This appeal of Revenue and cross-objections by assessee have been filed against order of CIT(A), Jalandhar for asst. yr. 2002-03. Since issues raised in appeal filed by Revenue and cross-objections of assessee are interrelated and arise from same order of CIT(A), these were heard together and are being disposed of by this consolidated order for sake of convenience. First, we take up cross-objections filed by assessee, where following grounds have been taken: "1. That order of CIT(A) is well reasoned on law and facts of case. That even on merits disallowance of deduction under s. 80-IB is wrongly made by AO. AO has gravely erred in deducting amount of DEPB including premium on sale of DEPB from profit and gains of business of undertaking. That grounds of Appeal No. 3 does not arise from order of learned CIT(A). That deduction under s. 80-IB and s. 80HHC have been rightly claimed by assessee. That assessment was wrongly reopened by AO under s. 147 of IT Act. That respondent requests for leave to add or amend any ground of appeal before cross-objection is heard and disposed off." At outset, learned counsel for assessee, Sh. Sudhir Sehgal, requested to withdraw cross-objections filed by assessee. learned Departmental Representative did not raise any objection to request of learned counsel. Therefore, cross-objections filed by assessee are dismissed as withdrawn. We now take up appeal filed by Revenue, where following four effective grounds have been taken: "1. That, learned CIT(A) has erred in holding that AO could not travel beyond reasons recorded for reopening assessment and thereby striking down partial disallowance made out of claim for deduction under s. 80-IB. That, learned CIT(A) has failed to appreciate that AO can assess n y other income which comes to his notice during reassessment proceedings. That, learned CIT(A) has failed to give effect judgment of jurisdictional High Court in case of Liberty India vs. CIT (2007) 207 CTR (P&H) 243 wherein Court has held that deduction under s. 80-IB is not allowable on duty drawback and other incentive. learned CIT(A) has further erred in not taking note of decision of jurisdictional High Court in case of CIT vs. Smt. Aruna Luthra (2001) 170 CTR (P&H) 73: (2001) 252 ITR 76 (P&H) to effect that even if decision of jurisdictional High Court on certain point is rendered after decision of CIT(A)/Tribunal is contrary to said decision of High Court, it would be case of mistake apparent from record which can be rectified under s. 154. That, on facts and in circumstances of case, learned CIT(A) has erred in law in vacating finding of AO to restrict deduction claimed by assessee under s. 80HHC by amount under s. 80-IB. While allowing aforesaid relief, learned CIT(A) has failed to appreciate legal provisions of s. 80-IB(13) r/w s. 80-IA(9) of Act." relevant material facts leading to this appeal are that assessee had filed return declaring therein income of Rs. 17,52,669 on 30th Oct., 2002. return was processed under s. 143(1) and assessment was not made under s . 143(3). Subsequently, AO noticed that in return of income filed, assessee had claimed deduction under ss. 80HHC and 80-IB of Income-tax Act, 1961 (in short "the Act") in respect of business income computed as per provisions of Act. AO referred to provisions of sub-s. (13) of s. 80-IB r/w sub-s. (9) of s. 80-IA as per which deduction allowed under these sections was required to be reduced from business for purpose of allowing deduction under any other provisions of Chapter VI-A (deduction under s. 80HHC in present case). Thus, AO was of view that amount of deduction allowed under s. 80-IB was to be reduced from profits for purpose of computing deduction under s. 80HHC. He, therefore, initiated proceedings under s. 147 of IT Act, 1961 on 10th Nov., 2004 by issue of notice under s. 148. In response to said notice, assessee filed return of income declaring same income as shown in original return. Thereafter, notice under s. 143(2) of Act was issued. During course of reassessment proceedings, AO also noticed that assessee had claimed deduction under s. 80-IB of Act without reducing amount received as DEPB and duty drawback from profits as according to him such receipts were not profits derived from industrial activities of undertaking. He was of view that assessee had claimed excess deduction under s. 80-IB. He also relied on two judgments of Hon ble Supreme Court in case of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439: (1999) 237 ITR 579 (SC) and Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99: (2003) 262 ITR 278 (SC) and judgment of Hon ble Delhi High Court in case of CIT vs. Ritesh Industries (2004) 192 CTR (Del) 81: (2005) 274 ITR 324 (Del). Thus, AO held that assessee w s not entitled to deduction in respect of DEPB receipts amounting to Rs. 1,63,85,511 and duty drawback of Rs. 55,54,245 both aggregating to Rs. 2,19,39,756. Accordingly, AO reduced these amounts from profits and computed deduction under s. 80-IB, @ 25 per cent of profit of industrial undertaking determined at Rs. 1,26,69,75. In this manner, deduction under s. 80-IB was allowed at Rs. 31,67,439. Further, AO reduced amount of deduction allowed under s. 80-IB from profits of business and worked out deduction under s. 80HHC at Rs. 2,10,37,027. In this manner, AO completed assessment under s. 143(3) r/w s. 147 at total income of Rs. 1,04,05,050. Aggrieved, assessee filed appeal before CIT(A), where action of AO for initiating reassessment proceedings was inter alia challenged. It was submitted that action of AO amounted to mere change of opinion and, therefore, reopening of assessment on such basis was illegal and bad in law. It was submitted that earlier AO had submitted reply to audit party stating that DEPB and duty drawback were to be considered as part of profit of industrial undertaking and, therefore, assessee was entitled to deduction under