MAGPPIE EXPORTS,NEW DELHI vs. DCIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘E’: NEW DELHI BEFORE SH. C.M. GARG, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER ITA Nos. 4314 & 4315/Del/2010 Assessment Years: 2001-02 & 2002-03 M/s. Magppie Exports, PD-4B, Vs. Deputy Commissioner of Income Pitampura, New Delhi Tax, Circle-25(1), New Delhi PAN : AABFM0775D (Appellant) (Respondent)

Appellant by S/sh. Salil Kapoor , Sanat Kapoor & Ms. Ananya Kapoor, Advocates Respondent by Sh. P. DAM Kanunjna, Sr.DR Date of hearing 02.03.2016 Date of pronouncement 08.04.2016 ORDER PER O.P. KANT, A.M.: These two appeals of the assessee are directed against two separate orders of Ld. Commissioner of Income-tax(Appeals)-XXIV, New Delhi for assessment years 2001-02 and 2002-03 respectively. The grounds of appeal raised in both these appeals are identical, therefore both are heard together and disposed of by this consolidated order: ITA No. 4314/Del/2010, AY 2001-02 2. First we take up appeal in ITA No. 4314/Del/2010. The grounds of appeal read as under: i. That the order of learned Assessing Officer as well as Commissioner of Income Tax(Appeals) is bad in law and against the facts of the case. ii. That the learned Assessing Officer as well as Commissioner of Income Tax(Appeals) acted arbitrarily in reopening the assessment u/s 147/148 of the I.T. Act.

2 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 iii. That the learned Deputy Commissioner of Income Tax as well as learned Commissioner of Income Tax(Appeals) was not justified in reducing the deduction u/s 80HHC of the I.T. Act. iv. The assessee craves the right to add, delete, modify any one or more of the grounds of appeal at the time of hearing.

3 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 response to the notice. The Ld. Commissioner of Income-tax( Appeals) issued a show cause for enhancement of the disallowance in respect of deduction under section 80IA of the Act and after considering the submission of the assessee on the issue, allowed deduction under section 80IA of the Act at Rs. 15,52,066/- as against deduction of Rs. 47,11,364/-allowed by the AO. Further he upheld the finding of the AO as regard to working of deduction under section 80HHC of the Act, however, directed the AO to re-compute the deduction under section 80HHC in view of the reduction in deduction under section 80IA of the Act and allow the deduction accordingly. Aggrieved, the assessee in appeal before the Tribunal. 5. The grounds No. 1 and 4 of the appeal are general in nature, and therefore not required to adjudicate upon by us. 6. In ground No. 2, the assessee has challenged reopening of the assessment under section 147/148 of the Act. 6.1 Before us, the Ld. Authorized Representative ( AR) of the assessee submitted that the reopening proceedings were not liable to be sustained because of following reasons: (a) since the original assessment was completed under section 143(3) of the Act, subsequent reopening beyond 4 years from the end of the assessment year, cannot be done unless there is a failure on the part of the assessee in disclosing fully and truly all material facts necessary for the assessment and in the case of assessee all the facts were disclosed in assessment proceedings and there was no failure on the part of the assessee, and therefore the reopening was bad in law and liable to be quashed; (b) that in the reasons recorded, it was not mentioned what was the failure on the part of the assessee to disclose fully and truly all material facts, and therefore reopening was not sustainable in view of the judgment of the Hon’ble Delhi High Court in the case of global signal cables (India)

4 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 Private Limited vs. DCIT in writ petition number WPC No. 747/2014 dated 17th of October 2014;. (c) that there was no new tangible material before the Assessing Officer for reopening of the assessment. In support of the proposition, the learned AR relied on the judgment of the Hon’ble Delhi High Court in the case of Orient Craft Ltd reported in (2013) 354 ITR 536; (d) that case cannot be reopened on the basis of a retrospective amendment in law. In support of the proposition, the learned AR relied on judgment of the Hon’ble Kerala High Court in the case of CIT Thiruvanathapuram vs. B Mohanachandranan Nair (2014) 45 taxmann.com 384 and judgment of the Hon’ble Gujarat High Court in the case of Sadbhav Engineering Ltd versus DCIT reported in (2012) 20 taxmann.com 784 (Guj); (e) that the amendment in section 80HHC of the Act on the basis of which the case was reopened, has been held prospective by the Hon’ble Courts in the case of Pawan Kumar Jain vs. Union of India reported in (2014) 46 taxmann.com 341 (Delhi) and CIT versus Awani Exports (2015) 58 taxmann.com 100 (SC) and and therefore the reason on the basis of which assessment was reopened did not survive and therefore proceedings under section 147 of the Act are not sustainable. 6.2 On the other hand, the Ld. Senior Departmental Representative referring to the reasons recorded by the AO, relied on the findings of the learned Commissioner of Income-tax(Appeals). 7. We have heard the rival submissions and perused the material on record including the paper books filed by both sides. Before, we proceed to decide the issue in dispute, we may like to reproduce the reasons recorded in the case as under, as whole controversy revolve around the reasons recorded:

