M/s. Apurva Chemicals, Vapi v. The Income tax Officer,Vapi Ward-1,, Vapi

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI MAHAVIR SINGH JM AND A N PAHUJA AM) ITA NO.2486/AHD/2007 (ASSESSMENT YEAR:- 2001-02) M/S APURVA CHEMICALS PLOT NO.2806 3 RD PHASE GIDC VAPI [PAN:AAEFA7616G] V/S THE INCOME-TAX OFFICER VAPI WARD-1 VAPI [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI J P SHAH AR REVENUE BY:- SMT. NEETA SHAH DR O R D E R A N PAHUJA : THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 05-02-2007 OF THE LD. CIT(APPEALS) VALSAD RAISES THE FOLLOWING GROUNDS: 1 THE CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN UP HOLDING THE REOPENING NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT 196 1. 2 THE CIT(A) FAILED TO APPRECIATE THAT THE REASSESS MENT NOTICE UNDER SECTION 148 WAS BAD IN LAW AS IT DID NOT FULFILL TH E CONDITION PRECEDENT FOR CARRYING OUT REASSESSMENT IN THE CASE OF ASSESS EE. 3 WITHOUT PREJUDICE TO THE ABOVE MENTIONED TWO LEGA L GROUNDS THE CIT(A) FURTHER ERRED IN NOT CONSIDERING INCOME OF R S.51 75 000/- AS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC OF THE I .T. ACT. 4 THE CIT(A) OUGHT TO HAVE TAKEN IN TO CONSIDERATIO N THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE PROCESS OUGHT TO HAVE ALLOWED THE APPEAL OF THE ASSESSEE IN TOTO. THE APPELLANT RESERVES ITS RIGHT TO ADD AMEND ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING 2 ADVERTING FIRST TO GROUND NOS.1 & 2 IN THE APPEAL FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT IN THIS CASE A SURV EY U/S 133A OF THE INCOME-TAX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT] WAS CONDUCTED ON 25/9/2000 IN THE PREMISES OF THE ASSES SEE WHEN IN ITA NO.2486/AHD/2007 2 FOUR CASES OF THE GROUP INCLUDING THE ASSEESSEE A DDITIONAL INCOME OF RS.1.10 CRORES WAS OFFERED TO TAX. OUT OF THE T OTAL DISCLOSURE AN INCOME OF RS.51 75 000/- NOT REFLECTED IN THE BOOKS OF ACCOUNTS AT THE TIME OF SURVEY OPERATION WAS OFFERED TO TAX IN THE HANDS OF THE ASSESSEE. SUBSEQUENTLY ASSESSMENT WAS COMPLETED ON AN INCOME OF RS.85 79 620/- VIDE ORDER DATED 22/01/2003 U/S . 143(3) OF THE ACT IN PURSUANCE TO RETURN FILED ON 30/10/2001 DEC LARING INCOME OF RS.83 84 454/-. INTER ALIA THE AO ALLOWED DEDUCTIO N U/S.80HHC OF THE ACT AS CLAIMED BY THE ASSESSEE ON THE AMOUNT OF STOCK OF RS.1 09 196/- AND ADVANCES RECEIVABLE OF RS.49 84 8 04/- DISCLOSED U/S 133A OF THE ACT. SINCE SUCH STOCK AND RECEIVABL E WERE NOT DERIVED FROM THE BUSINESS OF EXPORTS NOR WERE ACCO UNTED FOR IN THE BOOKS THE AO WAS OF THE OPINION THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT ON THE AFORESAID AMOUNT.AS THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S.80HHC OF TH E ACT ONLY ON THE PROFIT OF RS.52 35 022/- OUT OF THE PROFIT DISC LOSED BY THE ASSESSEE OF RS.1 04 10 022/- ACCORDINGLY TO THE AO THE ASSESSEE WAS ENTITLED FOR DEDUCTION OF ONLY RS.12 73 280/ -(5235022 X 35142572/14448624). SINCE THE ASSESSEE HAD BEEN ALL OWED EXCESS DEDUCTION OF RS.7 99 428/- THE AO RECORDED THE REA SONS THAT INCOME TO THAT EXTENT HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE ACT. ACCORDINGLY THE AO ISSUED A NOTICE U/S 148 OF THE ACT ON 23-3-2006. IN RESPONSE THE ASSESSEE VIDE LETTER DATED 28/4/2006 REQUESTED TO TREAT THE RETURN FILED ON 30/10/2001 AS RETURN IN RESPONSE TO NOTICE ISSUED U /S 148 OF THE ACT. THE REPRESENTATIVE OF THE ASSESSEE WAS ALSO PROVIDE D THE REASONS FOR REOPENING THE ASSESSMENT ON 17 7 2006. SUBSEQUE NTLY VIDE LETTER DATED 27-7-2006 THE ASSESSEE OBJECTED TO TH E REOPENING OF THE ASSESSMENT AND REQUESTED TO PASS A SPEAKING ORD ER AGAINST THE OBJECTIONS RAISED IN THE SAID LETTER IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT S INDIA LTD. (2003) 259 ITR 19.ACCORDINGLY THE AO OBSERVED THAT ITA NO.2486/AHD/2007 3 5. WHILE COMPLETING THE ASSESSMENT THE THEN ASS ESSING OFFICER HAS VERIFIED THE SURVEY REPORT AND OTHER EVIDENCE F OUND BY THE SURVEY TEAM AND IT WAS SEEN THAT IN THE P&L A/C. AD DITIONAL INCOME OF RS.51 75 000/-OFFERED AT THE TIME OF SURVEY OPER ATION WAS ACCOUNTED FOR AS UNDER WHICH WAS NOT RECORDED IN T HE BOOKS OF ACCOUNT AT THE TIME OF SURVEY OPERATION:- 1. STOCK RS. 1 90 196/- 2. ADVANCE RECEIVABLE. RS.29 84 804/- ----------------- TOTAL RS.51 75 000/- 5.1 HOWEVER WHILE COMPLETING ASSESSMENT THE AO HAS ALLOWED DEDUCTION U/S 80HHC ON THE AMOUNT OF STOCK AND ADVA NCES RECEIVABLE OF RS.51 75 000/- DISCLOSED U/S 133A OF THE ACT. SUCH STOCK AND