s. 80-IB. Reliance was placed on certain decisions of Tribunal, Amritsar Bench, where it was held that reassessment proceedings can confine only if reopening of assessment on ground mentioned in reasons recorded by AO is found to be valid. Further, it was argued that AO had initiated proceedings under s. 147 on ground that deduction under s. 80HHC was liable to be reduced after reducing deduction allowed under s. 80-IB from profits in view of provisions of s. 80-IB(13) r/w s. 80-IA(9) o f Act. It was submitted that proceedings under s. 147 have not been initiated on ground that DEPB and duty drawback did not constitute profit from industrial undertaking. assessee had relied on decision of Tribunal, Amritsar Bench, in case of Upkar International in ITA No. 559/Asr/2004 and some other decisions of CIT(A) where it was held that for purpose of computing deduction under s. 80HHC, deduction allowed under s. 80-IB was not to be reduced from profits of business. only condition was that deductions allowed under ss. 80HHC and 80-IB should not exceed gross total income computed as per provisions of Act before allowing deductions under these sections. Thus, it was submitted that reassessment proceedings initiated by AO could not continue because ground for which such proceedings were initiated no longer survive. Relying on judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P&H), it was argued that reassessment proceedings cannot continue, if ground on which such proceedings were initiated was found to be incorrect. Thus, it was submitted that since ground for which proceedings were initiated did not survive, no addition in respect of exclusion of DEPB receipts and duty drawback for purpose of allowing deduction under s. 80-IB could be made by AO. learned CIT(A) considered these submissions and observed that assessment has been reopened by AO only on basis of applicability of provisions of s. 80-IB(13) r/w sub-s. (9) of s. 80-IA of Act. In reasons recorded, AO has not mentioned that assessee was not entitled to deduction under s. 80-IB in respect of DEPB and duty drawbacks. Earlier AO had sent reply to AO that assessee was entitled to deductions under s. 80-IB in respect of these items of income. Therefore, action of AO to withdraw such deductions in respect of these items of income tantamounted to change of opinion. Therefore, such action was not valid. He further observed that it has been held by Tribunal that deduction allowed under s. 80-IB is not to be reduced from profits for purpose of allowing deduction under s. 80-IB. Therefore, action of AO for reopening assessment on ground mentioned in reason no longer survives. That being so, reassessment proceedings cannot continue for making disallowance of deduction under s. 80-IB in respect of DEPB receipts and duty drawback. He particularly relied on decision of Tribunal, Amritsar Bench in case of D.D. Cotton (P) Ltd. vs. Asstt. CIT, Cir. II, 7, Bhatinda in ITA No. 555/Asr/2004 for asst. yr. 1999-2000, where it was held that if ground on which assessment was reopened is found to be incorrect, reassessment proceedings cannot continue. Thus, learned CIT(A) allowed appeal of assessee by recording following findings in impugned order: "I have considered submissions of appellant, findings of AO as incorporated in order, submissions of AO and have gone through copy of reasons recorded by AO which led to initiation of proceedings under s. 148 of IT Act in case of appellant. I have also gone through information available on case records. It is gathered from record that before resorting to action under s. 148 of IT Act assessment in case of appellant was completed under s. 143(1) of IT Act and said fact is material in light of arguments of appellant on issue of change of opinion. It is also seen that assessment was reopened by AO only on basis of applicability of provisions of s. 80-IB(13) r/w sub-s. (9) of s. 80-IA of IT Act. From reasons so recorded it is obvious that issue of DEPB and duty drawback was not one of reason for reopening assessment. It is also important to mention here that audit query was raised wherein it was objected that receipt on account of DEPB and duty drawback cannot be said to be attributable to business of industrial undertaking but said objection was rejected by AO by mentioning that said receipts are attributable to business of undertaking directly and case cited at Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50: (1978) 113 ITR 84 (SC) was distinguished and reference was invited by AO to decision reported at Dy. CIT vs. Metro Tyres Ltd. (2001) 79 ITD 557 (Del) which according to AO was direct case on issue. In view of reply furnished by AO one fact becomes obvious that said issue had already attained finality and due to this reason it was not made part of reasons at time of reopening of case as per reasons recorded by AO. Thus, herein, I find substance in arguments of appellant that assessment framed by invoking this issue again amounts to change of opinion and situation herein gets covered by decision of Hon ble jurisdictional High Court in cases reported at Vipan Khanna vs. CIT (2002) 175 CTR (P&H) 335: (2002) 255 ITR 220 (P&H) and Amrinder Singh Dhiman vs. ITO (2004) 192 CTR (P&H) 351: (2004) 269 ITR 378 (P&H) and prior to amendment of s. 148 by decision of Hon ble apex Court in case reported at CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209: (1992) 198 ITR 297 (SC) wherein it was adjudicated that AO cannot start inquiries on issues which have already attained finality. It is mentioned here that case of appellant prior to reopening was completed under s. 143(1) of IT Act but even said situation gets covered by decision of Hon ble Punjab & Haryana High Court in case reported at (2002) 175 CTR (P&H) 335: (2002) 255 ITR 220 (P&H) (supra) that it makes no difference whether assistant proceedings have become final on account of framing