Bharat Industrial Enterprises Ltd, v. Addl. CIT Karnal Range,

ITA 4760/DEL/2007 | 2000-2001
Pronouncement Date: 31-03-2011 | Result: Allowed

Appeal Details

RSA Number 476020114 RSA 2007
Assessee PAN AABCB2611C
Bench Delhi
Appeal Number ITA 4760/DEL/2007
Duration Of Justice 3 year(s) 3 month(s) 21 day(s)
Appellant Bharat Industrial Enterprises Ltd,
Respondent Addl. CIT Karnal Range,
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 31-03-2011
Date Of Final Hearing 08-03-2011
Next Hearing Date 08-03-2011
Assessment Year 2000-2001
Appeal Filed On 10-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH NEW DELHI BENCH NEW DELHI BENCH NEW DELHI BENCH B BB B BEFORE SHRI R. P. TOLANI JUDICIAL MEMBER AND SHRI K. D. RANJAN ACCOUTANT MEMBER ITA NO. 4759-4762 /DEL/2007 (ASSESSMENT YEARS 1999-2000 TO 2002-03 ) M/S. BHARAT INDUSTRIAL ENTERPRISES LTD. VS. ADDL. CIT TARAORI DISTT. KARNAL (HARYANA) KARNAL RANGE KARNAL HARYANA (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AABCB2611C APPELLANT BY: SHRI VIKRANT GUPTA/ABHISHEK GUPTA A DV. RESPONDENT BY: SHRI K. RAVI CHANDRAN SR. DR O OO ORDER RDER RDER RDER PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: 1. THESE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 1999- 2000 TO 2002-03 ARISE OUT OF THE SEPARATE ORDERS OF CIT(A) KARNAL. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE FIRST ISSUE FOR CONSIDERATION WHICH IS COMMO N IN ALL THE APPEALS RELATES TO COMPLETION OF ASSESSMENT U/S 14 7/143(3) WITHOUT FOLLOWING THE PRESCRIBED PROCEDURE. DURING THE COU RSE OF HEARING THE LD. A.R. FOR THE ASSESSEE DID NOT PRESS THIS GR OUND OF APPEAL. THEREFORE THIS GROUND OF APPEALS IS DISMISSED AS N OT PRESSED IN ALL THE FOUR YEARS. 3. THE 2 ND ISSUE FOR CONSIDERATION WHICH IS COMMON IN ALL TH E APPEALS RELATES TO ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. THE RELEVANT GROUND OF APPEAL IS REPRODUCED AS UNDER: I.T.A.NO. 4759-4762/DEL/2007 2 LD. CIT(A) ERRED IN NOT DECLARING THE NOTICE U/S 1 48 AS BAD IN LAW ON MERITS. NEITHER ANY INCOME OF THE ASSESS EE HAS ESCAPED ASSESSMENT AND NOR ANY REASON TO BELIEVE FO R THE ESCAPEMENT OF INCOME EXISTS WHICH IS THE FOREMOST CONDITION FOR THE ISSUANCE OF THE NOTICE U/S 148. HENCE THE NOTICE HAS BEEN ISSUED IN GROSS VIOLATION OF TH E SUBSTANTIVE LAW AND DESERVES TO BE QUASHED WHICH B E KINDLY ORDERED SO. 4. THE FACTS OF THE CASE STATE IN BRIEF ARE THAT TH E ASSESSEE FILED RETURNS OF INCOME FOR THE ASSESSMENT YEARS UNDER CO NSIDERATION ON THE FOLLOWING DATES: ASSESSMENT DATE OF DATE OF ASSESSMENT YEAR RETURN ASSESSMENT MADE U/S 1999-2000 29.10.1999 30.11.2000 143(1)(A) 2000-01 20.11.2000 28.11.2002 143(3) 2001-02 15.10.2001 20.01.2004 143(3) 2002-03 07.10.2002 18.12.2002 143(1)(A) 5. IN THESE YEARS THE ASSESSEE RECEIVED DEPB. TH E ASSESSEE CLAIMED DEDUCTION U/S 80HHC IN RESPECT OF DEPB RECE IPT WHICH WAS ALLOWED BY THE ASSESSING OFFICER WHILE