“Reasons for taking action u/s 147/148 of the IT Act in the case of M/s. Magpie Exports, PD-4B, Pitampura, Delhi -34 for the AY 2001-02.

5 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03

Return of income in this case was filed on 20.09.2011 declaring an income of Rs. 457,000/-. As per CA’s certificate in form 10CCAC dated 19.09.2001, the assessee claimed deduction u/s 80HHC at Rs. 13662093/- and as per CA’s certificate in form 10CCB dated 19.09.2001, it claimed deduction u/s 80IA at Rs. 4706365/-. The assessment in this case was completed u/s 143(3) on 25.03.2003 on total income of 477000/- and the deductions u/s 80HHC and 80IA as claimed by the assessee were allowed while completed the assessment. On going through the assessment records of the assessee for AY 2001-02, it is noticed that the assessee has incorrectly claimed deduction u/s 80HHC at Rs. 136,62,093/- for the reasons given hereunder: Sub-section (9A) to section 80IA introduced by Finance Act (No. 2) of 1998 with effect from 1.4.1999 which later became sub-section (9) of Sec. 80IA reads as under: "(9) Where any amount of profit and gains of the industrial undertaking or of a hotel in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this chapter under the heading ‘C-Deduction in respect of certain income’ and shall in no case exceed the profits & gains of such eligible business of the undertaking or enterprise, as the case may be”. In view of the above facts, the deduction u/s 80IA will be calculated first and thereafter it will be reduced from the profit and gains of industrial undertaking and the deduction u/s 80HHC will be calculated on the balance amount of business profit of the undertaking. Further, it is also noticed that while calculated deduction u/s 80HHC, the assessee has incorrectly taken into account the following incomes as export business income. i) Duty entitlement. 126,37,196/- ii) Supervision charges 10,000/- iii) Prior period income 17,748/- As regards assessee’s claim of deduction u/s 80HHC on the amount of Duty entitlement of Rs. 126,37,196/-, it is stated that the Taxation Laws Amendment Act, 2005 has amended provisions of Section 28 & 80HHC w.e.f. AY 1998-99, as per section 28(iiid) any profit on the transfer of the Duty entitlement passbook scheme, being Duty Remission Scheme, under the Export & Import policy formulated and announced u/s 5 of the Foreign Trade (Development & Regulation) Act, 1922 would be profit & gains of business or profession. Further a new proviso to Sec. 80HHC(3) has been inserted for allowing the deduction for profit on account of sale of DEPB Licence. For this purpose, the exports have been classified in two categories –(i) Assessee’s having export turnover upto Rs. 10 Cr. and (ii) assessee’s having export turnover exceeding Rs. 10 Cr. The assessee having export turnover up to Rs. 10 crore would get reduction of 90% of export incentive on account of profits on transfer of DEPB Licences but assessees having export turnover exceeding Rs. 10 Cr. would get this deduction only if the assessee has necessary and sufficient evidence to prove that- a) He had an option to choose either the duty draw back or the DEPB Scheme or the Duty Free Replacement Certificate as the case may be, being Duty Remission Scheme, and

