Nishant Exports vs Commissioner of Income Tax

C.N. Ramachandran Nair, J

This is an appeal filed by the assessee challenging the order of the Income Tax Appellate Tribunal upholding re-assessment completed u/s 147 of the Income Tax Act (hereinafter referred to as the Act for short) for withdrawing excess deduction granted on export profit u/s 80HHC of the Act. We have heard learned counsel appearing for the assessee and learned Standing Counsel appearing for the Department.

The return filed by the assessee for the assessment year 2000-2001 was accepted by issuing intimation u/s 143(1) of the Act. However Assessing Officer later noticed that the exemption claimed on export profit is not in terms of Section 80HHC of the Act as amended by Finance Act No. 2 of 2005 with retrospective effect from 01/04/1998.

Since the amendment squarely applies to the assessment year in question which is for the year 2000-2001, the Assessing Officer revised the assessment limiting the exemption to the extent permissible under the amended provisions of the Act. The assessee challenged the revised assessment in appeal before the first appellate authority both on jurisdictional aspect that is on validity of reassessment and on merits. The appellate authority upheld the revised assessment and in the second appeal filed, the Tribunal also confirmed the reassessment. It is against this order, the assessee has filed this Appeal before us.

After hearing both sides, we do not find any substantial question of law arising on the validity of the reassessment completed u/s 147 of the Act which is upheld by the two appellate authorities including the Tribunal because all the authorities have followed the principles laid down by the Supreme Court in the decision in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., . The Supreme Court after referring to the amended provisions of Section 147 clearly held that even though regular assessment was not completed u/s 143(3), the Assessing Officer is entitled to reopen and bring to tax escaped income, which includes excess relief granted in the original assessment. In this case, admittedly, deduction on export profit claimed by the assessee and that got allowed in the intimation issued by the Assessing Officer on the return filed was not in terms of the amended provisions of the Act. This is because the assessees export turnover was above Rs. 10 crores and the amended provisions of Section 80HHC are applicable. The computation of eligible export profit for deduction u/s 80HHC in reassessment is seen made strictly in accordance with the amended provisions of the Act. Even though learned counsel for the assessee has relied on the decision of the Supreme Court in Commissioner of Income Tax Vs. Max India Ltd., what we notice is that the Honourable Supreme Court in that case considered the scope of Section 263 under which the order impugned was issued by the Commissioner of Income Tax. The Hon''ble Supreme Court held that the amendment by retrospective effect cannot make an assessment order already passed based on existing law as one prejudicial to the interest of the Revenue. In this case, the appellant assessees export turnover was above Rs. 10 crores, and so much so, in order to be eligible for deduction u/s 80HHC on the export profits reckoning benefit under Duty Entitlement Pass Book (DEPB) Scheme, the assessee has to satisfy the two conditions referred to in the said Section. Admittedly, the assessee has not satisfied the conditions stated therein, which entitles it to reckon DEPB benefit received for the purpose of deduction u/s 80HHC of the Act. Since deduction on export profit over the limit eligible under the Section was granted in the original assessment order, the Assessing Officer invoked Section 147 and revised the assessment withdrawing relief granted u/s 80HHC on DEPB benefits. The Hon''ble Supreme Court has in the above referred decision explained the scope of Section 147 by stating that the only condition for reopening of assessment is that the Assessing Officer should have reasonable belief that income chargeable to tax has escaped assessment. Excess relief granted is squarely covered by the scope of Section 147 and the assessee also has no case on merits that the deduction granted in re-assessment is not in accordance with the amended provisions of Section 80HHC of the Act. We, therefore do not think there is any scope for interference with the order of the Tribunal upholding the validity of reassessment completed u/s 147 of the Act. So far as the case on merit is concerned, the assessee has no case that recomputation on export profit u/s 80HHC is not in accordance with the provisions of the Act applicable for the relevant assessment year.

Therefore, we do not find any merit in the appeal and the same is accordingly dismissed.