Case Law Details
RELEVANT PARAGRAPH
7. We have considered the issue. The learned CIT (A) has considered that there was a change of opinion by the A.O. and he deemed to have formed an opinion at the time of original assessment on allowing 80HHC deduction on DEPB. There is nothing on record to support the opinion formed by the learned CIT(A) on this issue. The learned counsel during the present proceedings could not point out any show cause letter or clarification sought by the A.O. on the issue of DEPB income and has relied on only legal issues before us. There is no evidence that the A.O. has at least sought clarification or considered the issue of DEPB at the time of original assessment. As seen from the order under section 143(3) passed on 28.02.2003 the issue which was discussed in the order was with reference to manufacturing/ processing of goods and recomputation on that basis and in that recomputation in page 10, 90% of the incentives were considered in the working. Except this mention of the incentives in the working, nowhere there was any discussion about the nature of incentives or the incentive being DPEB income. Only the A.O. considered 90% of the incentives at Rs.77,59,495/ – in the working of deduction under section 80HHC (3) based on the Audit report submitted by the assessee. In view of this it cannot be said that the A.O. has considered the issue of DEPB and has decided the issue at the time of completion of original assessment. If the A.O. makes enquiry, asks for some clarifications/ details/working of claims or computation one can consider that the A.O. made an enquiry and formed an opinion to accept assessee’s contention. In this case there is no evidence that the A.O. had at least made any enquiry with reference to the nature of incentives, more so of DEPB. The incomes as reflected in Audit report have been considered in the revised working in the said order. In view of this we are not persuaded by the logic of the learned CIT(A) that once the assessment has been completed by the A.O. and the claim was allowed, he has deemed to have formed an opinion. If that being so the provisions of Explanation 2(c) becomes redundant. Explanation 2(c) is as under: –
“Explanation 2. —For the purposes of this section, ………….
(a) …………………………
(b) …………………………
(c) where an assessment has been made, but—
(i) income chargeable to tax has been underassessed ; or
(ii) such income has been assessed at too low a rate ; or
(iii) such income has been made the subject of excessive relief under this Act ; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.”
8. The provisions of clause (c) of Explanation 2 to Section 147 is with reference to where the assessment has been made but such income has been made the subject of excessive relief under the Act. This gives scope for reassessment even in a case where the assessment has been made. If the opinion of the learned CIT (A) has to be accepted then no assessment can be reopened under this clause because it will always becomes a change of opinion even though there is no evidence on record that the A.O. has formed an opinion. Even in a case where the assessment has been completed under section 143(3), the assessment can be reopened within four years if the conditions under Explanation 2(c) have been satisfied.
9. The only restriction in case where assessment under section 143(3) has been completed, for reopening after four years there should be failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. Even in those cases Explanation 1 was considered by the Hon’ble Bombay High Court in the case of Dr. Amin’s Pathology Laboratory vs. JCIT and Others 252 ITR 673 wherein the following has been considered: –
“After introduction of changes in section 147 of the Income-tax Act, 1961, with effect from April 1, 1989, the scope of reassessment has been widened. After the amendment, the only restriction put in the section is “reason to believe”. The reason has been a reason of a prudent person. That reason should be fair and not necessarily due to failure of the assessee to disclose fully or partially some material facts relevant for assessment. However, where a period of four years has elapsed the proviso to section 147 of the Income-tax Act, 1961, comes into the picture. Under the said proviso, no action can be taken after four years unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Under Explanation 1 to the proviso, mere production of account books fro which material evidence could have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the proviso. Therefore, mere production of the balance-sheet, profit and loss account or account books will not necessarily amount to disclosure within the meaning of the proviso.”
10. Even in a case where mere production of Balance Sheet, P & L Account or account books will not necessarily mean disclosure within the meaning of the proviso and the Hon’ble Bombay High Court has upheld the reopening of the assessment after four years in the above said case. In this particular case the facts were entirely in favour of the Revenue to hold that the A.O. has not formed any opinion at the time of original assessment and Explanation 2(c) is clearly applicable to the facts of the case. In view of this we are not in agreement with the order of the learned CIT (A) that the A.O. deemed to have formed an opinion and it is change of opinion.
12. We are also not in agreement with the above findings given by the learned CIT (A) with reference to the basis for reopening. While accepting that the A.O. has power to reopen the assessment after the aforesaid amendments, he failed to notice that the opinion expressed by the CBDT in its earlier letter was the basis for Assessing Officer’s forming an opinion to reopen. In fact the Board has issued circular first and later amended the Act w.e.f. 01.04.1998 by the Taxation Laws (Amendment) Act 2005 which indicates that the issue of DEPB were very much in consideration of the Revenue and the A.O. has formed an opinion that income escaped assessment consequent to the Board’s circular dated 08.09.2004 which is the basis for reopening of the assessment. There cannot be two situations where the A.O. forms an opinion on the basis of the Board’s circular which can considered wrong but forms the same opinion after the amendment which can considered correct. The learned CIT(A)’s logic in holding that the A.O. can be said to have acted quite in hurry before bringing the amendment in the statute cannot be upheld, since the A.O. has formed an opinion that excess relief was granted on the basis of Board’s circular and this belief get sustained by the consequent amendment to the Act and not vice-versa. Whether it is the Board’s circular or subsequent amendment the A.O. has a reason to believe to consider that excess deduction on incentives of DEPB were allowed and his belief was justified by the amendment brought to the act. In view of this it has to be held that the A.O. has reason to believe that income has escaped assessment at the time of issuing notice under section 148.