6 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 b) The rate of Duty draw back credit attributable to the Custome Duty was higher than the rate of credit allowance under the DEPB Scheme or the Duty Free Replenishment Scheme as the case may be, being Duty Remission Scheme. As it is a case where export turnover exceeds Rs. 10 Crores and DEPB of Rs. 126,37,196/-is also involved, the assessee firm is entitled to claim deduction u/s 80HHC on the amount of said DEPB only when it fulfills the above said conditions laid down in the Taxation Laws Amendment Act, 2005. The assessment for AY 2004-05 in this case has since been completed u/s 143(e) on 27.12.2006 at a total income of Rs. 37757080/- in which the assessee’s claim of deduction u/s 80HHC on the amount of DEPB was not allowed as the assessee did not fulfill the said conditions in that year. The assessee would thus not fulfill the said conditions in A.Y. 2001-02 also. In view of these facts, the assessee firm is not entitled for deduction u/s 80HHC on the amount of said DEPB for the AY 2001-02 also. As regards Supervision Charges amounting to Rs. 10,000/-, the assessee firm is not entitled for deduction u/s 80HHC on this amount as these charges do not pertain to profit of export business. In respect of Prior period income amounting to Rs. 17748/- also the assessee firm is not entitled for deduction u/s 80HHC of the Income Tax Act. In view of the above facts, the deduction u/s 80IA as well as 80HHC are calculated hereunder:- Calculation of deduction u/s 80IA of I.T. Act. Profit u/s 28 as computed u/s 143(3) (18825458 + 20000) 188,45,458/- Deduction u/s 80IA (25% of above) 47,11,364/- Calculation of deduction u/s 80HHC of IT Act Export turnover as declared by the assessee 11,65,43,497/- Total turnover as declared by the assessee. 12,84,71,359/- DEPB as declared by the assessee 1,26,37,196/- Profit on sale of licence as declared by the assessee 3,54,367/- Profit of the business from export activity Profit u/s 28 as above 188,45,458/- Less: Deduction u/s 80IA as calculated above 47,11,364/- 141,64,094/- Less: Supervision charges & prior period income As discussed above 27,748/- 141,06,346/- Less: 90% DEPB 131,73,476/- 27,32,870/- Less: 90% of sale of licence 3,18,930/- 24,13,940/- Deduction u/s 80HHC Profit of export business x ET + 90% of export incentive x ET TT TT 80% of { 2413940 x 116543497 + 318930 x 116543497 128471359 128471359 80% of {2413940 + 318930} x 116543497 128471359

7 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 80% of {2732870 x 116543497 } 128471359 80% o 2479138 = 19,83,310/- 80IA 80HHC Total Deduction allowable calculated Above 47,11,364/- 19,83,310/- 66,94,674/- Deduction allowed. 47,06,365/- 1,36,62,093/- 1,83,68,458/- Deduction allowed in excess (-) 4,999/- 1,16,78,783/- 1,16,73,784/- Income escaped assessment 1,16,73,784/- From the above calculation of deductions u/s 80IA & 80HHC, it is seen that the assessee has claimed excess deduction of Rs. 116,78,783/- u/s 80HHC of IT Act. Also income to the extent of Rs. 11673784/- has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the AY 2001-02. I have therefore reason to believe that income f Rs. 11673784/- has escaped assessment year 2001-02 for which action 147/148 is needed, I am, therefore, submitted proposal for taking action u/s 147 in the case for the assessment year 2001-02.

8.1 The undisputed fact in the case in hand is that the original assessment was completed under section 143(3) of the Act on 25th March, 2003 and the assessment has been reopened by way of issue of notice under section 148 of the Act on 02/07/2007. Thus, the notice under section 148 of the Act has been issued beyond 4 years from and of the end of relevant assessment year i.e. 2001- 02. The issue of notice under section 148 of the Act, where the assessment was completed under section 143(3) of the Act, has been restricted by the proviso below the main section, which is reproduced as under: “Provided that where an assessment under sub-section(3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.” 8.2 So in a case where the original assessment was completed under section 143(3) of the Act, for issue of notice under section 148 of the Act beyond 4 years from the end of relevant assessment year, it is essential that the

8 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 escapement of income is due to reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. 8.3 We find from the reasons recorded above that after going through the assessment records of the assessee for the year under consideration, the AO noticed that the deduction under section 80HHC of the Act was allowed incorrectly due to two reasons, firstly, the deduction under section 80IA of the Act should have been calculated first and the deduction under section 80HHC, should have been allowed on the remaining amount of profit and secondly deduction under section 80HHC in respect of DEPB was to be allowed as per amended provisions of section 28 and 80 HHC w.e.f. AY 1998-99. Further, we find that in the last para of the reasons recorded, the AO has mentioned that income to the extent of Rs. 1,16,73,784/- had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the AY 2001-02, but we do not find any mention of the material facts which the assessee failed to disclose. In the absence of any such failure on the part of the assessee, the assessment for the year under consideration cannot be reopened. 8.4 In the case of Global Signal Cables (India) Private Limited versus DCIT (supra), the Hon’ble jurisdictional High Court has observed that the Assessing Officer has not specifically indicated as to which material facts are not disclosed by the petitioner/assessee in the course of assessment proceedings under the Act and notice under section 148 of the said Act was based on re-appreciation of the same material on record, thus held that there exists no ground for reopening of the assessment after expiry of 4 years from the relevant assessment year. 8.5 In the facts of the case in hand also, the AO has not mentioned which was the material fact which was not disclosed by the assessee truly and fully, and thus respectfully following the finding of the Hon’ble jurisdictional High Court in the case of Global Signal Cables (India) Private Limited (supra), the

