Commissioner Of Income Tax Chennai v. M/S. Baer Shoes (India) Pvt. Ltd. Flat 1B

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 03.08.2010 CORAM :- THE HON'BLE MR.JUSTICE F.M.IBRAHIM KALIFULLAandTHE HON'BLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) No.706 of 2010 Commissioner of Income TaxChennai. .. Appellantvs. M/s. Baer Shoes (India) Pvt. Ltd.Flat 1B, No.13, First FloorBishop Lane, PursawakkamChennai 600 007... Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act,1961, against the order of the Income Tax Appellate Tribunal, Madras'A' Bench, dated 11.12.2009 passed in I.T.A.No.2486/Mds/2007. Appealagainst the order of the Commissioner of Income Tax (Appeals)-III,Chennai-34, dated 14.9.2007 made in ITA No.964/2006-2007/A-III,against the Assessment order of the Income Tax Officer, CompanyWard-I(1) Chennai-34, dated 29.12.2006 for the Assessment year 1999-2000 made in G.I.No/PAN-AAACB36034/BX3-028. For Appellant : Mr.Arun Kurian Joseph Standing Counsel for Income-tax Judgment (Judgment of the Court was delivered by M.M.SUNDRESH,J.) The Revenue has come on appeal challenging the order of theTribunal passed in ITA.No.2486 of 2007, by raising the followingsubstantial question of law: "Whether on the facts and in the circumstances ofthe case, the Appellate Tribunal was right in holdingthat the second reassessment proceedings were notvalidly initiated and thereby quashing the reassessmentproceedings?" 2.1. Facts in brief: For the assessment year 1999-2000, the assessee filed returnshowing 'nil' income by claiming deduction under Section 80HHC of theIncome-tax Act, 1961. The assessee's return was initially processedunder Section 143(1) of the Act. The assessee was engaged inmanufacturing, trading and exporting of leather goods. 2.2. The Assessing Officer reopened the assessment by invokingthe provisions under Section 147 of the Act. The reopened assessmentwas completed on 18.03.2003. Accordingly, the deduction claimed bythe assessee under Section 80HHC of the Act, was scaled down toRs.73,42,876/-. In the said reassessment order, the loss from theexport business was adjusted in accordance with the provisos toSection 80HHC(3)(c) of the Act. However, the Assessing Officerreopened the assessment, which was already reopened, by once againinvoking the provisions of Section 147 of the Act. Accordingly, anotice under Section 148 of the Act, was issued to the assessee on04.08.2005. The said proceedings have been initiated by theAssessing Officer on the ground that the assessee was wrongly alloweddeduction under Section 80HHC of the Act, after netting the negativebusiness profits with the export incentive. Thereafter, theAssessing Officer has passed an order rejecting the case of theassessee by disallowing the deduction under Section 80HHC. 2.3. Challenging the same, the assessee filed a further appealto the Commissioner of Income-tax (Appeals). Since the said appealwas dismissed, the assessee preferred a further appeal to theTribunal, which was allowed in favour of the assessee and hence, thepresent appeal by the Revenue. 2.3. Challenging the same, the assessee filed a further appealto the Commissioner of Income-tax (Appeals). Since the said appealwas dismissed, the assessee preferred a further appeal to theTribunal, which was allowed in favour of the assessee and hence, thepresent appeal by the Revenue. 3. Mr.Arun Kurian Joseph, learned standing counsel for theRevenue submitted that the proceedings have been initiated for thesecond time under Section 147 of the Act, only based upon thejudgment of the Apex Court, wherein the Hon'ble Supreme Court waspleased to hold that the deduction under Section 80HHC could beallowed only if there was positive profits from export operations.The learned counsel also made reliance upon the decision rendered bythis Court in ACIT vs. Apollo Hospitals Enterprises (300 ITR 167).The learned counsel therefore submitted that inasmuch as the orderpassed in the earlier reassessment proceedings having been done bytaking into consideration of the negative business profits, the orderpassed by the Tribunal will have to be set aside. The learnedcounsel further submitted that as per the provision to Section 147,the order passed by the Assessing Officer is well within the periodof limitation. 