of asset under s. 143(3) of IT Act or on account of non-issuance of notice under s. 143(2) of IT Act within stipulated period. It was further held that amendment made under ss. 143(3) and 147 of IT Act w.e.f. 1st April, 1989 do not in any manner negate this preposition of law as enunciated by Hon ble Supreme Court in case reported at (1992) 107 CTR (SC) 209: (1992) 198 ITR 297 (SC) (supra). It was held by Hon ble Tribunal, Amritsar Bench in case of D.D. Cotton (P) Ltd., by order dt. 12th Aug., 2005 bearing ITA No. 36/Asr/2003 that if assessment had been opened on one issue and no addition had been made on that issue reassessment proceedings comes to end and no further addition can be made on any other issue. Hon ble jurisdictional Tribunal while holding so referred to decision of Hon ble Punjab & Haryana High Court in case reported at CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P&H). It is not case that any new facts were brought on record after original assessment, though completed under s. 143(1) of IT Act and in light of objection of audit party being not accepted by AO, addition made on this issue amounted to change of opinion and in this regard I find substance in submissions of appellant. proceedings before appellate authority are not subject to proceedings pending under s. 263 of IT Act whereas converse is true that if order is passed under s. 263 of IT Act in case of assessee for same assessment year, same effects pending proceedings before appellate authority. Therefore, grounds taken by appellant are allowed. Ground Nos. 4 to 4.2. pertain to merits of addition corresponding to restricted claim for deduction under s. 80-IB by excluding receipts on account of DEPB and duty drawback from profits of industrial undertaking as shown by assessee whereby claim for deduction was restricted to Rs. 31,67,439 as against claim of Rs. 85,52,378 made by assessee in return. learned Authorised Representative for assessee filed written submissions on merits of issue. In view of decision under ground Nos. 1 and 2, merits of addition are not required to be adjudicated and relevant grounds taken by appellant gets allowed. Ground No. 5 taken by appellate relates to restricting claim of deduction under s. 80HHC by amount allowed under s. 80-IB of IT Act. It is seen from order of AO that deduction under s. 80HHC was worked out at sum of Rs. 2,42,04,466 but it was allowed at sum of Rs. 2,10,37,027 after curtailing it with figure of deduction allowable under s. 80-IB of IT Act at sum of Rs. 31,67,439. learned Authorised Representative for assessee relied upon order of my learned predecessor in case of assessee for asst. yr. 2001-02 decided vide Appeal Nos. 66/2004-05/CIT(A)/Jal and also for same assessment year on order bearing Appeal Nos. 401 and 442/2004- 05/CIT(A)/Jal. learned Authorised Representative for assessee further relied on decision of Hon ble jurisdictional Tribunal in case of Upkar International decided on 20th Sept., 2006 by order bearing ITA No. 559/Asr/2004. After considering submission of appellant, I find that issue herein gets squarely covered by decision in case of Shital Fibres Ltd., decided on 29th March, 2007 bearing Appeal No. 50/2006-07/CIT(A)/Jal and following decision therein, findings of AO to restrict deduction claimed by appellant under s. 80HHC by amount allowed under s. 80-IB claimed by appellant under s. 80HHC by amount allowed under s. 80-IB is vacated. Thus, grounds taken by appellant are allowed." Revenue is aggrieved with order of CIT(A). Hence, this appeal before this Bench. learned Departmental Representative, Sh. Manjit Singh submitted that i n this case, return filed was processed under s. 143(1). AO had not completed assessment under s. 143(3) of Act. He submitted that as per provisions of s. 147 amended w.e.f. 1st April, 1989, AO has jurisdiction to assess or reassess income that has escaped assessment for which proceedings under s. 147 have been initiated and also to bring to tax any other income which has escaped assessment and same comes to his notice during course of completion of reassessment proceedings. He submitted that learned CIT(A) was not correct in relying on judgment of Hon ble Punjab & Haryana High Court in case of Vipan Khanna vs. CIT (2002) 175 CTR (P&H) 335: (2002) 255 ITR 220 (P&H) for coming to conclusion that initiating of proceedings under s. 147 was on basis of mere change of opinion. He particularly drew our attention to p. 235 of 255 ITR, wherein Hon ble High Court has clearly stated that AO is free to bring to tax any other item of income which may have escaped assessment and which comes to his notice during course of proceedings under s. 147 of Act. He submitted that only limitation imposed on his power is that AO cannot make fishing inquiries. He submitted that in present case, Hon ble jurisdictional High Court of Punjab & Haryana in case of Liberty India vs. CIT (2007) 207 CTR (P&H) 243 has already held that assessee is not entitled to deduction under s. 80-IB in respect of DEPB and other incentives like duty drawback. Therefore, there is no doubt that claim of assessee for deduction under s. 80-IB by including DEPBs and duty drawback was against law. Therefore, same represented escaped assessment of assessee. Further, relying on judgment of Hon ble Punjab & Haryana High Court (Full Bench) in case of CIT vs. Smt. Aruna Luthra (2001) 170 CTR (P&H) 73: (2001) 252 ITR 76 (P&H), it was submitted that in case where assessment was made only under s. 143(1) and subsequently there is judgment of jurisdictional High Court as per which assessee is found to be not entitled to claim made in return, same would constitute mistake of law apparent from record and same can be rectified under s. 154 of Act. He submitted that said mistake would relate back to date when particular provision giving rise to dispute was inserted in Act. Thus, he submitted that learned CIT(A) was