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2015 (7) TMI 297 - GUJARAT HIGH COURT

2015 (7) TMI 297 - GUJARAT HIGH COURT - [2015] 376 ITR 419 (Guj) - Validity of reopening of assessment - payment of purchase price in excess to the SMP - petitioners are Sugarcane Factory Societies - Held that:- In absence of any allegation in the notice under Section 148 of the Act that there was any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, considering first proviso to Section 147 of the Act, the assumption of jurisdiction is a .....

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rice of sugarcane more than the SMP. It is required to be noted that in all these cases the assessments were completed under Section 143(3) of the Act after holding necessary inquiry by the Assessing Officer. It also appears that the inquiry was made and the issue was gone into detail. It is also required to be noted that in some of the cases the practice of paying more prices to the cane growers than the SMP declared by the Government has been consistently followed since many years and the same .....

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se of Shri Satpuda Tapi Parishar SSK Ltd. (2010 (1) TMI 117 - SUPREME COURT ). However it is required to be noted that once at the time of original assessment under Section 143(3) of the Act the Assessing Officer after applying the mind accepted the return, thereafter reopening of the assessment can be said to be on mere change of opinion of the Assessing Officer and as per the catena of decisions of the Hon'ble Supreme Court as well as this Court mere on change of opinion of the Assessing Offic .....

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than the total price comprising the minimum sugarcane price fixed under clause (3) and the additional price determined under sub-clause (2) or subclause (3) as the case may be of Clause 5A. Therefore, even in the Control Order itself there is a reference to the additional purchase price which can be more than the purchase price fixed under clause (3). However, as observed hereinabove, in a given case after holding inquiry if it is found that the purchase price paid in excess to the SMP is so exo .....

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sustained and the same deserves to be quashed and set aside. - Decided in favour of assessee. - Special Civil Application Nos.17870, 17773, 18784, 18785, 18787 & 18795 of 2014, 2362, 2364, 2368, 2371, 2373, 2375, 2638, 2641, 4446, 4448, 3676, 3678, 3682, 3684, 5009 & 5011 of 2015 - Dated:- 12-6-2015 - M. R. Shah And S. H. Vora, JJ. For the Appellant Rep by: Mr J P Shah, Mr Manish J Shah, Mr BS Soparkar, Advs. For the Respondent : Mr Sudhir M Mehta & Mr KM Parikh, Advs. JUDGMENT (Per : Honou .....

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f respective assessment years. [2.0] That for the sake of convenience all these petitions can be bifurcated into two groups. One group in which the reopening has taken place beyond the period of 4 years from the end of the concerned / relevant assessment year and another group in which the reopening has taken place within the period of 4 years from the end of the concerned/relevant assessment year. The statement of particulars with respect to each petitioner falling under the first group and sec .....

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ri Khand Udyog Mandli Ltd. 6 18795/2014 2007-08 Shree Madhi Vibhag Sahkari Khand Udyog Mandli Ltd. 7 2638/2015 2007-08 Shree Maroli Vibhag Khand Udyog Sahkari Mandli Ltd. 8 2639/2015 2007-08 Shree Sahkari Khand Udyog Mandli Ltd. 9 4446/2015 2007-08 Shree Vadodara Dist. Coop. Sugarcane Growers Union Ltd. 10 4447/2015 2008-09 Shree Vadodara Dist. Coop. Sugarcane Growers Union Ltd. 11 3676/2015 2007-08 Khedut Sahakari Khand Udyog Mandli Ltd. 12 3677/2015 2008-09 Khedut Sahakari Khand Udyog Mandli L .....

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Khand Udyog Mandli Ltd. 4 2369/2015 2009-10 Shree Kamrej Vibhag Sahkari Khand Udyog Mandli Ltd. 5 2370/2015 2009-10 Shree Sayan Vibhag Sahkari Khand Udyog Mandli Ltd. 6 2371/2015 2009-10 Shree Coper Co­op. Sugar Ltd. 7 2373/2015 2009-10 Shree Madhuva Pradesh Sahkari Khand Udyog Mandli Ltd. 8 2375/2015 2010-11 Shree Mahuva Pradesh Sahkari Khand Udyog Mandli Ltd. 9 2640/2015 2009-10 Shree Maroli Vibhag Khand Udyog Sahkari Mandli Ltd. 10 2641/2015 2009-10 Shree Sahkari Khand Udyog Mandli Ltd. .....

