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2003] 126TAXMAN104 (CHD.)(MAG.)
ITAT CHANDIGARH BENCH ‘A’
DEPUTY COMMISSIONER OF INCOME-TAX
V.
SMITHKLINE BEECHAM CONSUMER BRANDS LTD.
VIMAL GANDHI, VICE PRESIDENT AND P.K. BANSAL, ACCOUNTANT MEMBER
IT APPEAL NO. 461 (CHD.) OF 1995
MAY 13, 2002

Section 147 of the Income-tax Act, 1961 – Income escaping assessment – Illustrations – Main provision – Assessment year 1989-90 – While passing order under section 143(3), and allowing deduction under section 80HHC – Assessing Officer accepted interest income as business income – Later he issued notice under section 148 because he was of view that interest income was to be excluded for computation of deduction for purposes of section 80HHC – Whether reopening of assessment on same set of facts under garb of ‘reason to believe’ tantamounted to review of decision, which was not permissible even under amended section 147 – Held, yes
Section 255 of the Income-tax Act, 1961 – Appellate Tribunal – Procedure of – Assessment year 1989-90 – Whether in view of rule 27 of the Income-tax (Appellate Tribunal) Rules assessee-respondent can support order of Commissioner (Appeals) on any ground decided against it, even though no appeal is filed – Held, yes
FACTS
While completing the assessment under section 143(3), the Assessing Officer treated income on bank deposits as business income and allowed deduction under section 80HHC in respect of such income. Thereafter, the Assessing Officer took the view that the deduction allowed on interest amount had to be excluded for computation of deduction under section 80HHC and issued notice to the assessee under section 148 requiring the assessee to, accordingly, file another return within 30 days. On appeal, the Commissioner (Appeals) set aside the order of the Assessing Officer on the basis of time-limit given for filing of return in notice but did not deal with other grounds on which the assessee pleaded that the order was invalid.
On the revenue’s appeal :
HELD
The Commissioner (Appeals) had cancelled reassessment being illegal and void on the basis that the notice under section 148 had given the assessee 30 days’ time to file return. He had not considered the other grounds of appeal taken before him and the arguments advanced against the validity of jurisdiction and action under section 147. From rule 27 of the ITAT Rules, it is clear that the respondent-assessee can support the order of the Commissioner (Appeals) on any ground that reassessment order is bad in law and invalid. The Commissioner (Appeals), no doubt, had held reassessment order to be invalid and without jurisdiction on the basis of time-limit given for filing of return in notice but had not dealt with other grounds on which the assessee asked that the order was invalid. The assessee-respondent can support the order of the Commissioner (Appeals) on any ground decided against it, even though no appeal is filed. Therefore, the assessee-respondent could support the order of the Commissioner (Appeals) by taking any plea that reassessment was invalid and void.
For the applicability of section 147, the Assessing Officer should have ‘reason to believe’ and words ‘reason to believe’ were then in the old section as well prior to amendment with effect from 1-4-1989. ‘Reason to believe’ has been the matter of judicial scrutiny by the Apex Court in several cases.
In the instant case, the assessee had shown business income in audited accounts. The assessee claimed deduction under section 80HHC on the basis of audit report. The Assessing Officer framed first assessment under section 143(3) and recomputed deduction under section 80HHC and treated the income on bank deposits to be a part of business income. The Assessing Officer allowed deduction under section 80HHC treating interest income to be the business income. The interest income was assessed as the business income by the Assessing Officer for the assessment years 1988-89 to 1991-92. The Assessing Officer also took the view that there could be two views to treat the interest income as business income.
Section 147 does not empower the Assessing Officer to review on the same set of facts the assessment order which had already been framed merely by fresh application of mind to its own decision or to the decision of predecessor. Fresh application of mind by the Assessing Officer on similar facts would tantamount to review of own decision. Amended section 147 does not authorise the Assessing Officer to reopen assessment under the garb of ‘reason to believe’ to review its own decision. In the instant case, the Assessing Officer had applied his mind to the same set of facts and change of opinion was not permissible to reopen even under the amended provision of section 147. The Assessing Officer had not brought any fresh/new material on record and neither had received any fresh information. It was a case of absence of jurisdiction of the Assessing Officer to militate proceedings under section 147/148 and in the absence of jurisdiction, reassessment framed was illegal and void.
S.S. Thindfor the Appellant.Ajay Vohra for the Respondent.

ORDER
Per Bansal.—This appeal by the Revenue is directed against the order dated 27-1-1995 passed by ld. CIT (A) and the following effective grounds are raised :—
“1. On the facts and in the circumstances of the case, ld. CIT(A) has erred in holding that notice under section148 issued in the instant case was defective as the time allowed for filing return fell short by one day when the appellant in fact was asked to file return within 30 days of service of said notice on it.