not justified in coming to conclusion that action of AO for disallowing claim for deduction under s. 80-IB in respect of duty drawback and DEPB receipts during course of reassessment proceedings tantamounted to mere change of opinion. He further submitted that reply submitted to audit party by AO (a copy placed at p. 3 of paper book) does not amount to expression of opinion on issue. He submitted that opinion can be said to have expressed only if assessment was made under s. 143(3) and claim of assessee was examined at time of completing such assessment. Admittedly, in this case no assessment under s. 143(3) was made. He further, submitted that reply submitted to audit party is purely administrative matter and does not amount to recording of opinion by AO. Further, learned Departmental Representative submitted that as per provisions of s. 80-IB(13) r/w sub-s. (9) of s. 80-IA of Act, deduction allowed under s. 80-IB has to be reduced from business profit for purpose of working out deduction under s. 80HHC of Act. He submitted that learned CIT(A) has not decided claim of assessee on merits and has merely based his decision on ground that action of AO for initiating reassessment proceedings was based on mere change of opinion. He stated that such view is totally incorrect and untenable. Thus, learned Departmental Representative submitted that order of CIT(A) may be set aside and that of AO be restored. learned counsel for assessee, on other hand, heavily relied on order of CIT(A) and reiterated submissions made before authorities below. He drew our attention to pp. 1 and 2 of paper book, which is copy of audit objection raised by audit party. He further referred to p. 3 of paper book, which is copy of reply dt. 8th Sept., 2004 of AO to audit party where he has stated that receipts on account of DEPB and duty drawback were attributable to business of undertaking. He also relied on decision of Tribunal, Delhi Bench in case of Dy. CIT vs. Metro Tyres Ltd. (2001) 79 ITD 557 (Del). He then referred to p. 4 of paper book which is copy of reasons recorded by AO for initiating proceedings under s. 147. only reason given by AO was that deduction allowed under s. 80-IB required to be reduced from profits of business for purpose of computing deduction under s. 80HHC in terms of provisions of sub-s. (13) of s. 80-IB r/w sub-s. (9) of s. 80-IA of Act. He submitted that AO has nowhere referred to fact that DEPB receipts and duty drawback were required to be reduced from business profit for purpose of computing deduction under s. 80-IB although this fact was within his knowledge. He submitted that these reasons were recorded by AO on 10th Nov., 2004 i.e. after reply was sent to audit party on 8th Sept., 2004. Accordingly, learned Authorised Representative argued that action of AO not to allow deduction under s. 80-IB in respect of DEPB receipts and duty drawback was based on mere change of opinion and same was untenable. learned Authorised Representative further drew our attention to copy of Tribunal, Amritsar Bench s decision dt. 20th April, 2007 in case of assessee in ITA No. 590/Asr/2004 for asst. yr. 2001-02 (a copy placed at pp. 5 to 25 of paper book), where it was held that for purpose of computing deduction under s. 80HHC, deduction allowed under s. 80-IB is not to be reduced from profits of business. Thus, learned Authorised Representative submitted that basis for initiating proceedings under s. 147 no longer survives. However, his attention was drawn to decision dt. 27th April, 2007 of Tribunal, Special Bench Chennai in case of Asstt. CIT vs. Rogini Garments (2007) 111 TTJ (Chennai)(SB) 274: (2007) 294 ITR (AT) (Chennai)(SB) 15, where it has been held that deduction allowed under s. 80-IA/80-IB is to be deducted from profits and gains of business for computing deduction under s. 80HHC. copy of relevant part of ITR where this judgment has been reported was also shown to him. It is precisely for this reason that he has withdrawn cross- objections filed by assessee. As regards action of AO to deny deduction under s. 80-IB in respect of DEPB receipts and duty drawback, learned Authorised Representative submitted that this action could survive if only ground for which proceedings have been initiated is found to be correct. He relied on decision of Tribunal, Amritsar Bench in case of D.D. Cotton (P) Ltd. vs. Asstt. CIT in ITA No. 555/Asr/2004 (supra) for asst. yr. 1999-2000. copy was also placed before Bench. He further submitted that since AO had in his reply to audit party submitted that impugned receipts were attributable to industrial undertaking, subsequent action to cover these receipts tantamounted to mere change of opinion. Such action is untenable in eyes of law. He further submitted that even as per amended provisions, AO can bring to tax any other income that has escaped assessment, if it comes to his notice subsequently. He submitted that there is nothing on record to show that it came to his notice subsequently though facts on record do show that AO was aware of same even on date when he initiated proceedings under s. 147 on 10th Nov., 2004. Reply to audit was sent on 9th Sept., 2004. In rejoinder, learned Departmental Representative submitted that action of AO is to be seen in spirit of provisions of s. 147. If fact that income chargeable to tax by way of allowing deduction under s. 80-IB in respect of DEPB receipts and duty drawback also represented escaped income of assessee, same can be disallowed while completing reassessment proceedings. He submitted that it is not correct to say that such action had attained finality. We have heard both parties at some length and given our thoughtful consideration to rival contentions, gone through material and evidence placed on record as well as orders of authorities below. picture that emerges from detailed discussion of facts of case, submissions made by assessee before