ACIT RG 1(3), MUMBAI v. RALLIS INDIA LTD, MUMBAI

ITA 4834/MUM/2009 | 2005-2006
Pronouncement Date: 28-05-2010 | Result: Dismissed

Appeal Details

RSA Number 483419914 RSA 2009
Assessee PAN ACTOF2009W
Bench Mumbai
Appeal Number ITA 4834/MUM/2009
Duration Of Justice 9 month(s) 7 day(s)
Appellant ACIT RG 1(3), MUMBAI
Respondent RALLIS INDIA LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 28-05-2010
Assessment Year 2005-2006
Appeal Filed On 20-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO. 4834/MUM/2009 ASSESSMENT YEAR-2005-06 THE ACIT-1(3) MUMBAI VS. M/S. RALLIS INDIA LTD. APEEJAY HOUSE 7 TH FLOOR 3 DINSHAW VACHHA ROAD CHURCHGATE MUMBAI-400 020 PAN-AAABCR2657N (APPELLANT) (RESPONDENT) C.O. NO.43/MUM/2010 (ARISING OUT OF ITA NO. 4834/MUM/2009 ASSESSMENT YEAR-2005-06 M/S. RALLIS INDIA LTD. APEEJAY HOUSE 7 TH FLOOR 3 DINSHAW VACHHA ROAD CHURCHGATE MUMBAI-400 020 PAN-AAABCR2657N VS. THE ACIT-1(3) MUMBAI ( CROSS OBJECTOR ) (RESPONDENT) DEPARTMENT BY: SHRI R.N. JHA ASSESSEE BY: SHRI M.M. GOLVALA SHRI S.B. CHETIWAL O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) THE APPEAL IS FILED BY THE REVENUE AND THE CROSS O BJECTION IS FILED BY THE ASSESSEE. BOTH THE APPEALS EMANATE FROM AN ORDER OF ASSESSMENT U/S 143(3) READ WITH SEC. 147 DATED 29.12.2008. 2. ON APPEAL THE LD. CIT(A) ALLOWED THE ASSESSEES APPEAL ON MERITS AND DID NOT DEEM IT NECESSARY TO CONSIDER THE GROUN DS RAISED AGAINST JURISDICTION OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. THE - 2 - RALLIS INDIA LTD. REVENUE HAS COME ON APPEAL AGAINST THE DECISION OF THE LD. CIT(A) ON MERITS AND THE ASSESSEE HAS COME ON CROSS OBJECTION AGITATING THE JURISDICTION. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION ARE AS UNDER: 1. THE CROSS OBJECTOR SUBMITS THAT THE ASSESSING O FFICER ERRED IN RESORTING TO THE PROVISIONS OF SECTION 147 WHEN TH E JURISDICTIONAL CONDITIONS WERE NOT SATISFIED. 2. THE ASSESSING OFFICER ERRED IN REOPENING THE ASS ESSMENT WHEN HE COULD NOT HAVE HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. 3. THE CROSS OBJECTOR SUBMITS THE ASSESSING OFFICER ERRED IN REOPENING THE ASSESSMENT ON A PURE CHANGE OF OPINI ON AND WITHOUT ANY FRESH MATERIAL. 4. THE APPELLANT SUBMITS THE REASSESSMENT U/S 147 I S ERRONEOUS AND INVALID AND REQUIRES TO BE QUASHED. 3. THE ASSESSEE ORIGINALLY RETURNED AN INCOME OF RS . NIL UNDER THE NORMAL COMPUTATION AND INCOME OF RS.8 87 36 107/- U /S 115JB OF THE I.T. ACT 1961 IN THE RETURN FILED ON 24.10.2005. O RDER U/S 143(3) WAS PASSED ON 10.12.2007 DETERMINING A TOTAL INCOME AT RS.8 87 36 110/- U/S 115JB. THEREAFTER THE ASSESSING OFFICER RECORD ED HIS REASONS FOR RE- OPENING AND ISSUED A NOTICE U/S 148 DATED 6.2.2008 CALLING FOR A RETURN OF INCOME. THE ASSESSEE VIDE LETTER DATED 14.2.200 8 REQUESTED TO PROVIDE