2. Ld. CIT(A) has further erred in holding the notice issued under section 148 bad in law & consequential reassessment made illegal void and in cancelling the assessment when this was a technical defect which may not be held to be fatal to re-assessment.
3. Ld. CIT(A) has also erred in directing the Assessing Officer to include interest income of Rs. 119.16 lakhs from short term deposits of business income of the assessee for the purpose, an allowing deduction under section 80HHC when then same was not includible as per section 80HHC for assessment year under consideration.”
2. Brief facts of the case are that original assessment in this case was passed on 22-3-1993. The assessee made claim for deduction under section 80HHC at Rs. 1,20,67,723. Assessing Officer while framing the assessment under section 143(3) restricted the said claim to Rs. 74,11,601. The assessee has shown interest on bank deposits aggregating to Rs. 119.16 lakhs as business income. Assessing Officer while passing order under section 143(3) also accepted interest income as business income. He issued notice under section 148 dated 23-12-1996 because he was of the view that interest income amounting to Rs. 119.16 lakhs was to be excluded for computation of deduction for the purpose of section 80HHC, requiring the assessee to file return in the prescribed Form within 30 days. The assessee challenged the action of the Assessing Officer on the ground that the proceedings were illegal. Even on merits, it was submitted that the assessee was eligible for deduction under section 80HHC in respect of said interest income chargeable under the head ‘income from business’. The Assessing Officer vide order dated 22-3-1993 computed deduction under section 80HHC at Rs. 70,27,919 had thus enhanced the income by reducing deduction already allowed by a 3,83,681 (Rs. 74,11,601 minus Rs. 70,27,919).
3. Before ld. CIT(A) following grounds were taken :—
“1.1 The present reassessment made under section 143(3)/147 is without jurisdiction and is invalid.
2.2 Ld. DCIT erred in initiating action under section 147 without complying with the conditions pre requisite for involving section 147 and without having any information that any income had escaped assessment.
“1.3 Ld. DCIT erred in ignoring the fact that all material facts for completion of original assessment had been brought on record by the assessee and action under section 147 could not be taken on a mere change of opinion on the same facts.
2.1 Ld. DCIT erred in holding that deduction under section 80HHC is to be allowed against income from business excluding interest on deposits.
2.2 Ld. DCIT erred in holding that income of Rs. 119.16 lakhs is to be excluded for the purpose of computation under section 80HHC and in reducing the allowance thus enhancing income by Rs. 3,83,681.”
Ld. CIT(A) found force in the contention of the assessee reg. notice under section 148 requiring the assessee to file return within a period of 30 days. He, relying on the decisions reported in 35 ITR 388 and 82 ITR 821 cancelled reassessment being illegal, void and he did not deal with the other grounds challenging the action of the Assessing Officer being without jurisdiction under section 147. On merits also, he observed that income of Rs. 119.16 lakhs had been wrongly excluded for the purpose of computation of deduction under section 80HHC.
4. Ld. DR relied on the order of the Assessing Officer and submitted that the action of the ld. CIT(A) holding reassessment to be invalid in view of allowing the assessee less than 30 days for filing return is not correct. He submitted that by the Finance Act, 1996, section 148 has been amended w.e.f. 1-4-1989 and by this amendment the words ‘not being less than thirty days stand omitted. Therefore, assessment order passed under section 148 can no longer be treated as non est, illegal, void on account of technical defect in notice.
4.1 Ld. AR, on the other hand, was fair enough to concede that due to amendment by the Finance Act, 1996, w.e.f. 1-4-1989, Notice under section 148 requiring the assessee to file return within 30 days can no longer be called to be illegal. But he vehemently submitted that under rule 27 of the Income-tax (Appellate Tribunal) Rules, the assessee can support the order of ld. CIT(A) on any of the grounds decided against the respondent. For this, he relied on the following case law :—
“(a)CIT v. Sundaram & Co. (P.) Ltd. 52 ITR 763 (Mad);
(b)Kanpur Industrial Works v. CIT 59 ITR 407 (All);
(c)B.L. Bamasi v. CIT 83 ITR 223 (Bom.); and
(d)CIT v. Edward Keventer (Successors) (P.) Ltd. 123 ITR 200 (Delhi).”
Ld. AR submitted that reassessment is invalid because there was no reason to believe. Assessing Officer has duly considered the claim of the assessee under section 80HHC and has treated income from interest on bank deposit, etc. amounting to Rs. 119.16 lakhs as business income appearing in audited accounts under Schedule XI and details of which were furnished along with return at page 55 of the Annexure. The assessee claimed deduction at Rs. 1,20,67,723. Assessing Officer recalculated deduction under section 80HHC and restricted the claim at Rs. 74,11,601. Assessing Officer cannot change his opinion subsequently and take a different view on the same set of facts.