PROCESSING T HE RETURN U/S 143(1)(A)/ ASSESSMENT U/S 143(3) OF THE ACT. SUBSE QUENTLY IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAD RECEIVED EXPORT INCENTIVE BY WAY OF DEPB RECEIPT WHICH WAS NOT COVE RED IN CLAUSE (IIIA) OF SECTION 28 AS HELD BY VARIOUS COURTS AND THEREFORE THE SAME WAS NOT ELIGIBLE FOR DEDUCTION U/S 80HHC. THE ASSE SSING OFFICER INITIATED ASSESSMENT/ REASSESSMENT PROCEEDINGS BY I SSUING NOTICE U/S 148 FOR ALL THE FOUR ASSESSMENT YEARS ON FOLLOW ING DATES: ASSESSMENT YEAR DATE OF ISSUE OF NOTICE DATE OF SERVICE 1999-2000 29.03.2005 30.03.2005 2000-2001 18.03.2005 18.03.2005 2001-02 18.03.2005 18.03.2005 2002-03 22.02.2005 15.03.2005 I.T.A.NO. 4759-4762/DEL/2007 3 IN RESPONSE OF NOTICE ISSUED U/S 148 ASSESSEE FI LED RETURNS OF INCOME DECLARING THE SAME INCOME AS DECLARED IN THE ORIGINAL RETURNS OF INCOME. THE ASSESSING OFFICER THEREAFTE R COMPLETED THE ASSESSMENT BY EXCLUDING DEPB RECEIPT FROM THE PROFI TS OF BUSINESS AND COMPUTED DEDUCTION U/S 80HHC ACCORDINGLY IN ALL THE FOUR YEARS. 6. BEFORE CIT(A) LD. A.R. OF THE ASSESSEE SUBMITT ED THAT NOTICE U/S 148 WAS ISSUED IN THE MONTH OF MARCH 2005 WITHO UT INTIMATING THE BASIS OF FORMING THE OPINION THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. SECONDLY ALL THE JUDICIAL PR ONOUNCEMENTS RELIED ON BY HT ASSESSING OFFICER IN THE REASONS RE CORDED AND SUPPLIED TO THE ASSESSEE AS PER THE DIRECTION OF TH E CIT(A) WERE IRRELEVANT AND NOT EVEN REMOTELY RELATED TO THE POI NT IN ISSUE. IT WAS ALSO SUBMITTED THAT AS ON THE DATE OF ISSUANCE OF NOTICES U/S 148 THERE WAS NO JUDICIAL PRONOUNCEMENT WHICH ESTA BLISHED THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE AMENDMENT TO SECTION 28/80HHC CAME IN EXISTENCE IN DEC 2005 A ND THUS HAD NO RELEVANCY OF THE PURPOSE OF ISSUANCE OF NOTICES U/S 148 IN THE MONTH OF MARCH 2005. 7. THE ASSESSING OFFICER IN HIS REMAND REPORT HAD S UBMITTED THAT AT THE TIME OF ISSUING NOTICE U/S 148 THERE WERE V ARIOUS JUDICIAL PRONOUNCEMENTS VIE WHICH IT WAS HELD THAT INCOME BY WAY OF DEPB ETC. DID NOT TANTAMOUNT TO DERIVED FROM THE BUSINE SS AND AS SUCH THE SAME WOULD NOT QUALIFY FOR DEDUCTION U/S 80HHC OF THE ACT. THE SHOW CAUSE NOTICE ON THE BASIS OF JUDICIAL PRONOUNC EMENTS WERE ISSUED TO THE ASSESSEE AND THE REASONS U/S 148 WERE ALSO RECORDED ON THE BASIS OF THE SAME. IT WAS ALSO REPORTED THA T BEFORE COMPLETION OF ASSESSMENT TAXATION LAW (AMENDMENT) ACT 2005 WAS ENACTED WITH RETROSPECTIVE EFFECT FROM 01.04.19 98. TAXATION LAW (AMENDMENT) ACT 2005 STIPULATES THAT DEDUCTION U/S 80HHC IS I.T.A.NO. 4759-4762/DEL/2007 4 NOT ALLOWABLE IN THE CASES WHERE EXPORT TURNOVER EX CEEDS ` 10 CRORES. THE SAID NOTIFICATION WAS DULY CONSIDERED A T THE TIME OF COMPLETION OF ASSESSMENT AND SINCE THE TURNOVER OF THE ASSESSES DURING THE YEAR WAS MORE THAN ` 10 CRORES AND THE ASSESSEE FAILED TO SATISFY THE CONDITIONS OF THIRD PROVISO. THEREF ORE THE ASSESSMENTS COMPLETED IN THE CASE OF THE ASSESSEE W ERE IN ACCORDANCE WITH TAXATION LAW (AMENDMENT) ACT 2005. 