THE REASONS FOR RE-OPENING. IN RESPONSE THE ASSES SEE HAS FILED A RETURN OF INCOME ON 11.3.2008 REQUESTING TO TREAT THE ORIG INAL RETURN OF INCOME AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 1 48. A NOTICE U/S 143(2) DATED 30.10.2008 WAS ISSUED TO SCRUTINIZE THE RETUR N OF INCOME FILED BY THE ASSESSEE. AS REQUESTED BY THE ASSESSEE THE REA SONS FOR REOPENING WERE PROVIDED TO THE ASSESSEE ON 1.12.2008. IT IS SEEN THAT WHILE COMPUTING THE BOOK PROFITS U /S 115JB NEITHER THE ASSESSEE NOR THE A.O. HAVE CONSIDERED THE FOLLO WING PROVISIONS MADE IN THE BOOKS OF ACCOUNTS.: - 3 - RALLIS INDIA LTD. PROVISION FOR DOUBTFUL DEBTS/ ADVANCES THUS THIS HAS RESULTED IN ESCAPEMENT OF INCOME OF R S. 6 24 68 882/- WITHIN THE MEANING OF SEC 147 OF TH E I.T.ACT 1961 4. THE AO OBSERVED THAT ASSESSEE WHILE COMPUTING TH E BOOK PROFIT U/S 115JB HAS EXCLUDED THE PROVISION FOR DOUBTFUL D EBTS/ ADVANCES AND DIMINUTION IN VALUE OF INVESTMENTS. THE AO CONCLUD ED THAT THIS IS IN VIOLATION OF PROVISIONS OF SEC. 115JB OF THE ACT. I N THE EXPLANATION 1 TO CLAUSE 2 OF SECTION 115JB ITEM NO. (C) READ AS FO LLOWS: THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MAD E FOR MEETING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES OR 5. HENCE THE AO FELT THAT THE ASSESSEE SHOULD NOT H AVE DEDUCTED THE PROVISIONS THAT HAVE PASSED THROUGH THE PROFIT AND LOSS A/C WHILE COMPUTING THE BOOK PROFIT U/S 115JB. WHILE CONFRON TING THE SAME WITH THE ASSESSEE THEY HAD REPLIED THAT THE PROVISION F OR DOUBTFUL DEBTS/ ADVANCES AND DIMINUTION IN VALUE OF INVESTMENTS ARE NOT TO BE TREATED AS PROVISIONS MADE FOR MEETING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES. THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO WHO WAS OF THE OPINION THAT THESE ITEMS SQUARELY FALL UNDER TH E MEANING OF PROVISION (C) OF EXPLANATION 1 TO CLAUSE 2 OF SECTION 115JB. HENCE THE AO INCREASED THE BOOK PROFIT COMPUTED U/S 115JB BY T HE ASSESSEE BY RS. 6 24 68 882(BEING PROVISIONS FOR DOUBTFUL DEBTS/ AD VANCES AMOUNTING TO RS. 5 84 04 830/- AND PROVISION FOR DIMINUTION IN V ALUE OF INVESTMENTS AMOUNTING TO RS.40 64 052/-). 6. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD.CIT(A) AGITATING BOTH ON JURISDICTION AS WELL AS MERITS. O N APPEAL THE LD.CIT(A) HAD ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS FO LLOWING THE DECISION OF THE APEX COURT IN THE CASE OF HCL COMNET SERVICES A ND SYSTEMS LTD. - 4 - RALLIS INDIA LTD. (305 ITR 409). HE DECLINED TO DECIDE THE CLAIM OF T HE ASSESSEE IN RESPECT OF JURISDICTION. WHILE THE DEPARTMENT HAS COME UP O N APPEAL IN RESPECT OF MERITS OF THE CLAIM THE ASSESSEE HAS FILED THIS CR OSS OBJECTION AGITATING THE JURISDICTION OF THE AO TO REOPEN THE ASSESSMENT . 