TMI Blog2010 (6) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the basis on which it was claiming a deduction under Section 80IB in respect of the VREPII project. The attention of the Assessing Officer was specifically drawn to the basis of the claim. – an assessment can not be reopened on the ground that Assessee did not disclosed the facts – The facts show that there was a due application of mind by the Assessing Officer upon a full and true disclosure being made by the assessee of the relevant facts. – Notice issued u/s 147 set aside. - 2513 OF 2009 - - - Dated:- 18-6-2010 - DR.D.Y.CHANDRACHUD J.P.DEVADHAR, JJ. Mr. Percy J. Pardiwala, Senior Advocate with Mr. Atul K. Jasani for the Petitioner. Mr. Vimal Gupta for the Respondents. JUDGMENT (Per DR.D.Y.CHANDRACHUD, J.): 1. Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2. An assessment for Assessment Year 2002-03 has been sought to be reopened under Section 147 of the Income Tax Act, 1961 beyond the period of four years of the end of the Assessment Year, by the issuance of a notice of 23 March 2009. The issue which falls for determination in these proceedings is as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture or produce any article or thing within the meaning of the statutory provision since it is engaged only in processing, involving the mixing of lube based stock and additives. Not being engaged in manufacture, the Petitioner is held not to be entitled to the deduction under Section 80IB (4). 5. On behalf of the Petitioner learned counsel submitted that (i) The reopening of the assessment having taken place beyond the period of four years of the end of Assessment Year 2002-03 the validity of the action would depend upon whether there was a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment; (ii) The record before the Court would show that on each of the three issues, the Petitioner had fully and truly disclosed all the material facts necessary for the assessment; (iii) During the course of the assessment proceedings a notice was issued to the Petitioner under Section 142(1) on 19 February 2004 to which a detailed reply was submitted on 24 June 2004 and it was only thereafter that an assessment was framed under Section 143(3) on 21 March 2005; (iv) On each of the three issues the Petitioner had disclosed that a ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made in respect of the newly established industrial undertakings commissioned from financial year 1992-93 to the financial year 2001-02. During the year 1999-2000 a major expansion took place of the Vizag refinery by which the capacity of the refinery was expanded. The Petitioner claimed that the profits made by the expanded unit were eligible for deduction for seven consecutive years under Section 80IB (a). No claim was made for Assessment Years 1999-2000 and 2000-01 since the expanded unit did not generate profits. During the year in question the expanded unit had contributed to the profits to the extent of Rs.138.47 Crores and accordingly a deduction was claimed. The tax audit report under Section 44AB was annexed to the return as is mandatorily required by law. The nature of the deductions claimed under Section 80IA and 80IB was explained in the annexures. The deduction under Section 80IA on the CPP was claimed at Rs.86.37 lacs, on the Lube Blending Plant at Silvassa under Section 80IB at Rs. 14.44 Crores and under Section 80IB on the VREPII project of Rs.138.47 Crores. 9. For facilitating exposition, it would now be appropriate to deal with each one of the three issues o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f steam in the cogeneration of power and steam in the captive power unit resulted in savings, the assessee considered that to be its income in the profit and loss account of the CPP at the Vizag refinery. 10. During the course of the assessment proceedings a notice was issued to the assessee under Section 142(1) on 19 February 2004 in which a specific disclosure was sought inter alia in respect of the following: "In Note no. 4 of the Notes to the return of income, you have claimed relief u/s. 80IA, 80IB on LPG Bottling Plants (Rs.297.70 lakh), Captive Power Plant (86.37 lakh), Propylene Recovery Unit (Rs.330.43 lakh) and Lube Blending Plant (Rs.144.87 lakh) and Visakh Refinery Expansion Phase II (Rs.13847.28). You are caused to justify the claim on LPG Bottling Plants and to how bottling plants are manufacturing units. Similarly, to justify your claim on Captive Power Plant, Propylene Recovery Unit, Lube Blending Plant and Visakh Refinery Expansion Phase II. In this regard you are also requested to furnish complete, working for deductions u/s. 80IA/80IB for each of the above units and method of allocation of H.O. Expenses including interest, R D, etc. to all these units." 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an inference cannot be drawn since the record before the Court would show that as a matter of fact there was a full and true disclosure. Besides this, the attention of the Court has also been drawn to the circumstance that a similar claim of deduction under Section 80IA has been consistently made and allowed in the case of the assessee since 1990-91. The record before the Court inter alia contains an application for rectification made by the assessee on 31st March, 1999 in respect of a deduction inter alia under Section 80IA on the CPP units of the Mumbai and Vizag refineries, the profit and loss account for the Vizag refinery for 1995-96 which contains a similar computation of income including the saving in LSHS and an order dated 6 April 1999 passed under Section 154 by the Joint Commissioner of Income Tax, Special Range 56 Mumbai. For all these reasons were are of the view that the first issue on which the assessment is sought to be reopened, the Revenue has failed to establish a case for the reopening of the assessment beyond four years. 13. The second issue on which the assessment is sought to be reopened is that a claim under Section 80IB was made in respect of the VREPII ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice of reopening stated that the Lupe Unit at Silvassa does not manufacture any article or thing, but merely carries out the activity of processing. Here as well, the assessee by its letter dated 24 June 2004 had explained before the Assessing Officer, the basis on which a deduction under Section 80IB was claimed. The relevant disclosure in the letter dated 24 June 2004 was to the following effect: "We wish to submit that the activity of blending lubricating oils is an activity amounting to manufacture since the activity results in producing a new product different from the Base Oils used in the process. As per Central Excise Act and Rules even an activity of labeling, relabelling, repacking of lubricating preparations have been defined to amount to manufacture. ... We submit that our claim of deduction for the profits made by the Lube Blending Plants have been accepted by the Assessing Officer in the earlier Asst. Years." 16. The Assessing Officer while framing the issue under Section 143 had observed thus: "In respect of the Lube Blending Plant at Silvassa this is the third year of the claim. It is seen that deduction claimed on the Captive Power Plants product recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X
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