCH RECEIPTS HAS TO BE DEDUCTED FROM THE GROSS TOTAL INCOME AND ACCORDINGLY RESTRICTED THE ASSESSEES CLAIM FOR T HE DEDUCTION AT RS. 48 25 110/ - . THIS HAS ALSO BEEN CONFIRMED BY THE LEARNED CIT(A) IN APPEAL. 4. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS ALL THESE DETAILS WERE THERE BEFORE THE AO WH O AFTER EXAMINING THE SAME HAS COMPUTED THE DEDUCTION UNDER SECTION 80HHC AS PER THE DETAILED WORKING GIVEN IN ORDER DATED 22.2.2006 . ONCE THE AO HAS CALLED FOR THE DETAILS AND AFTER EXAMINING THE SAME HAS PASSED THE ORDER AFTER APPLYING HI S MIND REOPENIN G ON THE SAME ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80HHC AMOUNTS TO CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN THE LAW. HE FURTHER SUBMITTED THAT THE EXCISE DUTY WAS EXEMPT ON EXPORTS HOWEVER ON CLEARANCE OF GOODS THE ASSESSEE HAS REQUIRED TO P AY EXCISE DUTY AND ON EXPORT OF GOODS THE SAME WAS REFUNDED. DURING THE YEAR THE ASSESSEE HAS PAID THE EXCISE DUTY OF RS .27 17 196/ - OUT OF WHICH THE EXCISE DUTY REFUND RECEIVED/RECEIVABLE FOR THE YEAR WAS RS. 22 71 462/ - . THE NET EXCISE DUTY PAYABLE/PAID W AS RS. 4 45 734/ - ONLY. THIS AMOUNT IS DEDUCTIBLE FROM THE TOTAL INCOME AND THE ENTIRE EXCISE DUTY HAS NO RELEVANCE WHILE ESTIMATING THE TOTAL INCOME BUSINESS PROFIT OR THE AMOUNT DEDUCTIBLE UNDER SECTION 80HHC. THUS ON BOTH THE COUNTS NOT ONLY THE REOPE NING IS IN VALID BUT ALSO ON MERITS THE SAME IS NOT SUSTAINABLE. ON THE ISSUE OF CHANGE OF OPINION LEARNED COUNSEL HAD ITA NO S . 1183 & 2818 /20 1 1 5 STRONGLY RELIED UPON THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF CIT VS. KELVINATOR INDIA PVT. LTD. 320 ITR 561 (SC) AND ON THE ISSUE OF NETTING OFF (HEREIN THIS CASE NET EXCISE DUTY PAYABLE) HE RELIED UPON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATES CAPSULES PVT. LIMITED REPORTED IN 343 ITR 89 . 5 . ON THE OTHER HAND LEARNED DR STRONGLY RELIED UP ON THE FINDINGS OF THE AO AND SUBMITTED THAT IN THIS CASE REOPENING HAS BEEN DONE WITHIN THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR . THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING HAS FAILED TO EXAMINE THIS ASPECT TH AT EXCISE DUTY REFUND CANNOT BE PART OF BUSINESS PROFIT AND THEREFORE THE AO HAS RIGHTLY ENTERTAIN REASONS TO BELIEVE FOR REOPENING THE CASE UNDER SECTION 147. IN SUPPORT OF THE ABOVE LEARNED DR RELIED UPON THE DECISION OF THE H O N BLE BOMBAY HIGH COUR T IN THE CASE OF AMINS PATHOLOGY LABORATORY VS. JCIT MUMBAI REPORTED IN 252 ITR 673 . 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THE ASSESSEE ALONG WITH RETURN OF INCOME FILED UNDER SECT ION 139(1) HAS FURNISHED THE TAX AUDIT REPORT AND ALSO FORM 10CCAC GIVING DETAILS OF DEDUCTION UNDER SECTION 80HHC . THESE DETAILS OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC WAS SUBJECT MATTER OF THE SCRUTINY BY THE AO WHO HAS EXAMINED THE DETAILS AF TER CALLING FOR THE RECORDS AND HAS MADE CERTAIN ITA NO S . 