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ted more particularly when the basic facts in each of the petitions are common / similar. [3.1] Facts leading to the Special Civil Application No.17870/2014 in nut-shell are as under: [3.2] That the petitioner - assessee is a co-operative society manufacturing sugar out of sugarcane supplied by its members and has been assessed to tax under the Act for last several years. That the assessee filed its return of income for AY 2007-08 on 23.10.2007 declaring NIL income after set off of brought forwa .....

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ment of income atleast of ₹ 44,90,71,133/-on account of the original assessment. [3.4] That immediately on receipt of the said notice under Section 148 of the Act, the petitioner - assessee vide communication / letter dated 31.03.2014 requested to treat the original return of income under Section 139(1) of the Act filed on 23.10.2007 as the return of income filed in response to the notice under Section 148 of the Act. Simultaneously, the petitioner - assessee also requested to supply the c .....

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e respondent by a letter dated 30.06.2014, raising objections against reopening of the assessment for AY 200708 stating inter alia that at the time of original assessment proceedings, all the relevant facts were disclosed to the Assessing Officer who passed a regular assessment order under Section 143(3) of the Act; that on identical facts, similar/identical assessments have been made for past decades; that apart from the farmers, the petitioner - assessee has other two types of members being Ge .....

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the last day of the accounting year regarding which an entry came to be passed because the assessee is following mercantile system of accounting which tallies with the subsequent actual payment. It was also submitted that the Statutory Minimum Price (hereinafter referred to as "SMP") declared by the Government under Sugar (Control) Order, 1966 (hereinafter referred to as "Control Order") is only the minimum price payable by the sugar factory and therefore, any payment made i .....

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red by the Government under the Control Order whether the society had really passed on the profits to its members in the form of payment of final price and thereafter the Assessing Officer had held that there was no such passing of a profit. It was submitted that therefore even Rule of Constituency would also demand that the department in a later year should not somersault. It was also further submitted on behalf of the assessee that as such there was no failure on the part of the petitioner - a .....

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h, learned Advocate has appeared on behalf of the respective petitioners - assessees in Special Civil Application Nos.17870/2014, 17773/2014, 18784/2014, 18785/2014 18787/2014, 18795/2014, 2362/2015, 2364/2015, 2368/2015 to 2371/2015, 2373/2015, 2375/2015 and 2638/2015 to 2641/2015 and Shri B.S. Soparkar, learned Advocate has appeared on behalf of the petitioners - assessees in Special Civil Application Nos.3676/2015 to 3678/2015, 3682/2015 to 3684/2015 and 5009/2015 to 5011/2015. [4.1] Shri Sud .....

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nd the SMP declared by the Government and the Assessing Officer is of the opinion that the difference between the actual price paid to the cane growers and the statutory minimum price is not the price of sugarcane but is distribution of profits and that the amount paid to the cane growers in excess to the SMP declared by the Government is passing of the profit/distribution of profits and that there has been escapement of income to the extent of excess amount paid i.e. the amount paid in excess t .....

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ing of the profits. Submissions made by learned Advocates appearing on behalf of the respective petitioners - assessees in the cases where the reopening is beyond the period of 4 years [4.3] Shri J.P. Shah, learned Advocate appearing on behalf of some of the assessees has vehemently submitted that the impugned notices to reopen the concluded assessment beyond the period of 4 years is absolutely illegal, invalid and not justifiable. It is further submitted that the condition precedent for assumpt .....

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cases it is alleged in the notice that there was any failure on the part of the assessee to disclose fully or truly all necessary material for assessment. It is submitted that therefore the assumption of jurisdiction to reopen the assessment in the present case is wholly without jurisdiction. In support of his above submissions, Shri Shah, learned Advocate appearing on behalf of the assessees has relied upon the following decisions of this Court. 1. Austin Engineering Co. Ltd. v. Joint Commissi .....

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ssing Officer has reopened the completed assessment on the basis of the subsequent judgment of the Hon'ble Supreme Court in the case of Deputy Commissioner of Income Tax v. Shri Satpuda Tapi Parishar SSK Ltd. reported in [2010] 326 ITR 42 (SC). It is vehemently submitted by Shri Soparkar, learned Advocate appearing on behalf of some of the assessees that there cannot be any reopening beyond the period of 4 years on the basis of the subsequent Supreme Court decision and that too without whisp .....

