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TIRUPATI FOAM LIMITED Versus DEPUTY COMMISSIONER OF INCOME TAX OR HIS SUCESSOR TO OFFICE & 1

2015 (5) TMI 222 - GUJARAT HIGH COURT

Reopening of assessment - accounting treatment in respect of unutilized Cenvat credit questioned - Held that:- Identical question came to be considered by the Division Bench of this Court in the case of Heavy Metal and Tubes Limited (2015 (2) TMI 820 - GUJARAT HIGH COURT) and in identical facts and circumstances of the case, the Division Bench quash and set aside the reassessment proceedings which were sought to be initiated on the very grounds on which the impugned reassessment proceedings are .....

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ted (supra) as well as Lanxess ABS Limited Now known as INEOS ABS (India) Ltd. (2012 (5) TMI 133 - Gujarat High Court), to the facts of the case on hand and as observed hereinabove, there does not appear to be failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, the initiation of the impugned reassessment proceedings which are initiated beyond the period of four years, are not permissible and the same cannot be sustained and on that ground .....

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d/or direction to quash and set aside the impugned notice issued under section 148 of the Income Tax Act, 1961 dated 23/1/2014 for the A.Y. 2009-2010, by which the Assessing Officer has reopened the assessment for the A.Y. 2009-2010. The petitioner assessee has also prayed to quash and set aside the communication / order dated 28/10/2014 (Annexure-P), by which the Assessing Officer has overruled/rejected the objections raised by the petitioner - assessee, raised against reopening of the proceedi .....

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on to furnish necessary details / documents as mentioned in the communication dated 4/2/2011, which include underutilized balance of Modvat. The petitioner assessee replied to the same vide communication dated 19/9/2011 and furnished explanation as to why underutilized balance of Modvat of ₹ 9.53 Lacs should not be added back. It was submitted that they have followed exclusive method of accountancy wherein purchase cost of raw materials were shown net of excise duty. It was submitted that .....

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atment of Modvat Credit in accounts i.e. exclusive Method and Inclusive Method. The assessee also furnished / produced detailed Write-up on account treatment for Modvat as per the Guidance Note issued by the Institute of Chartered Accountant of India. That thereafter the Assessing Officer framed the assessment and passed assessment order accepting exclusive method of accounting adopted by the assessee of utilizing balance of MODVAT credit relating to the relevant previous year. 2.03. That therea .....

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4. Hence, the petitioner has preferred the present Special Civil Application under Article 226 of the Constitution of India requesting to quash and set aside the impugned reassessment proceedings for A.Y. 2009-2010. 3.00. Mr.R.K. Patel, learned advocate appearing on behalf of the petitioner - assessee has vehemently submitted that initiation of the impugned reassessment proceedings for A.Y. 2009-2010 which is beyond 4 years, is absolutely illegal, invalid and without jurisdiction. 3.01. Mr.R.K. .....

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as such there was no failure on the part of the assessee to disclose truly and fully material facts necessary for assessment. 3.03. Mr.R.K. Patel, learned advocate appearing on behalf of the petitioner - assessee has further submitted that as such the case was selected for scrutiny assessment under section 143(3) of the Income Tax Act and before finalization of the assessment by the Assessment Officer, detailed query was sent to the assessee to submit the documents as required including the que .....

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ceedings beyond the period of four years, are not satisfied. It is submitted that as there was no failure on the part of the assessee to disclose truly and fully material facts necessary for the purpose of assessment, assumption of jurisdiction for the purpose of reopening of the assessment beyond the period of 4 years is illegal. 3.05. Mr.R.K. Patel, learned advocate appearing on behalf of the petitioner - assessee has heavily relied upon the decision of this Court in the case of Heavy Metal an .....

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of assessment on same issue without any tangible material was mere change of opinion and hence not sustainable. 3.06. Mr.R.K. Patel, learned advocate appearing on behalf of the petitioner - assessee has also heavily relied upon the decision of the Division Bench of this Court in the case of Lanxess ABS Limited Now known as INEOS ABS (India) Ltd. Versus Dy. Commissioner of Income Tax, rendered in Special Civil Application No.17530 of 2011 in support of his prayer to quash and set aside the impugn .....

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with section 148 of the Income Tax Act. 4.02. Mr.M.R. Bhatt, learned counsel appearing on behalf of the revenue has vehemently submitted that as such the present petition is filed at premature stage, as only a notice under section 148 read with section 147 of the Income Tax Act has been issued. It is submitted that in the event the petitioner assessee is aggrieved by the reassessment order, alternative efficacious remedy is available by way of an appeal to the CIT(A) and thereafter to the learn .....

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er submitted that it is not true that the petitioner had not defaulted in disclosing fully and truly all material facts necessary for the assessment. It is submitted that during the course of assessment proceedings under section 143(3) of the Income Tax Act, nowhere was the issue of inclusion of duty in the closing stock was discussed or details called for relating to this issue. It is submitted that therefore, the issue of non-inclusion of Modvat / Cenvat Credit in the closing stock was conside .....

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mitted that the Assessing Officer has noticed possible escapement of income from assessment and has recorded reasons thereof and provided the same to the petitioner and therefore, assumption of jurisdiction under section 147 read with section 148 is absolutely justified. Submitting accordingly it is requested to dismiss the present Special Civil Application. 5.00. Heard the learned advocates appearing on behalf of the respective parties at length. 5.01. At the outset, it is required to be noted .....

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rved and found that the income has escaped assessment due to the failure on the part of the assessee to disclose truly and fully all material facts for the assessment, the Assessing Officer is not authorized to make reassessment even in the event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. 5.03. As per the first proviso to section 147, assessment can be reopened under section 147 after expiry of 4 years only if (1) assessee fa .....

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o omission or failure on the part of the assessee to disclose truly and fully all material facts, initiation of reassessment proceedings beyond the period of 4 years is not permissible and shall be wholly without jurisdiction. 5.04. Now, in the backdrop of the above legal provisions, challenge to the impugned reassessment proceedings are required to be considered. 5.05. In the present case, reassessment proceedings initiated under section 147 of the Income Tax for the A.Y. 2007-2008 are initiate .....

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ble Polyrethane Foam filed return of income for A.Y. 2009-10 on 29.09.2009 declaring total income of 2,12,24,180/-. The income was assessed at 2,14,96,266/- u/s. 143(3) of I.T. Act on 31.10.2011. As derived from the 'Schedule 'J' to the Profit and Loss account, it followed exclusive method of accounting CENVAT and VAT. As per Annexure E (Showing details required under Clause-22(a) the Auditors Report in Form 3CD the details of cenvat credit availed and utilized by the Company during .....

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ounting u/s. 145A, this was to be shown as closing stock unutilized Cenvat credit . Since the assessee followed exclusive method of accounting, the unutilized balance of Cenvat Credit relating to the relevant Previous Year amounting to 16,68,767/- (Closing Balance: R5.39,53,913/- less Opening Balance: ₹ 22,85,146/-) was required to be part of the closing stock in terms of 145. But the same was not considered for computation of income and the income was arrived at without including the unut .....

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l and true disclosure of all material facts necessary for his assessment 5.06. Thus, from the aforesaid it appears that the assessment for the A.Y. 2009-2010 is sought to be reopened on the ground that since the assessee followed exclusive method of accounting system and unutilized balance of Cenvat credit relating to the relevant previous year amount to ₹ 16,68,767 (Closing Balance : ₹ 39,53,913/- less Opening Balance: ₹ 22,85,146/-) was required to be part of the closing stoc .....

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2/2011, the Assessing Officer called upon the assessee to furnish necessary informations / details. 5.08. That the assessee replied to the same vide communication dated 19/9/2011 in which in para 11, the petitioner assessee has stated as under :- With regard to explanations as to why unutilized balance of Modvat of ₹ 39.53 lacs should not be added back, the company followed exclusive method of MODVAT wherein purchase cost of raw materials are shown net of excise duty. Hence in our case, if .....

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ODVAT credit in accounts i.e. exclusive method and inclusive method. For more clarifications, we enclose herewith the detailed write up on Accounting Treatment for MODVAT as per the Guidance Note issued by the ICAI in the Annexure- A for your kind reference. 5.09. Not only that even subsequently and during the scrutiny assessment, vide communication dated 15/10/2011, the petitioner assessee also furnished the details of utinisation of unutilised Modvat. That thereafter, while framing the assessm .....

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lly all material facts necessary for assessment, condition precedent for initiation of reassessment proceedings under section 147 of the Income Tax Act beyond the period of four years are not satisfied. 5.10. Identical question came to be considered by the Division Bench of this Court in the case of decision of this Court in the case of Niko Resources Ltd. Versus Assistant Director of Income Tax, reported in (2014) 51 Taxman.com 568 (Gujarat) and while considering the scope and ambit of powers t .....

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ssessment year. As per the 1st proviso to section 147 of the Act, assessment can be reopened under section I47 of the Act after expiry of 4 years only if (1) the assessee failed to make a return under section I39 of the Act or in response to notice issued under section 142(1) or under section 148 of the Act, he failed to disclose truly and fully all material facts necessary for the assessment. Once all primary facts are before the assessing authority, no further assistance is required by way of .....

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terial facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Ltd. (supra), has held thus: "l0. It can be clearly noted from the reasons recorded that there is no mention at all of the assessee having not disclosed fully or truly material facts which were necessary for the purpose of computing the income of the assess .....

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on 148 of the Act for reassessment. on his having a reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped the assessment. However, no such action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and .....

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ficer himself or because he choose not to opine on the issue or even when he changes his mind and interprets the material or law otherwise than what was done by him. 5.11. Identical question came to be considered by the Division Bench of this Court in the case of Heavy Metal and Tubes Limited (supra) and in identical facts and circumstances of the case, the Division Bench quash and set aside the reassessment proceedings which were sought to be initiated on the very grounds on which the impugned .....

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