Shri Rameshchandra S.Patel, Ahmedabad v. The Income tax Officer,Ward-4(4),, Ahmedabad

ITA 431/AHD/2009 | 2000-2001
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 43120514 RSA 2009
Assessee PAN AEHPP6335A
Bench Ahmedabad
Appeal Number ITA 431/AHD/2009
Duration Of Justice 3 year(s) 1 month(s) 19 day(s)
Appellant Shri Rameshchandra S.Patel, Ahmedabad
Respondent The Income tax Officer,Ward-4(4),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 30-03-2012
Date Of Final Hearing 05-01-2012
Next Hearing Date 05-01-2012
Assessment Year 2000-2001
Appeal Filed On 10-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI JM AND SHRI A. MOHAN ALAN KAMONY AM) ITA NO. 431 AND 647/AHD/2009: A. Y.: 2000-01 AND 2001-02 SHRI RAMESHCHANDRA S. PATEL 501 SHIKKHAR NEAR NAVRANGPURA RLY. CROSSING NAVRANGPURA AHMEDABAD 380 009 PA NO. AEHPP 6335 A VS THE INCOME TAX OFFICER WARD 4 (4) AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. SOPARKAR AR RESPONDENT BY SHRI ALOK JOHRI SR. DR DATE OF HEARING: 05-01-2012 DATE OF PRONOUNCEMENT: 30-03-2012 O R D E R PER A. MOHAN ALANKAMONY: THESE ARE TWO APPEALS OF THE ASSESSEE WHICH ARE DIRECTED AGAINST THE IMPUGNED OR DERS OF LD. CIT (A)- VIII AHMEDABAD IN APPEAL NOS. CIT(A)-VIII/ITO/4(4) /249/07-08 & CIT(A)-VIII/ITO/4(4)/250/07-08 DATED 28.11.2008 AND 5.1.2009 FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 RESPECTIVELY. - 2 - I. ITA NO.431/A/09 A.Y 2000-01: 2. THE ASSESSEE HAD RAISED SIX GROUNDS IN AN ILLUST RATIVE AND NARRATIVE MANNER. FOR THE SAKE OF CONVENIENCE AND CLARITY THEY ARE REFORMULATED IN A CONCISE MANNER AS UNDER: (1) ( GR. NO.1 & 2 ): THAT THE CIT (A) HAD ERRED IN HOLDING THAT THERE WAS NO INFIRMITY IN REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT; (2) ( GR.NO.3 ): THAT THE CIT (A) ERRED IN CONFIRMING THE DISALL OWANCE MADE U/S 80HHC OF THE ACT ON THE EXPORT SALES MADE AS A SUPPORTING MANUFACTURER; (3) ( GR.NO.4 ): THAT THE CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE MADE U/S 80IA OF THE ACT ON RECEIPT FROM DEPB ENTIT LEMENTS; (4) ( GR.NO.5 ): THAT THE CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE MADE U/S 80HHC ON RECEIPTS FROM DEPB ENTITLEMENTS; & (5) ( GR.NO.6 ): ALSO ERRED IN CONFIRMING HE ORDER IN COMPUTING T HE DEDUCTION U/S 80HHC AFTER REDUCING THE DEDUCTION AL LOWED U/S 80- IA OF THE ACT FROM THE PROFIT OF BUSINESS. II ITA NO.647/A/09 A.Y 2001-02: (1) ( GR. NO.1 & 2 ): THAT THE CIT (A) HAD ERRED IN HOLDING THAT THERE IS NO INFIRMITY IN REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT; (2)( GR.NO.3 ): THAT THE CIT (A) ERRED IN CONFIRMING THE DISALL OWANCE MADE U/S 80HHC OF THE ACT ON THE EXPORT SALES MADE AS A SUPPORTING MANUFACTURER; (3) ( GR.NO.4 ): THAT THE CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE MADE U/S 80IA OF THE ACT ON RECEIPT FROM DEPB ENTIT LEMENTS; (4) ( GR.NO.5 ): ALSO ERRED IN CONFIRMING HE ORDER IN COMPUTING T HE DEDUCTION U/S 80HHC AFTER REDUCING THE DEDUCTION AL LOWED U/S 80-IA OF THE ACT FROM THE PROFIT OF BUSINESS; & - 3 - (5)( GR.NO.6 ): THAT THE CIT (A) ERRED IN CONFIRMING THE DISALLO WANCE MADE U/S 80HHC ON RECEIPTS FROM DEPB ENTITLEMENTS. 3. AS THE ISSUES RAISED IN THESE APPEALS BEING ALMO ST SIMILAR AND INTER-LINKED FOR THE SAKE OF CONVENIENCE AND CLARI TY THEY WERE HEARD CONSIDERED AND DISPOSED OFF IN THIS COMMON ORDER. THE FACTS OF THE ISSUES IN BRIEF ARE AS UNDER: 4. THE ASSESSEE AN INDIVIDUAL ENGAGED IN THE BUSI NESS OF MANUFACTURING OF DYES MONEY LENDING AND FINANCING FURNISHED HIS RETURNS OF INCOME ADMITTING INCOMES OF RS.29 60 81 0/- AND RS.37 81 390/- AFTER CLAIMING DEDUCTIONS UNDER CH. VIA OF RS.11 56 462/- & RS.6 82 17 338/- WHICH WERE HOWEV ER DETERMINED U/S 143(3) OF THE ACT AT RS.1 37 24 130/- AND RS.1 48 1 3 767/- FOR THE AYS 2000-01 AND 2001-02 RESPECTIVELY. ON APPEAL THE T HEN CIT (A) SLASHED THE INCOMES OF THE ASSESSEE TO RS.1 31 68 640/- AND RS.1 47 01 738/- RESPECTIVELY. CONSEQUENT TO GIVING EFFECT TO THE OR DER OF THE JURISDICTIONAL LD. CIT-III FOR THE AY 2000-01 THE INCOME OF THE ASSESSEE WAS ENHANCED TO RS.1 36 04 451/-. 4.1. SUBSEQUENTLY FOR THE IDENTICAL SATISFACTION N OTES RECORDED BY THE AO ON 1.3.2007 THE ASSESSEE WAS SLAPPED WITH NOTIC ES U/S 148 OF THE ACT FOR THE AYS UNDER DISPUTE. AFTER DUE CONSIDER ATION OF THE LENGTHY BUT IDENTICAL CONTENTIONS OF THE ASSESSEE DURING T HE COURSE OF REASSESSMENT PROCEEDINGS AND ALSO FOR THE REASONS R ECORDED IN THE RESPECTIVE ASSESSMENT ORDERS BY EXTENSIVELY QUOTING THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATOR IES V. DCIT REPORTED IN 266 ITR 521 (SC) THE AO HAD OBSERVED T HUS: - 4 - (ON PAGE 10) THE INFORMATION GATHERED FROM THE ASS ESSING OFFICER OF M/S. CLARIANT (INDIA) LTD AS WELL AS THE COMPANY ITSELF IT IS OBSERVED THAT THE SAID EXPORT HOUSE IS NOT HAVING ANY POSITIVE CLAIM OF DE DUCTION U/S 80HHC ON THE EXPORT OF TRADING GOODS. IN FACT IT IS INCURRING LOSSES AND THEREFORE IT CANNOT PASS ON THE BENEFIT OF CLAIMING OF DEDUCTION U/S 80 HHC TO THE ASSESSEE. DISALLOWANCE (82948420 501160934 = RS.3 27 87 486) (AY 2000-01) DISALLOWANCE (45962502 22082982 = RS.2 38 79 520) (AY 2001-02) 5. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUES SIMUL TANEOUSLY FOR BOTH THE AYS BEFORE THE CIT (A) FOR RELIEF. THE LD . CIT (A) AFTER DUE CONSIDERATION OF THE ASSESSEES SUBMISSIONS AS RECO RDED IN HIS IMPUGNED ORDERS TOOK AN IDENTICAL STAND IN HIS SEP ARATE FINDINGS DATED 28.11.2008 AND 5.1.2009. THE RELEVANT PORTION OF H IS OBSERVATIONS FOR APPRECIATION OF FACTS ARE EXTRACTED AS UNDER: REOPENING OF ASSESSMENTS U/S 147 OF THE ACT : 5.5.THE RE-OPENING OF ASSESSMENT BY THE AO SHALL BE JUDGED IN BACK DROP OF JUDICIAL PRONOUNCEMENT MADE BY THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES V. DCIT 266 ITR 521 ( SC) AND THE AMENDMENT MADE IN THE ACT BY THE TAXATION LAW AMENDMENT ACT 2005 W ITH REGARD TO PROFIT ON TRANSFER OF DEPB ENTITLEMENTS. THE AMENDMENT IN TH E ACT WHICH HAS BEEN MADE EFFECTIVE FROM 1.4.1998 AND THE DECISION OF HONBLE SUPREME COURT PROVIDE SUFFICIENT GROUND TO THE AO IN THE GIVEN CIRCUMSTAN CES TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF EXCESSIVE RELIEF ALLOWED TO THE APPELLANT UNDER THE PROVISIONS OF SE C.80HHC OF THE ACT. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PUNJAB S TATE CO-OPERATIVE AGRICULTURAL DEVELOPMENT BANK LTD V. CIT 207 CTR 35 2 (P&H) RELYING ON DECISIONS IN THE CASE OF SWARAJ ENGINE LTD V. ACIT 260 ITR 20 2 (P&H) HAS HELD THAT AN ITO ACQUIRES JURISDICTION TO REOPEN AN ASSESSMENT UNDER S. 147(A) R.W.S.148 OF THE I.T. ACT 1961 ONLY IF ON THE BASIS OF SPECIFIC REL IABLE AND RELEVANT INFORMATION COMING TO HIS POSSESSION SUBSEQUENTLY HE HAS REASON S WHICH HE MUCH RECORD TO BELIEVE THAT BY A REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A TRUE AND FULL DISCLOSURE OF ALL MATERIAL FAC TS NECESSARY FOR EACH ASSESSMENT DURING THE CONCLUDED ASSESSMENT PROCEEDI NGS ANY PART OF ITS INCOME PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAD ESCAP ED ASSESSMENT HE MAY START - 5 - REASSESSMENT PROCEEDINGS EITHER BECAUSE SOME FRESH FACTS HAD COME TO LIGHT WHICH WERE NOT PREVIOUSLY DISCLOSED COMES INTO HIS POSSESSION WHICH TENDS TO EXPOSE THE UNTRUTHFULNESS OF THOSE FACTS.. THE HO NBLE COURT HELD THAT COMING TO THE PRESENT CASE THE NOTICE FOR REASSESSMENT IS NOT BASED MERELY ON CHANGE OF OPINION BUT ON SUBSEQUENT JUDGMENT OF THE HONB LE SUPREME COURT IN U.P. CO-OPERATIVES CASE (SUPRA). 5.6. FURTHER HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHANDIRAM V. ITO 225 ITR 611 HAS HELD THAT ANY EXPOSITION OF LAW BY THE SUPREME COURT IS NOT ENACTMENT OF LAW AND IS ONLY EXPOSITION OF CORRECT POSITION OF LAWS. IN OTHER WORDS THE SUPREME COURT ONLY INTERPRETS THE LAW AN D THEREFORE THE LEGAL POSITION AS EXPLAINED BY THE SUPREME COURT HAS TO B E CONSIDERED AS ALWAYS IN EXISTENCE. THE RELEVANT EXTRACTS OF THE DECISION A RE AS UNDER: THE JURISDICTION.IN EXISTENCE. 5.7. IN VIEW OF THE ABOVE I DO NOT FIND ANY LEGAL INFIRMITY SO FAR AS REOPENING OF ASSESSMENT U/S 147 OF THE ACT IS CONCERNED. THEREF ORE THE GROUND TAKEN BY THE APPELLANT AGAINST THE SAME IS HEREBY REJECTED. 5.1. WITH REGARD TO (I) THE CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT ON THE SALES OF A SUPPORTING MANUFACTURER TO THE EXPOR T HOUSE AND ON DEPB ENTITLEMENTS; (II) ALLOWING DEDUCTION U/S 80HH C AFTER REDUCING THE DEDUCTION U/S 80IA OF THE ACT; (III) AOS ACTION FO R REDUCING THE PROFIT ON SALE FROM DEPB ENTITLEMENTS FROM THE INCOME ELIGIBL E FOR DEDUCTION U/S 80IA OF THE ACT ETC. FOR THE DETAILED REASONS RECO RDED IN HIS IMPUGNED ORDERS THE LD. CIT (A) HAD DISMISSED THE ASSESSEE S BOTH THE APPEALS IN TOTO. 6. AGITATED THE ASSESSEE HAS COME UP WITH THE PRES ENT APPEALS. THE WIDE-RANGING SUBMISSIONS PUT-FORTH BY THE LD. S ENIOR COUNSEL FOR THE ASSESSEE ARE SUMMARIZED AS UNDER: (I) THAT THE ASSESSEE WAS AN EXPORTER OF GOODS DIRE CTLY AND ALSO THROUGH EXPORT HOUSE; THAT AN EXPORTER WHO EXPORTS GOODS THROUGH AN EXPORT HOUSE AND CLAIMS DEDUCTION U/S 80 HHC (1A) WAS REQUIRED TO FURNISH ALONG WITH RETURNS - 6 - (A) A CERTIFICATE IN FORM 10CCAC FROM THE CA THAT T HE AMOUNT OF DEDUCTION TO BE CLAIMED U/S 80HHC INCLUDING IN R ESPECT OF SALE OF HIS GOODS OR MERCHANDISE TO EXPORT HOUSE ; & (B) A CERTIFICATE FROM THE EXPORT HOUSE IN 10CCAB V ERIFYING THAT IN RESPECT OF TURNOVER MENTIONED IN THE SAID CERTIF ICATE THAT THE EXPORT HOUSE HAD NOT CLAIMED DEDUCTION U/S 80HH C THE PARTICULAR OF WHICH WERE CERTIFIED BY A CA/AUDITOR OF THE EXPORT HOUSE. (II) THAT WHILE FURNISHING HIS RETURNS OF INCOME FO R THE AYS UNDER CONSIDERATION THE ASSESSEE HAD FURNISHED BOTH THE CERTIFICATES AND THE AO CONCLUDED THE ASSESSMENTS BUT DID NOT ALLOW FULL CLAIM OF DEDUCTION U/S 80HHC OF THE ACT. THE ASSES SEE PREFERRED APPEALS FOR BOTH THE AYS AMONG OTHERS C LAIMING FULL DEDUCTION U/S 80HHC HOWEVER HE MET WITH A PARTIAL RELIEF; (III) THAT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF BOTH THE AYS THE AO ISSUED NOTICES U/S 148 REASONING THAT THE AS SESSEES INCOME HAD ESCAPED ASSESSMENTS TO THE EXTENT OF EXC ESS CLAIM OF DEDUCTION U/S 80HHC OF THE ACT; AND THAT IT WAS THE CASE OF THE ASSESSEE THAT THE NOTICES WERE ILLEGAL AND SUBS EQUENT REASSESSMENT PROCEEDINGS WERE INVALID; (IV) THAT TO INVOKE THE PROVISIONS OF S.147 THE RE VENUE HAVE TO SATISFY TWO CONDITIONS SIMULTANEOUSLY WHICH ARE THE CONDITIONS PRECEDENT AND IF EITHER OF THEM IS NOT SATISFIED T HE PROCEEDINGS FAIL NAMELY; (A) THAT THE AO MUST HAVE REASON TO BELIEVE THAT TH E INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT; & (B) THE ESCAPEMENT OF ASSESSMENT IS ON ACCOUNT OF F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSURE FULLY AND TR ULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THAT YEA R; (V) THAT THE CONDITION FAILURE OF THE ASSESSEE WAS NOT SATISFIED SINCE NOWHERE IN THE REASONS RECORDED THE AO HAD R ECORDED HIS SATISFACTION THAT INCOME CHARGEABLE TO TAX HAD ESCAPED; AND THAT UNLESS REASONS RECORDED THAT THE INCOME HAD ES CAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT OF THAT YEAR THEN THE RE-OPENING WAS BA D. - 7 - RELIES ON CASE LAWS : (A) KANAK FABRICS V. ITO SPL. CIVIL APPLN. NO.335 OF 2001 DATED: 3.3.2011 (GUJ); (B) SAYAJI INDUSTRIES LTD. JCIT (ASST) - (2011) 336 ITR 360 (GUJ); & (C) GACKWARD INVESTMENT CORPORATION (P) LTD V. ACIT (2010) 129 TTJ 379 (AHD). (VI) THAT EVEN GLIMPSE AT THE REASONS RECORDED CLEA RLY SHOWS THAT SO SUCH SATISFACTION WAS REACHED BY THE AO THAT A D EDUCTION WAS WRONGLY GRANTED TO THE ASSESSEE AND THAT EVEN A SSUMING THAT THE CLAIM WAS WRONGLY GRANTED DOES NOT MEAN TH AT AFTER THE EXPIRY OF FOUR YEARS THE ORIGINAL ASSESSMENT WHICH WAS FRAMED U/S 143(3) CAN BE REOPENED. RELIES ON CASE LAWS : (A) CALCUTTA DISCOUNT CO. LTD V. ITO 41 ITR 191 (SC ); & (B) PARASHURAM POTTERY WORKS CO. LTD V. ITO 106 ITR 1 (SC); (VII) THAT WHEN THE ASSESSEE MAKES A CLAIM OF HIS D EDUCTION WHICH WAS DEPENDING ON LEGAL POSITION AND THAT DULY SUPPO RTED BY THE CERTIFICATES AS REQUIRED IN LAW MERELY BECAUSE THE REVENUE AT A LATER DATE TAKES A DIFFERENT INTERPRETATION OF LAW ON THE FACTS PLACED ON RECORD THE ASSESSEE CANNOT BE SUBJECTED TO RE- OPENING OF THE ASSESSMENT UNDER THE PROVISO TO S.14 7; (VIII) REBUTTING THE CIT (A)S REASONING THAT THE L AW HAS BEEN AMENDED WHICH WOULD JUSTIFY THE REOPENING AS WAS NO TED IN PARA (D) OF THE SATISFACTORY NOTE IT WAS CONTENDED THAT THE AMENDMENT EVEN A RETROSPECTIVE CAN NEVER VEST JURIS DICTION IN THE AO TO REOPEN THE ASSESSMENT IN A CASE COVERED B Y PROVISO TO S.147; RELIES ON CASE LAWS : (A) SADBHAV ENGG. LTD V. DICT (2011) 333 ITR 483 (G UJ); & (B) DENISH INDUSTRIES LTD V. ITO 271 ITR 340 (GUJ) - 8 - (IX) REFUTING THE CIT(A)S STAND IN JUSTIFYING THE RE-OPENING IN LIEU OF THE RULING OF THE HONBLE SUPREME COURT IN IPCA LAB ORATORY LTD V. DCIT (2004) 266 ITR 521 (SC) THAT THE LAW IS WEL L SETTLED THAT A SUBSEQUENT JUDGMENT OF THE SUPREME COURT CANNOT P ERMIT THE REOPENING OF ASSESSMENT UNDER THE PROVISO TO S.147. RELIES ON CASE LAWS : (A) AUSTIN ENGG. CO. LTD V. JCIT (2009) 312 ITR 70 (GUJ); (B) B J SERVICE CO. MIDDLE EAST LTD V. DDIT (INTL. TAXATION) (2011) 201 TAXMAN 188 (UTTARKHAND); & (C) RASIKLAL MARDIA AND OTHERS V. DCIT IN ITA NO.2382/AHD/2009 (AY 1997-98) DATED 23.12.2011. (X) COUNTERING THE LD. D R ARGUMENT THAT THE ASSESS EE WAS SUPPLIED REASONS FOR REOPENING ON REQUISITION BUT HE DID NOT OBJECT TO THE REOPENING AND EVENTUALLY PARTICIPATED IN THE REASSESSMENT PROCEEDINGS AND THUS HE WAS DEBARRED FROM CHALLENGING ASSESSMENTS ETC. IT WAS CONTENDING TH AT IF AN ASSESSEE DOES NOT OBJECT TO REOPENING OF THE ASSESS EE BEFORE THE AO HE DOESNT LOSE THE RIGHT TO CHALLENGE SUCH RE-OPENING BEFORE THE HIGHER AUTHORITIES; RELIES ON P V DOSHI V. CIT 113 ITR 22 (GUJ) (XI) TERMING THE CASE LAWS QUOTED BY THE LD. D R RE PORTED IN 238 ITR 1008 (MP) AND 125 TAXMAN 291 (CAL) CANNOT COME TO THE RESCUE OF THE REVENUE IT WAS CONTENDED THAT THEY D EAL WITH THE ISSUE AS TO WHETHER PROCEEDINGS WHICH WERE VALIDLY INITIATED BUT SUFFER TECHNICAL LAPSE OF A DEFECTIVE NOTICE CAN BE CHALLENGED BY THE ASSESSEE AT THE APPELLATE STAGE WHERE HE HAD NO T RAISED THAT ISSUE BEFORE THE LOWER AUTHORITY; (XII) WITH REGARD TO STRONG RELIANCE PLACED BY THE LD D R IN THE RULING OF THE JURISDICTIONAL HONBLE HIGH COURT IN THE CAS E OF DISHMAN PHARMACEUTICALS & CHEMICALS LTD V. DCIT IN SPECIAL CIVIL APPLICATION NO.15304 OF 010 DATED 1.3.2011 TO DRIVE HOME HIS POINT THAT EXCESS DEDUCTION CAN ALWAYS RESULT IN S UBJECT MATTER OF REOPENING ETC. IT WAS COUNTERED THAT THE ISSUE WAS HELD AGAINST THE ASSESSEE ON THE PRETEXT THAT THE ASSESSEE MADE NO CLAIM OF DEDUCTION; NOR WAS SUCH A CLAIM PROCESSED BY THE AO - 9 - IN THE ORIGINAL ASSESSMENT; THAT THIS IS A CASE WHE RE THE ASSESSEE HAD RECEIVED CERTAIN LOAN WHICH BY VIRTUE OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT SHOULD HA VE BEEN OFFERED AS DIVIDEND INCOME BUT THE ASSESSEE DID NOT DO THAT. IT WAS CONTENDED THAT AS FOUND BY THE HIGH COURT NEIT HER IN THE RETURN OF INCOME OR DOCUMENT CONNECTED THEREWITH T HE SAME WAS STATED OR ASCERTAINABLE AND THEREFORE THE HIG H COURT FOUND THAT THE ASSESSEE HAD FAILED TO FULFILL ITS D UTY TO TRULY AND FULLY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASS ESSMENT. THUS THE JUDGMENT HAS NO BEARING IN THE PRESENT IS SUE WHERE THE ALLEGATION WAS NOT NON-DISCLOSURE OF FACTS BUT IT WAS INCORRECT CALCULATION OF DEDUCTION BY THE AO HIMSEL F ON THE BASIS OF FACTS SUPPLIED BY THE ASSESSEE WHICH WERE NOT FOUND TO BE INCORRECT OR INCOMPLETE; (XIII) TAKING CUE FROM THE