8. LD. CIT(A) EXAMINED THE CONTENTION OF THE ASSESS EE AFTER GOING THROUGH THE REPORT OF THE ASSESSING OFFICER. HE OBSERVED THAT THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 148 AFT ER PROPER RECORDING OF REASONS. THE SUFFICIENCY OF REASONS C ANNOT BE MATTER OF CHALLENGE IN APPEAL. HE ALSO OBSERVED THAT THER E WAS NO CHANGE OF OPINION AND THE NOTICES HAVE BEEN ISSUED ON THE BASIS OF VARIOUS DECISIONS OF HON'BLE HIGH COURTS ON THE ISSUE WHICH IS EVIDENT FROM THE REASONS RECORDED. THE NOTICES WERE ISSUED WITH IN THE TIME ALLOWED AS PER LAW. SINCE THE ASSESSEE HAD MADE WR ONG CLAIM FOR DEDUCTION U/S 80HHC LD. CIT(A) UPHELD THE REOPENIN G OF THE ASSESSMENT IN ALL THE FOUR ASSESSMENT YEARS. 9. BEFORE US LD. A.R. FOR THE ASSESSEE SUBMITTED T HAT FROM THE TIME OF ORIGINAL ASSESSMENT AND TILL THE DATE OF IS SUANCE OF NOTICES U/S 148 NEITHER ANY FACT HAD CHANGED NOR ANY LEGAL POSITION CHANGED. THESE ISSUES HAVE BEEN DECIDED IN THE CAS E OF THE ASSESSEE REPEATEDLY AND DEDUCTIONS HAVE BEEN ALLOWE D U/S 80HHC. AS PER SECTION 147 IF THE ASSESSING OFFICER HAS RE ASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR HE MAY SUBJECT TO PROVISIONS OF S ECTION 148 TO 153 ASSESS OR REASSESS SUCH INCOME. HE HAS THER EFORE PLEADED THAT THE FOREMOST CONDITION FOR ISSUANCE OF NOTICE U/S 148 IS THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE REGAR DING THE ESCAPEMENT OF INCOME FROM ASSESSMENT. THIS IS IMPE RATIVE I.T.A.NO. 4759-4762/DEL/2007 5 CONDITION WITHOUT WHICH THE ASSESSING OFFICER DOES NOT HAVE ANY JURISDICTION FOR REASSESSMENT. HE FURTHER SUBMITTE D THAT THE ASSESSING OFFICER HAD FAILED TO MENTION ANY PRONOUN CEMENT OF ANY COURT OR TRIBUNAL OR ORDER / INSTRUCTION ISSUED BY CBDT WHEREIN IT HAS BEEN HELD THAT D EPB RECEIPTS WERE NOT ENTITLED FOR INCLUSION IN THE BUSINESS INCOME FOR THE PURPOSE OF DEDUCTION U/ S 80HHC. THE CASE LAWS RELIED UPON BY THE ASSESSING OFFICER ARE IN RESPECT OF DEDUCTION U/S 80IA OF NEW INDUSTRIAL UNDERTAKINGS. THEREFORE THE NOTICE HAS BEEN ISSUED BY THE ASSESSING OFFICER AS PER HIS SWEET WILL AND NOT BASED ON ANY REASONED DECISION. HE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS KELVINATOR OF INDIA 320 ITR 561 FOR THE PROPOSITION THAT THERE SHOULD BE TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER IN O RDER TO ARRIVE AT THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LINK WITH THE FORM ATION OF THE BELIEF. HE FURTHER SUBMITTED THAT NOTICE U/S 148 W ERE ISSUED IN THE MONTH OF MARCH 2005 WHEREAS TAXATION LAW (AMENDMENT ) ACT 2005 WAS PASSED ON 06.12.2005. EVEN BILL WAS NOT W ITH RETROSPECTIVE EFFECT FROM 01.04.1998. HE THEREFOR E PLEADED THAT REOPENING OF ASSESSMENT IN THESE CASES IS BAD IN LA W. 10. ON THE OTHER HAND LD. SR. DR SUBMITTED THAT WHE N NO DISCUSSION ON THE ISSUE IN THE