Review of assessment order is not permissible under the garb of ‘reason to believe’. Interest has been assessed as business income in assessment years 1990-91 and 1991-92, which were completed after reassessment under appeal and deduction under section 80HHC allowed on business income including interest assessment for assessment year1990-91 was completed on 26-3-1993, just four days after reassessment under appeal, which means that Assessing Officer was of the view that interest on business income eligible for deduction under section 80HHC even after four days after reassessment. In assessment year 1988-1989 also, interest income has been assessed as business income and deduction allowed accordingly. He specifically drew our attention to the following observations of the Assessing Officer in para 3 of the order :—
“…In case of disputed issues where two views are possible action under section 147 is possible.”
This observation, as per ld. AR, clearly established that Assessing Officer had substituted his opinion in place of the opinion of his predecessor. Such substitution tantamounts to a review, which is not permitted under section 147. He relied on the following case law :—
“(a)Jindal Photo Films Ltd. v. DCIT 234 ITR 170 (Delhi);
(b)Garden Silk Mills Ltd. v. DCIT 222 ITR 68 (Guj.);
(c)Ranchi Handloom Emporium v. CIT 235 ITR 604 (Pat.);
(d)Berger Paints (India) Ltd. v. JCIT 245 ITR 645 (Cal.);
(e)Garden Silk Mills (P.) Ltd. v. DCIT237 ITR 668 (Guj.);
(f)Garden Silk Mills Ltd. v. DCIT 222 ITR 27 (Guj.);
(g)Kaira Coop. Milk Producers Union v. CIT 220 ITR 194 (Guj;);
(h)Foramer v. CIT 247 ITR 436 (All.);
(i)Nagin Bhai G. Patel v. ITO 134 CTR 210 (Guj.);
(j)Sarabhai M. Lakhani v. ITO 145 CTR 110 (Guj.);
(k)CIT v. Hardware Trading Co. 167 CTR 4 (Kar.);
(l)DCIT v. Kelvinator of India Ltd.67 ITD 213 (Delhi).”
Ld. AR submitted that it appears that the assessment has been reopened on the basis of an audit objection, which is not permissible under law. Audit opinion in regard to the application or interpretation of law cannot be treated as information for reopening. He relied on the decisions in the cases of CIT v. Lucas TVS Ltd. 234 ITR 296 (Mad.); and Indian and Eastern Newspapers Society v. CIT 119 ITR 996 (SC). Deduction has been claimed on the basis of audit certificate, which was part and parcel of return. Assessing Officer after considering all the documents allowed deduction under section 80HHC. Initially, Assessing Officer issued notice under section 154 for the purpose of a rectifying deductions allowed under section 80HHC but when the assessee pointed out that its income did not contain any income by way of interest on short term loan and there cannot be any action under section 154 asstt was reopened under section 147. On merits, he submitted that the surplus arising out of business transaction was credited to the bank a/c and interest earned from time to time and the same has always been assessed as business income. He relied on the following case law :—
(i)Snam Progetti SPA v. Addl. CIT 132 ITR 70 (Delhi);
(ii)CIT v. Tamil Nadu Dairy Development Corpn. Ltd. 216 ITR 535 (Mad.);
(iii)CIT v. Ahmedabad Elecy. Co. Ltd. 203 ITR 521 (Bom.);
(iv)CIT v. United Carbon India Ltd. 190 ITR 622 (Bom.);
(v)CIT v. Paramount Premises (P.) Ltd. 190 ITR 259 (Bom.).
Ld. AR submitted that prior to insertion of clause (baa) in Explanation to section 80HHC w.e.f. 1-4-1992, there was no power to reduce interest income which has been assessed as business income for computing deduction under section 80HHC. Reliance in this regard is placed on the following decisions :—
(a)CIT v. Isher Dass Mahajan & Sons 170 CTR 271 (P&H);
(b)CIT v. Nagpur Engg. Co. Ltd. 245 ITR 806 (Bom.);
(c)International Research Park Lab Ltd. v. ACIT 50 ITD 37 (Delhi) (SB);
(d)Pearl Polymers Ltd. v. DCIT 80 ITD 1 (Delhi); and
(e)ACIT v. Sharda Gums & Chemicals 76 ITD 282 (Jodh.).
5. We have heard the rival submissions, perused the orders of tax authorities and gone through the material on record as well as the case law cited by ld. AR. We feel that ld. CIT(A) had cancelled reasstt. being illegal and void on the basis that notice under section 148 has given the assessee 30 days time to file return. He has not considered the other grounds of appeal taken before him and the arguments advanced against the validity of jurisdiction and action under section 147. Ld. AR was fair enough to concede that section 148 stands amended by the Finance Act, 1986, w.e.f. 1-4-1989 and, therefore, in our considered view, notice issued after 1-4-1989 allowing the assessee to file return within 30 days becomes valid and cannot be held to be illegal and invalid. Rule 27 of the ITAT Rules reads as under :—
“27. The respondents, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.”
From the above, it is clear that the respondent-assessee can support the order of ld. CIT(A) on any ground that re-asstt. order is bad in law and invalid. Ld. CIT(A) no doubt has held reassessment order to be invalid and without jurisdiction on the basis of time limit given for filing of return in notice but has not dealt with other grounds in which the assessee asked that the order was invalid. We have gone through the case law cited by the assessee and find that the same is fully applicable and in the aforesaid cases it has been held that the respondent can support the order of ld. CIT(A) on any ground decided against it, even though no appeal is filed. We are, therefore, of the considered opinion that the assessee-respondent can support the order of ld. CIT(A) by taking any plea that reassessment is invalid and void.
5.1 Now we will deal with the plea of the assessee that reassessment is invalid because there is no reason to believe that the income escaped assessment because this is a case of change of opinion by the Assessing Officer and thus the issue before us is whether reopening is valid on account of change of opinion by the Assessing Officer on the same set of facts. Section 147 w.e.f. 1-4-1989 reads as under :—
“147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also may other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year).”
From the above, it is seen that for applicability of section 147 the Assessing Officer must have ‘reason to believe’ and words ‘reason to believe’ were there in the old section as well which were prior to amendment w.e.f. 1-4-1989, ‘Reason to believe’ has been the matter of judicial scrutiny by the Apex Court in several cases. In the case of Calcutta Discount Co. Ltd. v. ITO 41 ITR 191 (SC), it was observed that it is the duty of the assessee to disclose all the primary facts which have a bearing on the liability of the income earned by the assessee being subjected to tax. It is for the Assessing Officer to draw inferences from the facts and apply the law determining the liability of the assessee. The assessee cannot draw the conclusions drawn by the Assessing Officer and once the conclusion is drawn and the assessment order framed, the Assessing Officer cannot at a later point of time form a different opinion by giving a second thought to the facts disclosed by the assessee, holding that he committed an error in computing taxable income and reopen the assessment under section 147. Discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment would constitute a ‘reason to believe that income had escaped assessment’ within the meaning of section 147. Similar view has been taken by the apex court in the following cases :—
(i)Phool Chand Bajrang Lal v. ITO 203 ITR 456, 477;
(ii)ALA Firm v. CIT 189 ITR 285, 298;
(iii)Indian and Eastern Newspaper Society v. CIT 119 ITR 996, 1004; and
(iv)ITO v. Lakhmani Mewal Das 103 ITR 437, 445.
5.2 Now coming to the facts of the present case, the assessee has shown business income in audited accounts under Schedule XI and details of which were also furnished along with return at page 55 of the Annexure. The assessee claimed deduction under section 80HHC at Rs. 1,20,67,723 on the basis of audit report given at page 27 etc. of the paperbook. Assessing Officer while framing first assessment under section 143(3) recomputed deduction available under section 80HHC and treated interest income on bank deposit to be a part of business income, deduction under section 80HHC was computed at Rs. 74,11,601. Thus, he allowed deduction under section 80HHC treating interest income to be the business income. Even said interest income has been assessed as the business income by Assessing Officer in assessment years 1988-89, 1990-91 and 1991-92. To repeat, following observations in para 3 of the assessment order clearly speak that the Assessing Officer was also of the view that there can be two views for treating the interest income as business income :—
“…In case of disputed issues where two views are possible action under section 147 is possible.”
In our view, section 147 does not empower the Assessing Officer to review on the same set of facts the assessment order which has already been framed merely by fresh application of mind to his own decision or to the decision of his predecessor. Fresh application of mind by the Assessing Officer on similar facts will tantamount to review of his own decision. Section 147, even after amendment does not authorise the Assessing Officer to reopen assessment under the garb of ‘reason to believe’ for reviewing his own decision. In our considered view, this is a case where the Assessing Officer by applying his mind to the same set of facts has changed his opinion and change of opinion is not permissible for reopening even under the amended provisions of section 147. Assessing Officer has not brought any fresh/new material on record, neither any fresh information received. It is a case of absence of jurisdiction for Assessing Officer to initiate proceedings under section 147/148 and in the absence of jurisdiction reassessment so framed is illegal and void. In the case of law cited by ld. AR, it has been held that reopening by mere change of opinion on same set of facts is not permissible. On the facts of the case and in view of our above discussion, we hold that reassessment framed by the Assessing Officer in this case is invalid and illegal. Therefore, we confirm the order of the CIT(A) to the extent it holds that the reassessment made was illegal and void and cancel the reassessment so made.
6. Since we have held that reassessment made is illegal and void, therefore, the other ground No. 3, extracted above, does not survive and becomes infructuous. Accordingly, we are not going into merits of this issue.
7. In the reassessment the appeal is dismissed.