RULING IN THE CASE OF IP CA LABORATORY (SUPRA) THE LD. D R ARGUED THAT FOR THE PURPOSE OF SHOWING THAT IN LAW THE CALCULATION MADE BY THE ASSESSEE WAS INC ORRECT ETC. IT WAS ARGUED AGAINST BY THE ASSESSEE THAT WHILE EX AMINING THE VALIDITY OF REASSESSMENT UNDER PROVISO TO S. 147 T HE CORRECTNESS OR OTHERWISE OF DEDUCTION IN LAW WAS IR RELEVANT AND WHAT WAS RELEVANT WAS THE FAILURE ON THE PART OF TH E ASSESSEE TO DISCLOSE A FULLY AND TRULY ALL MATERIAL FACTS. STR ETCHING FURTHER THAT THIS JUDGMENT HAS NO BEARING BECAUSE WHEN THE ASSESSMENT FOR AY 2004-05 IN THE CASE OF THE ASSESS EE WAS REMANDED BACK BY THE TRIBUNAL TO THE AO TO EXAMINE THE MATTER AFRESH WHILE GIVING EFFECT TO THE SAID ORDER THE A O HIMSELF HAD HELD IN HIS ORDER DT.2.12.2011 THAT IT IS SEEN THAT THE FACTS OF THE CASE IPCA LABORATORY LTD (SUPRA) ARE DISTINGUISHABL E FROM THE FACTS OF THE ASSESSEES CASE..THEREFORE THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORA TORY LTD (SUPRA) IS NOT APPLICABLE TO THE ASSESSEES CASE. THEREFORE THE LD. A R CONTENDED THAT RELIANCE ON THIS JUDGMEN T IS WITHOUT ANY BASIS; & (XIV) FINALLY WITH REGARD TO THE LD DRS REFERENCE TO THE ISSUE OF MERGER BY SUBMIT THAT THOUGH THE COMPUTATION OF DED UCTION U/S 80HHC MAY HAVE BEEN SUBJECT MATTER OF APPEAL BEFORE THE CIT (A) THE ISSUES RAISED BY THE ASSESSEE FOR REOPENIN G WERE NOT THE SUBJECT MATTER OF CIT (A) AND THEREFORE THE P RINCIPLE OF MERGER DOESNT APPLY ETC. THE LD. AR SUBMITTED TH AT FIRSTLY THIS CONTENTION WAS FACTUALLY INCORRECT AND THAT THE FIR ST BASIS FOR - 10 - REOPENING AS RECORDED IN THE SATISFACFTION NOTE IN BOTH THE AYS WAS SALES-TAX AND EXCISE DUTY ARE TO BE CONSIDERED AS P ART OF TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 80HHC . THIS ISSUE WAS SUBJECT MATTER OF ADJUSTMENT IN THE ORIGI NAL ASSESSMENT ORDER AND THE SAME WAS ALSO ADJUDICATED BY THE CIT (A) IN THE FIRST ROUND IN THE RESPECTIVE YEARS BEFORE THE ASSESSMENTS WERE REOPENED; - SECONDLY THE PRINCIPLE OF MERGER WAS IN RELATI ON TO ISSUE AND NOT THE DIFFERENT FACETS OF AN ISSUE. THE ISSU E BEFORE THE AO IN THE ORIGINAL ASSESSMENT WAS DEDUCTION U/S 80H HC. HE DID NOT GRANT IT FULLY TO THE ASSESSEE AND WHEN IT WAS CARRIED IN APPEAL THE CIT (A) LOOKED INTO THE CLAIM OF DEDUCT ION U/S 80HHC AND GRANTED RELIEF PARTIALLY. THE ASSESSEES CLAIM OF DEDUCTION U/S 80HHC THEREFORE GOT PROCESSED BEFORE THE AO AND WAS A SUBJECT MATTER OF APPEAL BEFORE THE CIT ( A) WHO HAD DECIDED THE MATTER BEFORE THE CASE WAS REOPENED AND THE ORDER THEREFORE WAS IN RELATION TO QUANTIFICATION OF DEDU CTION U/S 80HHC OF THE ACT. HOWEVER IT WAS ARGUED THE REOP ENING WAS DONE IN THE INSTANT CASE ONLY ON THE GROUND THAT CL AIM OF DEDUCTION U/S 80HHC WAS WRONGLY GRANTED AND THAT TH E ISSUE GOT MERGED FROM THE ORIGINAL ASSESSMENT ORDER TO TH E ORDER OF THE CIT (A). THE SAME CANNOT NOW BE A SUBJECT MAT TER OF REOPENING AS HELD BY THE HONBLE GUJARAT HIGH COURT (SUPRA). EXTENSIVELY QUOTING THE RULING OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT V. NIRMA CHEMICALS WORKS ( P) LTD. 309 ITR 67 (GUJ) IT WAS CONTENDED THAT IN VIEW OF THE ABOVE RULING THE ARGUMENT OF THE LD. D R REQUIRES TO BE REJECTED ; 6.1. IN CONCLUSION IT WAS FERVENTLY SUBMITTED THAT THE LD. DR HAD VERY FAIRLY CONCEDED THAT IT IS NOT THE CASE WHERE THE ASSESSEE MADE A WRONG CLAIM OF DEDUCTION BUT IT IS AN INCORRECT CLAIM OF DEDUCTION ALLOWED BY THE AO. IT WAS FURTHER SUBMITTED THAT ASSUMING BUT NOT ADMITTING THIS TO BE TRUE EVEN IF A CLAIM IS INCORRECTLY ALLOWED B Y THE AO IN AN ASSESSMENT U/S143(3) THE SAME CANNOT BE SUBJECT MAT TER OF REOPENING UNDER THE PROVISO TO S. 147 BECAUSE THERE WAS NO FI NDING THAT THE AO - 11 - GRANTED INCORRECT CLAIM BECAUSE THE ASSESSEE DID NO T SUPPLY FULLY AND TRULY ALL MATERIAL FACTS. SINCE IN THE PRESENT CAS E THERE WERE NO SUCH ALLEGATIONS THE APPEALS OF THE ASSESSEE REQUIRE TO BE ALLOWED. 6.1.1. ON THE OTHER HAND THE LD. D R HAD VERY ELA BORATELY AGUED THE CASE BY EXTENSIVELY QUOTING VARIOUS JUDICIAL PRONOU NCEMENTS IN SUPPORT OF HIS ARGUMENTS AND ALSO JUSTIFIED THE STAND OF T HE LD. AO IN REOPENING OF THE ASSESSMENTS UNDER CONSIDERATION AND SUBSEQUE NT FINDINGS OF THE LD. CIT (A) IN SUSTAINING THE AOS REASONING. THE DETAILED SUBMISSIONS OF THE LD. D R COUPLED WITH VARIOUS CASE LAWS ARE A LREADY FINDING A PLACE ALONG WITH THE POINT-BY-POINT REBUTTAL MADE BY THE LD. A R (SUPRA). 6.2. WE HAVE VERY CAREFULLY CONSIDERED THE RIVAL SU BMISSIONS COUPLED WITH A NUMBER OF CASE LAWS IN THEIR STRIDE DILIGEN TLY PERUSED THE RELEVANT CASE RECORDS AND ALSO DOCUMENTARY EVIDENCES ADVANCE D IN THE SHAPE OF VOLUMINOUS PAPER BOOKS DURING THE COURSE OF HEARING BY THE LD. A R. 6.2.1. THE CRUX OF THE ISSUE CHIEFLY IS AS TO WH ETHER THE AO WAS WITHIN DOMINION TO ISSUE NOTICES U/S 148 OF THE ACT TO REO PEN THE ASSESSMENTS FOR THE AYS UNDER CONSIDERATION. (I) INITIALLY THE LD. AO HAD FRAMED TH E ORIGINAL ASSESSMENTS U/S 143(3) OF THE ACT WHEREIN HE HAD TURNED DOWN THE AS SESSEES FULL CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT AND ACCORDINGLY REWORKED OUT AND REDUCED THE SAID CLAIMS. ON APPEALS THE THEN LD. CIT (A) HAD PARTIALLY ACCEDED TO THE CLAIM FOR DEDUCTION U/S 