7. THE LD. COUNSEL FOR THE ASSESSEE SHRI M.M. GOLVA LA SUBMITTED AS FOLLOWS: IN THE ORIGINAL MEMO OF INCOME FILED WITH THE INCOM E TAX RETURN THE ASSESSEE HAD PREPARED THE COMPUTATION O F PROFITS U/S 115JB (PAGE 4 OF THE PAPER BOOK) AS WELL THE AU DITORS CERTIFICATE COMPUTING THE PROFITS U/S 115JB. THE ASSESSING OFFICER HAS ADOPTED THE BOOK PROFITS COMPUTED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT . THE AO SUBSEQUENTLY PROPOSED TO REOPEN THE ASSESSMENT ON T HE GROUND THAT THE PROVISION FOR BAD DEBTS AND PROVISI ON FOR DIMINUTION IN VALUE OF INVESTMENTS SHOULD NOT BE EX CLUDED WHILE COMPUTING THE BOOK PROFITS U/S 115JB. THUS THE ASSESSING OFFICER WAS AWARE OF THE METHOD OF COMPUTATION OF BOOK PROFITS U/S 115JB. THERE WERE N O NEW FACTS WHICH HAD COME TO HIS NOTICE ON THE BASIS OF WHICH HE COULD HAVE COME TO THE CONCLUSION THAT INCOME HAS E SCAPED ASSESSMENT. REOPENING IS BASED ON THE VERY SAME FACTS WHICH WER E BEFORE THE ASSESSING OFFICER AT THE TIME OF ORIGINA L ASSESSMENT AND HE HAS ONLY REAPPRAISED THE EXISTING FACTS AND HAS COME TO A DIFFERENT CONCLUSION. IT IS MERELY DUE TO A CHANGE OF OPINION. 8. WE FIND THAT AN IDENTICAL ISSUE CAME UP BEFORE T HE BOMBAY HIGH COURT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMEN T YEAR 2004-05( RALLIS INDIA LTD. VS ACIT (2010) 37 DTR 33) THE ASSESSME NT UNDER SEC. 143(3) WAS COMPLETED ON 29.12.2006. WHILE ISSUES FROM THIS ASSESSMENT ORDER WERE BEING PURSUED IN APPEAL THE AO ISSUED A NOTIC E U/S 148 ON 16.7.2008. ONE OF THE REASONS FOR REOPENING WAS THA T THE ASSESSEE HAS - 5 - RALLIS INDIA LTD. NOT WHILE COMPUTING THE BOOK PROFITS U/S 115JB CO NSIDERED THE PROVISIONS FOR DOUBTFUL DEBTS PROVISION FOR DOUBTF UL ADVANCES PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS. THE BOMBAY HIGH COURT WHILE DEALING WITH THIS ISSUE IN THE ASSESSEES OWN CASE RALLIS INDIA LTD VS ACIT (2010) 37 DTR (BOM) 33 (AT PAGES 42-46) HAS HE LD AS UNDER: (B) COMPUTATION OF BOOK PROFITS: THE AO HAS WHILE REOPENING THE ASSESSMENT STATED TH AT IN THE PROCESS OF COMPUTING THE BOOK PROFITS UNDER SEC . 115JB THE ASSESSEE HAD NOT CONSIDERED THE FOLLOWING PROVISIONS MADE IN THE BOOKS OF ACCOUNT NAMELY (I) PROVISIONS FOR DOUBTFUL DEBTS. (II) PROVISIONS FOR DOUBTFUL ADVANCES (III) PROVISIONS FOR DOUBTFUL DEB TS BEING INTER CORPORATE DEPOSITS TO SUBSIDIARIES AND (IV) PROVISIONS FOR DI MINUTION IN THE VALUE OF INVESTMENTS. WHILE DISPOSING OF THE OBJECTION OF TH E ASSESSEE THE AO HAS ALSO NOTED THAT AT THE INITIAL STAGE WHEN THE C OMPUTATION OF INCOME UNDER THE PROVISIONS OF SEC.115JB WAS MADE THE AO HAD NOT FORMED ANY OPINION NOR HAD HE CALLED FOR DETAILS WITH REGARD T O THE PROVISIONS MADE UNDER THE HEADS NOTED ABOVE AND WHILE NOT ADDING TH E SAME TO THE TOTAL INCOME. THE ISSUE WHICH FALLS FOR DETERMINATION IS AS TO WHETHER THE REASONS WHICH HAVE BEEN FURNISHED BY THE