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- existing judgment could not be basis for reassessment. ii) CIT v. Ramachandra Hatcheries, (2008) 305 ITR 117 (Mad.) To submit that re- assessment could not be justified on change of opinion even if earlier opinion was erroneous. 7. Learned counsel for the revenue supported the view taken by the Tribunal and submitted that it was not a case of mere change of opinion but of satisfaction of income escaping assessment. He submitted that it is not the case of the assessee that 5 ITA No.97 of 2009(O&M) income had not escaped assessment nor was it the case of the assessee that procedure had not been followed. Reasons had been duly recorded and conveyed to the assessee and the same had nexus with the finding that the income escaped assessment. The initiation 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 subsequent assessment year could validly form basis for initiating reassessment 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 of the view that no substantial question of law arises as the impugned judgment of the Tribunal is consistent with the settled law on the point. The power of reassessment can be validly exercised if satisfaction is arrived at after following due procedure that income had escaped assessment. Such satisfaction may involve change of opinion but was not at par with ‘mere change of opinion’. If satisfaction is arrived at on the basis of any relevant material, such satisfaction cannot be assailed. In the present case, the Assessing Officer has referred to proceedings for the subsequent assessment years. In such a situation, the judgments relied upon on behalf of the assessee are clearly distinguishable. The law for exercise of 6 ITA No.97 of 2009(O&M) power of reassessment has been authoritatively settled by the Hon’ble Supreme court, inter-alia in A.L.A Firm v. CIT, Madras, (1991) 2 SCC 558. View of the Tribunal is consistent with settled law. It is not disputed by learned counsel for the assessee that the second proposed question is consequential and if reassessment is upheld, the levy of interest cannot be objected to. Thus, no substantial question of law arises. 9. The appeal is dismissed. (Adarsh Kumar Goel) Judge October 13, 2009 (Gurdev Singh) ‘gs’ Judge 7