authorities below and findings recorded by authorities below is that return was processed under s. 143(1); that original assessment under s. 143(3) had not been made; that AO initiated proceedings under s. 147 on ground that deduction under s. 80HHC was to be computed after reducing amount of deduction allowed under s. 80-IB in terms of provisions of sub-s. (13) of s. 80-IB r/w sub-s. (9) of s. 80-IA and that during course of reassessment proceedings, AO by relying on two judgments of Hon ble Supreme Court in cases of CIT vs. Sterling Foods (supra) and Pandian Chemicals Ltd. vs. CIT (supra) observed that assessee was not entitled to deduction under s. 80-IB in respect of DEPB receipts and duty drawback and accordingly allowed claim for deduction under s. 80-IB after reducing these amounts from profits of industrial undertaking. after reducing these amounts from profits of industrial undertaking. learned CIT(A) observed that in reply sent to audit, AO had clearly mentioned that DEPB receipts and duty drawback were attributable to business of undertaking and, therefore, assessee was entitled to deduction under s. 80-IB in respect of such receipts. Accordingly, learned CIT(A) has held that subsequent action to exclude these receipts for purpose of computing deduction under s. 80-IB tantamounted to mere change of opinion and same was not permissible under law. He relied on two judgments of Hon ble Punjab & Haryana High Court in cases of Vipan Khanna vs. CIT (supra) and Amrinder Singh Dhiman vs. ITO (2004) 192 CTR (P&H) 351: (2004) 269 ITR 378 (P&H). learned CIT(A) did not record any finding on merits of such claim of assessee for deduction under s. 80-IB in respect of DEPB receipts and duty drawback. As regards issue that deduction under s. 80HHC is to be reduced after reducing amount of deduction allowed under s. 80-IB, learned CIT(A) accepted claim of assessee by relying on decision dt. 20th Sept., 2006 of Tribunal, Amritsar Bench in case of Upkar International (supra). Now Bench is required to decide whether learned CIT(A) was justified in arriving at above conclusion. Admittedly, in this case, proceedings for assessment year under consideration have been initiated under s. 147 by issue of notice under s. 148 on 10th Nov., 2004. action of AO is to be considered as per amended provisions of s. 147 of Act w.e.f. 1st April, 1989. Sec. 147 of Act confers powers on AO to assess or reassess income, if he has "reason to believe" that such income chargeable to tax has escaped assessment for that assessment year. amended provisions of s. 147 of Act are liberal and confer more power on AO for initiating reassessment proceedings. In case of Asstt. CIT vs. Rajesh Javeri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30: (2007) 291 ITR 500 (SC), Hon ble Supreme Court has recently considered scope of powers of AO for initiating action under s. 147 in case where return filed was processed under s. 143(1) and original assessment was not completed under s. 143(3). Hon ble apex Court, observed that under old provisions, if assessment was to be reopened under s. 147(a) of Act, two conditions were required to be satisfied: firstly, AO must have reason to believe that income or profits chargeable to tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of omission or failure on part of assessee to disclose fully and truly all material facts necessary for his assessment of that year. However, under amended provisions, AO can initiate proceedings under s. 147 on existence of only first condition i.e. income chargeable to tax has escaped assessment. second condition need not be satisfied. However, both conditions would be required to be satisfied in case where case is covered under proviso to s. 147, i.e. where original agreement was completed under s. 143(3) or s. 147 and action for reopening assessment is being initiated after period of four years from end of relevant assessment year. But in present case, original assessment has not been made under s. 143(3) or under s. 147. Therefore, this condition is not required to be satisfied for reopening assessment. Hon ble Supreme Court has also observed that so long as ingredients of s. 147 are fulfilled, AO is free to initiate proceedings under s. 147 and failure to take steps under s. 143(3) will not render AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued. Hon ble Supreme Court has further explained meaning of expression "reason to believe" in s. 147. It would be relevant to reproduce hereunder relevant para at p. 501 (headnotes) of 291 ITR: "The expression reason to believe in s. 147 would mean cause or justification. If AO has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. expression cannot be read to mean that AO should have finally ascertained fact by legal evidence or conclusion . What is required is reason to believe but not established fact of escapement of income. At stage of issue of notice, only question is whether there was relevant material on which reasonable person could have formed requisite belief. Whether material would conclusively prove escapement of income is not concern at that stage. This is so because formation of belief is within realm of subjective satisfaction of AO." In case of Aditya & Co. vs. CIT (2005) 195 CTR (P&H) 258: (2005) 279 In case of Aditya & Co. vs. CIT (2005) 195 CTR (P&H) 258: (2005) 279 ITR 47 (P&H),the Hon ble Punjab & Haryana High Court has held that intimation sent under s. 143(1) does not amount to assessment. mere fact that AO had not issued notice under s. 143(2) within time allowed does not debar AO for initiating proceedings under s. 147, if there is material to show that income chargeable to tax has escaped assessment Thus, position that emerges from these judgments of Hon ble Punjab & Haryana High Court and Supreme Court is that mere fact that return was processed under s. 143(1) does not debar AO from initiating proceedings