AO WERE GE RMANE TO THE PROVISIONS MADE FOR BOOK PROFITS IN SEC.115JB. 14. FOR THE PURPOSES OF SEC.115JB EXPLN. I PROVIDE S THAT BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE P & L A/C FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB SEC (2) AS INCREASED BY THE CLAUSES THAT IMMEDIATELY FOLLOW SUB SEC (2) OF SEC. 115JB PROVID ES THAT EVERY ASSESSEE BEING A COMPANY SHALL FOR THE PURPOSES OF THE SECTION PREPARE ITS P & L A/C FOR THE RELEVANT PREVIOUS YEAR IN ACC ORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCH.VI TO THE COM PANIES ACT 1956. NOW IT IS A SETTLED PRINCIPLE OF LAW THAT FOR THE COMPUTAT ION OF BOOK PROFITS UNDER SEC. 115JB THE AO HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF PAR TS II AND III OF SCH.VI OF THE COMPANIES ACT 1956 WHICH ARE CERTIFIED BY TH E AUDITORS AND PASSED BY THE COMPANY IN ITS GENERAL MEETING. THE AO DOES NOT HAVE JURISDICTION TO GO BEYOND THE NET PROFITS AS SHOWN IN THE P & L A/C SAVE AND EXCEPT TO THE EXTENT WHICH IS PROVIDED FOR IN THE EXPLANATION . THE AO CAN INCREASE THE NET PROFITS AS REFLECTED IN THE P & L ACCOUNT P REPARED UNDER PARTS II AND III OF SCH.VI TO THE COMPANIES ACT 1956 ONLY T O THE EXTENT THAT IS PERMISSIBLE IN THE EXPLANATION NOTED ABOVE. (APOLL O TYRES VS CIT (2002) 174 CTR (SC) 521: (2002) 255 ITR 273(SC) AND CIT VS HCL COMNET SYSTEMS & SERVICES LTD (2008) 219 CTR (SC)222 (2008 ) 13 CTR (SC)105 (2008) 305 ITR 409(SC) CLAUSE OF EXPLANAT ION I DEALS WITH THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES. - 6 - RALLIS INDIA LTD. 15. IN RESPONSE TO THE NOTICE FOR REOPENING OF THE ASSESSMENT THE ASSESSEE IN THE COURSE OF ITS OBJECTIONS POINTED OU T THAT THE VIEW OF THE AO WAS CONSISTENT WITH THE LAW LAID DOWN BY THIS CO URT IN CIT VSECHJAY FORGINGS (P)LTD (SUPRA) AND THE JUDGMENTS OF THE DE LHI HIGH COURT IN CIT VS EICHER LTD (SUPRA) AND CIT VS HCL COMNET SYSTEMS & SERVICES (SUPRA) IN THE DECISION IN ECHJAY (SUPRA). HONBLE MR.JUSTICE S.H. KAPADIA (AS HE THEN WAS) SPEAKING FOR A DIVISION BENCH OF T HIS COURT NOTED THAT UNDER CL OF THE EXPLANATION TO SEC. 115JB UNLESS A PROVISION IS MADE FOR ASCERTAINED LIABILITIES THE PROVISION HAS TO BE INC LUDED IN THE BOOK PROFITS FOR THE PURPOSE OF TAXATION UNDER SEC. 115J. THE DE LHI HIGH COURT HAD HELD IN EICHER AND IN HCL (SUPRA) THAT UNDER EXPLAN ATION I THE INCREASE SHALL BE OF THE AMOUNT OR AMOUNTS SET ASIDE FOR MEE TING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES. THE DELHI HIGH COURT HELD THAT ASCERTAINED LIABILITIES ARE NOT TO BE INCLUDED IN THE BOOK PROF ITS AS DEFINED IN THAT SECTION. IN OUR VIEW THE BASIC QUESTION WHICH WOULD ARISE IS AS TO WHETHER A PROVISION MADE FOR DOUBTFUL DEBTS OR ADVANCES CAN BE REGARDED AT ALL AS A PROVISION MADE FOR MEETING LIABILITIES IN THE FIR ST PLACE IN ORDER THAT CL (C) SHOULD APPLY THERE MUST BE A PROVISION THE PROVISIO N MUST BE FOR MEETING A LIABILITY AND THE LIABILITY IN QUESTION MUST BE O THER THAN AN ASCERTAINED LIABILITY. 