RECEIVABLE CAN NOT BE SAID TO BE DERIVED FROM THE BUSINESS TO BE INCLUDED IN THE PROFIT OF BUSINESS FOR THE PU RPOSE OF DEDUCTION U/S.80HHC FOR THE FOLLOWING REASONS. (A) IN ANY CASE WHERE INCOME IS DISCLOSED U/S.13 3A OF THE ACT THE SAME TO BE TAKEN SEPARATELY UNDER THE HEAD INCOME FROM OTHER SOURCES BECAUSE THE INCOME DISCLO SED PARTAKES THE CHARACTER ON UNDISCLOSED INCOME. (B) IN CASE OF ADVANCES RECEIVED THE ACCOUNTING TREATMENT FOR THE SAME TRANSACTION DOES NOT PARTAKES THE CHAR ACTER OF INCOME BECAUSE IN SUCH A SITUATION PARTY'S ACCOU NT WILL BE CREDITED AND CASH/BANK ACCOUNT WILL BE DEBI TED. THEREFORE THE TRANSACTION L DOES RESULT INTO ANY I NCOME. IF THE ASSESSEE INTENDS TO TREAT THIS TRANSACTION A S AN INCOME GENERATING TRANSACTION IN NO WAY IT CAN BE CONSIDERED AS BUSINESS INCOME. (C) WHERE THE DISCLOSURE IS MADE U/S 133A THE IN COME DISCLOSED PERTAINS TO THE YEAR WHEN SURVEYS IS CARR IED OUT. CONSIDERING THE SHELTER TAKEN BY THE ASSESSEE THAT THE INCOME DISCLOSED REPRESENTS RECEIVABLES RECOVER ED IT TAKES THE CHARACTER OF CURRENT YEAR'S INCOME WHI CH HAS NOT BEEN RECORDED PRIOR TO THE ACTION U/S 133A. HOW EVER IN THIS SITUATION THE TRANSACTIONS HAVE TO BE ROUT ED THROUGH THE BOOKING ON SALES FOR THE CURRENT YEAR. THIS HAS NOT BEEN DONE IN THE PRESENT CASE. VERIFICATION SALES RECORD ALSO BECOME MORE SIGNIFICANT. IN THE INSTANT CASE ADVANCES / RECEIVABLES WERE RECORDED IN A DIARY WHI CH WAS FOUND DURING THE COURSE OF SURVEY. THE AMOUNT W AS DISCLOSED AS RECEIVABLE. IT IS NOT SPECIFIED AS TO WHICH TRANSACTION THESE RECEIVABLES PERTAINED TO IT. IT M AY BE THE CASE THAT ADVANCES WERE MADE BY THE ASSESSEE AN D ITA NO.2486/AHD/2007 4 SUBSEQUENTLY RECOVERED IN SUCH CASE THE TRANSACTIO NS HAVING NOT BEEN RECORDED IN THE REGULAR BOOKS. IN T HIS CONTEXT THE NATURE OF TRANSACTION PARTAKES THE CHAR ACTER OF UNDISCLOSED INCOME. GRANTING DEDUCTION ON SUCH INCOME DEFEATS THE VERY PURPOSE OF LEGISLATIVE INTE NTION. 5.2 THE CASE OF THE ASSESSEE IS SUCH THAT THE ASSES SEE HAS BEEN ALLOWED EXCESS ALLOWANCE OF DEDUCTION U/S.80HHC OF THE ACT ON THE DISCLOSURE MADE DURING THE COURSE OF SURVEY PROCEED INGS. OF COURSE WHILE FILING THE RETURN OF INCOME THE ASSESSEE HAS ACCOUNTED FOR SUCH DISCLOSURE IN THE BOOKS OF ACCOUNTS BUT IT WA S NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS IN THE REGULAR COURSE OF ACCOUNTING. IN THE P&L A/C. SUCH DISCLOSURE HAS BEEN REFLECTED IN THE INCOME SIDE OVER AND ABOVE THE INCOME EARNED BY THE ASSESSEE DU RING THE REGULAR COURSE OF BUSINESS. THUS IT IS VERY CLEAR T HAT THE INCOME DISCLOSED DURING THE COURSE OF SURVEY PROCEEDINGS A RE DISCLOSED AS INCOME FROM OTHER SOURCES. THE MAIN CONTENTION OF T HE ASSESSEE BASED ON THE JUDICIAL PRONUNCIATION OF JUDICIAL REF ERRING IN THE CASES OF BHANHJI LAVJI (1971) 79 ITR 582 (HC) AND SIRPUR PAPER MILLS (1978) 114 ITR 404 (AP) IS THAT ON ACCOUNT OF A MER E CHANGE IN OPINION WILL NOT EMPOWER THE ASSESSING OFFICER TO R EOPEN THE ASSESSMENT. 5.3 I HAVE CAREFULLY GONE THROUGH THE ARGUMENTS MAD E BY THE ASSESSEE REGARDING RE-OPENING THE ASSESSMENT WHICH ARE NOT ACCEPTABLE AS PER THE FACTS OF THE CASE AS WELL AS ON MERITS. IT IS TO BE STATED THAT THE COMPLETED ASSESSMENT CAN BE OPEN ED EITHER WHEN THERE IS OMISSION OR FAILURE ON THE PART OF THE ASS ESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL AND RELEVANT FACT OR E VEN IF THERE IS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE BUT THE INCOME IS DEEMED TO HAVE BEEN ESCAPED AS PER THE PROVISIONS O F SECTION 147 OF THE ACT. RELIANCE IS PLACED ON THE DECISION OF P HOOLCHAND BAJRANG LAL VS. ITO 2O3 ITR 4S6 WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT SINCE FOR THE PURPOSE OF REOPENING THE BE LIEF IS THAT OF THE ITO THE SUFFICIENCY OF REASONS FOR FORMING THE BEL IEF IS NOT FOR THE COURT TO JUDGE BUT IT IS OPEN TO AN ASSESSEE TO EST ABLISH THAT THERE IN FACT EXISTED NO BELIEF OR THAT BELIEF WAS NOT BONAF IDE. THE COURT CAN ONLY LOOK INTO THE REASONS TO THAT LIMITED EXTENT. 5.4 WITH RESPECT TO THE ARGUMENT THAT SINCE ALL THE INFORMATION WAS GIVEN RETURN IT IS TO BE STATED THAT AS DELIVE RED IN THE JUDGEMENT IN THE CASE RAKESH AGRAWAL VS. ACIT BY THE HON'BLE DELHI HIGH COURT THAT SECTION 147 ACT AS AMENDED WITH EFFECT F ROM 01.04.89 PROVIDES THAT IF THE AO HAS TO BELIEVE THAT ANY INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR HE MAY SUBJECT TO THE PROVISIONS OF SECTION 148 TO 153 ASSESS OR REAS SESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT. THE COURT OBSERVED THAT THE SECTION NOT ONLY MERGES CLAUSE (A) AND (B) OF THE PRE-AMENDED SECTION 147 O F THE ACT BUT ITA NO.2486/AHD/2007 5 ALSO BRINGS ABOUT A SIGNIFICANT CHANGE IN THE PRELI MINARY REQUIREMENT OF CERTAIN MANDATORY CONDITIONS BEFORE ASSESSMENT P ROCEEDINGS COULD BE INITIATED UNDER THE OLD SECTION. THE HON'B LE COURT OBSERVED THAT IN THE AMENDED SECTION THE ONLY CONDITION FOR ACTION NOW IS THAT THE AO SHOULD HAVE REASON TO BELIEVE THAT INCOME HA S ESCAPED ASSESSMENT WHICH BELIEF CAN BE REACHED IN ANY MANNE R AND IS NOT QUALIFIED BY THE PROCEEDINGS OF FAILURE BY THE ASSE SSEE TO MAKE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS AS CONTEMPLA TED UNDER THE UN- AMENDED SECTION 147(A). THE HON'BLE COURT STATED TH E AO CAN NOW LEGITIMATELY REOPEN THE ASSESSMENT IN RESPECT OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. IT WAS OBSERVED BY THE HON' BLE COURT THAT UNDOUBTEDLY UNDER THE AMENDED SECTION POWER TO REO PEN ASSESSMENT IS MUCH WIDER AND CAN BE EXERCISED EVEN IF AN ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS. I N THE CASE OF CIT VS. ABAD FISHERIES 258 ITR 641 THE HON'BLE KERALA HIGH COURT STATED THAT SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED THE AO IS FREE TO INITIATE PROCEEDINGS U/S.147 AND FAILURE TO TAKE STEPS U/S. 143(3) WILL NOT RENDER THE AO POWERLESS TO INITIATE ASSESSMENT PROCEEDINGS. 5.5 IN VIEW OF THE ABOVE TWO DECISIONS ALL THE ARG UMENTS OF THE ASSESSEE HAVE BECOME INVALID AND THERE IS NO CHANGE OF OPINION AND RESPECTFULLY FOLLOWING THE DIRECTIONS GIVEN IN THE CASE OF GKN DRIVESHAFT LTD. (2003) 259 ITR 19 THE OBJECTIONS R AISED BY THE ASSESSEE FOR REOPENING OF THE ASSESSMENT HAS BEEN R EJECTED. 6. VIDE LETTER 21/9/2006 THE ASSESSEE HAS AGAIN OB JECTED TO THE REOPENING OF THE ASSESSMENT AND REQUESTED TO GRANT DEDUCTION U/S 80HHC ON THE DISCLOSED AMOUNT OF RS.51 75 000/-. ON PERUSAL OF THE ASSESSMENT ORDER MADE U/S 143(3) OF THE ACT DATED 22/1/2003 P&L A/C. OF THE ASSESSEE AND FACTS OF THE CASE AND FIN DING OF THE SURVEY TEAM THE ASSESSEE ITSELF HAS TAKEN THE DISCLOSURE AMOUNT OF RS.51 75 000/- SEPARATELY UNDER THE HEAD INCOME FRO M OTHER SOURCES AS REFLECTED IN THE P&L A/C. BECAUSE THE INCOME DI SCLOSED PARTAKES THE CHARACTER OF UNDISCLOSED INCOME. IN VIEW OF THE DISCUSSION MADE ABOVE THE INCOME DISCLOSED DURING THE COURSE OF SU RVEY OPERATION U/S 133A IS HAVING DOES NOT PARTAKES THE CHARACTER OF INCOME GENERATED DURING THE REGULAR COURSE OF BUSINESS AND CANNOT BE CONSIDERED AS BUSINESS INCOME WITHIN THE MEANING OF SECTION 80HHC OF THE ACT. THUS THE DEDUCTION CLAIMED BY THE ASSES SEE AND ALLOWED U/S 80HHC WHILE PASSING THE ORDER U/S 143(3) DATED 22-1-2003 REQUIRES TO BE RECALCULATED AND TO BE ALLOWED ONLY ON THE PROFIT OF RS.52 35 022/- EXCLUDING THE DISCLOSURE MADE OF RS .51 75 000/- OUT OF THE PROFIT DISCLOSED BY THE ASSESSEE IN THE P&L ACCOUNT OF RS.1 04 10 022/-. ITA NO.2486/AHD/2007 6 2.1 IN THE LIGHT OF AFORESAID DISCUSSION THE AO RESTRICTED THE CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT TO THE EXT ENT OF RS. 12 73 280/- 3. ON APPEAL THE ASSESSEE ARGUED THAT THAT THE ORIGINAL ASSESSMENT HAVING BEEN COMPLETED U/S. 143(3) OF THE ACT THE SAME CAN NOT BE REOPENED ON THE BASIS OF CHANGE OF OPINI ON REGARDING TAXABILITY OF CERTAIN INCOME OR ALLOWABILITY OF CER TAIN DEDUCTION WHICH HAD ALREADY BEEN EXAMINED IN THE ORIGINAL AS SESSMENT. IT WAS POINTED OUT THAT NO NEW MATERIAL WAS BROUGHT ON RE CORD BY THE AO TO REOPEN THE ASSESSMENT . RELYING UPON THE DECISIO NS IN THE CASE OF CALCUTTA DICOUNT CO. LTD. VS. ITO 41 ITR 191 ( SC) ITO VS. LAKHMANI MEWAL DAS 103 ITR 437(SC) CIT & ANR. V FO RAMER FRANCE 264 ITR 566 (SC) SIESTA STEEL CONSTRUCTION PVT. LTD. 154 ITR 547 (BOM.) CIT V. INDIAN OVERSEAS BANK LTD. 25 2 ITR 640 (MAD.) CIT V. OMRAO INDTL. CORPN. PVT. LTD. 246 I TR 346 (ALL.) GARDEN SILK MILLS (P) LTD. V DCIT & ANR 237 ITR 66 8 (GUJ) THE ASSESSEE CONTENDED THAT THE AO WAS NOT JUSTIFIED I N REOPENING THE ASSESSMENT. HOWEVER THE LD. CIT(A) UPHELD THE REOP ENING OF ASSESSMENT IN THE FOLLOWING TERMS: 4.4. I HAVE CONSIDERED THE SUBMISSION OF THE A.R. AS WELL AS OBSERVATION OF THE A.O. IN THE ASSESSMENT ORDER. UN DER THE SPECIFIC PROVISIONS OF SECTION 147 THE POWERS OF T HE A.O. ARE AMPLITUDE. IT HAS BEEN IN THE CASE RAYMOND WOOLEN M ILLS V/S. I.T. O. REPORTED IN 236 ITR 34 (SUPREME COURT) THAT IN DETERMINING AS TO WHETHER COMMENCEMENT OF REOPENIN G ASSESSMENT ARE VALID IT HAS ONLY TO BE SEEN WHETHE R THERE WAS PRIMA FACIE SOME MATERIALS ON THE BASIS OF WHICH DE PARTMENT CAN REOPEN THE CASE. IN VIEW OF THE AFORESAID FACTU AL AND LEGAL POSITION THE APPELLANT'S CONTENTION THAT A.O. HAS ERRED IN RE- OPENING THE ASSESSMENT HAS NO MERIT IN IT AND THERE FORE THE APPELLANT'S GROUND NO. 1 IS DISMISSED. 3.1 AS REGARDS THE CLAIM OF DEDUCTION U/S 80HHC TH E LD. CIT(A) CONCLUDED AS UNDER: ITA NO.2486/AHD/2007 7 5.1 THE FACTS OF THE CASE ARE SUCH THAT THE APPELLA NT IS A PARTNERSHIP FIRM ASSESSED TO TAX SINCE A.Y. 1989-90 . THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S. 80HHC SINC E INCEPTION A.Y. 1991-92. A SURVEY ACTION U/S. 133 A OF THE INC OME-TAX ACT WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE APPELLANT AND A SUM OF RS.51 75 000/- (RS.1 90 196/- ON ACCOU NT OF EXCESS STOCK AND RS.49.84.804/- ON ACCOUNT OF ADVANCES/RECEIVABLES) WAS OFFERED BY THE APPELLANT AS AN ADDITIONAL INCOME AND THE SAME WAS ASSESSED U/S. 14 3(3) AS BUSINESS INCOME AFTER ALLOWING DEDUCTION U/S. 80HHC OF THE ACT. HOWEVER A NOTICE U/S. 148 WAS ISSUED TO DENY DEDUCTION U/S 80HHC OF THE ACT ON THE AFORESAID AMOUNT OF RS.51.75.000/- DECLARED DURING THE COURSE OF SURVEY ACTION. 5.2 THE APPELLANT CONTENDED THAT EXCESS STOCK OF RS.1 90 196/- WAS OFFERED AS ADDITIONAL INCOME WHIC H WAS ADDED TO THE INCOME OF THE ASSESSMENT YEAR UNDER AP PEAL. THE STOCK FORMED PART OF THE ELIGIBLE BUSINESS. HENCE IT WAS RIGHTLY CONSIDERED BY AO IN THE ORIGINAL ASSESSMENT WHILE CALCULATING DEDUCTION 80HHC. THE APPELLANT FURTHER CONTENDED TH AT ADVANCES RECEIVABLE OF RS.49 84 804/- WERE DISCLOSE D AS ADDITIONAL BUSINESS INCOME AT THE TIME OF SURVEY AN D THESE RECEIVABLES HAVE ARISEN IN THE COURSE OF CARRYING O N THE ELIGIBLE BUSINESS THE SAID AMOUNT WAS CORRECTLY CO NSIDERED BY THE AO WHILE CALCULATING DEDUCTION U/S. 80HHC AS EV IDENT FROM THE ASSESSMENT ORDER DATED 22.1.2003. THE ABSTRACT OF WHICH IS RE-PRODUCED BELOW :- 'BEFORE I DISCUSS POINTS FOR ASSESSMENT I DISCUSSE D THE MATTER REGARDING SURVEY PROCEEDINGS. I HAVE VERIFIED THE S URVEY REPORT AND OTHER EVIDENCE PRODUCED BY THE SURVEY TEAM AT T HE TIME OF SURVEY PROCEEDINGS. I HAVE GONE THROUGH SURVEY REPO RT AND OTHER EVIDENCE FOND BY THE SURVEY TEM. THE ASSESSEE HAS OFFERED ADDITIONAL INCOME AND PAID TAX ON RS.51 75 000/-. THIS HAS BEEN DULY REFLECTED IN FINAL STATEMENT AND INCL UDED IN P&L A/C AS UNDER;- 1) STOCK : RS. 1 90 196/- 2) ADVANCE RECEIVABLE : RS. 49.84.8047- ------------------- TOTAL RS. 51 75 0007- ' 5.3 THE AR ARGUED THAT EVEN OTHERWISE THERE IS NO F ORCE IN THE CONTENTION OF THE AO AS MENTIONED IN THE ORDER THAT INCOME DISCLOSED IN THE SURVEY U/S. 133A IS NOT BUSINESS I NCOME AND THEREFORE DEDUCTION U/S. 80HHC OF THE ACT IS NOT AL LOWABLE ON ADDITIONAL INCOME DECLARED. THE AR ARGUED THAT THER E IS NO OTHER OSTENSIBLE SOURCE OF INCOME OTHER THAN BUSINE SS INCOME OF THE APPELLANT. THE ONLY SOURCE OF INCOME IS BUSI NESS ITA NO.2486/AHD/2007 8 INCOME. THE AR VEHEMENTLY ARGUED THAT DESPITE THE A CTION OF THE SURVEY NO INCOME OTHER THAN BUSINESS INCOME WAS FOUND. THE AR CONTENDED THAT IT WOULD NOT BE CORRECT TO HO LD THAT THE INCOME DISCLOSED DURING THE COURSE OF SURVEY IS NOT BUSINESS INCOME. THE AR HIGHLIGHTED THAT THE FACT OF ADDITIO NAL INCOME DECLARED IS BUSINESS INCOME WAS ALSO STATED AT THE TIME OF SURVEY IN STATEMENT U7S. 131 OF THE ACT AND THE REL EVANT FACTS ARE NARRATED IN REPLY TO QUERY NO. 7 OF THE STATEME NT DURING THE COURSE OF SURVEY. IN THE SAID STATEMENT IT IS C ATEGORICALLY STATED THAT THE AMOUNT DISCLOSED UNDER SURVEY ARE' ADDITIONAL INCOME OF THE RESPECTIVE CONCERNS. THE AR THEREFORE FINALLY SUBMITTED THAT THE CONTENTION OF THE AO THAT THESE ARE NOT BUSINESS INCOME IS INCORRECT. THE AR MENTIONED THAT EXCEPT MAKING A BALD STATEMENT THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT THE INCOME DECLARED DURI NG SURVEY IS NOT BUSINESS INCOME. THE APPELLANT HAS RELIED UPON ON THE FOLLOWING DECISIONS: ITO V. JAMNADAS MULJIBHAI 99 TTJ 197 (RAJKOT) 'NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE DEPA RTMENT TO DISPROVE THE ASSESSEE'S CONTENTION REGARDING SOURCE OF BUSINESS INCOME WHICH IS OUT OF BUSINESS OF GOLD AN D SILVER ORNAMENTS. IT IS ALSO NOT THE CASE OF THE DEPARTMEN T THAT ASSESSEE WAS DOING SOME OTHER ACTIVITIES IN WHICH S UCH INCOME WAS EARNED AND ALLEGED TO BE INVESTED IN THE GOLD AND SILVER ORNAMENTS IN WHICH THE ASSESSEE WAS DEALING. WE THEREFORE FIND OURSELVES INCLINED TO AGREE WIT H THE LEARNED AR THAT SOURCE OF STOCK WAS OUT OF BUSINESS INCOME AND WHICH WAS NOT CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY MATERIAL ON RECORD.' ROYALE SUNRISE V. ITO 99 TTJ 1305 (BANG) 'ADDITIONAL INCOME ON ACCOUNT OF SURVEY WAS NOT ASS ESSED BY THE AO UNDER ANY OTHER HEAD OF INCOME. THEREFORE TH E SAME HAS TO BE CONSIDERED AS BUSINESS INCOME.' 5.3 THE AO HAS REOPENED THE ASSESSMENT BASED ON THE REASONS RECORDED THAT THE ADDITIONAL INCOME DECLARE D HAS NO RELEVANCE WITH THE DEDUCTION U/S.80HHC.THE AO CONTE NDED THAT HE HAD REASONS TO BELIEVE THAT THE ADDITIONAL INCOME DECLARED DURING THE COURSE OF SURVEY IS NOT A BUSIN ESS INCOME AND IT IS ACTUALLY INCOME FROM OTHER SOURCES. THE A O HAS PINPOINTED THAT THE CAPTIONED DECLARATION OF RS.49 84 804/- ON ACCOUNT OF RECEIVABLES AND RS.1 90.146/- ARE ON ACC OUNT OF VARIATION IN STOCKS HAS NO RELEVANCE WITH THE BUSIN ESS INCOME AS THE ADDITIONAL INCOME DECLARED CAN NOT BE TERMED AS PROFIT ITA NO.2486/AHD/2007 9 DERIVED FROM EXPORT BUSINESS AS ENVISAGED IN SECTIO N 80HHC OF THE ACT. THE AO CONTENDED THAT THE APPELLANT HAS NOT EVEN EXPLAINED OR PROVED DURING THE COURSE OF SURVEY AS WELL AS DURING THE COURSE OF ASSESSMENT THAT THE RECEIVABLE S OF RS.49.84 804/- ARE TRADE RECEIVABLES AS THE AMOUNT DECLARED IS SIMPLY SHOWN AS RECEIVABLES OR ADVANCES. ACCORDING TO THE AO THESE RECEIVABLES OR ADVANCES HAVE NO RELEVANCE SO FAR AS PROFIT DERIVED FROM EXPORT BUSINESS IS TO BE WOR KED OUT FOR THE PURPOSE OF ASSESSMENT OF THE INCOME OF THE APPE LLANT IS CONCERNED. THE AO FOUND THAT THESE INCOMES DECLARED DURING THE SURVEY ARE UNEXPLAINED STOCKS AND RECEIVABLES WHICH HAS BEEN DECLARED AND RIGHTLY BROUGHT TO TAX AS NON EXP ORT BUSINESS INCOME. 5.4 I HAVE CONSIDERED THE FACTS OF THE CASE AS WELL -AS THE RIVAL CONTENTIONS. I FIND MERIT IN THE OBSERVATIONS OF THE AO THAT INCOME OF RS.51 75 000/- DECLARED DURING THE COURSE OF SURVEY ON ACCOUNT OF VARIATION IN STOCK AS WELL AS RECEIVA BLES DECLARED HAS NO RELEVANCE WITH THE PROFIT DERIVED F ROM EXPORT BUSINESS OF THE APPELLANT. TO AVAIL DEDUCTION U/S. 80HHC THE APPELLANT HAS TO SHOW THAT HE HAS EXPORTED GOODS AN D MERCHANDIZE OUTSIDE INDIA AND FOR WHICH THE APPELL ANT HAS BROUGHT INTO INDIA THE SALES PROCEEDS IN CONVERTIBL E FOREIGN EXCHANGE WITHIN THE STIPULATED TIME. ONCE THESE CON DITIONS ARE FULFILLED THEN THE PROFIT DERIVED FROM EXPORT BUSIN ESS HAS TO BE COMPUTED AS PER PROVISIONS OF SECTION 80HHC CONTAIN ED IN THE LAW. IN THE INSTANT CASE NO EVIDENCES WITH RESPECT TO CONTENTIONS THAT INCOME DECLARED DURING SURVEY HAS BEEN DERIVED FROM EXPORT BUSINESS HAS BEEN BROUGHT OUT O N RECORD. SECONDLY IT IS ALSO APPARENT THAT THE VARIATION IN STOCKS DECLARED AND DECLARATION ON ACCOUNT OF RECEIVABLES HAS NO NEXUS WITH THE PROFIT DERIVED FROM EXPORT BUSINESS. EVEN IF THE INCOME DECLARED DURING THE COURSE OF SURVEY IS TREA TED AS BUSINESS INCOME IT CAN NOT BE CHARACTERIZED AS INC OME DERIVED FROM EXPORT BUSINESS. THE TERM PROFITS OF T HE EXPORT BUSINESS HAS BEEN DEFINED UNDER SUB-SECTION (1A) OF SECTION 80HHC. FOR COMPUTING THE PROFITS DERIVED FROM EXPOR T BUSINESS ELIGIBLE FOR DEDUCTION U/S. 80HHC THERE IS A FORMU LA LAID OUT IN THE LAW WITH REFERENCE TO PROPORTION OF EXPORT TURN OVER VIS-A-VIS TOTAL TURNOVER. THE APPELLANT HAS NOT BROUGHT OUT O N RECORD THAT THE INCOME DECLARED DURING THE COURSE OF SURVEY HAS ORIGINATED AS A RESULT OF EXPORT BUSINESS OR LOCAL BUSINESS. T HUS EVEN IF THE INCOME DECLARED IS CHARACTERIZED AS BUSINESS IN COME ITS RELEVANCE WITH THE TURNOVER BEING LOCAL OR EXPORT H AS TO BE JUDGED TO DERIVE THE PROFIT ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE ACT. IN THE INSTANT CASE THE DECLARATION HAS BE EN MADE UNDER THE HEAD RECEIVABLES AND VARIATION IN STOCK. THE AFORESAID ADDITIONAL INCOME CAN NOT BE CO-RELATED E ITHER WITH EXPORT TURNOVER OR LOCAL TURNOVER AND THEREFORE TH E DEDUCTION ITA NO.2486/AHD/2007 10 U/S. 80HHC CAN NOT BE COMPUTED ON SUCH ADDITIONAL I NCOME DECLARED DURING THE COURSE OF SURVEY. THE NATURE AN D CHARACTER OF ADDITIONAL INCOME OF RS.51.75 LACS DECLARED DURI NG THE COURSE OF SURVEY IS SUCH THAT IT IS AN UNDISCLOSED INCOME AND THEREFORE IT HAS NO RELEVANCE WITH THE PROFITS ELI GIBLE FOR DEDUCTION U/S. 80HHC. BASED ON THESE FINDINGS OF TH E AO I AM INCLINED TO AGREE WITH THE VIEW OF THE AO AND I UPH OLD THE VIEW TAKEN BY THE AO THAT DEDUCTION U/S. 80HHC CLAIMED B Y THE APPELLANT IS LIABLE TO BE REDUCED TO THE EXTENT OF RS.7 99 438/-. I AM THEREFORE OF THE CONSIDERED VIEW THAT INCOME OF RS.51 75 000/- DECLARED DURING THE COURSE OF SURVEY AS INCOME NOT ELIGIBLE FOR DEDUCTION U/S. 80HHC OF THE ACT. T HE APPELLANT'S GROUND NO. 2 IS DISMISSED. 4 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR WHILE CARRYI NG US THROUGH THE RELEVANT PAGES IN THE PAPERBOOK AND ORIGINAL ASSESS MENT ORDER DATED 22.1.2003 CONTENDED THAT ASSESSMENT HAVING BE EN COMPLETED U/S 143(3) OF THE ACT AND NO NEW MATERIAL HAVING BEEN BROUGHT ON RECORD THE AO WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT SIMPLY ON THE BASIS OF REVIEW OF THE ORIGINAL ASSESSMENT. ON THE OTHER HAND THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. WE FIND THAT IN THE ORIGINAL ASSESSMENT C OMPLETED U/S 143(3) OF THE ACT ON 22.1.2003 THE AO ALLOWED DED UCTION U/S. 80HHC OF THE ACT INTER ALIA ON THE AMOUNT OF STOCK AND ADVANCES RECEIVABLE OF RS.51 75 000 DISCLOSED U/S. 133A OF T HE ACT INCLUDED IN THE PROFITS OF THE BUSINESS. SUBSEQUENTLY THE A O RECORDED THE REASONS FOR REOPENING THAT SUCH STOCK AND RECEIVABL E CANNOT BE SAID TO BE DERIVED FROM THE BUSINESS TO BE INCLUDED IN T HE PROFIT OF BUSINESS FOR THE PURPOSE OF DEDUCTION U/S. 80HHC OF THE ACT. THE LD. CIT(A) ON THESE FACTS CONCLUDED THAT THE AO WAS JU STIFIED IN REOPENING THE ASSESSMENT. THE ISSUE BEFORE US IS A S TO WHETHER OR NOT THE AO WAS JUSTIFIED IN REOPENING THE ASSESSME NT COMPLETED U/S 143(3) OF THE ACT WITHIN FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT ORDER ON THE SAME SET OF FACTS AS WERE AVAILABLE WITH ITA NO.2486/AHD/2007 11 THE AO AT THE TIME OF COMPLETION OF ORIGINAL ASSESS MENT. BEFORE WE PROCEED FURTHER WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF SEC. 147 OF THE ACT WHICH READ AS UNDER: 147. INCOME ESCAPING ASSESSMENT. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YE AR HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION OR RECOMPUTE TH E LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE AS T HE CASE MAY BE FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTIO N AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF S ECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSE SSMENT YEAR NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SEC TION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. EXPLANATION 1: PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COUL D WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING P ROVISO. EXPLANATION 2 : FOR THE PURPOSES OF THIS SECTION T HE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT NAMELY: (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED B Y THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARG EABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED B Y THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY TH E ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOM E OR HAS CLAIMED EXCESSIVE LOSS DEDUCTION ALLOWANCE OR REL IEF IN THE RETURN ; ITA NO.2486/AHD/2007 12 (C) WHERE AN ASSESSMENT HAS BEEN MADE BUT - (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER-ASSE SSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR A NY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. 5.1 IN THE INSTANT CASE ASSESSMENT HAS BEEN REO PENED WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR . THEREFORE WE ARE NOT CONCERNED WITH THE PROVISO TO SEC. 147 OF THE ACT. THE AO CAN REOP EN THE ASSESSMENT WITHIN FOUR YEARS ONLY IF HE HAS REASONS TO BELIEVE THAT AN Y INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YE AR CONCERNED FOR WHICH THE NOTICE IS ISSUED .IN THE CASE UNDER C ONSIDERATION AS IS APPARENT FROM THE ORIGINAL ASSESSMENT ORDER DATED 2 2.1.2003 COMPLETED U/S 143(3) OF THE ACT THE AO WAS WELL AW ARE OF THE CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF AD DITIONAL INCOME DISCLOSED DURING THE SURVEY AND ASSESSED AS BUSINES S INCOME. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SUB-SECTION (3) OF SECTION 143 OF THE ACT A PRESUMPTION CAN BE RAISED THAT SUC H AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRE SUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 1 14 OF THE INDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PER FORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATI ON OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO R EOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG . IN THE CASE UNDER CONSIDERATION NO FRESH FACTS HAD COME TO THE KNOWLEDGE OF THE AO BETWEEN THE DATE OF THE ORDER OF ASSESSMENT SOUGHT TO BE REOPENED AND THE DATE OF FORMING OF OPINION BY THE AO NOR ANYTHI NG NEW IS STATED TO HAVE HAPPENED. APPARENTLY ON SAME SET OF FACTS THE AO SOUGHT TO REOPEN THE ASSESSMENT . THIS IN OUR OPINION AMOUNTS TO CH ANGE OF OPINION. IN THIS CONNECTION WE MAY REFER TO RELEVANT OBSERV ATIONS IN THE CASE OF KAIRA DISTRICT CO-OP. MILK PRODUCERS UNION LTD. V ACIT ITA NO.2486/AHD/2007 13 (1996) 220 ITR 194 (GUJ) WHEREIN HONBLE JURISDICT IONAL HIGH COURT OBSERVED AS UNDER: HELD ALLOWING THE PETITION THAT THE AO WAS CONSC IOUS ABOUT THE CLAIMS MADE BY THE ASSESSEE THE POSITION OF INTEREST EARN ED ON INVESTMENT VIS- -VIS THE INTEREST OR COMMISSIONS PAID BY IT AND HA D BEEN TREATING THE INVESTMENT INCOME AS HAVING NO RELATION TO THE INTE REST PAID. FOR THE ASSESSMENT YEAR 1992-93 THE AO AFTER ISSUING THE N OTICE IN QUESTION FOR AY 1991-92 ON FEBRUARY 23 1995 BARELY AFTER ONE MO NTH ON MARCH 29 1995 RAISING THE SAME ISSUE HAD AGAIN COME TO THE CONCLUSION THAT THE INTEREST PAID BY THE ASSESSEE WAS NOT ADJUSTABLE AG AINST THE INTEREST EARNED ON INVESTMENT ALLOWABLE FOR DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. HENCE THE NOTICE IN QUESTION HAD BEEN ISS UED ON A MERE CHANGE OF OPINION AND WAS NOT VALID. 5.2 IN JINDAL PHOTO FILMS LTD. [1998] 234 ITR 170 (DELHI) HONBLE DELHI HIGH COURT WHILE ADJUDICATING A SIMILAR ISSUE OBSERVE D: ' THE POWER TO REOPEN AN ASSESSMENT WAS CONFERRED BY THE LEGISLATURE NOT WITH THE INTENTION TO ENABLE THE INCOME-TAX OFFICER TO R EOPEN THE FINAL DECISION MADE AGAINST THE REVENUE IN RESPECT OF QUESTIONS THAT DI RECTLY AROSE FOR DECISION IN EARLIER PROCEEDINGS. IF THAT WERE NOT THE LEGAL POS ITION IT WOULD RESULT IN PLACING AN UNRESTRICTED POWER OF REVIEW IN THE HANDS OF THE AS SESSING AUTHORITIES DEPENDING ON THEIR CHANGING MOODS.' IT WAS FURTHER HELD BY THE BENCH THAT: 'REVERTING BACK TO THE CASE AT HAND IT IS CLEAR FR OM THE REASONS PLACED BY THE ASSESSING OFFICER ON RECORD AS ALSO FROM THE STATEM ENT MADE IN THE COUNTER AFFIDAVIT THAT ALL THAT THE INCOME-TAX OFFICER HAS SAID IS THAT HE WAS NOT RIGHT IN ALLOWING DEDUCTION UNDER SECTION 80-I BECAUSE HE HA D ALLOWED THE DEDUCTIONS WRONGLY AND THEREFORE HE WAS OF THE OPINION THAT THE INCOME HAD ESCAPED ASSESSMENT. THOUGH HE HAS USED THE PHRASE 'REASON T O BELIEVE' IN HIS ORDER ADMITTEDLY BETWEEN THE DATE OF THE ORDERS OF ASSES SMENT SOUGHT TO BE REOPENED AND THE DATE OF FORMING OF OPINION BY THE INCOME-TA X OFFICER NOTHING NEW HAS HAPPENED. THERE IS NO CHANGE OF LAW. NO NEW MATERIA L HAS COME ON RECORD. NO INFORMATION HAS BEEN RECEIVED. IT IS MERELY A FRESH APPLICATION OF MIND BY THE SAME ASSESSING OFFICER TO THE SAME SET OF FACTS. WH ILE PASSING THE ORIGINAL ORDERS OF ASSESSMENT THE ORDER DATED FEBRUARY 28 1 994 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS BEFORE THE ASSESSING OFFICER. THAT ORDER STANDS TILL TODAY. WHAT THE ASSESSING OFFICER HAS SAID ABOUT THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WHILE RECORDIN G REASONS UNDER SECTION 147 HE COULD HAVE SAID EVEN IN THE ORIGINAL ORDERS OF ASSESSMENT. THUS IT IS A CASE OF MERE CHANGE OF OPINION WHICH DOES NOT PROVI DE JURISDICTION TO THE ASSESSING OFFICER TO INITIATE PROCEEDINGS UNDER SEC TION 147 OF THE ACT. ITA NO.2486/AHD/2007 14 IT IS ALSO EQUALLY WELL SETTLED THAT IF A NOTICE UN DER SECTION 148 HAS BEEN ISSUED WITHOUT THE JURISDICTIONAL FOUNDATION UNDER SECTION 147 BEING AVAILABLE TO THE ASSESSING OFFICER THE NOTICE AND THE SUBSEQUENT PR OCEEDINGS WILL BE WITHOUT JURISDICTION LIABLE TO BE STRUCK DOWN IN EXERCISE OF WRIT JURISDICTION OF THIS COURT. IF 'REASON TO BELIEVE' BE AVAILABLE THE WRIT COURT WI LL NOT EXERCISE ITS POWER OF JUDICIAL REVIEW TO GO INTO THE SUFFICIENCY OR ADEQUACY OF TH E MATERIAL AVAILABLE. HOWEVER THE PRESENT ONE IS NOT A CASE OF TESTING THE SUFFIC IENCY OF MATERIAL AVAILABLE. IT IS A CASE OF ABSENCE OF MATERIAL AND HENCE THE ABSENCE O F JURISDICTION IN THE ASSESSING OFFICER TO INITIATE THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT.' 5.3 THUS THE HONBLE HIGH COURT HELD THAT EVEN UN DER THE NEWLY SUBSTITUTED SECTION 147 WITH EFFECT FROM APRIL 1 1989 AN ASS ESSMENT COULD NOT BE REOPENED ON A MERE CHANGE OF OPINION. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF FORAMER V CIT (2001) 247 ITR 432 (ALL) HELD THA T NOTICE FOR REASSESSMENT COULD NOT BE GIVEN ON A MERE CHANGE OF OPINION. THIS DECISION HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V FORAMER FRANCE (2003) 264 ITR 566 (SC) 5.4 ADMITTEDLY IN THE CASE UNDER CONSIDERATIO N THERE IS NO CHANGE OF LAW AND NO FRESH MATERIAL HAS COME ON RECORD ENABLING T HE AO TO INVOKE THE POWERS UNDER SECTION 147 OF THE ACT. THE INSTANT CASE IS A CASE OF MERE CHANGE OF OPINION WHICH DOES NOT PROVIDE JURISDICTION TO THE AO TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT. HERE WE MAY ALSO REFER TO A DECISION OF THE HONBLE GUJARAT HIGH COURT IN GARDEN SILK MILLS PVT. LTD. [ 1999] 237 ITR 668 WHILE EXPRESSING SIMILAR VIEWS OBSERVED: 'THE REASONS RECORDED BY THE ASSESSING OFFICER WHIC H LED TO THE BELIEF ABOUT THE ESCAPEMENT OF ASSESSMENT DISCLOSE THAT THE PRESENT CASE IS NOTHING BUT MERE CHANGE OF OPINION ON THE FACTS WHICH WERE ALREADY B EFORE THE ASSESSING OFFICER WHILE MAKING THE FIRST ASSESSMENT TO WHICH CONSCIOU S APPLICATION OF MIND IS REFLECTED FROM THE PROCEEDINGS AND ALLOWED IN THE COMPUTATION AND WHICH HAS NOT BEEN DISPUTED BY THE REVENUE.' 5.5 SIMILARLY IN CIT V. KELVINATOR OF INDIA LTD. [2002] 256 ITR 1 (DELHI) HONBLE DELHI HIGH COURT HELD THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REA SSESSMENT PROCEEDING UPON HIS MERE CHANGE OF OPINION. WHILE AFFIRMING THE SAID D ECISION HONBLE APEX COURT RECENTLY HELD IN THEIR DECISION DATED 18.1.2010 IN CIT V. KELVINATOR OF INDIA LTD. 320 ITR 561(SC) IN CIVIL APPEAL NOS.2009-2011 OF 2 003 AS FOLLOWS: ITA NO.2486/AHD/2007 15 ON GOING THROUGH THE CHANGES QUOTED ABOVE MADE T O SECTION 147 OF THE ACT WE FIND THAT PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT 1987 RE-OPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFILLMENT 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 WHE RE THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T CONFERS JURISDICTION TO RE- OPEN THE ASSESSMENT. THEREFORE POST-1ST APRIL 198 9 POWER TO RE-OPEN IS MUCH WIDER. HOWEVER ONE NEEDS TO GIVE A SCHEMATIC INTER PRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH WE ARE AFRAID S ECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE-OPEN ASSESSME NTS ON THE BASIS OF 'MERE CHANGE OF OPINION' WHICH CANNOT BE PER SE REASON T O RE-OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWE R TO REVIEW AND POWER TO RE- ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIE W; HE HAS THE POWER TO RE- ASSESS. BUT RE-ASSESSMENT HAS TO BE BASED ON FULFIL LMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVE D AS CONTENDED ON BEHALF OF THE DEPARTMENT THEN IN THE GARB OF RE-OPENING THE ASSESSMENT REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE O F OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENC E AFTER 1ST APRIL 1989 ASSESSING OFFICER HAS POWER TO RE-OPEN PROVIDED TH ERE 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. 6. THE FACTS AND CIRCUMSTANCES AS GIVEN HEREI NABOVE IN THE CASE UNDER CONSIDERATION WHEN VIEWED IN THE LIGHT OF AFORESA ID DECISIONS LEAD TO ONLY ONE CONCLUSION THAT THE ASSESSING OFFICER RE-OPENED TH E ASSESSMENTS ON A MERE CHANGE OF OPINION AND ON THE SAME SET OF FACTS AS W ERE AVAILABLE BEFORE HIM DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S. IT IS WELL-SETTLED THAT IF A NOTICE UNDER SECTION 148 OF THE ACT HAS BEEN ISSUED WITHOUT THE JURISDICTIONAL FOUNDATION U/S 147 OF THE ACT BEING AVAILABLE TO TH E ASSESSING OFFICER THE NOTICE AND THE SUBSEQUENT PROCEEDINGS WILL BE WITHOUT JUR ISDICTION AND THUS LIABLE TO BE STRUCK DOWN . IN THESE CIRCUMSTANCES WE QUASH THE IMPUGNED ASSESSMENT ORDER AND ALLOW THE GROUND NOS. 1 & 2 RAISED IN THE APPEA L. AS A COROLLARY THE OTHER GROUND NO. 3 RAISED IN THE APPEAL DOES NOT SURVIVE FOR ADJUDICATION AND IS THEREFORE TREATED AS INFRUCTUOUS. 7. GROUND NO. 4 BEING GENERAL IN NATURE DOES NOT RE QUIRE ANY SEPARATE ADJUDICATION NOR ANY SUBMISSIONS HAVING BE EN MADE ON BEHALF OF THE ASSESSEE ON THIS GROUND WHILE NO ADDI TIONAL GROUND HAVING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND THESE GROUNDS ARE DISMISSED. ITA NO.2486/AHD/2007 16 8. IN THE RESULT APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 9-04-20 10 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 9-04-2010 COPY OF THE ORDER FORWARDED TO : 1. M/S APURVA CHEMICALS PLOT NO.2806 3 RD PHASE GIDC VAPI 2. THE ITO VAPI WARD-1 VAPI 3. CIT CONCERNED 4. CIT(A) VALSAD 5. THE DR ITAT B BENCH AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD