TMI Blog2014 (12) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... e details of purchase of trading goods exported and failure to corelate the trading export with the purchases has resulted in failure to make a true and full disclosure - the reasons for re-opening cannot be supplemented by affidavits - The reasons have to be read as they are and cannot be improved upon by filing affidavits in Ajanta Pharma Ltd. Versus Assistant Commissioner of Income-Tax And Others [2003 (11) TMI 32 - BOMBAY High Court] wherein it has been held that the petitioners have categorically stated about the disclosure of details of trading goods exported along with direct cost of purchases for the assessment year along with their return and the fact also finds corroboration from the affidavit of the Assistant Commissioner of Income Tax wherein he has made a grievance only of non-furnishing of documents in support of those details - the reasons for issuance of notice did not disclose to be borne out from the records - the so called reasons are totally flimsy, as has been contended on behalf of the petitioners, and, by no stretch of imagination, can be said to be sufficient to draw the conclusion about escapement of income which could empower the authorities to invoke powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act. The order dated 23rd March, 1999 restricted the Petitioner's claim for deduction under Section 80HHC of the Act to ₹ 9.66 Crores i.e. gross total income while assessing the Petitioner to taxable income of ₹ 1050/; (c) Being aggrieved by order dated 23rd March, 1999 the Petitioner had preferred an appeal to Commissioner of Income Tax (Appeals) (CIT[A]) in respect of claim for deduction under Section 80 HHC of the Act. The CIT[A] by order dated 9th July, 1999 allowed the appeal; (d) On 24th January, 2003, the impugned notice was issued. The reasons in support of the impugned notice reads as under: The assessee company is engaged in manufacturing of pharmaceuticals and sale in domestic market as well as export of pharmaceutics and engineering items. The return of income for assessment year 1996-97 was filed by the assessee on 30.11.1996 declaring income of ₹ 1050/-. This returned income was declared after claiming deduction u/s. 80 HHC at ₹ 12,08,74,663/-. Along with the return the assessee company had filed certificate of auditors in Form No. 10CCAC for claiming deduction u/s. 80 HHC. In this certificate the total turnover was sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment as is evident from : (i) Its Return of Income was accompanied with Computation of Income and a certificate in Form 10CCAC by an independent Accountant in respect of deduction claimed under Section 80HHC of the Act wherein the claim for deduction of ₹ 13.98 Crores and the basis for the same was tabulated and certified to be correct; (ii) The nonsetting off of losses of ₹ 31 lakhs in respect of export of manufactured goods was made clear in the computation of Income ; and (iii) During Assessment proceedings, the Assessing Officer had enquired into the claim for deduction under Section 80HHC of the Act and the same was considered while passing of an Assessment Order dated 23rd March, 1999 in regular assessment proceedings. (b) Reliance was placed upon the decision of this Court in Petitioner's own case in Ajanta Pharma Ltd., v/s. ACIT (267) ITR 200 wherein on identical ground, notices for reopening of an assessments for Assessment Years 1998-99, 1999-2000 and 2000-01 made by the Revenue, were held to be bad by this Court. The only distinction being th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... believe). An additional jurisdictional condition for reopening of an assessment beyond a period of four years from the end of the relevant assessment year is the failure to truly and fully disclose all material facts necessary for assessment. 6. In this case, admittedly the impugned notice has been issued beyond a period of four years from the end of the relevant Assessment Year. Therefore, we shall first examine the primary contention raised by the Petitioner that there is no failure on its part to disclose truly and fully all material facts necessary for assessment. The reasons in support of the impugned notice as reproduced hereinabove are the following : (i) On perusal of the record, it is noticed from the record filed by the Petitioner that the assessee had claimed higher profit on export of trading goods with reference to the ratio of trading export turnover to the total turnover; (ii) The Petitioner did not file invoicewise details of purchases of trading goods exported and did not corelate the trading export sales with invoicewise purchase of trading goods exported; and (iii) The computation of deduction under Section 80 HHC of the Act had not been determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing. Therefore, it is not accepted. Further, reliance is placed upon the affidavit in reply to submit that the invoices were not submitted. First of all, it is a settled position accepted by this Court on numerous occasions that the reasons for re-opening cannot be supplemented by affidavits. The reasons have to be read as they are and cannot be improved upon by filing affidavits. Thus, the reliance upon the affidavit is not acceptable. Besides, in any event, the same objection on the basis of affidavit and identically word was taken in reply affidavit by the Revenue in Ajanta Pharma Ltd. (supra) while dealing with the challenge to reopening for assessment for Assessment Years 1998-99, 1999-2000 and 2000-01 and this Court rejected the affidavit in following terms: A bare reading of the reasons in support of the notice disclose that the conclusion regarding escapement of the income was on the basis that nondisclosure of the invoicewise details of purchases of trading goods exported and the failure to corelate the trading export sales with invoicewise purchase of trading goods exported, whereas the affidavitinreply claims nondisclosure of the materials in support of such details. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of loss on manufactured exports as that was the prevailing understanding. In fact, it was only later that in the case of IPCA Laboratories v/s. Deputy Commissioner of Income Tax 2001 (251) ITR 401 this Court took a view that the loss in any of the two segments has to be set off against the other for the purpose of determining the deduction available under Section 80HHC of the Act. The aforesaid view is upheld by the Supreme Court in IPCA Laboratories v/s. Deputy Commissioner of Income Tax 266 ITR 521 . These decisions in no manner impact the true and full disclosure of all material facts necessary for assessment. 9. Before closing, the other objection taken by Mr. Pinto is that in letter dated 18th February, 1999 the Petitioner had stated that they do not keep different sets of accounts for manufacturing and trading activities. This was done prior to passing of Assessment Order dated 23rd March, 1999 under Section 143 (3) of the Act. We are not able to understand how the above disclosure would lead to an inference that there was a failure to disclose fully and truly all facts necessary for assessment. Thus, the impugned notice is not sustainable. 10. However, as we have held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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