16. THE SUPREME COURT HAD OCCASION TO CONSIDER TH E INTERPRETATION OF CL (C) TO EXPLN. I IN ITS JUDGMENT IN HCL COMNET SY STEMS & SERVICES LTD (SUPRA) THE JUDGMENT OF THE SUPREME COURT AROSE IN APPEAL FROM THE JUDGMENT OF THE DELHI HIGH COURT TO WHICH A REFEREN CE HAS BEEN MADE EARLIER. HONBLE MR.JUSTICE .H. KAPADIA SPEAKING FO R A BENCH OF THE SUPREME COURT HELD THAT A DEBT WHICH IS PAYABLE BY THE ASSESSEE MUST BE DISTINGUISHED FROM A DEBT WHICH IS RECEIVABLE BY THE ASSESSEE. A PROVISION FOR BAD AND DOUBTFUL DEBTS IS MADE TO COV ER UP THE PROBABLE DIMINUTION IN THE VALUE OF THE ASSET NAMELY A DEBT WHICH IS AN AMOUNT RECEIVABLE BY THE ASSESSEE. SUCH A PROVISION THE SU PREME COURT HELD CANNOT BE REGARDED AS A PROVISION FOR A LIABILITY B ECAUSE EVEN IF A DEBT IS NOT RECOVERABLE NO LIABILITY COULD BE FASTENED UPON THE ASSESSEE. THE SUPREME COURT HELD THUS: .. THE ASSESSEES CASE WOULD THEREFORE FALL WITHI N THE AMBIT OF ITEM (C) ONLY IF THE AMOUNT IS SET ASIDE AS PROVISI ON THE PROVISION IS MADE FOR MEETING A LIABILITY AND THE PROVISION SHOULD BE FOR OTHER THAN AN ASCERTAINED LIABILITY I.E IT SHOULD BE FOR AN UNASC ERTAINED LIABILITY IN OTHER WORDS ALL THE INGREDIENTS SHOULD BE SATISFIED TO AT TRACT ITEM OF THE EXPLANATION TO SEC.115JA. IN OUR VIEW THEN ITEM I S NOT ATTRACTED. THERE ARE TWO TYPES OF DEBTS. A DEBT IS PAYABLE BY THE AS SESSEE IS DIFFERENT FROM A DEBT RECEIVABLE BY THE ASSESSEE. A DEBT IS PAYABL E BY THE ASSESSEE WHERE THE ASSESSEE HAS TO PAY THE AMOUNT TO OTHERS WHEREAS THE DEBT RECEIVABLE BY THE ASSESSEE IS AN AMOUNT WHICH THE A SSESSEE HAS TO RECEIVE FROM OTHERS. IN THE PRESENT CASE THE DEBT UNDER CONSIDERATION IS A DEBT RECEIVABLE BY THE ASSESSEE. THE PROVISION FOR BAD AND DOUBTFUL DEBTS THEREFORE IS MADE TO COVER UP THE PROBABLE DI MINUTION IN THE VALUE OF THE ASSET I.E. DEBT WHICH IS AN AMOUNT RECEIVAB LE BY THE ASSESSEE. THEREFORE SUCH A PROVISION CANNOT BE SAID TO BE A PROVISION FOR A LIABILITY BECAUSE EVEN IF A DEBT IS NOT RECOVERABLE NO LIABIL ITY COULD BE FASTENED - 7 - RALLIS INDIA LTD. UPON THE ASSESSEE. IN THE PRESENT CASE THE DEBT IS THE AMOUNT RECEIVABLE BY THE ASSESSEE AND NOT ANY LIABILITY PA YABLE BY THE ASSESSEE AND THEREFORE ANY PROVISION MADE TOWARDS IRRECOVERA BLITY OF THE DEBT CANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THE REFORE IN OUR VIEW ITEM OF THE EXPLANATION IS NOT ATTRACTED TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE ALSO THE DEBTS WRITTEN OFF WERE THOSE RECEIVABLE BY THE ASSESSEE THESE ARE NOT LIABILITIES AND DID NOT FAL L WITHIN CL TO EXPLN. I AS EXPLAINED BY THE SUPREME COURT. 17. SUBSEQUENT TO THE DECISION OF THE SUPREME COU RT IN HCL (SUPRA) PARLIAMENT STEPPED IN TO AMEND EXPLN. 1 TO S 115JB BY THE FINANCE ACT OF 2008 AS A RESULT OF THE AMENDMENT CL (I) CAME TO T HE INSERTED IN EXPLN I SO AS TO PROVIDE FOR THE AMOUNT OR AMOUNTS SET ASID E AS PROVISION FOR DIMINUTION IN THE VALUE OF AN ASSET. THOUGH THE AM ENDMENT WAS MADE WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2001 IT WAS ENACTED INTO LAW AFTER THE AO HAD EXERCISED THE POWER TO REOPEN THE ASSESS MENT IN THE PRESENT CASE BY HIS NOTICE DT.16 TH JULY 2008. CONSEQUENTLY ON THE DATE ON WHICH THE AO EXERCISED HIS JURISDICTION UNDER SEC.148 THE AMENDMENT WHICH WAS BROUGHT IN SUBSEQUENTLY BY THE FINANCE ACT OF 2 009 WAS NOT IN EXISTENCE. 18. A LEGISLATIVE AMENDMENT THOUGH MADE WITH RETRO SPECTIVE EFFECT HAS BEEN HELD NOT TO JUSTIFY A RECOURSE TO THE REVISION AL POWER OF THE CIT UNDER SEC.263 OF THE IT ACT IN THE CASE OF CIT VS MAX INDIA LTD (SUPRA) COUNSEL FOR THE REVENUE SOUGHT TO DISTINGUISH THE J UDGMENT IN MAX INDIA (SUPRA) ON THE GROUND THAT IT DEALT WITH SEC 80HHC AND ONE OF THE GROUNDS WHICH WEIGHTED WITH THE SUPREME COURT WAS T HAT THE SECTION HAD BEEN AMENDED SEVERAL TIMES. THE JUDGMENT OF THE SU PREME COURT CANNOT BE DISTINGUISHED FOR THE REASONS AS SUGGESTE D BY THE COUNSEL FOR THE REVENUE. THE PRINCIPAL WHICH HAS BEEN LAID DOW N IN THE JUDGMENT OF THE SUPREME COURT CANNOT BE CONFINED TO SEC.80HHC I N THAT CASE THE REVISIONAL AUTHORITY HAD SOUGHT TO EXERCISE ITS REV ISIONAL JURISDICTION THAT TWO VIEWS ON THE INTERPRETATION OF THE PROVISION WE RE POSSIBLE AND HENCE RECOURSE TO SEC. 263 WAS NOT PERMISSIBLE. MOREOVER THE SECOND GROUND WHICH APPEARS TO HAVE BEEN URGED WAS THAT THE RETRO SPECTIVE AMENDMENT TO THE STATUTORY PROVISION IN QUESTION WOULD NOT HA VE A BEARING ON THE CORRECTNESS OF THE RECOURSE TO SEC. 263 SINCE ON TH E DATE ON WHICH THE POWER WAS EXERCISED BY THE CIT THE LEGISLATIVE AMEN DMENT HAD NOT BEEN BROUGHT INTO FORCE. THE JUDGMENT OF THE SUPREME CO URT NOTES FIRSTLY THAT ON THE DATE ON WHICH THE CIT PASSED HIS ORDER TWO VIEWS ON THE WORD PROFIT UNDER SEC.80HHC WERE POSSIBLE AND THE PROVIS ION ITSELF HAD BEEN AMENDED ON SEVERAL OCCASIONS. THE SECOND GROUND WHI CH WEIGHTED WITH THE SUPREME COURT WAS THAT THE SUBSEQUENT AMENDMENT IN 2005 OF THE PROVISIONS OF SEC.80HHC EVEN THOUGH RETROSPECTIVE W OULD NOT ATTRACT THE PROVISIONS OF SEC.263 POSITION OF LAW AS IT STOOD O N THE DATE WHEN THE CIT PASSED HIS ORDER IN PURPORTED EXERCISE OF HIS POWER S UNDER SEC.263. 19. IN THE PRESENT CASE THE PRINCIPLE OF LAW WHICH HAS BEEN LAID DOWN BY THE SUPREME COURT IN MAX INDIA (SUPRA) WOULD BE ATT RACTED. ON THE DATE ON WHICH THE AO PURPORTED TO EXERCISE HIS POWER TO REOPEN THE - 8 - RALLIS INDIA LTD. ASSESSMENT UNDER SEC 147 THE LEGISLATIVE AMENDMENT BY THE INSERTION OF CL(I) TO EXPLN. I TO SEC 115JB HAD NOT BEEN BROUGHT INTO FORCE ON THE STATUTE BOOK. OBVIOUSLY THEREFORE THE SUBSEQUENT A MENDMENT COULD NOT HAVE BEEN AND IS NOT A GROUND WHICH HAS BEEN TAKEN BY THE AO WHILE REOPENING THE ASSESSMENT. THE VALIDITY OF THE NOTI CE ISSUED BY THE AO IN SEEKING TO REOPEN THE ASSESSMENT MUST BE DETERMINED WITH REFERENCE TO THE REASONS WHICH ARE FOUND IN SUPPORT OF THE REOPE NING OF THE ASSESSMENT. THESE REASONS CANNOT BE ALLOWED TO BE S UPPLEMENTED ON THE BASIS WHICH WAS NOT PRESENT TO THE MIND OF THE OFFICER AND COULD NOT HAVE BEEN SO PRESENT ON THE DATE ON WHICH THE POWER TO REOPEN THE ASSESSMENT WAS EXERCISED. WE THEREFORE HOLD THA T THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN MAX INDIA (SUPRA) WOUL D BE ATTRACTED TO THE PRESENT CASE. CONSEQUENTLY IT IS EVIDENT THAT T HE ORDER OF THE AO WITH REFERENCE TO THE COMPUTATION OF BOOK PROFITS UNDER SEC 115JB WAS AT THE LEAST A PROBABLE VIEW AND AS A MATTER OF FACT THE C ORRECT VIEW TO TAKE IN VIEW OF THE DECISION OF THE SUPREME COURT IN HCL (S UPRA). IT IS WELL SETTLED THAT THE LAW LAID DOWN BY THE SUPREME COURT IS DECL ARATORY OF THE POSITION AS IT ALWAYS STOOD. IN ANY EVENT AS WE HAVE NOTED T HE VIEW OF THE AO WAS SUPPORTED BY THE INTERPRETATION PLACED EVEN CONTEMP ORANEOUSLY IN THE JUDGMENT OF THIS COURT IN ECHJAY (SUPRA) AND IN THE JUDGMENTS OF THE DELHI HIGH COURT IN EICHER AND HCL (SUPRA) IN THE CIRCUMS TANCES THERE WAS NO WARRANT FOR REOPENING THE ASSESSMENT IN EXERCISE OF THE POWER CONFERRED UNDER SEC. 147. 20.FOR ALL THESE REASONS WE ARE OF THE VIEW THAT TH E PETITIONER WOULD BE ENTITLED TO SUCCEED IN THESE PROCEEDINGS. RULE IS MADE ABSOLUTE BY SETTING ASIDE THE NOTICE DATED 16 TH JULY 2008 AND THE ORDER REJECTING THE OBJECTIONS OF THE PETITIONER DATED 30 TH NOVEMBER 2009. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT Y EAR WE HOLD THAT THE REOPENING OF ASSESSMENT WAS NOT PROPER IN LAW AND S ET ASIDE THE ORDER OF ASSESSMENT U/S 143(3) READ WITH SEC. 147 DATED 29.1 2.08. THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 9. AS WE HAVE SET ASIDE THE ORDER OF ASSESSMENT TH E DEPARTMENTAL APPEAL ON MERITS DOES NOT SURVIVE AND HENCE WE DISM ISS THE DEPARTMENTAL APPEAL IN ITA NO 4834/M/2009 AS NOT MA INTAINABLE. - 9 - RALLIS INDIA LTD. 10. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE C.O. FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF MAY 2010 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 28 TH MAY 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI - 10 - RALLIS INDIA LTD. DATE INITIALS 1 DRAFT DICTATED ON: 14.5.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 18. 5 .2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/ PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______