80HHC FOR BO TH THE AYS. IN ESSENCE THE ORDERS OF THE AO IN RELATION TO DEDUCT ION U/S 80HHC OF THE ACT THEREFORE GOT MERGED WITH THE FINDINGS OF THE C IT (A). FOR RECORD AN ORDER U/S 263 OF THE ACT WAS PASSED BY THE JURISDIC TIONAL LD. CIT III AHMEDABAD AND CONSEQUENTLY THE AO ON 31.3.2005 AL SO PASSED AN ORDER GIVING EFFECT TO THE SAID ORDER. - 12 - (II) AFTER THE EXPIRY OF FOUR YEARS PERIOD FROM THE END OF BOTH THE ASSESSMENT YEARS THE AO HAD SLAPPED NOTICES ON THE ASSESSEE U/S 148 OF THE ACT ON 20.3.2007 BY RECORDING SATISFACTORY N OTES FOR RE-OPENING OF ASSESSMENTS OF THE ASSESSEE FOR BOTH THE AYS UNDER CHALLENGE. IN ESSENCE THE ASSESSMENTS HAVE ORIGINALLY BEEN FRAME D U/S 143(3) OF THE ACT AND SUBSEQUENTLY THE ASSESSMENTS WERE SOUGHT TO BE REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS. THEREFORE THE ASSESSEE HAD RAISED A BOGEY THAT THE VALIDITY OF THE REOPENING OF THE ASSESSMENTS WILL HAVE TO BE EX AMINED IN LIEU OF THE REQUIREMENTS OF PROVISO TO S. 147 OF THE ACT. IT W AS THE VEHEMENT ARGUMENT OF THE LD. SENIOR COUNSEL FOR THE ASSESSEE THAT IN ORDER TO ATTRACT THE PROVISO TO S. 147 OF THE ACT THE LD. A O WAS TO BE OBLIGED TO SATISFY TWIN CONDITIONS PRECEDENT NAMELY (AT THE C OST REPETITION): (I) THE ESCAPEMENT OF ASSESSMENT IS ON ACCOUNT OF F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THAT YEA R; (II) THAT THE AO MUST HAVE BEEN REASON TO BELIEVE T HAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 6.2.2. ON A CAREFUL READING/SCRUTINY OF THE REASO NS RECORDED BY THE AO [COURTESY: PAGE 2 OF THE ASST. ORDER] IT HAS BEEN SIGNIFICANTLY OBSERVED THAT NEITHER THE AO HAD REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENTS NOR THE ESCAPEMENT OF A SSESSMENTS WERE ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCHARGE FU LLY TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENTS. 6.2.3. AT THIS POINT OF TIME WE SHALL HAVE A LOOK AT THE JUDICIAL VIEW ON A SIMILAR ISSUE. - 13 - 1. KANAK FABRICS V. ITO SPECIAL CIVIL APPLICATIO N 335/2001 DATED: 3.3.2011 HONBLE GUJARAT HIGH COURT: BRIEFLY THE ASSESSEE FILED ITS RETURN OF INCO ME FOR AY 1989-90 AND THE ASSESSMENT CAME TO BE FRAMED U/S 143(3) OF THE ACT ON 22.1.1991 IN AN ENHANCED INCOME. LATER ON ON A QUERY FROM THE REV ENUE THAT ITS AUDIT WING REQUIRED CERTAIN CLARIFICATION THE ASSESSEE W AS OBLIGED TO CLARIFY AS REQUIRED ON 13.2.2000. SUBSEQUENTLY THE ASSESSEE WAS SERVED WITH A NOTICE U/S 148 OF THE ACT WHICH WAS OBJECTED TO BY THE ASSESSEE HOWEVER THE REVENUE REJECTED ITS OBJECTION. ON BEING APPROACHED THE HONBLE COURT WITH A PLEA T HAT THE ORIGINAL ASSESSMENT FOR THE AY 1989-90 WAS FRAMED U/S 143(3) AND THAT THE SAME WAS SOUGHT TO BE RE-OPENED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE SAID AY; AND THAT THE ASSESSMENT FRA MED U/S 143(3) CAN BE REOPENED BEYOND A PERIOD OF FOUR YEARS IF AND ONLY AN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE ETC. THE HONBLE COURT HAD AFTER CONSIDERING TH E RIVAL SUBMISSIONS OBSERVED: 6. AS NOTED EARLIER IN THE PRESENT CASE NOTICE U NDER SECTION 148 OF THE ACT HAS BEEN ISSUED ON 30.3.2000 IN RELATION TO ASSESSMENT YEAR 1989-90 ADMITTEDLY THE SAME HAS BEEN ISSUED AFTER THE EXPIRY OF A PERIOD O F FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN THE CIRCUMSTANCES IN THE LIGHT OF THE PROVISO TO SECTION 147 OF THE ACT IN CASE WHERE ASSESSMENT HA S BEEN FRAMED UNDER SECTION 143(3) OF THE ACT NO ACTION CAN BE TAKEN UNDER SEC TION 147 UNLESS INCOME HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR I TS ASSESSMENT FOR THE ASSESSMENT YEAR. 7. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFORESAID LEGAL POSITION A PERUSAL OF THE REASONS RECORDED SHOWS T HAT THERE IS NOT EVEN A WHISPER TO THE EFFECT THAT INCOME HAS ESCAPED ASSES SMENT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. EVEN IN THE AFFIDAVI T IN REPLY FILED BY THE - 14 - RESPONDENT THERE IS NO ALLEGATION OF ANY SUCH FAIL URE ON THE PART OF THE PETITIONER. IN THE CIRCUMSTANCES IT IS APPARENT T HAT THE REQUIREMENTS OF THE PROVISO TO SECTION 147 OF THE ACT ARE NOT SATISFIED . CONSEQUENTLY IN THE ABSENCE OF ANY SATISFACTION HAVING BEEN RECORDED BY THE ASS ESSING OFFICER THAT INCOME HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT IS INVALID. THE IMPUGNED NOTICE UNDER SECTION 148 OF THE ACT THEREFORE CANNOT BE SUSTAINED. 2. SAYAJI INDUSTRIES LTD V. JCIT (ASST) (2011) 33 6 ITR 360 (GUJ) ON AN IDENTICAL ISSUE THE HONBLE JURISDICTIONAL H IGH COURT HAD AFTER ANALYZING THE ISSUE IN DEPTH RULED THUS: 7. (ON PAGE 364) EXAMINING THE FACTS OF THE PRESEN T CASE IN THE LIGHT OF THE AFORESAID STATUTORY REQUIREMENT A PERUSAL OF THE R EASONS RECODED INDICATES THAT THE ASSESSING OFFICER HAS RECORDED AS MANY AS THREE GROUNDS IN RELATION TO WHICH HE HAS RECORDED THE BELIEF THAT THE INCOME HAS ESCA PED ASSESSMENT. IN SO FAR AS THE SATISFACTION REGARDING FAILURE TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT IS CONCERNED IN THE C ONCLUDING PARAGRAPH OF THE REASONS RECORDED THE ASSESSING OFFICER HAS MERELY RECORDED THAT IN VIEW OF THE ABOVE FACTS I HAVE REASON TO BELIEVE THAT THE INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 1994-95 DUE TO THE OMISSION ON THE PART OF THE ASSESSEE TO FURNISH THE TRUE AND CO RRECT AFFAIRS OF THE COMPANY WITHIN THE MEANING OF THE PROVISIONS SECTION 147 OF THE INCOME-TAX ACT. HOWEVER THOUGH IN THE CONCLUDING PARAGRAPH IT HAS BEEN RECORDED THAT THERE IS OMISSION ON THE PART OF THE ASSESSEE TO FURNISH THE TRUE AND CORRECT AFFAIRS OF THE COMPANY IN THE PRECEDING PARAGRAPHS WHEREIN THE AS SESSING OFFICER HAS EXTENSIVELY RECORDED REASONS AS REGARDS HIS BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT THERE IS NOTHING WHATSOEVER TO INDICATE ANY OMISSION ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS. THUS FROM THE REASONS RECORDED IT APPEARS THAT IN EFFECT AND SUB STANCE NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER AS REGARDS F AILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THUS FROM THE REASONS RECORDED IT APPEARS THAT IN EFFECT AND SUBSTANCE NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER AS REGARDS FAILUR E ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. WH AT IS RECORDED IN THE CONCLUDING PARAGRAPH OF THE REASONS AS REGARDS OMISSION ON THE PART OF THE PETITIONER TO FURNISH TRUE AND CORRECT AFFAIRS OF THE COMPANY DO ES NOT FIND ANY SUPPORT IN THE PRECEDING PARAGRAPHS. THUS EXCEPT FOR THE BALD ST ATEMENT THAT THERE IS - 15 - OMISSION ON THE PART OF THE PETITIONER TO FURNISH T RUE AND CORRECT AFFAIRS OF THE COMPANY THERE IS NOTHING WHATSOEVER IN THE REASONS RECORDED TO INDICATE THE NATURE OF THE OMISSION AND AS TO WHICH FACTS HAD NO T BEEN TRULY AND FULLY DISCLOSED. HENCE ON A PLAIN READING OF THE REASON S RECORDED IT IS APPARENT THAT THERE IS NO MATERIAL ON RECORD ON THE BASIS OF WHIC H THE ASSESSING OFFICER COULD HAVE RECORDED THE SATISFACTION AS REGARDS INCOME HA VING ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE PETITIONER TO FURNISH TRUE AND CORRECT AFFAIRS OF THE COMPANY. IN THE CIRCUMSTANCES IN THE ABSENCE OF ANY FOUNDAT ION HAVING BEEN LAID IN THE REASONS RECORDED TO INDICATE ANY OMISSION ON THE PA RT OF THE PETITIONER IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT BY ISSUING NOTICE UNDER SECT ION 148 OF THE ACT IS WITHOUT JURISDICTION AND AS SUCH THE IMPUGNED NOTICE CANNO T BE SUSTAINED. 3. YET SIMILAR RULING THE HONBLE HIGH COURT OF BOMBA Y AT PANAJI GOA IN WRIT PETITION NO.71 OF 2005 DATED 9.6.2011 IN T HE CASE OF TITANOR COMPONENTS LTD V. ACIT C 2(1) PANAJI AFTER EXTENS IVELY QUOTING THE CONDITIONS PRESCRIBED BY THE PROVISO TO S.147 OF TH E ACT AND ANALYZING THE ISSUE HAD OBSERVED: 4. ACCORDING TO THE LEARNED COUNSEL THE REVENUE IS ENTITLED TO ISSUE SUCH A NOTICE IF THE ASSESSING OFFICER HAS REASON TO BELIE VE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE (A) TO MAKE A RETURN UNDER SECTION 139 OR (B) IN RE SPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR (C) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THAT ASSESSM ENT YEAR. SINCE THE FIRST TWO CONDITIONS ARE NOT PLEADED BY THE RESPONDENTS IT I S THE SUBMISSION OF THE PETITIONER THAT THE NOTICED IS WHOLLY UNWARRANTED A ND INVALID SINCE THERE IS NO ALLEGATION WHATSOEVER THAT THE PETITIONER HAS FAILE D TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THIS SUBMISSION CAN BE C ONSIDERED ONLY WITH REFERENCE TO THE REASONS PUT FORTH BY THE RESPONDEN TS FOR ISSUING THE NOTICE. THE LETTER DATED 27.1.2005 INTER ALIA STATES THAT THE ASSESSING OFFICER HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BECAUSE THE PETITIONER HAS WRONGLY CLAIMED DEDUCTION UNDER SECTION 80IA IN RESPECT OF INCOMER WHICH WAS NOT DERIVED FROM THE INCOME OF THE PETITIONERS UNIT OF KUNDAIM. FURTHER THAT LONG - 16 - TERM CAPITAL GAINS HAVE BEEN WRONGLY CLAIMED BY THE ASSESSEE WHICH HAVE BEEN WRONGLY CONSIDERED FOR THE SET OFF OF THE UNIT OF K UNDAIM WHICH HAS RESULTED IN ESCAPEMENT OF INCOME. NOWHERE HAS THE ASSESSING OF FICER STATED THAT THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HAVING REGARD TO T HE PURPOSE OF THE SECTION WE ARE OF THE VIEW THAT THE POWER CONFERRED BY SECTION 147 DOES NOT PROVIDE FRESH OPPORTUNITY TO THE ASSESSING OFFICER TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNLESS THE MISTAKE IN THE ASSESSMENT SO MAD E IS THE RESULT OF A FAILURE OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT. INDEED WHERE THE ASSESSEE HAS FULLY D ISCLOSED ALL THE MATERIAL FACTS IT IS NOT OPEN FOR THE ASSESSING OFFICER TO RE-OPEN THE ASSESSMENT ON THE GROUND THAT THERE IS MISTAKE IN ASSESSMENT. MOREOVE R IT IS NECESSARY FOR THE ASSESSING OFFICER TO FIRST OBSERVE WHETHER THERE IS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT A ND HAVING OBSERVED THAT THERE IS SUCH A FAILURE TO PROCEED UNDER SECTION 147. IT MUST FOLLOW THAT WHERE THE ASSESSING OFFICER DOES NOT RECORD SUCH A FAILURE HE WOULD NOT BE ENTITLED TO PROCEED UNDER SECTION 147. IT MUST FOLLOW THAT WHE RE THE ASSESSING OFFICER DOES NOT RECORD SUCH A FAILURE HE WOULD NOT BE ENTITLED TO PROCEED UNDER SECTION 147. AS OBSERVED EARLIER THE ASSESSING OFFICER HAS NOT RECORDED THE FAILURE ON THE PART OF THE PETITIONER TO FULLY AND TRULY DISCLOSE ALL M ATERIAL FACTS NECESSARY FOR THE ASSESSMENT YEAR 1997-98. WHAT IS RECORDED IS THAT THE PETITIONER HAS WRONGLY CLAIMED CERTAIN DEDUCTIONS WHICH HE WAS NOT ENTITLE D TO. THERE IS WELL KNOWN DIFFERENCE BETWEEN A WRONG CLAIM MADE BY AN ASSESSE E AFTER DISCLOSING ALL THE TRUE AND MATERIAL FACTS AND A WRONG CLAIM MADE BY T HE ASSESSEE BY WITHHOLDING THE MATERIAL FACTS FULLY AND TRULY. IT IS ONLY IN THE LATTER CASE THAT THE ASSESSING OFFICER WOULD BE ENTITLED TO PROCEED UNDER SECTION 147. WE ARE SUPPORTED IN THIS VIEW BY A DECISION OF A DIVISION BENCH OF THIS COUR T IN HINDUSTAN LEVEL LTD V. R.B. WADKAR ASSISTANT COMMISSIONER OF INCOME-TAX (2004) 268 ITR 0332 WHEREIN A SIMILAR CASE THE DIVISION BENCH HELD THAT THERE WA S A FAILURE TO DISCLOSE FULLY AND TRULY THAT ALL MATERIAL FACTS MUST BE READ AS RECOR DED BY THE ASSESSING OFFICER AND IT WOULD NOT BE PERMISSIBLE TO DELETE OR ADD TO THOSE REASONS AND THAT THE ASSESSING OFFICER MUST BE BALE TO JUSTIFY THE SAME BASED ON MATERIAL RECORD. THE DIVISION BENCH OBSERVED AS FOLLOWS: HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. 5. WE FIND IN THE CIRCUMSTANCES THAT THE IMPUGNED N OTICE IS NOT SUSTAINABLE AND IS LIABLE TO BE QUASHED AND SET-ASIDE - 17 - 6.2.4. WITH REGARD TO THE LD D RS ARGUMENT THAT THE ISSUE OF MERGER THOUGH COMPUTATION OF DEDUCTION U/S 80HHC OF THE AC T MAY HAVE BEEN THE SUBJECT MATTER OF APPEAL BEFORE THE CIT (A) TH E ISSUE RAISED BY THE ASSESSEE FOR REOPENING OF ASSESSMENTS WERE NOT THE SUBJECT MATTER BEFORE THE CIT (A) AND THEREFORE THE PRINCIPLE OF MERGER WOULD NOT APPLY ETC. THIS ARGUMENT OF THE LD. D R WAS REBUTT ED BY THE LD. SENIOR COUNSEL FOR THE ASSESSEE THAT (AT THE COST OF PET ITION) THE ISSUE BEFORE THE AO IN THE ORIGINAL ASSESSMENT WAS DEDUCTION U/ S 80HHC BUT HE DID NOT GRANT IT FULLY AND WHEN THE ASSESSEE TOOK U P THE ISSUE WITH THE CIT (A) WHO PARTIALLY CONCEDED TO THE ASSESSEES CL AIM. THUS ACCORDING TO THE LD. COUNSEL THE ISSUE GOT PROCESSED BEFORE THE AO AND WAS THE SUBJECT MATTER OF APPEAL BEFORE THE CIT (A) WHO HAD DECIDED THE MATTER BEFORE THE CASE WAS REOPENED AND THEREFORE THE OR DER WAS IN RELATION TO QUANTIFICATION OF DEDUCTION U/S 80HHC WHICH WAS SUBJECT MATTER OF APPEAL. IN THE PRESENT CASE ACCORDING TO THE LD. COUNSEL REOPENING WAS DONE ONLY ON THE GROUND THAT THE CLAIM OF DEDUC TION U/S 80HHC WAS WRONGLY GRANTED AND THUS THE ISSUE GOT MERGED FRO M THE ORIGINAL ASSESSMENT ORDER TO THE ORDER OF CIT (A). THE SAME CANNOT NOW BE A SUBJECT MATTER OF REOPENING. 6.2.5. AT THIS POINT OF TIME WE WOULD LIKE TO RE CALL THE RULING OF THE JURISDICTIONAL HONBLE HIGH COURT IN THE CASE OF UN ITED PHOSPHORUS LTD V. ADDL. CIT IN SPECIAL CIVIL APPLICATION 3352 OF 2001 DATED 8.3.2011; THE HONBLE DIVISION BENCH HAS OBSERVED THAT - 13. IN THE LIGHT OF THE REASONS RECORDED IT MAY BE GERMANE TO REFER TO THE ASSESSMENT ORDER FRAMED UNDER SECTION 143(3) OF THE ACT IN RELATION TO THE YEAR UNDER CONSIDERATION WHICH INDICATES THAT INSOFAR AS DEDUCTION UNDER SECTION 80HHC OF THE ACT IS CONCERNED THE ASSESSING OFFICE R AFTER DUE APPLICATION OF MIND AS PER THE SEPARATE WORKING ENCLOSED AS ANNEXU RE A WITH THE ASSESSMENT ORDER GIVING REASONS AS PER THE NOTE COMPUTED THE A LLOWABLE DEDUCTION. AS REGARDS THE DEDUCTION UNDER SECTION 80I AND 80IA O F THE ACT THE ASSESSING - 18 - OFFICER HAS PLACED RELIANCE UPON THE CERTIFICATE IS SUE BY THE CHARTERED ACCOUNTANTS AND ALLOWED DEDUCTION OF RS.1 25 603 45 3/-. THUS BOTH THE ISSUES HAVE BEEN SPECIFICALLY CONSIDERED BY THE ASSESSING OFFICER WHILE FRAMING THE ORIGINAL ASSESSMENT. AGAINST THE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE HAD PREFERRED APPEAL BEFORE THE COMMISSIONER (APPEALS) ON VARIOUS GROUNDS WHEREIN ADDITION OF EXCISE DUTY REFUND RECEIVABLE DUTY DRAW BACK RECEIVABLE AND CASH ASSISTANCE RECEIVABLE THE REDUCTION OF CL AIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT AS WELL AS DEDUCTION UNDER SECTION 80I AND 80IA OF THE ACT WERE ALSO SUBJECT MATTER OF APPEAL. THE COMMIS SIONER BY AN ORDER DATED 15.3.2000 ALLOWED SOME OF THE GROUNDS OF APPEAL. T HUS THE ORDER OF THE ASSESSING OFFICER STOOD MERGED WITH THE ORDER OF CO MMISSIONER (APPEALS) AND HAD NO INDEPENDENT EXISTENCE OF ITS OWN AND AS SUCH THE ASSESSMENT COULD NOT HAVE BEEN REOPENED IN RESPECT OF THE SAID ITEMS. 14. APART FROM THE AFORESAID POSITION A PERUSAL O F THE STATEMENT SHOWING ALLOCATION OF INCOME AND EXPENSES TO ELIGIBLE UNITS AND NON-ELIGIBLE UNITS FOR DEDUCTION UNDER SECTION 80I AND 80IA OF THE ACT (AN NEXURE F TO THE REJOINDER AFFIDAVIT) CLEARLY SHOWS THAT THE OTHER INCOME TO T HE TUNE OF RS.10 03 36 210/- HAD NOT BEEN TAKEN INTO CONSIDERATION WHILE COMPUTI NG DEDUCTION UNDER SECTION 80I AND 80IA OF THE ACT. THUS THE REASONS RECORDE D PROCEED ON AN ERRONEOUS FACTUAL PREMISE THAT THE OTHER INCOME HAD BEEN INCL UDED WHILE ALLOWING DEDUCTION UNDER SECTION 80I OF THE ACT. THE THIRD GROUND FOR REOPENING VIZ. THAT DEDUCTION UNDER SECTION 80IA OF THE ACT IS NOT ALLO WABLE ON INCOME FROM OTHER SOURCES ALSO PROCEEDS ON A FACTUALLY ERRONEOUS BAS IS AS AFORESAID. AS REGARDS THE SECOND GROUND FOR REOPENING VIZ. EXCISE DUTY R EFUND DUTY DRAWBACK AND CASH ASSISTANCE RECEIVABLE HAVE BEEN CHARGED TO TAX VIDE SECTION 28(11)(C) AND WERE REQUIRED TO BE EXCLUDED WHILE WORKING OUT DEDU CTION UNDER SECTION 80I/80IA THE SAID ISSUE HAD BEEN DULY CONSIDERED A T THE TIME OF FRAMING THE ORIGINAL ASSESSMENT AND WAS ALSO SUBJECT MATTER OF APPEAL BEFORE THE COMMISSIONER (APPEALS). 15. IN THE LIGHT OF THE AFORESAID DISCUSSION IT I S APPARENT THAT THE ASSESSMENT ORDER IN RESPECT OF THE ITEMS FOR WHICH ASSESSMENT IS SOUGHT TO BE REOPENED HAS MERGED WITH THE ORDER OF COMMISSIONER (APPEALS) AND AS SUCH HAS NO INDEPENDENT EXISTENCE AND THEREFORE THE ASSESSMEN T COULD NOT BE REOPENED IN RESPECT OF THE SAID ITEMS. MOREOVER THE REOPENING OF ASSESSMENT APART FROM BEING BASED ON A FACTUALLY ERRONEOUS PREMISE IS AL SO BASED UPON A MERE CHANGE OF OPINION WITHOUT THERE BEING ANY TANGIBLE MATERIA L TO COME TO THE CONCLUSION THAT THEREFORE IS ESCAPEMENT OF INCOME FROM ASSESSM ENT. HENCE IN VIEW OF THE LAW LAID DOWN BY THE SUPREME COURT IN THE CASE OF C OMMISSIONER OF INCOME-TAX V. KELVINATOR OF INDIA LTD (2010) 320 ITR 561 (SC) THE CONDITION PRECEDENT FOR REOPENING OF ASSESSMENT HAS NOT BEEN FULFILLED AND AS SUCH THE ASSUMPTION OF - 19 - JURISDICTION UNDER SECTION 147 OF THE ACT IS NOT VA LID. THE IMPUGNED NOTICE ISSUED UNDER SECTION 148 OF THE ACT THEREFORE CANNOT BE SUSTAINED. 6.2.6. TAKING INTO ACCOUNT ALL THE FACTORS AND ALS O THE CIRCUMSTANCES AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS AND I N CONFORMITY WITH THE JUDICIARY VIEW (SUPRA) WE ARE OF THE CONSIDERED VI EW THAT LD. AO WAS NOT JUSTIFIED IN ASSUMING OF JURISDICTION UNDER SEC TION 147 OF THE ACT. THE IMPUGNED NOTICES UNDER SECTION 148 OF THE ACT FOR T HE ASSESSMENT YEARS 2000-01 AND 2001-02 IN THE CASE OF THE PRESENT ASSE SSEE CANNOT THEREFORE BE SUSTAINED. IT IS ORDERED ACCORDINGLY . 6.2.7. BEFORE PARTING WITH WE WOULD LIKE TO REIT ERATE WITH DUE REGARDS THAT WE HAVE DULY PERUSED THE VARIOUS CASE LAWS ON WHICH THE LD D.R HAD PLACED HIS UNSTINTED CONFIDENCE NAMELY: (I) CIT V. SAFETAG INTERNATIONAL INDIA PVT. LTD. ITA NOS. 355 & 412 OF 2010 DATED: 3.2.2011 HONBLE HIGH COURT OF DELHI: THE ISSUE BEFORE THE HONBLE HIGH COURT WAS ENTIREL Y ON A DIFFERENT ISSUE WHICH HAS NO RELEVANCE TO THE ISSUE ON HAND. (II) SMT.KAUSHALYABAI V. CIT (1999) 238 ITR 1008 (MP) : THE ISSUE BEFORE THE HONBLE HIGH COURT WAS CLEARLY DISTINGUISHABLE IN THE SENSE THAT THE ISSUE WAS - W HETHER THE PROCEEDINGS WERE VALIDLY INITIATED BUT DISABLED FRO M A TECHNICAL LAPSE OF A DEFECTIVE NOTICE CAN BE CHALLENGED BY THE ASSESSE E ON THE GROUND OF DEFECTIVE NOTICE AT THE APPELLATE STAGE WHEREAS SHE HAD NOT RAISED THAT ISSUE BEFORE THE LOWER AUTHORITY? HOWEVER IN THE CASE ON HAND THE VALIDITY OF REASSESSMENT IS IN DISPUTE AND NOT THE TECHNICAL OBJECTION AS TO ANY DEFECT IN THE NOTICE. - 20 - (III) IN THE CASE OF MULCHAND RAMPURIA V. ITO (20 02) 125 TAXMAN 291 (CAL) THE HONBLE HIGH COURT HAD RULED THAT AFTER THE ENACTMENT OF S. 292B NO NOTICE SHALL BE DEEMED TO BE INVALID MEREL Y BY REASON OF ANY MISTAKE DEFECT OR OMISSION THEREIN IF NOTICE IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO INTENT AND PURPOSE OF ACT ETC. THEREFORE WE ARE OF THE FIRM VIEW THAT THE ISSUE R AISED BEFORE THE HONBLE COURT DOESNT FIT INTO THE ISSUE ON HAND AS IT IS CLEARLY DISTINGUISHABLE. (IV) DISHMAN PHARMACEUTICALS & CHEMICALS LTD V. DCI T SPL. CIVIL APPLN. NO.15304 OF 2010 DATED 1.3.2011 (HON . GUJARAT H.C) THE HONBLE DIVISION BENCH HAS OBSERVED THUS: 15. WE HAVE TAKEN NOTE OF REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT. THE ASSESSING OFFICER MAY NOT HAVE STATED IN SO MANY WORDS THAT INCOME ESCAPED ASSESSMENT ON ACCOUNT OF THE ASSESSE E NOT TRULY AND FULLY DISCLOSING ALL MATERIAL FACTS. SUFFICE IT TO SAY THE REASONS RECORDED CLEARLY ENVISAGES ESCAPEMENT OF INCOME ON ACCOUNT OF NON-DISCLOSURE BY THE ASSESSEE; ITS HOLDING IN SDBL FOR THE RELEVA NT ASSESSMENT YEAR. SUCH DISCREPANCY CAME TO LIGHT ONLY WHILE FRAMING THE AS SESSMENT OF THE SUBSEQUENT YEAR I.E. 2006-07 WHILE DURING THE COURSE OF INQU IRY THE ASSESSEE WAS ASKED TO SUBMIT SUCH DETAILS THROUGH WHICH IT WAS FOUND TH AT THE ASSESSEE HOLDS 22.3% OF THE SHARES OF SDBL. WITH HIGHEST REGARDS WE WOULD LIKE TO POINT OUT TH AT THE OBSERVATION OF THE HONBLE COURT HAS NO BEARING IN THE INSTANT CASE WHERE THE ALLEGATION WAS NOT NON-DISCLOSURE OF FACT S BUT INCORRECT CALCULATION OF DEDUCTION MADE BY THE AO HIMSELF ON THE BASIS OF FACTS FURNISHED BY THE ASSESSEE WHICH WERE NOT CLASSIFIED /POINTED OUT TO BE INCORRECT/INCOMPLETE PROMPTING THE AO TO INVOKE TH E PROVISIONS OF S.147 OF THE ACT UNCEREMONIOUSLY. - 21 - WE HAVE ALSO PERUSED WITH DUE CARE THE OTHER CASE L AWS MENTIONED BY THE LD. D R DURING THE COURSE OF HIS L ENGTHY ARGUMENTS AND OF THE CONSIDERED VIEW THAT THEY WERE ON THE DI FFERENT CONTEXT/PRETEXT WHICH HAVE NO DIRECT RELEVANCE TO THE ISSUE WHICH WE HAVE DEBATED SUPRA. 7. WE HAVE SINCE TAKEN A VIEW THAT THE IMPUGNED NOT ICES U/S 148 OF THE ACT ISSUED ON 20.3.2007 WERE INVALID AND CONSEQUENTLY BECAME IN- OPERATIONAL ; AND THEREFORE THE OTHER GROUNDS RAISED IN BOTH T HE APPEALS HAVE BECOME ACADEMIC AND REDUNDANT AND THUS THEY HAVE NOT BEEN ADDRESSED TO. 8. IN THE RESULT THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH -3-2012. SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHME DABAD