1183 & 2818 /20 1 1 6 DISALLOWANCE IN SUCH A COMPUTATION AND THEREAFTER RESTRICTED THE DEDUCTION OF RS. 62 89 552/ - AS AGAINST CLAIM OF RS. 6 3 45 381/ - . THE WORKING OF THE DEDUCTION WAS ALSO GIVEN BY THE AO IN ANNEXURE - A WHICH WAS PART OF THE ASSESSMENT ORDER DATED 22 - 2 - 2006 . THEREAFTER SUCH AN ASSESSMENT HAS BEEN REOPENED MAINLY ON THE GROUND THAT EXCISE REFUND OF RS. 22 71 462/ - HAS NOT BEEN REDUCED FROM THE ELIGIBLE EXPORT PROFITS. FROM THE PERUSAL OF THE REASONS RECORDED AND T HE MATERIALS PLACED ON RECORD IT APPEARS THAT THE AO HAS SOUGHT TO REOPEN THE CASE ONLY ON CHANGE OF OPINION BECAUSE ALL THE DETAILS FOR CLAIM FOR DEDUCTION UNDER SECTION 80HHC INCLUDING THE AMOUNTS INCLUDED IN THE PROFIT AS WELL AS EXPENSES IN THE WORK ING OF EXPORT PROFIT AND TOTAL TURNOVER WAS THERE BEFORE THE AO IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. ALL THESE DETAILS HAVE BEEN DULY EXAMINED BY HIM AND CLAIM FOR DEDUCTION HAS BEEN COMPUTED ON A CERTAIN AMOUNT. WITHOUT THERE BEING ANY FURT HER MATERIAL COM ING INTO POSSESSION OF THE AO OR ON THE RECORD SHOWING ANY LIVE LINK NEXUS WITH THE INCOME CHARGEABLE TO TAX WHICH CAN BE SAID TO HAVE ESCAPED ASSESSMENT REOPENING CANNOT BE DONE ON MERE CHANGE OF OPINION . ON SAME SET OF FACTS WHICH WER E EXAMINED BY THE A . O. ONCE THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) AFTER DETAIL SCRUTINY ON EXAMINATION THEN SUCH A COMPLETED ASSESSMENT COULD NOT BE DISTURBED UNLESS THERE IS SOME RELEVANT MATERIAL COMING INTO POSSESSION OF THE AO OR ANY DIRECT DECISION OF THE HONBLE APEX COURT ENTIRELY CHANGING THE EARLIER VIEW TAKEN WHICH GOES TO SUGGEST THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ITA NO S . 1183 & 2818 /20 1 1 7 ASSESSMENT AND WHICH HAS NOT BEEN EXAMINED BY THE AO OR WAS NOT THERE IN THE RECORD. THE REASON TO BELIEVE DOES NOT MEAN PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE AO BUT IT MUST BE HELD IN GOOD FAITH BASED ON CERTAIN MATERIAL AND THERE SHOULD BE RATIONALE CONNECTION AND RELEVANT BEARING ON THE FORMATION OF BELIEF THAT INCOME CHARGEABLE TO TAX H AS ESCAP ED ASSESSMENT . THE REASON TO BELIEVE CANNOT BE BASED ON THAT SOME DIFFERENT OPINION WHICH CAN BE FORMED ON THE SAME SET OF MATERIAL LATER ON . HON BLE APEX COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. REPORTED IN 320 ITR 561 (SC) HAS CLEARLY LAID D OWN THAT CHANGE OF OPINION IS IN - BUILT TE ST TO CHECK THE ABUSE OF POWER BY THE AO OTHERWISE THERE WOULD ALWAYS BE S O ME CASE OF REVIEW TAKING PLACE IN THE GARB OF REOPENING OF THE ASSESSMENT. THE RELEVANT OBSERVATIONS OF THE HON BLE SUPREME COURT IN THI S CONTEXT ARE REPRODUCED HERE UNDER : - ON GOING THROUGH THE CHANGES QUOTED ABOVE MADE TO SECTION 147 OF THE ACT WE FIND THAT PRIOR TO THE DIRECT TAX LAWS (AMENDMENT) ACT 1987 REOPENING COULD BE DONE UNDER THE ABOVE TWO CONDITIONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT BUT IN SECTION 147 OF THE ACT (WITH EFFECT FROM 1ST APRIL 1989) THEY ARE GIVEN A GO - BY AND ONLY ONE CONDITION HAS REMAINED VIZ. THAT WHERE THE ASSE SSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE POST - 1ST APRIL 1989 POWER TO REOPEN IS MUCH WIDER. HOWEVER ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REA SON TO BELIEVE' FAILING WHICH WE ARE AFRAID SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION' WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEP TUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW ; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRECONDITIONS AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED AS CONTENDED ON BEHALF OF THE DEPARTMENT THEN IN THE GARB OF REOPENING THE ASSESSMENT ITA NO S . 1183 & 2818 /20 1 1 8 REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE AFTER 1ST APRIL 1989 THE ASSESSING OFFICER HAS POWER TO REOPEN PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT 1987 PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE' PARLIAMENT REINTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSIN G OFFICER. WE QUOTE HEREINBELOW THE RELEVANT PORTION OF CIRCULAR NO. 549 DATED OCTOBER 31 1989 ( [1990] 182 ITR (ST. ) 1 29) WHICH READS AS FOLLOWS : '7.2 AMENDMENT MADE BY THE AMENDING ACT 1989 TO REINTRODUCE THE EXPRESSION `REASON TO BELIEVE' IN S ECTION 147. - A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS `REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE `OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION `REASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEA RS THE AMENDING ACT 1989 HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION `HAS REASON TO BELIEVE' IN PLACE OF THE WORDS `FOR REASONS TO BE RECORDED BY HIM IN WRITING IS OF THE OPINION'. OTHER PROVISIONS OF THE NEW SECTION 147 HOWEVER RE MAIN THE SAME.' 7 . HERE IN THIS CASE ALSO AS PER THE REASONS RECORDED IT COULD BE GATHERED THAT THERE IS NO TANGIBLE MATERIAL COMING INTO KNOWLEDGE OF THE A.O. BUT HE IS TRYING TO TAKE A DIFFERENT OPINION ON THE SAME SET OF MATERIAL WHICH HAS BEEN EX AMINED BY THE AO IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. THUS TH E REOPENING OF THE ASSESSMENT UNDER SECTION 147 IN THE PRESENT CASE IS DEFINITELY ON ACCOUNT OF CHANGE OF OPINION ONLY WHICH IS NOT PERMISSIBLE UNDER THE LAW FOR ACQUIRING JURIS DICTION UNDER SECTION 147 IN VIEW OF THE DECISION OF THE HON BLE ITA NO S . 1183 & 2818 /20 1 1 9 SUPREME COURT AS STATED ABOVE. THUS THE ENTIRE REOPENING BASED ON THE AFORESAID REASONS RECORDED IS VOID AB INITIO AND THEREFORE THE IMPUGNED ASSESSMENT ORDER DATED 16 - 10 - 2008 PASSED UN DER SECTION 143 R.W.S. 147 IS HEREBY QUASHED AS UNSUSTAINABLE IN LAW . 8 . IN ITA NO. 2818/M/2011 FILED FOR ASSESSMENT YEAR 2004 - 05 THE ASSESSEE HAS RAISED SIMILAR ADDITIONAL GROUND CHALLENGING THE VALIDITY OF ASSESSMENT UNDER SECTION 148 ON THE GROUND THA T THERE IS A CHANGE OF OPINION AS THE EARLIER ASSESSMENT ORDER WAS COMPLETED UNDER SECTION 143(3) BY THE AO. HERE IN THE PRESENT CASE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80HHC AT RS. 47 81 792/ - AS PER THE COMPUTATION AND WORKING GIVEN IN FORM 10CCAC. SUCH A CLAIM WAS EXAMINED BY THE AO IN THE SCRUTINY PROCEEDINGS UNDER SECTION 143(3) VIDE ORDER DATED 15 - 11 - 2006 AND THEREAFTER ALLOWED THE CLAIM OF DEDUCTION RECEIPTS OF ON LABOUR CHARGES ALSO . FOR REOPENING THE CASE UNDER SECTION 147 FOLLOWING REASONS WERE RECORDED : - THE ASSESSMENT FOR THE A.Y.2004 - 05 HAS BEEN REOPENED U/S.147 OF THE I.T.ACT IN YOUR CASE. THE REASONS RECORDED FOR INITIATING PROCEEDINGS U/S. 147 OF THE I.T. ACT 1961 FOR A.Y.2004 - 0 5 ARE AS UNDER : - IN THIS CASE FOR A.Y.2003 - 04 THE REASSESSMENT U/S 143(3) R.W.S. 147 HAS BEEN MADE ON 16.10.2008 WHEREIN DEDUCTION U/S 80HHC HAS BEEN RECOMPUTED. IN RE - COMPUTATION OF DEDUCTION U/S 80HHC 90% OF LABOUR CHARGES RECEIPT WAS REDUCED FROM E LIGIBLE PROFITS OF THE BUSINESS AND THE SAME WAS INCLUDED IN THE TOTAL TURN OVER FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN ITS ORDER DATED 13.11.2007 IN THE CASE OF CIT VS. K.RAVINDRANATHAN NAIR 295 ITR 298 (SC). ITA NO S . 1183 & 2818 /20 1 1 10 FOR A.Y.2004 - 05 ON VERIFICATION OF P & L A/C READ WITH SCHEDULE - 12 IT IS NOTED THAT THE PROFITS OF ELIGIBLE BUSINESS ALSO INCLUDED LABOUR CHARGES RECEIPTS OF RS.43 64 000/ - UNDER THE HEAD SALES BUT 90% THEREOF HAS NOT BEEN REDUCED FROM THE ELIGIBLE PROFITS FOR THE PUR POSE OF DEDUCTION U/S. 80HHC IN TERMS OF CLAUSE (BAA). IN THE ASSESSMENT U/S 143(3) THE CLAIM OF DEDUCTION U/S 80HHC WAS WRONGLY ALLOWED WITHOUT REDUCING 90% OF LABOUR CHARGES OF RS.43 64 000/ - AND THEREBY ALLOWED EXCESS DEDUCTION U/S 80HHC OF RS.11 19 86 3/ - . IN VIEW OF THE ABOVE INCOME CHARGEABLE TO TAX OF RS.11 19 863/ - BEING EXCESS DEDUCTION U/S 80HHC HAS ESCAPED ASSESSMENT FOR A.Y. 2004 - 05 WITHIN THE MEANING OF SECTION 147 OF THE I.T ACT 1961. 9 . THUS THE MAIN REASON FOR REOPENING THE CASE WAS THAT PROFITS OF THE ELIGIBLE BUSINESS ALSO INCLUDED LABOUR CHARGES RECEIPTS OF RS. 43 64 000/ - UNDER THE HEAD SALES AND 90% THEREOF HAS NOT BEEN REDUCED FROM THE ELIGIBLE PROFITS AND T HUS THERE WAS A CLEAR CUT MISTAKE OF LAW BY THE AO WHILE ALLOWING THE D EDUCTION UNDER SECTION 143 (3) WHICH IN A DIRECT VIOLATION OF DECISION OF HON BLE SUPREME COURT IN THE CASE OF K.RAVINDRANATHAN NAIR (SUPRA). THE AO IN THE ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 REDUCED THE 90% OF THE LABOR CHARGES FOR COMPUTING THE PROFITS FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT. THIS HAS BEEN CONFIRMED BY THE CIT(A) ALSO. 10 . BEFORE US LEARNED COUNSEL SUBMITTED THAT ONCE A VIEW HAS BEEN TAKEN BY THE AO WHICH WAS ALSO BASED ON CERTAIN DECISION S PREVALENT AT THAT TIM E THEN IT CANNOT BE HELD THAT SUCH A VIEW TAKEN BY THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS WAS A WRONG VIEW. THE SUBSEQUENT JUDGMENT OF THE HON BLE SUPREME COURT CANNOT RENDER THE EARLIER ASSESSMENT ORDER AS ERRONEOUS WHICH CAN BE COR RECTED BY ITA NO S . 1183 & 2818 /20 1 1 11 RESORTING TO REOPENING UNDER SECTION 147 . HE SUBMITTED THAT AT THE RELEVANT TIME THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BANGALORE CLOTHING COMPANY LTD. 260 ITR 371 WAS THERE AND THEREFORE THE VIEW TAKEN BY THE A. O. WAS IN ACCORDANCE WITH THE LAW. THE SUBSEQUENT REOPENING BASED ON THE DECISION OF THE HON BLE SUPREME COURT AMOUNTS TO CHANGE OF OPINION WHICH CANNOT BE UPHELD. RELIANCE WAS PLACED ON DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATO R INDIA LTD. (SUPRA) . 10.1 ALTERNATIVELY HE SUBMITTED THAT IN ANY CASE ONLY NET PER CENT OF NET LABOUR CHARGES SHOULD BE EXCLUDED UNDER CLAUSE (BAA ) OF EXPLANATION TO SECTION 80HHC IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATES CAPSULES PVT. LIMITED (SUPRA) . 11 . ON THE OTHER HAND LEARNED DR SUBMITTED THAT ONCE THE LAW HAS BEEN LAID DOWN BY THE H O N BLE SUPREME COURT THEN IT MEANS THAT THE LAW WAS ALWAYS LIKE THAT AND THEREFORE THE CLAIM ALLOWED EARLIER BY THE AO W AS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE LAW AND THEREFORE THE REOPENING THE ASSESSMENT U/S.147 FOR DISALLOWING THE CLAIM OF DEDUCTION WHICH HAS BEEN EXCESSIVELY ALLOWED BY THE AO IS IN ACCORDANCE WITH PROVISIONS OF LAW AND THERE IS NO QUESTION OF CHANGE OF OPINION . HE THUS STRONGLY RELIED UPON THE ORDER OF THE AO AS WELL AS CIT(A) . ITA NO S . 1183 & 2818 /20 1 1 12 12 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IN THIS CASE THE ASSESSEE HAS INCLUDED LABOUR CHARGES RECEIPTS WHILE COMPUTING THE PROFITS OF THE ELIGIBLE BUSINESS UNDER THE HEAD SALES. SUCH A CLAIM OF DEDUCTION ON ACCOUNT OF INCLUSION OF LABOUR CHARGES WAS ALSO ALLOWED BY THE AO IN THE ASSESSMENT ORDER PASSED U/S.143(3) . THEREAFTER NOTICE UNDER SECTION 148 HAS BEEN ISSUED FOR REOPENING THE ASSESSMENT ON THE GROUND THAT SUCH A CLAIM OF DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING 90% OF THE LABOUR CHARGES HAS WRONGLY BEEN ALLOWED IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF K.RAVINDRANATHAN NAIR (SUPRA). THE MAIN CONTENTION OF THE LEARNED COUNSEL IS THAT THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS HAS FOLLOWED A PLAUSIBLE VIEW WHICH WAS ALSO IN CONSONANCE WITH THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BANGALORE CLOTHING COMPANY LTD. (SUPRA) . H OWEVER THIS DECISION OF THE HON BLE BOMBAY HIGH COURT HAS BEEN IMPLIEDLY OVERRULED BY THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF K.RAVINDRANATHAN NAIR (SUPRA). ONCE THE HON BLE SUPREME COURT INTERP RETS ANY LAW AND LAYS DOWN ITS DECISION ON SUCH INTERPRETATION OF LAW THEN SUCH JUDICIAL DECISION APPLIES RETROSPECTIVELY. IT IS TRITE LAW THAT THE COURTS DO NOT MAKE ANY NEW LAW THEY ONLY DISCOVER AND FIND THE CORRECT INTERPRETATION OF THE LAW AS IF IT IS ALWAYS THE SAME AND SUCH A CORRECT PRINCIPLE OF LAW SUBSEQUENTLY LAID DOWN BY THE H ON BLE SUPREME COURT APPLIES RETROSPECTIVELY BECAUSE IT CLARIFIES A LEGAL ITA NO S . 1183 & 2818 /20 1 1 13 POSITION WHICH IS BINDING ON ALL THE COURTS SUBORDINATE TO IT . ONCE THE HON BLE SUPREME COUR T IN THE CASE OF K.RAVINDRANATHAN NAIR (SUPRA) HAS HELD THAT SUCH KIND OF CHARGES HAVE TO BE REDUCED BY 90% WHILE COMPUTING THE PROFITS OF THE BUSINESS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC AND S UCH A REDUCTION IS TO BE MADE FROM GROSS TOTAL INCOME AND WOULD BE INCLUDED IN THE TOTAL TURNOVER AS PER THE FORMULA GIVEN IN SECTION 80HHC(3) THEN SUCH A LAW APPLIES RETROSPECTIVELY OVERRIDING ALL THE VIEW TAKEN EARLIER. THUS IF THE LAW HAS BEEN LAID DOWN BY THE HON BLE SUPREME COURT EVEN AFTER THE PASSING OF ASSESSMENT ORDER THEN DEFINITELY IT CONSTITUTES TANGIBLE/RELEVANT MATERIAL HAVING LIVE LINK NEXUS WITH INCOME CHARGEABLE TO TAX HAVING ESCAPED ASSESSMENT. THERE IS NO QUESTION OF CHANGE OF OPINION BECAUSE THE EARLIER OPINION WAS NOT IN ACCORDANCE WI TH THE PROVISIONS OF LAW AND SUBSEQUENT DECISION OF THE HON BLE SUPREME COURT REVERSING THE EARLIER INTERPRETATION OF LAW DOES CONSTITUTE FRESH MATERIAL COMING IN POSSESSION OF THE ASSESSING OFFICER SO AS TO CLOTHE HIM WITH THE JURISDICTION TO REOPEN THE CASE U/S.147. T HEREFORE O N THESE FACTS AND CIRCUMSTANCES OF THE CASE WE HOLD THAT REOPENING UNDER SECTION 147 BASED ON THE AFORESAID REASONS RECORDED ARE IN ACCORDANCE WITH THE PROVISIONS OF LAW AND AO HAS RIGHTLY EXERCISED HIS JURISDICTION FOR ISSUING NOTICE UNDER SECTION 148 FOR REOPENING THE ASSESSMENT. 13 . HOWEVER WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL THAT WHILE REDUCING THE 90% LABOUR CHARGES RECEIPTS ONLY THE NET LABOUR CHARGES SHOULD BE REDUCED AFTER SETTING OFF THE LABOUR CHARGE S PAID IN ITA NO S . 1183 & 2818 /20 1 1 14 VIEW OF THE LAW LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATES CAPSULES PVT. LIMITED (SUPRA). THUS THE AO IS DIRECTED TO REDUCE ONLY THE NET LABOUR CHARGES WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC . WITH THIS DIRECT ION APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 14 . IN THE RESULT APPEAL OF THE ASSESSEE I.E. ITA NO. 1183/M/11 IS ALLOWED AND APPEAL IN ITA NO. 2818/M/2011 IS ALLOWED PARTLY . ITA NO.1183/M/11 ) ITA NO. 2818/M/2011 ) ORDER PRONOUNCED ON THIS 23 RD DAY OF OCTOBER 201 3 . 23 RD OCTOBER 2 01 3 SD/ - SD/ - ( ) ( P.M.JAGTAP ) ( ) ( AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 23/10/2013 /PKM PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X MUMBAI. 4. / CIT 5. / DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER ( ASSTT. REGISTRAR) / ITAT MUMBAI