TILAK RAJ BEDI vs. JOINT COMMISSIONER OF INCOME TAX RANGE-VI, LDH.

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. 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 GOEL HON'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 under section 260-A of the Income Tax Act, 1961 (in short, ‘the Act’) against the order dated 11.7.2008 passed by the Income Tax Appellate Tribunal, Chandigarh, Bench ‘B’, Chandigarh in ITA No.217/Chandi/2008, for the assessment year 2001-02, proposing to raise following substantial questions of law:- ITA No.97 of 2009(O&M) “i) Whether in facts and circumstances of the case, the action of the authorities below in reopening the assessment of the appellant and restricting the deduction under section 80IB are legally sustainable in the eyes of law? ii) Whether in facts and circumstances of the case, the action of the learned ITAT was justified in cancelling the deletion of interest charged under section 234B?” 3. The assessee made claim for deduction under section 80IB of the Act in respect of income received by way of incentive for export. The claim was upheld by the Assessing Officer vide assessment order dated 23.2.2004. On facts which came to light during the course of assessment for next year, proceedings for reassessment were initiated under section 147 of the Act and notice under section 148 of the Act was issued to the assessee. The reasons for initiating reassessment mentioned in notice dated 16.1.2006 are: “Assessment in the case of the assessee under section 143(3) for the AY 2003-04 was done by the undersigned and during the assessment proceedings it came to notice that export incentives and interest income are to be reduced for the purposes of calculating deduction under 2 ITA No.97 of 2009(O&M) section 80IB as the same is available on profit derived from industrial undertaking. During the assessment proceedings the assessee was confronted with the case laws Sterling Foods 237 ITR 579 and Commissioner of Income Tax v. Ritesh Industries Limited 274 ITR 324 wherein it was held that export incentives though business profits cannot be said to be profits derived from business. Vide order sheet entry dated 8/805 the assessee on being confronted with the above said fact replied vide written submissions dated 25.8.2005 that “The deduction under section 80IB @ 25% has been claimed on Rs.5707926/- which is inclusive of bank FDR interest and the same may be considered at Rs.5612067/- being the total business income of the assessee subject to no penalty”. Deduction claimed under section 80IB was accordingly recomputed and the above said incomes of export incentives and interest were reduced for the purpose of calculation of 80IB. For the assessment year 2002-03 the assessee has claimed deduction of Rs.4387253/- under section 80IB and it includes export incentives of Rs.10822487/- and interest of Rs.51704/- and the same have to be disallowed for the purpose of calculation of 80IB and therefore I have reason to believe that the income of Rs.2718548 (10822487+51704) X25%)) has escaped assessment for AY 2002-03. 3 ITA No.97 of 2009(O&M) Issue notice under section 148 for assessment year 2002-03.” 4. After following the due procedure, re-assesment was made and claim of the assessee under section 80IB of the Act was negatived. On appeal, the CIT(A) rejected the objection of the assessee to re-opening of assessment. It was held that from the original order of assessment, it could not be inferred that the Assessing officer had formed any opinion on admissibility of deduction under section 80IB of the Act and thus, no change of opinion was involved in initiating proceedings. Judgment of this Court in Vipan Khanna v. CIT and others , (2002) 255 ITR 220 was, accordingly, distinguished. The charging of interest under section 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 Court in CIT v. Sterling Foods, (1999) 237 ITR 579 was negatived by holding that the issue of Section 80IB of the Act was clinched by judgment of this Court in Liberty India v. CIT, (2007) 293 ITR 520 and thus, it was not a case of mere change of opinion but of reasons leading to forming of requisite satisfaction. The view of the CIT(A) with regard to chargeability of tax under section 234B of the Act was reversed and was decided in favour of the revenue. 4 ITA No.97 of 2009(O&M) 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 mere change of opinion and by relying upon a judgment which existed prior to the passing of the order of assessment. Reliance has been placed on following judgments:- i) Century Enka Limited v. Income tax Officer, Central circle and others, (1983) 143 ITR 629 (Cal.) Siemens Information system Limited v. Assistant Commissioner of Income tax and others, (2007) 295 ITR 333 (Bom). To submit that pre-