4. We are not able to countenance the said submission made bythe learned standing counsel for the appellant. In the present case https://hcservices.ecourts.gov.in/hcservices/ on hand, the assessee at the time of filing return for the assessmentyear 1999-2000 has disclosed all the materials before the AssessingOfficer and claimed deduction under Section 80HHC. Even before theearlier proceedings initiated under Section 147, it is not the caseof the Revenue that the assessee has not disclosed the materials.Therefore, on a consideration of the materials available on record,the Assessing Officer passed an order on the earlier two occasions.Thereafter, the Assessing Officer has sought to reopen the assessmentonce again invoking the power under Section 147 of the Act, which, inour considered opinion, is not permissible in law on the facts of thecase. 5. The judgment rendered by the Hon'ble Supreme Court is anexpression of opinion on the interpretation of statute. The powerunder Section 147 will have to be invoked by the Assessing Officer inaccordance with the said provision. In other words, merely because ajudgment has been rendered, the same cannot be a ground for reopeningthe assessment under Section 147 of the Act. The Hon'ble GujaratHigh Court in Austin Engineering Co. Ltd. vs. JCIT (312 ITR 70) hastaken the view that in a case where the material facts were fullydisclosed and the assessment was completed allowing deduction underSection 80HHC on export incentive, such an assessment cannot bereopened based upon a subsequent decision of the Supreme Court, sinceit merely would amount to a change of opinion. We are in respectfulagreement with the judgment of the Gujarat High Court on theproposition of law laid down therein. 6. Regarding the other contentions, it is not in dispute thatthe first reassessment was done by the Assessing Officer underSection 147 of the Act on 18.03.2003. Thereafter, notice forreopening the assessment for the second time was issued to theassessee on 04.08.2005. The assessment in the present case on handis for the assessment year 1999-2000. The four years period oflimitation for invoking the power under Section 147 expired on31.12.2004. As observed earlier, in the present case on hand, theassessee has disclosed all the material facts and he has also filedthe return within the time. Therefore, the proceedings initiated bythe Assessing Officer for the second time under Section 147 is barredby limitation. Therefore, we are of the considered opinion thateven the proviso to Section 147 does not come into play on the factsof the case. 7. We also perused Explanation-1 to proviso to Section 147,which is extracted hereunder: 7. We also perused Explanation-1 to proviso to Section 147,which is extracted hereunder: "Explanation 1:- Production before the Assessing Officerof account books or other evidence from which materialevidence could with due diligence have been discoveredby the Assessing Officer will not necessarily amount todisclosure within the meaning of the foregoing proviso."of account books or other evidence from which materialevidence could with due diligence have been discoveredby the Assessing Officer will not necessarily amount todisclosure within the meaning of the foregoing proviso." 8. In our considered view, the said explanation also does notapply to the present case on hand. A perusal of the said explanationwould show that a mere production of accounts books and otherevidence could have been discovered by the Assessing Officer wouldnot amount to disclosure within the meaning of the provision.Therefore, the said Explanation-1 should be considered in the contextof the provision, inasmuch as the same is applicable only for theproduction of the records and other evidence. Hence, we are of theopinion that the same will not be applicable to the case of filing ofa return with adequate particulars fully disclosing all the materialsfor the purpose of assessment. 9. Considering the above said factual and legal position, we areof the opinion that the question of law raised will have to beanswered against the Revenue and accordingly, the same is answeredagainst the Revenue. Consequently, this Tax Case Appeal standsdismissed. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarATRTo1. The Secretary, Central Board of Direct Taxes, New Delhi.2. Assistant Registrar, Income Tax Appellate Tribunal Madras 'A' Bench,Rajaji Bhavan, Besant Nagar, Madras-903. The Commissioner of Income Tax (Appeals)-III No.121, Mahatma Gandhi Road, Chennai 600034.4. The Income Tax Officer, Company Ward-I(1), Chennai-34.1 cc To Mr.K.Subramaniam, Advocate, SR.56625 TC (A) No.706 of 2010 TRM (CO)RH (16.8.10)