under s. 147. It has also been held that processing of return under s. 143(1) in absence of examination of books of account and material does not amount to assessment and expressing opinion by AO. Therefore, doctrine o f change of opinion is not applicable to initiation of proceedings under s. 147 where return is processed under s. 143(1). Since original return is processed under s. 143(1), AO is not required to establish that income chargeable to tax has escaped assessment by reason of omission or failure on part of assessee to disclose fully and truly all material facts for that assessment year. Only first condition that there is escapement of income is required to be specified. Hon ble Supreme Court has also held that expression "reason to believe" in s. 147 only means cause or justification and falls within realm of subjective satisfaction of AO. scope of powers for initiating proceedings under s. 147 under amended provisions of s. 147 in case where original assessment was completed under s. 143(3) and AO initiated reassessment proceedings under s. 147 within period of four years from end of relevant assessment year came to be considered by Hon ble Gujarat High Court in case of Inductotherm (India) (P) Ltd. vs. James Kurian, Asstt. CIT (2007) 212 CTR (Guj) 195: (2007) 294 ITR 341 (Guj). facts of case before Hon ble Gujarat High Court were that assessee had claimed deduction under s. 80HHC at Rs. 59,86,965. At time of completing assessment under s. 143(3), AO examined claim and restricted deduction under s. 80HHC to Rs. 50,37,685. Subsequently, AO noticed that in view of judgment of Hon ble Supreme Court in case of Pandian Chemicals Ltd. vs. CIT (supra), judgment of Hon ble Kerala High Court in case of K. Ravindranathan Nair vs. Dy. CIT (2003) 181 CTR (Ker) 310: (2003) 262 ITR 669 (Ker), interest income was taxable under head Income from other sources and, therefore, same was not eligible for deduction under s. 80HHC even to extent of 10 per cent as per Expln. (baa) to sub-s. (4) of s. 80HHC. Similarly, certain other receipts like insurance claim, bad debts recovered, exchange rate fluctuation, training fees income etc. were also liable to be excluded for computing deduction under s. 80HHC. Accordingly, AO initiated proceedings under s. 147. On these facts, Hon ble High Court referred to Expln. (1) to s. 147 and observed that once AO found that income has escaped assessment and income chargeable to tax has been underassessed or such income has been assessed at too low rate or such income has been made subject of excessive relief under this Act or excessive loss or depreciation allowance or any other allowance under this Act, AO can reopen assessment provided such action is being taken within period of four years from end of relevant assessment year. Hon ble High Court observed that it does not make any difference to such action even if original assessment was completed under s. 143(3). While taking such view, Hon ble High Court also followed its earlier judgment in case of Praful Chunilal Patel vs. M.J. Makwana, Asstt. CIT (1998) 148 CTR (Guj) 62: (1999) 236 ITR 832 (Guj), where expression "reason to believe" was dealt with. relevant findings recorded at p. 840 of 236 ITR, which are as under: "8. On proper interpretation of s. 147 of Act, it would appear that power to make assessment or reassessment within four years of end of relevant assessment year would be attracted even in cases where there has been complete disclosure of all relevant facts upon which correct assessment might have been based in first instance, and whether it is error of fact or law that has been discovered or found out justifying belief required to initiate proceedings. In our view, words escaped assessment where return is filed, are apt to cover case of discovery of mistake in assessment caused by either on erroneous construction of transaction or due to its non-consideration, or, caused by mistake of law applicable to such transfer or transaction even where there has been complete disclosure of all relevant facts upon which correct assessment could have been based. As noted above, provisions of s. 147 require that AO should have reason to believe that any income chargeable to tax has escaped assessment. T h e word reason in phrase reason to believe would mean cause or justification. If AO has cause or justification to think or suppose that income had escaped assessment, he can be said to have reason to believe that such income had escaped assessment. words reason to believe cannot mean that AO should have finally ascertained facts by legal evidence. They only mean that he forms belief from examination he makes and if he likes from any information that he receives. If he discovers or finds or satisfies himself that taxable income has escaped assessment, it would amount to saying that he had reason to believe that such income had escaped assessment. justification of his belief is not to be judged from standards of proof required for coming to final decision. belief though justified for purpose of initiation of proceedings under s. 147, may ultimately stand altered after hearing and while reaching final conclusion on basis of intervening enquiry. At stage where he finds cause or justification to believe that such income has escaped assessment, AO is not required to base his belief on any final adjudication of matter." (Emphasis supplied, italicized in print, is ours) findings recorded by Hon ble Gujarat High Court are more or less similar to findings recorded by Hon ble Supreme Court in case of Asstt. CIT vs. Rajesh Javeri Stock Brokers (P) Ltd. (supra) except that in case before Hon ble Gujarat High Court, original assessment was completed under s. 143(3) and in case before Hon ble Supreme Court return was processed under s. 143(1). present case also requires to be examined in light of legal position explained above. AO has recorded following reasons for initiating proceedings under s. 147: "This is case of firm deriving income from manufacture and trading of tyres and tubes. Returns declaring total income of Rs. 17,52,669 was furnished by assessee on 31st Oct., 2002 which was processed accordingly. deduction of Rs. 86,52,378 was claimed by assessee under s. 80-IB of IT Act, 1961 on total profit of Rs. 3,46,09,513. It is seen that assessee has claimed deduction at Rs. 2,42,04,446 under s. 80HHC of IT Act, 1961. As per provisions of sub-s. (13) of s. 80-IB r/w sub-s. (9) of s. 80-IA of IT Act, 1961, deduction claimed under s. 80HHC is liable to be excluded from profits eligible for deduction under s. 80-IB. Sec. 80-IA(9) of IT Act, 1961 reads as under: (9) Where any amount of profit and gains of undertaking or of enterprise in case of assessee is claimed and allowed under this section for any assessment year, deduction to extent of such profit and gains shall not be allowed under any other provisions of this chapter under heading C- Deduction in respect of certain income , and shall in no case exceed profit and gains of such eligible business of undertaking or enterprise, as case may be. deduction under s. 80-IB allowed in excess works out to Rs. 77,01,917 chargeable to tax has escaped assessment for previous year relevant to asst. yr. 2002-03 and as such, with view to assess/reassess such escaped income and also any other income chargeable to tax which comes to notice subsequently in due course, proceedings under s. 147 are hereby initiated against assessee whereby issuing notice under s. 148 of IT Act, 1961 for said assessment year." There is no dispute about fact that assessee had claimed deduction under s. 80HHC independently without reducing amount of deduction allowed under s. 80-IB. No doubt earlier, there was some doubt as to whether both deductions are to be allowed separately or deduction under s. 80HHC is to b e computed after reducing amount of deduction allowed under s. 80-IB in terms of provisions of s. 80-IB(13) r/w s. 80-IA(9). This controversy has since been resolved by Tribunal (Special Bench) Chennai Bench in case of Asstt. CIT vs. Rogini Garments (supra), where it has been held relief allowed under s. 80-IA is to be deducted from profits and gains of business before computing deduction under s. 80HHC in terms of provisions of s. 80-IB(13) r/w s. 80-IA(9). decision of Tribunal (Special Bench) Chennai, takes precedence over decision of Division Bench and binding on all Benches of Tribunal except in case where there is contrary judgment of jurisdictional High Court or Supreme Court. In present case, there is none. Further, even if decision of Special Bench is of later date, it would relate back to date on which provisions giving rise to dispute were inserted in Act. Reliance in this regard is placed on judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Smt. Aruna Luthra (supra). Considering fact that return was processed under s. 143(1) and original assessment under s. 143(3) had not been made, AO was justified in forming reason to believe that income chargeable to tax has escaped assessment in terms of provision of s. 80-IB(13) r/w s. 80-IA(9) of Act. As regards merits of claim of assessee, issue already stands decided in favour of Revenue and against assessee by decision of Tribunal, (Special Bench) Chennai in case of Asstt. CIT vs. Rogini Garments (supra). Having regards to these facts and circumstances of case, we set aside order of CIT(A) and restore that of AO in respect of this ground. Accordingly, this ground of appeal is allowed. next aspect that requires to be decided by Bench is whether A O was justified in restricting claim of assessee for deduction under s. 80-IB by excluding DEPB receipts and duty drawback from profit of industrial undertaking for purpose of computing deduction under s. 80-IB. Undoubtedly, AO had not covered this issue in reasons recorded for initiating proceedings under s. 147. Sec. 147 of Act reads as under: "147. If AO has reason to believe that any income chargeable to tax h s escaped assessment for any assessment year, he may, subject to provisions of ss. 148 and 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section or recompute loss or depreciation allowance or any other allowance, as case may be, for assessment year concerned (hereafter in this section and in ss. 148 and 153 referred to as relevant assessment year)." (Emphasis supplied, italicized in print, is ours) bare reading of above section shows that AO has jurisdiction to assess or reassess income that has escaped assessment for which proceedings under s. 147 have been initiated and also any other income chargeable to tax which has escaped assessment which comes to his notice subsequently in course of proceedings under this section. It is true that this issue was raised by audit party. This is clear from pp. 1 and 2 of paper book. It is also true that in reply sent by AO (a copy placed at p. 3 of paper book) to audit party, AO had mentioned that DEPB receipts and duty drawback are attributable to business of undertaking. Therefore, objection was not accepted. Now question arises whether reply sent to audit party which is purely internal matter can be said to reflect opinion of AO at time of initiating reassessment proceedings. In our humble view, opinion is to be expressed in assessment order only and not in form of internal communication or correspondence exchanged with senior authorities or with audit reply. But in this case, original return filed was processed under s. 143(1) and no assessment under s. 143(3) was made. Therefore, it cannot be said that AO had expressed his opinion in regard to this issue. Be that as it may, AO did not cover this item in reasons recorded at time of initiating proceedings under s. 147 on 11th Oct., 2004 i.e. subsequent to reply sent to audit. Thus, it shows that at time of when proceedings were initiated, AO did not consider this item having escaped assessment. However, during course of proceedings under s. 147, AO referred to two judgments of Hon ble Supreme Court in cases of CIT vs. Sterling Foods (supra) and Pandian Chemicals Ltd. vs. CIT (supra) and observed that DEPB receipts and duty drawback were not profits derived from industrial undertaking, and, therefore, assessee was not entitled to deduction under s. 80-IB in respect of these items of income. This fact came to knowledge of AO after he had initiated proceedings under s. 147. Now fact that assessee is not entitled to deduction under s. 80-IB in respect of these items of receipts, it is supported by judgment of jurisdictional High Court in case of Liberty India vs. CIT (supra), where again Hon ble Punjab & Haryana High Court has relied on judgment of Hon ble Supreme Court in case of CIT vs. Sterling Foods (supra). Therefore, deduction claimed under s. 80-IB by assessee in respect of duty drawback and DEPB receipts was not admissible and represented escaped income of assessee. Therefore, such income can be brought to tax while completing reassessment even though, same was not covered in reasons recorded by AO. plea of learned Authorised Representative that fact that this was escaped income must come to notice of AO subsequently is untenable for reason that at time of initiating proceedings, AO was of view that deduction under s. 80-IB was admissible in respect of these items. However, subsequently, during course of reassessment proceedings, AO by referring to two judgments of Hon ble Supreme Court came to know that assessee was not entitled to deduction under s. 80-IB in respect of these items. This only shows that fact that such income has escaped assessment came t o his knowledge only after initiation of reassessment proceedings. As already held by Hon ble Supreme Court in case of Asstt. CIT vs. Rajesh Javeri Stock Brokers (P) Ltd. (supra), theory of change of opinion is not applicable to case where return was processed under s. 143(1). Therefore, this plea of assessee is rejected. Since reassessment proceedings were initiated within period of four years from end of relevant assessment year and original assessment was not completed under s. 143(3), AO was only required to form reason to believe that income chargeable to tax has escaped assessment and he was not required to establish that such escapement was due t o failure on part of assessee to disclose fully and truly all material facts necessary for assessment. judgment of Hon ble Supreme Court in case of Asstt. CIT vs. Rajesh Javeri Stock Brokers (P) Ltd. (supra) and judgment o f Hon ble Gujarat High Court in case of Inductotherm (India) (P) Ltd. vs. James Kurian, Asstt. CIT (supra) also supports this view. Further, in case of Srikant G. Shah vs. ITO (2007) 110 TTJ (Mumbai) 422: (2007) 108 ITD 577 (Mumbai), Tribunal, Bombay Bench has held that in case where proceedings under s. 147 have been validly initiated, AO is authorised to bring to tax any other income chargeable to tax which has escaped assessment n d which comes to his notice, subsequently, in course of assessment proceedings under s. 147; his jurisdiction is not merely confined to bringing to charge to tax, income referred to in reasons recorded by issue of notice under s. 148. In that case, Tribunal has upheld disallowance of telephone, car and salary expenses, although proceedings were not initiated for making disallowance of such expenses. Besides in case of Vipan Khanna vs. CIT (supra), Hon ble Punjab & Haryana High Court has held that AO can bring to tax any other item of income which may have escaped assessment and which comes to his notice during course of proceedings under s. 147 of Act. However, AO cannot make fishing enquiries to probe, if any other income has escaped income or not. In case under consideration, items of income i.e. DEPB receipts and duty drawback are clearly mentioned in accounts and return and same represented escaped income of assessee to extent assessee had claimed deduction under s. 80-IB by including these in profits. action of AO is in conformity with view of Punjab & Haryana High Court in case of Liberty India vs. CIT (supra). plea of learned counsel that judgment of Hon ble Punjab & Haryana High Court in case of Liberty India vs. CIT (supra) is of later date would not make any difference because in case of CIT vs. Smt. Aruna Luthra (supra), t h e Hon ble Punjab & Haryana High Court has held that once there is subsequent judgment of jurisdictional High Court or Supreme Court, same would relate back to date when provisions of Act giving rise to dispute were inserted. Hon ble Punjab & Haryana High Court has held that same would be mistake of law apparent on record for which AO would be justified to rectify such mistake under s. 154 of Act. judgment of Hon ble Punjab & Haryana High Court in case of Amrinder Singh Dhiman vs. ITO (supra) is not applicable, because in this case issue involved did not relate to making of general enquiry. issues covered are definite, specific and represent escaped income of assessee. As regards merits of disallowance of deduction in respect of these items of income, issue is squarely covered in favour of Revenue and against assessee by judgment of Hon ble Punjab & Haryana High Court in case of Liberty India vs. CIT (supra). Thus, having regard to these facts and circumstances of case and legal position discussed above, we are of considered opinion that AO w s justified in reducing deduction under s. 80-IB by excluding DEPB receipts and duty drawback from profits of business while completing reassessment. Accordingly, we set aside order of CIT(A) and restore that of AO. These grounds of appeal are also allowed. In result, appeal of Revenue is allowed and cross-objection filed by assessee is dismissed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. ASIAN EXIM INTERNATIONAL