By AJAY R. SINGH Advocate
10. Pr. CIT vs. Century Textiles and Industries Ltd.
[ Income tax Appeal no 1367 of 2015 ; dated :
03rd April, 2018 (Bombay High Court)]. [Affirmed DCIT vs. Century Textiles and
Industries Ltd. [ITA No.
2036/Mum/2013; Dated:
22nd August, 2014 ; AY : 2007-08;
Mum. ITAT ]
Section 147 : Reassessment –
Reopening on basis of same set of facts – change of opinion – power not to
correct mistakes – reassessment was held to be invalid [Section 148 ]
Assessee is engaged in
manufacture of cotton piece goods, denim, yarn, caustic soda, salt, pulp and
paper, etc. The assessee had in its return of income claimed deduction
of Rs.33.67 crore u/s. 80IC of the Act in relation to its paper and pulp unit
on the basis of audit report in Form 10CCA.
During the scrutiny
proceedings, the A.O raised specific queries with regard to above claim u/s.
80IC of the Act which was responded. The A.O after considering the entire
material on record disallowed the assessee’s claim to the extent of Rs.11.49
crore out of total claim of Rs.33.67 crore u/s. 80IC of the Act while passing
assessment order u/s. 143(3).
Thereafter, a notice u/s. 148
of the Act was issued seeking to reopen assessment. Reasons in support of the
notice as communicated to the Assessee that “the income chargeable to tax to
the extent of Rs.4.99 crore has escaped assessment. Issue notice u/s. 148 for
A.Y.2007-08”
Assessee objected to the
reopening of the notice on the ground that the same amounts to change of
opinion and therefore without jurisdiction. However, the A.O rejected the
objection and proceeded to complete the assessment u/s. 143(3) r.w.s 147 of the
Act. The A.O disallowed the claim of deduction u/s. 80IC of the Act by further
amount of Rs.4.99 crore.
Being aggrieved, the assessee
carried the issue in appeal to the CIT(A). The CIT(A) rejected the assessee’s
appeal on the issue of reopening of assessment and confirmed the assessment
order.
Being aggrieved, the assessee
carried the issue in appeal to the ITAT. The Tribunal allowed the assessee’s
appeal, interalia holding that the assessee’s claim for deduction u/s. 80IC of the Act in respect of its paper and
pulp unit duly supported by audit report u/s. 10CCA of the Act was a subject
matter of enquiry by the A.O in the regular assessment proceedings. This is
evident from the fact that queries with regard to the claim of deduction
u/s. 80IC of the Act were specifically
raised by the A.O and the same were responded to by the assessee. Thus, the Tribunal
held that there was a view taken/opinion formed during the regular assessment
proceedings. Therefore, this is a case of change of opinion on the part of the
A.O in issuing notice and seeking to reopen assessment. The ITAT relied on the
decision of Supreme Court in CIT vs.
Kelvinator of India Ltd. [2010] 320 ITR 561 that “reasons to believe” do
not empower the A.O to reopen an assessment when there is change in opinion.
Power to reopen assessment as observed by the Supreme Court is only a power to
reassess not to review the order already passed.
Being aggrieved, the revenue
carried the issue in appeal to the High Court.
The Revenue in support of the appeal states that reopening notice was
not on account any change of opinion, as no opinion/view was taken in regular
assessment proceedings in respect of the receipts/income not derived directly
from the paper and pulp unit.
The Hon. High Court observed
that the reasons in support of the impugned notice is that during the regular
assessment proceedings on account of omission by the A.O the above income was
not excluded from the claim for deduction. This is different from non application
of mind to claim for deduction u/s. 80IC of the Act. As held by this Court in Hindustan
Lever vs. Wadkar (2004) 268 ITR 339, the reasons in support of the
reopening notice has to be read as it is. No additions and/or inferences are
permissible. Moreover, the power u/s. 147/148 of the Act is not to be exercised
to correct mistakes made during the regular assessment proceedings. In the
above facts, the view taken by the
Tribunal is a view in accordance with the decision of the Apex Court in
Kelvinator India (Supra).
The decision of this Court in
Export Credit Guarantee Corporation of India [2013] 350 ITR 651 relied by the Dept. was distinquished. It
was also found as a fact in the above case of Export Credit Guarantee
Corporation of India (Supra) that no query was raised during the course of
the regular assessment proceedings. Thus, the occasion for the A.O to apply his
mind to the claim by the assessee in that case, did not arise. Accordingly, the revenue Appeal was
dismissed.