ASSESSMENT ORDER HAS BEEN MADE AND NO DETAILS WERE CALLED FOR BY THE ASSESSING OFFICER WHICH IS FILED BY THE ASSESSEE ON THE ISSUE AND THERE WAS NO FINDING EITHER POSITIVE OR NEGATIVE WHICH WOULD HAVE BEEN ARRIVED AT DURING TH E COURSE OF EARLIER ASSESSMENT PROCEEDINGS IT CANNOT BE A CASE OF CHANGE OF OPINION. HE PLACED RELIANCE ON VARIOUS DECISIONS. HE FURTHER SUBMITTED THAT IN THE ORIGINAL ASSESSMENT DEDUCTIO N U/S 80HHC WORKED OUT WITHOUT CONSIDERING EXPLANATION (BAA) TO THE SECTION. THEREFORE THE REOPENING OF THE ASSESSMENT TO CONSI DER THE EXPLANATION (BAA) WOULD BE JUSTIFIED SINCE THERE IS NO CHANGE OF I.T.A.NO. 4759-4762/DEL/2007 6 OPINION. HE PLACED RELIANCE ON DECISION OF ITAT IN THE CASE OF DCIT VS S. C. CHEMICALS 99 ITD 41 (AHD.). HE FURTHER SU BMITTED THAT MERE PRODUCTION OF BOOKS OF ACCOUNTS AND OTHER EVIDENCE BEFORE THE ASSESSING OFFICER IS NOT SUFFICIENT. 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE ASSESSMENT YE AR 1999-2000 AND 2002-03 THE RETURNS OF INCOME WERE PROCESSED U /S 143(1)(A). NO ORDER U/S 143(3) WAS MADE. HON'BLE SUPREME COUR T IN THE CASE OF ACIT VS RAJESH JHAWERI STOCK BROKERS P. LTD. 291 ITR 500 HAS HELD THAT INTIMATION U/S 143(1) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. TAXING INCOME ESCAPING ASSESSMENT IN T HE CASE OF INTIMATION U/S 143(1)(A) IS COVERED BY THE MAIN PRO VISIONS OF SECTION 147 AS SUBSTITUTED W.E.F. 01.04.1989 AND INITIATING REASSESSMENT PROCEEDINGS IN THE CASE OF INTIMATION WOULD BE COVE RED BY THE MAIN PROVISIONS OF SECTION 147 AND NOT BY THE PROVISO T HERETO. ONLY ONE CONDITION HAS TO BE SATISFIED. ITS HAS FURTHER BEE N HELD THAT FAILURE TO TAKE STEPS U/S 143(3) WERE NOT RENDER THE ASSESSIN G OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS WHEN INTIMATION U/S 143(1) HAS BEEN ISSUED. FURTHER INTIMATION U/S 14 3(1)(A) IS DEEMED TO BE A NOTICE OF DEMAND U/S 156 FOR THE APPARENT P URPOSE OF MAKING MACHINERY PROVISION RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE IN THE INTIMATION BECAME PERMISSIBLE. NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISIONS. THEREFORE THERE BEING NO ASSESSMENT U/S 143(1)(A) THE QUESTION OF CHANGE OF OPINION WOULD NOT ARISE. IN THE CASE BEFORE US IN THE ASSESSMENT YEAR 1999-2000 AN D 2002-03 NO ASSESSMENT U/S 143(3) WAS MADE. THE RETURNS OF INC OME FILED WERE PROCESSED U/S 143(1)(A). THEREFORE AS HELD BY HON 'BLE SUPREME COURT IN THE CASE OF RAJESH JHAWERI STOCK BROKERS P VT. LTD. (SUPRA) THE PROCESSING OF RETURN U/S 143(1) CANNOT BE TREAT ED AS ASSESSMENT. THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND WHILE I.T.A.NO. 4759-4762/DEL/2007 7 PROCESSING THE RETURNS OF INCOME. THEREFORE THER E IS NO CHANGE OF OPINION WHEN THE ASSESSING OFFICER ISSUES NOTICE U/ S 148 TO RECOMPUTE DEDUCTION U/S 80HHC. ACCORDINGLY REOPEN ING OF ASSESSMENTS FOR THE ASSESSMENT YEARS 1999-2000 AND 2002-03 CANNOT BE DECLARED BAD IN LAW. WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. 12. IN ASSESSMENT YEARS 2000-01 AND 2001-02 THE OR IGINAL ASSESSMENT WAS MADE U/S 143(3) OF THE ACT. FIRST WE WILL TAKE UP REOPENING OF ASSESSMENT FOR THE ASSESSMENT YEAR 200 0-01. THE ASSESSING OFFICER PASSED ORDER U/S 143(3) WITHOUT A NY DISCUSSION IN RESPECT OF THE DEDUCTION U/S 40HHC OF THE ACT. THE DEDUCTION U/S 80HHC AS PER TAX AUDIT REPORT U/S 80HHC (IV) THE C HARTERED ACCOUNTANT DETERMINED THE DEDUCTION U/S 80HHC AT ` 2 20 25 468/-. WE HAVE GONE THROUGH ANNEXURE A TO REPORT U/S 90H HC(IV) IN FORM 10CC(AC). IN THE ANNEXURE THE AMOUNT OF ` 62 92 1 68/- HAS BEEN SHOWN AS SIL PREMIUM WHILE COMPUTING PROFIT OF BUSI NESS FOR THE PURPOSE OF DEDUCTION U/S 80HHC. NOWHERE IN THE AUD IT REPORT THE NATURE OF RECEIPT OF ` 62 92 168/- HAS BEEN MENTION ED AS DEPB RECEIPT. THE ASSESSING OFFICER HAS TAKEN THE INCOM E AS SHOWN IN THE RETURN OF INCOME AT ` 8 23 170/- WHICH WAS DETERMIN ED BY THE ASSESSEE WITHOUT GIVING THE NATURE OF RECEIPT. DED UCTION U/S 80HHC HAS BEEN TAKEN AS PER REPORT OF THE C.A. THE ASSES SEE HAD MADE REFERENCE TO THE QUESTIONNAIRE AND REPLY FURNISHED BY THE ASSESSEE AT THE TIME OF ORIGINAL ASSESSMENT. THE ASSESSING OFFICER VIDE LETTER DATED 12.11.2001 HAD ASKED THE ASSESSEE TO F ILE SEPARATE TRADING PROFIT & LOSS ACCOUNT AND DATE-WISE DETAIL S WITH RESPECT TO BANK ACCOUNTS THE RECEIPT OF EXPORT SALES AT ` 60. 37 CRORES IN FOREIGN EXCHANGE INTO INDIA. THE ASSESSEE HAD GIV EN TRADING PROFIT & LOSS ACCOUNT BUT NOWHERE THERE IS MENTION OF DEPB RECEIPT IN THE TRADING AND P&L ACCOUNT FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER VIDE PARA 14 OF HIS ORDER ASKED THE ASSESSE E TO FILE DETAILS OF I.T.A.NO. 4759-4762/DEL/2007 8 SIL/DEPB RECEIVABLES AT ` 46 51 347/-. THE ASSESSE E HAD GIVEN THE DETAILS OF DEPB RECEIVABLES AND SIL RECEIVABLES. T HE ASSESSING OFFICER HAS NOT ASKED THE ASSESSEE AS TO WHY THE DE PB RECEIPT TO BE EXCLUDED UNDER CLAUSE (BAA) TO SECTION 80HHC OF THE ACT. THE ASSESSING OFFICER HAD ACCEPTED HT CLAIM OF THE ASSE SSEE U/S 80HHC AS PER REPORT OF THE C.A. THEREFORE THERE IS NO C HANGE OF OPINION WHILE ISSUING THE NOTICE U/S 148 OF THE ACT IN ASSE SSMENT YEAR 2000- 01. 13. NOW COMING TO ASSESSMENT YEAR 2001-02 ON PERU SAL OF ORIGINAL ASSESSMENT MADE ON 28.01.2004 WE FIND THA T ASSESSING OFFICER HAS DISCUSSED DEPB RECEIPTS IN THE ASSESSME NT ORDER. HE HAS SPECIFICALLY HELD THAT DEPB RECEIPT OF ` 52 47 264/- DID NOT FALL WITHIN THE PURVIEW OF CLAUSE (IIIA) (IIIB) AND (II IC) OF SECTION 28. ACCORDINGLY THE ASSESSEE WAS NOT ELIGIBLE FOR DEDU CTION U/S 80HHC OF THE ACT. HE HAD DISCUSSED THE ISSUE OF DEPB IN THE ASSESSMENT ORDER. THE ASSESSEE PREFERRED APPEAL AGAINST THE D ISALLOWANCE OF CLAIM U/S 80HHC BY THE ASSESSING OFFICER. LD. CIT( A) VIDE HIS ORDER DATED 28.05.2007 HAS ALLOWED RELIEF TO THE ASSESSEE . THE LD. CIT(A) HOWEVER RESTRICTED THE DEDUCTION U/S 80HHC READ WI TH SECTION 28(IIIA) AND (IIIB) OF THE ACT IN RESPECT OF DEPB R ECEIPT OF ` 47 58 326/-. THE ASSESSING OFFICER IN THE ASSESSM ENT ORDER PASSED U/S 143(3)/147 DATED 08.03.2006 HAD SPECIFICALLY ME NTIONED THAT LD. CIT(A) HAS ALLOWED DEPB INCOME OF ` 47 58 326/- TO BE ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT. HE HAS ALSO MENTIO NED THAT DEPARTMENT HAS FILED APPEAL BEFORE THE TRIBUNAL WHI CH IS PENDING. FROM THESE FACTS IT IS CLEAR THAT THE ASSESSING OF FICER HAD CONSIDERED THE DEPB RECEIPT FOR THE PURPOSE OF COMP UTATION OF DEDUCTION U/S 80HHC THEREFORE REOPENING OF ASSESS MENT AMOUNTS TO CHANGE OF OPINION. THEREFORE REOPENING OF ASSE SSMENT FOR THE ASSESSMENT YEAR 2001-02 CANNOT BE SUSTAINED. HON'B LE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD . 320 ITR 561 HAS HELD THAT THE CONCEPT OF CHANGE OF OPINION ON THE P ART OF THE I.T.A.NO. 4759-4762/DEL/2007 9 ASSESSING OFFICER. REOPENING OF ASSESSMENT DOES NO T TEND TO OBLITERATE FROM THE PROVISIONS OF SECTION 147 OF TH E INCOME TAX ACT 1961 BY THE DIRECT TAX LAW (AMENDMENT) ACT 1987 AN D 89. AFTER AMENDMENT THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. BUT THIS DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON M ERE CHANGE OF OPINION. THE CAPACITY OF CHANGE OF OPINION MUST BE TREATED AS INBUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AF TER 01.04.1989M THE ASSESSING OFFICER HAS POWERS TO REOPEN AN ASSES SMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO CONCLUSION TH AT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE REASON M UST HAVE A LINK WITH THE FORMATION OF BELIEF. 14. AS DISCUSSED ABOVE THE ASSESSING OFFICER AT TH E TIME OF ORIGINAL ASSESSMENT HAS CONSIDERED DEPB RECEIPT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC. NO NEW MATERIA L CAME TO THE NOTICE OF THE ASSESSING OFFICER. THE ASSESSING OFF ICER HAS REOPENED THE ASSESSMENT BASED ON THE MATERIAL WHICH WAS AVAI LABLE AT THE TIME OF ORIGINAL ASSESSMENT WHICH WAS CONSIDERED BY HIM WHILE DISALLOWANCE OF CLAIM OF THE ASSESSEE U/S 80HHC. T HEREFORE THE REOPENING OF ASSESSMENT ON THE SAME MATERIAL AMOUNT S TO CHANGE OF OPINION. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPR A) WE HOLD THAT REOPENING OF ASSESSMENT FOR HT ASSESSMENT YEAR 2001 -02 IS BAD IN LAW AS IT IS BASED ON CHANGE OF OPINION. 15. THE NEXT ISSUE FOR CONSIDERATION RELATES TO COM PUTATION OF DEDUCTION U/S 80HHC IN RESPECT OF DEPB/SIL RECEIPTS . THE ASSESSING OFFICER WHILE COMPUTING DEDUCTION U/S 80HHC HAS RE DUCED THE DEPB RECEIPTS FOR THE PURPOSE OF COMPUTATION OF PRO FITS OF BUSINESS UNDER CLAUSE (BAA) OF SECTION 80HHC OF THE ACT. O N APPEAL LD. I.T.A.NO. 4759-4762/DEL/2007 10 CIT(A) HAS UPHELD EXCLUSION OF DEPB RECEIPT FOR THE PURPOSE OF DEDUCTION U/S 80HHC. 16. BEFORE US LD. A.R. FOR THE ASSESSEE FAIRLY ADM ITTED THAT ASSESSEE HAS NO CASE ON MERITS IN VIEW OF DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF KALPATARU COLOUR & CHEMICALS VS CIT 328 ITR 451 (2010) 192 TAXMAN 435 (BOM) WHEREI N IT HAS BEEN HELD THAT THE AMOUNT RECEIVED ON TRANSFER OF DEPB C REDITS INCLUDING THE FACE VALUE OF THE DEPB CREDIT WOULD CONSTITUTE PROFITS OF BUSINESS UNDER SECTION 28(IIID) OF THE ACT AND THE REFORE THE ENTIRE AMOUNT OF DEPB RECEIVED HAS TO BE EXCLUDED UNDER CL AUSE (BAA) OF EXPLANATION TO SECTION 90HHC OF THE ACT. HON'BLE H IGH COURT WHILE ARRIVING AT THIS DECISION OBSERVED THAT WHEN SECTIO N 28(IIID) DEALS WITH PROFITS REALIZED ON TRANSFER OF DEPB CREDIT T HERE WOULD BE NO JUSTIFICATION TO BIFURCATE THE FACE VALUE OF THE DE PB AND THE AMOUNT RECEIVED IN EXCESS OF FACE VALUE OF DEPB. SINCE TH E ISSUE IS NOW COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CA SE OF CIT VS KALPATARU COLOURS & CHEMICALS (SUPRA) WE SET ASIDE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N TO DECIDE THE ISSUE RELATING TO EXCLUSION OF DEPB CREDITS INCLUDING PRO FITS THEREON AS PER THE DECISION OF HON'BLE BOMBAY HIGH COURT CIT VS KA LPATARU COLOURS & CHEMICALS (SUPRA) AFTER AFFORDING THE ASSESSEE RE ASONABLE OPPORTUNITY OF BEING HEARD. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF BOMBAY IT IS HELD THAT THE A SSESSEE WILL NOT BE ENTITLED FOR DEDUCTION U/S 80HHC IN RESPECTS OF DEPB RECEIPTS. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY CIT(A). 17. THE NEXT ISSUE WHICH IS COMMON APPEALS FOR THE ASSESSMENT YEARS 1999-2000 2000-01 AND 2001-02 RELATES TO TR EATING OF INTEREST INCOME UNDER THE HEAD OTHER SOURCES FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80HHC. WE FIND THAT THIS ISSUE IS COVERED I.T.A.NO. 4759-4762/DEL/2007 11 BY THE DECISION OF HON'BLE HIGH COURT OF DELHI IN T HE CASE OF HONDA POWER EQUIPMENTS (DELHI) VS CIT 289 ITR 475 WHEREIN THE HON'BLE DELHI HIGH COURT AFTER EXAMINING VARIOUS DECISIONS OF HON'BLE SUPREME COURT HAS HELD THAT INTEREST EARNED ON FDRS IS TO BE ASSESSED UNDER THE HEAD OTHER SOURCES. RESPECTFU LLY FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF DELHI IT IS HELD THAT INTEREST RECEIVED ON FDRS IS TO BE TREATED AS INCOME UNDER T HE HEAD OTHER SOURCES FOR THE PURPOSES OF CALCULATING DEDUCTION U/S 80HHC OF THE ACT. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 18. THE LAST ISSUE FOR CONSIDERATION RELATES TO LEV Y OF INTEREST U/S 234B AND 234C OF THE ACT. SINCE CHARGING OF INTERE ST U/S 234A 234B AND 234C IS MANDATORY THIS GROUND OF APPEAL B EING CONSEQUENTIAL IN NATURE IS DISMISSED AS SUCH. 19. IN THE RESULT APPEALS FILED BY THE ASSESSEE FO R ASSESSMENT YEARS 1999-2000 2000-01 AND 2002-03 ARE DISMISSED AND APPEAL FOR THE ASSESSMENT YEAR 2001-02 IS ALLOWED. 20. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAR. 2011. SD./- SD./- (R. P. TOLANI) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:31 ST MAR. 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI