Sh.tilak Raj Bedi v. Joint Commissioner Of Income Tax Range Vi, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITA No.97 of 2009(O&M)Date of decision: 13.10.2009 Sh.Tilak Raj Bedi -----Appellant Vs. Joint Commissioner of Income Tax Range VI, Ludhiana ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE GURDEV SINGH Present:- Mr. Akshay Bhan, Advocate for the appellant. Mr. Rajesh Sethi, Sr.Standing Counsel for the revenue. Adarsh Kumar Goel,J. 1.Delay condoned. Heard on merits. 2. This appeal has been preferred by the assessee undersection 260-A of the Income Tax Act, 1961 (in short, ‘the Act’)against the order dated 11.7.2008 passed by the Income TaxAppellate Tribunal, Chandigarh, Bench ‘B’, Chandigarh in ITANo.217/Chandi/2008, for the assessment year 2001-02, proposingto raise following substantial questions of law:- “i) Whether in facts and circumstances of the case,the action of the authorities below in reopening theassessment of the appellant and restricting thededuction under section 80IB are legally sustainablein the eyes of law? ii) Whether in facts and circumstances of the case,the action of the learned ITAT was justified incancelling the deletion of interest charged undersection 234B?” 3.The assessee made claim for deduction under section 80IB of the Act in respect of income received by way of incentivefor export. The claim was upheld by the Assessing Officer videassessment order dated 23.2.2004. On facts which came to lightduring the course of assessment for next year, proceedings forreassessment were initiated under section 147 of the Act and noticeunder section 148 of the Act was issued to the assessee. Thereasons for initiating reassessment mentioned in notice dated16.1.2006 are: “Assessment in the case of the assessee undersection 143(3) for the AY 2003-04 was done bythe undersigned and during the assessmentproceedings it came to notice that exportincentives and interest income are to be reducedfor the purposes of calculating deduction under section 80IB as the same is available on profit derived from industrial undertaking. During the assessment proceedings the assesseewas confronted with the case laws Sterling Foods237 ITR 579 and Commissioner of Income Tax v.Ritesh Industries Limited 274 ITR 324 wherein itwas held that export incentives though businessprofits cannot be said to be profits derived frombusiness. Vide order sheet entry dated 8/805 theassessee on being confronted with the above saidfact replied vide written submissions dated25.8.2005 that “The deduction under section 80IB@ 25% has been claimed on Rs.5707926/- whichis inclusive of bank FDR interest and the samemay be considered at Rs.5612067/- being the totalbusiness income of the assessee subject to nopenalty”. Deduction claimed under section 80IB wasaccordingly recomputed and the above saidincomes of export incentives and interest werereduced for the purpose of calculation of 80IB.For the assessment year 2002-03 the assessee hasclaimed deduction of Rs.4387253/- under section80IB and it includes export incentives ofRs.10822487/- and interest of Rs.51704/- and thesame have to be disallowed for the purpose ofcalculation of 80IB and therefore I have reason tobelieve that the income of Rs.2718548(10822487+51704) X25%)) has escapedassessment for AY 2002-03. Issue notice under section 148 for assessment year2002-03.” 4. After following the due procedure, re-assesment was Deduction claimed under section 80IB wasaccordingly recomputed and the above saidincomes of export incentives and interest werereduced for the purpose of calculation of 80IB.For the assessment year 2002-03 the assessee hasclaimed deduction of Rs.4387253/- under section80IB and it includes export incentives ofRs.10822487/- and interest of Rs.51704/- and thesame have to be disallowed for the purpose ofcalculation of 80IB and therefore I have reason tobelieve that the income of Rs.2718548(10822487+51704) X25%)) has escapedassessment for AY 2002-03. Issue notice under section 148 for assessment year2002-03.” 4. After following the due procedure, re-assesment was made and claim of the assessee under section 80IB of the Act wasnegatived. On appeal, the CIT(A) rejected the objection of theassessee to re-opening of assessment. It was held that from theoriginal order of assessment, it could not be inferred that theAssessing officer had formed any opinion on admissibility ofdeduction under section 80IB of the Act and thus, no change ofopinion was involved in initiating proceedings. Judgment of thisCourt inVipan Khanna v. CIT and others ,(2002) 255 ITR 220was, accordingly, distinguished. The charging of interest undersection 234B of the Act was, however, set aside. On further appeal,the Tribunal affirmed the re-assessment. Contention that re-assessment was based on judgment of the Hon’ble Supreme CourtinCIT v. Sterling Foods, (1999) 237 ITR 579 was negatived byholding that the issue of Section 80IB of the Act was clinched byjudgment of this Court inLiberty India v. CIT,(2007) 293 ITR520 and thus, it was not a case of mere change of opinion but ofreasons leading to forming of requisite satisfaction. The view ofthe CIT(A) with regard to chargeability of tax under section 234Bof the Act was reversed and was decided in favour of the revenue. 5.We have heard learned counsel for the parties and perused the record. 6.Learned counsel for the assessee submitted that re-opening of the assessment was invalid as the same was by merechange of opinion and by relying upon a judgment which existedprior to the passing of the order of assessment. Reliance has beenplaced on following judgments:- 7.Learned counsel for the revenue supported the viewtaken by the Tribunal and submitted that it was not a case of merechange of opinion but of satisfaction of income escapingassessment. He submitted that it is not the case of the assessee that income had not escaped assessment nor was it the case of theassessee that procedure had not been followed. Reasons had beenduly recorded and conveyed to the assessee and the same hadnexus with the finding that the income escaped assessment. Theinitiation of reassessment proceedings was not based on pre-existing law but on assessment order for the subsequent year,though the said assessment order referred to the existing case law.The subsequent assessment facts coming to light in subsequentassessment year could validly form basis for initiatingreassessment proceedings, in view of Explanation 2 to Section 147(2) of the Act. Judgments relied upon, on behalf of the assessee,were distinguishable. 8.After hearing learned counsel for the parties, we are ofthe view that no substantial question of law arises as the impugnedjudgment of the Tribunal is consistent with the settled law on thepoint. The power of reassessment can be validly exercised ifsatisfaction is arrived at after following due procedure that incomehad escaped assessment. Such satisfaction may involve change ofopinion but was not at par with ‘mere change of opinion’. Ifsatisfaction is arrived at on the basis of any relevant material, suchsatisfaction cannot be assailed. In the present case, the AssessingOfficer has referred to proceedings for the subsequent assessmentyears. In such a situation, the judgments relied upon on behalf ofthe assessee are clearly distinguishable. The law for exercise of 8.After hearing learned counsel for the parties, we are ofthe view that no substantial question of law arises as the impugnedjudgment of the Tribunal is consistent with the settled law on thepoint. The power of reassessment can be validly exercised ifsatisfaction is arrived at after following due procedure that incomehad escaped assessment. Such satisfaction may involve change ofopinion but was not at par with ‘mere change of opinion’. Ifsatisfaction is arrived at on the basis of any relevant material, suchsatisfaction cannot be assailed. In the present case, the AssessingOfficer has referred to proceedings for the subsequent assessmentyears. In such a situation, the judgments relied upon on behalf ofthe assessee are clearly distinguishable. The law for exercise of power of reassessment has been authoritatively settled by theHon’ble Supreme court, inter-alia inA.L.A Firm v. CIT, Madras,(1991) 2 SCC 558. View of the Tribunal is consistent with settledlaw. It is not disputed by learned counsel for the assessee that thesecond proposed question is consequential and if reassessment isupheld, the levy of interest cannot be objected to. Thus, nosubstantial question of law arises.9. The appeal is dismissed. (Adarsh Kumar Goel)Judge October 13, 2009‘gs’ (Gurdev Singh)Judge