9 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 reopening proceedings after expiry of 4 years from the relevant years are not valid as per law. 9.1 In support of the next proposition, that in absence of no new tangible material, reassessment will amount to change of opinion and therefore the reassessment will not be sustainable, the Ld. AR has relied on the judgement of the Hon’ble jurisdictional High Court in the case of CIT versus Orient Craft Ltd (supra). In that case the assessment was completed under section 143 (1) of the Act and subsequently the AO noticed from the return of income that the assessee was wrong in treating the proceeds of premium on sale of quota and DEPB income as part of export turnover for claiming deduction under section 80HHC of the Act and made reassessment under section 147 of the Act. In the circumstances, the Hon’ble jurisdictional High Court held that there was no fresh tangible material before the Assessing Officer, subsequent to the intimation issued under section 143(1) of the Act and the AO was not having any power of reviewing whatever concluded under section 143(1) proceedings of the Act. The relevant findings of the Hon’ble High Court are as under: “15. In the present case the reasons disclose that the Assessing Officer reached the belief that there was a escapement of income “on going through the return of income” filed by the assessee after he accepted the written under section 143 (1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both are strongly deprecated by the Supreme Court in CIT versus Kelvinator (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words “reason to believe” viz-a-viz in intimation issued under section 143(1) can cause to the tax resigm. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation. It reflects and arbitrary exercise of the power conferred under section 147. 16. For the above reason, we answer the substantial question of law framed by us in favour in affirmative, in favour of the assessee and against the Revenue. The appeal of the Revenue is accordingly dismissed. There shall be no order as to cost.”

10 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 9.2 The Tribunal Mumbai bench in order dated 22/09/2015 in the case of Motolal R Todi Vs. ACIT 7 (3) Mumbai in ITA No. 2910/Mum/2013 after analysis of various judgements on the issue decided that reopening done by the AO in absence of fresh tangible material is invalid and bad in law. The relevant finding of the Tribunal in the case of Moti Lal R Todi (supra) is reproduced as under: “6.19. In the present case, it has already been discussed that admitted facts are that there was no fresh material coming into the possession of the AO, at the time of recording of the ‘Reasons’. These facts have not been rebutted by Ld DR also. The case law relied upon by Ld DR in the case of Dr. Amin’s Pathology, supra is not applicable on the issue being decided here. The issue that in absence of any fresh material, whether AO can proceed to record Reasons, was not before Hon’ble High Court, therefore Hon’ble High court had decided the issue of Change of opinion in that case. In the case before us, as discussed above, we are not going into that issue. In our considered opinion, at this stage, we need not go into the other aspect i.e. whether there was change of opinion or not. This issue has been aptly clarified by Hon’ble High Court in the case of Madhukar Khosla, (supra), wherein it has been held by their lordships that external facts or material constitute the driver, or the key which enables the AO to http://www.itatonline.org 18 Motilal R. Todi legitimately reopen the completed assessment and in absence of this objective “trigger”, the AO does not possess jurisdiction to reopen the assessment. Further, most importantly, it was held by the Hon’ble High Court that it is at the next stage when the question, whether the reopening of assessment amounts to “review” or “change of opinion” arises. In other words, if there are no “new tangible materials”, then there would be no “reasons to believe”, and consequently reopening would be an impermissible review. Under these circumstances there would not arise any need to go the next stage to examine the next question, i.e., whether there was “review” or “change of opinion”. The condition with respect to availability of “new tangible material” is step anterior to the condition of no “change of opinion” or “review”. 9.3 When we advert to the facts of the case in hand, we find from the reasons recorded that there was no fresh tangible material before the Assessing Officer. In the circumstances respectfully following the Hon’ble jurisdictional High Court in the case of Orient Craft (supra) and the decision of the Tribunal in the case of Moti Lal R Todi (supra), the reassessment proceedings under section 147 of the Act in the case of the assessee are not justifiable, illegal and bad in law.

10.1 On the perusal of the reasons, we also find that the assessment was reopened merely on the basis of an amendment made in the Act in year 2005 amending the provisions of section 28 and 80 HHC w.e.f. AY 98-99. The ld. AR

11 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 has placed reliance on the judgement of Hon’ble High Court of Kerala in the case of CIT, Thiruvanthapuram Vs B Mohanachandran Nair (supra) . In that case the assessment was completed under section 143(3) of the Act, was sought to be reopened after the expiry of 4 years from the end of the relevant assessment year on the ground that the assessee was not eligible for deduction under section 80 HHC, in view of the retrospective amendment made to the said provision by the 2005 amendment, and that loss from export of trading goods was to be set off against profits from export of manufactured goods in view of the judgment of the Hon’ble Apex Court. In response to the question raised by the revenue whether the retrospective amendment of law and subsequent judgement of the Apex Court after filing of the return of income and completion of assessment under section 143(3) can be a basis for reopening of the assessment under section 147 of the Income-tax Act, 1961 the court held as under: “….. First of all on undisputed facts that the assessee cannot be blamed for filing return by contemplating a possible amendment of section 80 HHC of the Act. Therefore one cannot estate that there was an escaped assessment of tax which could be reopened within a period of 4 years from the end of the relevant assessment year. Admittedly the amendment and the judgement relied upon by the Assessing Officer was subsequent to the finalisation of the assessment proceeding. It is trite law that subsequent amendments are subsequent interpretation of the statute is not a ground to reopen concluded transactions. Admittedly the assessment had been completed under section 143(3) of the Act and in order to reopen the same, necessarily it has to be done within a period of 4 years…… “ 10.2 Similarly, the Hon’ble High Court of Gujarat in the case of Sadbhav Engineering Ltd versus DCIT (supra), where the assessee was a works contractor, for the assessment year in question notices were issued under section 148 beyond a period of 4 years from the end of the relevant assessment year and the assessment was sought to be reopened on the ground that as per Explanation given below the subsection (13) of section 80-IA, which had been substituted by the finance (No. 2) Act, 2009 with retrospective effect from 01/04/2000, deduction under section 80-IA would not be admissible to an assessee who carried on business which was in the nature of works contract, held that there

12 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 was no failure on the part of the assessee to disclose fully and truly all material facts necessary for each assessment and in the circumstances the very initiation of proceeding under section 147 stood vitiated and as such could not be sustained. 11.1 In the case in hand , the proceedings under section 147 of the Act were initiated by the Assessing Officer in view of the retrospective amendment to the provisions of sections 28 and 80HHC of the Act w.e.f. AY 98-99, by Taxation Laws Amendment Act, 2005, however, we find that the Jurisdictional High Court in the case of Pawan Kumar Jain Vs. Union of India, [2014] 46 taxmann.com 341 (Delhi) following the judgment in the case of Avani Exports vs. CIT (2012) 348 ITR 391/23 taxmann.com 62/209 taxmann 59(Mag) has held the said amendment is prospective in nature and not retrospective. The finding of the Hon’ble High Court in the case of Pawan Kumar Jain (supra) are reproduced as under: “2. It would be evident from prayer (a) itself that essentially the petitioner is challenging the retrospectivity of the amendments to Section 80 HHC brought about by the Taxation Laws (Amendment) Act, 2005 (hereinafter referred to as 'the said Act'). This issue was considered by the Gujarat High Court in the case of Avani Exports v.CIT [2012] 348 ITR 391/23 taxmann.com 62/209 Taxman 59 (Mag.) which set aside the retrospectivity. The Gujarat High Court held as under:— "26. On consideration of the entire materials on record, we, therefore, find substance in the contention of the learned counsel for the petitioners that the impugned amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assesses. 27. We, accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs.10 crore. In other words, the retrospective amendment should not be detrimental to any of the assessees." 3. The said decision of the Gujarat High Court in Avani Exports (supra) has already been recognized and accepted by a Division Bench of this Court in the case of CIT v. Jayanita IT Appeal No.48/2014 decided on 31-11-2014. Consequently, agreeing with the views expressed by the other Division Bench of this Court as also the

13 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 views expressed by the Gujarat High Court, prayer (a) of the writ petition has to be allowed. 4. It is ordered accordingly. 5. In view of the fact that we have allowed prayer (a) to the extent that the amendment brought about by introducing the 2nd, 3rd and 4th proviso to Section 80 HHC (3) (c) is to operate only prospectively and not retrospectively, the other prayers which are in the nature of consequential reliefs also stand allowed.” 11.2. In the case of Avani Export(supra), the matter was carried to Hon’ble Supreme Court, and their Lordship in the judgment of CIT Vs. Avani exports reported in ( 2015) 58 taxmann.com 100 (SC), has upheld the findings of the Hon’ble High Court of Gujarat. The relevant findings of the Hon’ble Supreme Court are as under: “5. We find that in essence the High Court has quashed the severable part of third and fourth proviso to Sec.80HHC (3) and it becomes clear therefrom that challenge which was laid to the conditions contained in the said provisos by the respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following direction: "Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. This order is in substitution of the judgment in Appeal." 11.3. In view of the above facts, we find that the reason on the basis of which the notice under section 148 was issued, no longer survive in view of the judgement of the Hon’ble Supreme Court in the case of Avani Exports(supra), the proceedings under section 147 of the Act also cannot be sustained. 12. In view of our detailed discussion in preceding paras on the issues raised before us, we are of the considered opinion that there was no failure on the part of the assessee to disclose fully and truly all material facts in respect of the assessment and the case has been reopened beyond the period of 4 years from the end of the relevant assessment year, the proceedings of reopening under section 147 of the Act are without jurisdiction and not sustainable. Accordingly, we quash the proceedings under section 147 of the Act in the case of the assessee for the year under consideration. Thus ground No. 2 of the appeal is allowed.

14 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 13. As we have already quashed the assessment order proceedings completed under section 147 of the Act, ground No. 3 of the appeal is not adjudicated at this stage. In the result , the appeal of the assessee is allowed. ITA No. 4315/Del/2010, AY 2002-03 14. Now we take up the appeal having ITA No. 4315/Del/2010, grounds of appeal read as under: i. That the order of the learned Assessing Officer as well as Commissioner of Income Tax(Appeals) is bad in law and against the facts of the case. ii. That the learned Assessing Officer as well as Commissioner of Income Tax(Appeals) acted arbitrarily in reopening the assessment u/s 147/148 of the I.T. Act. iii. That the learned Deputy Commissioner of Income Tax as well as Commissioner of Income Tax(Appeals) was not justified in disallowing Rs. 2096635/- and Rs. 8788257/- under Section 80IA and 80HHC of the Income Tax Act, 1961 respectively. iv. The assessee craves the right to add, modify any one or more of the grounds of appeal at the time of hearing. 15. The facts and circumstances of the present appeal are identical to the facts and circumstances of appeal of the assessee in ITA No. 4314/Del/2010 except the fact that assessment in the year under consideration was not completed under section 143(3) of the Act and the return was processed under section 143(1) of the Act. In the circumstances the proviso below the section 147 of the Act is not applicable in the year under consideration. However, as discussed in detail in para 9.3 of ITA No. 4314/Del/2010, following the findings of the Hon’ble jurisdictional High Court in the case of Orient Crafts Ltd.(supra) as there was no tangible material for reopening the assessment, we hold that the initiation of proceeding under section 147 of the Act in the year under consideration are without jurisdiction and not valid. The proceedings also cannot survive, as discussed in para 11.3 of ITA No. 4314/Del/2010, in view of the judgement of the jurisdictional High Court in the case Pawan Kumar Jain versus union of India (supra) and Avani exports versus CIT (supra) that the amendment in

15 ITA Nos.4314 & 4315/Del/2010 AYs: 2001-02 & 2002-03 reference is prospective and not retrospective. Accordingly, the ground No. 2 of the assessee is allowed. 16. Since we have already quashed that assessment completed section 147 of the Act, remaining ground No. 3 of the appeal is not adjudicated. 17. The ground Nos. 1 and 4 of the appeal being general in nature and, therefore, we are not required to adjudicate upon on these grounds. 18. In the result, both the appeals of the assessee are allowed.

The decision is pronounced in the open court on 8th April, 2016.

Sd/- Sd/- (C.M. GARG) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 8th April, 2016. Laptop Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi