TMI Blog2013 (5) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... n record to support the finding of the CIT(A) that the manufacturing activity was being undertaken at the Delhi unit. Rather, if so, that would imply a change in the nature of the operations at the Delhi unit after the transfer of its entire machinery to the Noida unit in October, 2003. As such, its accounts should bear and reflect the said change, i.e., pre and post 01.10.2003 when the machinery gets transferred. No such case is made out by the Revenue at any stage while the operations of the Delhi unit appear to continue in the same manner. Continuing further, it may well be that the machinery was used by the Delhi unit prior to 01.07.2003, when the assessee firm comes into existence. Nothing has been brought on record by the Revenue to the effect that the nature of the activity at the Delhi unit had witnessed a change after 01.07.2003 or roundabout. Rather, the only inference, in the absence of any adverse or contrary material or finding, would be of a continuity of operations. The fact that the address of the Delhi branch, as stated in the purchase bills of machinery which is at variance with its actual address, as evidenced from other materials, viz. invoices and letter-he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption under section 10A in respect of the profits of the Noida Unit at Rs. 195.75 lacs, i.e., besides, deduction u/s. 80HHC at Rs. 32,56,193/- in respect of the export profits from its other two units i.e., at Mumbai and Delhi, for the said assessment year. Both these claims were subject matters of dispute; the matter getting settled on the assessment u/s. 143(3) read with section 254 of the Act on 29.11.2010, with the claim u/ss. 10A and 80HHC being allowed at Rs. 171.62 lacs and Rs. 30.23 lacs respectively, assessing the total income at Rs. 1,20,71,890/- (PB pages 48 - 62). Thereafter, notice under section 148 of the Act was issued on 31.03.2011 for AY 2004-05, after recording reasons for escapement of income from assessment on 29.03.2011. The assessee, it was claimed thereby, had wrongly claimed exemption u/s. 10A for the reason that, as apparent from the balance-sheet of the Noida Unit, the said Unit had no plant and machinery of its own. It was formed by the transfer of machinery worth Rs. 1.00 lac from the Delhi Unit. The said claim was, therefore, not admissible in view of s. 10A (2)(iii), and to that extent there had been an escapement of income chargeable to tax (PB p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to strictly construed. Section 10A(2)(iii) stipulates, as one of the qualifying conditions, employment of new plant and machinery in setting up of an eligible unit thereunder. In the instant case, the entire machinery of the Noida Unit was as transferred from the Delhi Unit. In fact, the application for the setting up of the Noida unit was itself moved only on 05.09.2003, while the machinery stands purchased in May, 2003 i.e., months prior to the conception of the Noida unit. As such, to state that the machinery was purchased only for the Noida unit was misleading, which Unit was formed only with old machinery. The assessee's claims were, accordingly, rejected. Aggrieved, the assessee in second appeal. 3. Before us, the assessee has raised several legal issues, including with regard to the non-issue of notice under section 143(2), by way of (an additional) ground no. 1, i.e., apart from contesting the disallowance of deduction u/s. 10A on merits. Though the issue qua non-service of notice u/s. 143(2) is being raised for the first time, the matter is legal, going to the root of the matter inasmuch as the same (non-service of the said notice) renders the assessment u/s. 143(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment on grounds of non-adherence to proper procedure (Ground No. 4), as well as non- satisfaction of the qualifying condition for a valid issue of notice u/s. 148 (Ground Nos. 2 and 3). We shall take up the assessee's Ground No. 4 first. The AO, it is claimed thereby, having not disposed of its preliminary objections vide letter dated 08.11.2011, i.e., to the issue of notice u/s. 148, the ensuing assessment u/s. 147 is bad in law. We are unable to, for the reasons that follow, accept the assessee's claim in this regard. The reasons were recorded on 29.03.2011, and notice u/s. 148 issued and served on 31.03.2011 (PB page 7). The assessee was, thus, thereby put to notice that the Revenue considers that there has been an escapement from assessment of income chargeable to tax for that year, and has proceeded in the matter. The assessee could have requested for a copy of reasons recorded at any time thereafter on complying with the notice u/s. 148, which it does vide letter dated 06.04.2011. However, it does not do so, and makes a request to the AO only on 02.11.2011 vide letter dated 01.11.2011, i.e., seven months later, which though was immediately accepted and complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial facts necessary for the assessment for that year. In this regard, we find that the reasons recorded refer to the assessee's balance-sheet as the source of the information as to the Noida Unit being established with the transfer of machinery from its Delhi Unit. It is on this basis that it is inferred that the new, Noida Unit has been formed by transferred machinery used previously for any other purpose, violating the condition of s. 10A(2)(iii). We consider the said inference as not improper inasmuch as a transfer of machinery from one unit, already in existence, to another unit, being newly set-up, would give rise to a normal presumption of the said machinery being either surplus, so that the existing operations could be carried out undisturbed without it, or on transfer of locus of the operations from one unit to another. Either way, the normal presumption would be of the said machinery being in use. The Revenue has in fact drawn this presumption from the information on record in issuing the notice u/s. 148. At the same time, as we shall presently see, the information of it having not been used prior to its transfer, stands also mentioned in the same balance-sheet, and equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviously either by the assessee, or any other for that matter, and which again is not the case. 6.2 As regards the requirement of the disclosure being full, i.e., apart from being true, the same no doubt reflects and bears on both the qualitative as well as the quantitative aspect of the 'disclosure'. The requirement has to be reasonably construed, as otherwise no amount of disclosure would be considered as 'full'; there being always a possibility of some more information, which could degenerate into an exercise of indefinite scope, and which cannot be. In our view, the circumscription in this regard flows from the words 'all material facts necessary for the assessment, for that assessment year' following the prescription of the words 'disclose fully and truly' in the relevant provision, i.e., first proviso to sec. 147. As such, the completeness of the disclosure is to be adjudged from the stand-point of being 'material' and, two, 'necessary' for the assessment of income. Clearly, the return of income is to be with reference to the provisions of law and, thus, section 10A, among others, in the instant case. The completeness of the disclosure would therefore have to be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertiary facts. Rather, drawing proper inference could have led to an inquiry in the matter qua user; the assessee disclosing the fact of the unit being set-up by an inter- unit transfer of machinery, which was not done during the course of the ensuing assessment proceedings. In our view, therefore, there has been full and true disclosure of all the material and relevant facts and, thus, a proper disclosure by the assessee in terms of the first proviso to section 147. The assessment in the first instance being u/s. 143(3), the impugned notice could thus have been valid issued only within four years from the end of the relevant assessment year, i.e., by 31.03.2009. Though both the parties have relied on case law in support of their respective cases on this aspect, we do not consider it relevant; the issue being principally factual, and our determination being based on findings of fact, to advert thereto. We decide accordingly. The assessee succeeds on its ground no. 3 and, resultantly, the reassessment for A.Y. 2004-05 is not legally valid. 7. The assessee's ground no. 2, assailing the assessment for A.Y. 204-05 on the basis of change of opinion, is in view of the acceptance of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts. In fact, the order u/s. 143 r/w s. 254 dated 29.11.2010 (PB pages 59-62) also does not bear any reference to this aspect. The matter in appeal, it may be appreciated, pertained to the quantification of deduction u/s. 10A, while the issue in reference concerns the very eligibility of the asessees's Noida unit to deduction u/s. 10A of the Act. Change of opinion, barring reassessment, as the assessing authority cannot review his order, could only be if there has been an examination of and an expression of view in the matter. We are unable to accept the assessee's claim in this regard, which is again based on findings of fact, so that reference of case law relied upon by both the parties is rendered of little moment. The assesse's relevant ground is, therefore, dismissed. We decide accordingly. 8. We may, next, consider the issue on merits. This becomes particularly relevant in view of the assessment for the A.Y. 2009-10, also in appeal along with. 8.1 Before we proceed to discuss the same, we may at the outset, state some of our preliminarily observation/findings. Firstly, the materials at Sr. Nos.10 11 of the assessee's paper-book for A.Y. 2004-05, being a certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of responding to the audit query in August, 2010, i.e., when this aspect was taken up by the Revenue for the first time, has continuously maintained that the gold ornaments for its Mumbai and Delhi branches are got made from Karigars on job work basis. That the Noida unit is it's only manufacturing facility, whereat, apart from some nominal labour charges, expenses in the form of wages and electricity stand incurred. Further, the entire machinery of the Delhi unit was transferred to the Noida unit, and the same was used for the first time only at the 'transferee' unit; the transferor (Delhi) unit being a trading unit. The Revenue brings nothing on record to meet or rebut this clarification, which is consistent with the disclosure made per the return, as well as the assessee's accounts. We find nothing on record to support the finding of the ld. CIT(A) that the manufacturing activity was being undertaken at the Delhi unit. Rather, if so, that would imply a change in the nature of the operations at the Delhi unit after the transfer of its entire machinery to the Noida unit in October, 2003. As such, its accounts should bear and reflect the said change, i.e., pre and post 01.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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