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Deputy Commissioner of Incometax 360 ITR 496 (Guj.) [5.1] It is further submitted by Shri Soparkar, learned Advocate appearing on behalf of some of the assessees that even the reasons which have been recorded by the Assessing Officer by no stretch of logic lead a prudent person to form a reason to believe that the income has escaped assessment. It is further submitted that it is mandatory that "reason to believe" must necessarily show, indicate and communicate why and for what grounds .....

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of income and should not be extraneous or irrelevant, otherwise they will be considered as invalid since they do not meet the statutory preconditions/prerequisites. In support of his above submissions he has relied upon the following decisions of the Delhi High Court. 1. Commissioner of Income-tax-V v. Orient Craft Ltd. (2013) 354 ITR 536 (Del) 2. G.S. Engineering & Construction Corporation v. Deputy Director of Income-tax (International Taxation) & Ors. 357 ITR 335 (Del) [5.2] It is fu .....

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ot; that the income chargeable to tax has escaped assessment. It is submitted that Assessing Officer does not have any jurisdiction to review its own order, and that, the opinion formed by the Assessing Officer, on the opinion of another Assessing Officer, could not be made basis to initiate the reassessment proceedings, as it can be described to be "borrowed satisfaction". In support of his above submissions, he has heavily relied upon the decision of the Rajasthan High Court in the c .....

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. It is submitted that in the present case the Assessing Officer has solely and simply reiterated "that CIT(Appeals)'s findings" in order to held in the case of the assessee before this Court that the income has escaped assessment in the case of these / present assessees. It is submitted that therefore such borrowed satisfaction in the absence of any application of mind and any real finding in the case of the assessee do not constitute valid reason to believe that the income has es .....

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ed upon the following decisions. 1. Commissioner of Income-tax v. Solapur District Co-op. Milk Producers & Process Union Ltd. 315 ITR 304 (Bombay) 2. Commissioner of Income-tax v. Mehsana District Co-op. Milk Producers Union Ltd. 282 ITR 24 (Guj.) 3. Commissioner of Income-tax v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd. 301 ITR 191 (Bombay) [5.5] It is further submitted by Shri J.P. Shah, learned Advocate appearing on behalf of some of the petitioners that infact there was no tangible .....

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rial whatsoever before the Assessing Officer that what was the prevailing price paid to the cane growers by other co-operative societies at the relevant time and/or whether the price paid in excess to the SMP declared by the State under the Control Order was so exorbitant and/or too excessive which can be said to be passing of the profit and/or distributing the profits. It is submitted that any amount paid in excess to the SMP declared by the State under the Control Order ipso facto cannot be sa .....

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as such the SMP declared by the State under the Control Order is the minimum price to be paid by the society to the concerned cane growers. It is submitted that therefore every payment or price paid to the cane growers in excess to the SMP cannot be said to be per se passing of the profits and/or distributing the profits and chargeable to tax as alleged by the Assessing Officer. [5.6] It is submitted that in any case without any allegation by the Assessing Officer that there was any failure on t .....

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within 4 years is also absolutely illegal, impermissible and wholly without jurisdiction, as the same is solely on the basis of change of opinion by the concerned Assessing Officer. It is vehemently submitted that the foundation of the reasons to believe escapement of income is on mere change of opinion without any tangible material. It is submitted that on mere change of opinion the reopening of the assessment is not permissible as held by the Hon'ble Supreme Court in the case of Commission .....

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inquiry was made and the issue was gone into detail and once having taken the facts and circumstances into consideration and formed an opinion and thereafter assessment was concluded, thereafter it is not open for the Assessing Officer to reopen the same due to change of opinion. It is submitted that when assessee's claim was processed at length and after calling for detail explanation same was accepted, merely because certain element or angle was not in the mind of Assessing Officer while a .....

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of this Court. 1. Cliantha Research Ltd. v. Deputy Commissioner of Incometax (2013) 35 taxmann.com 61 (Gujarat) 2. Sarla Rajkumar Verma v. Assistant Commissioner of Incometax (2014) 43 taxmann.com 372 (Gujarat) 3. Niko Resources Ltd. v. Assistant Director of Incometax (2015) 51 taxmann.com 568 (Gujarat) [6.2] Shri Shah, learned Advocate appearing on behalf of some of the petitioners has further submitted that even in the case of most of the petitioners co-operative societies for number of decade .....

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o ascertain whether any part of the price paid was not the price but was part of profit to the cane growers and the Assessing Officer in consequential orders for these years did not make any addition by disallowing part of the price, and therefore, for all the succeeding years also, the entire price paid came to be allowed in case of all sugar mills, the way it was allowed in all the years in past. It is submitted that therefore on the principle of Rule of Consistency the Assessing Officer is no .....

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case of General Motors India Ltd. v. Deputy Commissioner of Income-tax reported in (2013) 354 ITR 244 (Guj.) and another decision in the case of Sahkari Khand Udyog Mandal Ltd. v. Assistant Commissioner of Income-tax reported in (2015) 370 ITR 107 on the aforesaid ground even within a period of 4 years, the reopening is not valid. [6.3.1] It is submitted that in the presence case the reopening of the assessment is beyond the period of 4 years and therefore, there must be a failure on the part o .....

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ss loss and depreciation allowance revealed that the brought forward unabsorbed depreciation of ₹ 12,32,03,579/-(before set off from current year's profit) includes unabsorbed depreciation of ₹ 7,80,40,419/- pertaining to the period prior to AY 1997-98. Since the unabsorbed depreciation for the period prior to AY 1997-98 was allowed to be carry forward & set off for eight assessment years only, as per provisions of Income Tax Act, set off of the unabsorbed depreciation pertai .....

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996-97 and AY 1997-98 to AY 2008-09)".It is submitted that therefore, on the second reason also the reopening of the assessment is not permissible so far as aforesaid two Special Civil Applications are concerned. [6.4] Shri Shah, learned Advocate appearing on behalf of petitioners of Special Civil Application Nos.17875/2014 and 18787/2014 has submitted that the third reason for reopening of the assessment in the aforesaid two cases is with respect to wrong calculation under section 145A of .....

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t. In this case, the assessee society has wrongly calculated adjustment u/s.145A. The correct working u/s.145A is as under..". It is submitted that therefore even the Assessing Officer concedes that all facts were on record but the Assessing Officer who passed under Section 143(3) assessment order committed an error in accepting the calculation of the petitioner. It is submitted that on the aforesaid the reopening of the assessment beyond 4 years is not permissible. [6.5] It is submitted th .....

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5 has also vehemently submitted that in the aforesaid cases the reopening of the assessment which is beyond the period of 4 years is not permissible as the reopening is solely on mere change of opinion of the Assessing Officer. It is submitted that the issues / reasons on which the assessment is sought to be opened were as such considered in detail by the Assessing Officer while passing 143(3) assessment order in detail. Making above submissions and relying upon the above decisions, learned Advo .....

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submitted that in the facts and circumstances of the case and more particularly when the notices under Section 148 of the Act have been issued and the assessments have been reopened on recording the reasons and having satisfied that the income chargeable to tax has been escaped, it is requested not to entertain the present petitions at this stage. [7.1] It is vehemently submitted that when the State Government declared the final purchase price under the Control Order after due procedure as requ .....

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cane after finalizing its account profits in the financial year subsequent to procurement of sugarcane and till the time of finalization of purchase price, adhoc payments are distributed amongst the sugarcane farmers. It is submitted that the sugar purchase price is declared after arriving at a profit earned by the society during the year of procurement of sugarcane. It is submitted that thus the adhoc payments and final payments contained the element of profit of the society, which has been dis .....

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further submitted that as such the SMP is finalized by the Central Government on the recommendation of the expert panel which considers the cost of production of sugarcane + adequate profit margin of farmers and profit margin of the sugarcane companies. It is submitted that the SMP is a fair price determined to protect the interest of the farmers as well as the sugarcane factories and applies uniformly to the co-operative sugar factories and privately owned sugar factories across India. It is su .....

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sorbed loss pertaining prior to AY 1997-98 and since the unabsorbed depreciation for the period prior to AY 1997-98 was allowed to be carried forward and set off for 8 assessment years only, as per the provisions of the Act, set off of the unabsorbed depreciation pertaining to period prior to 1997-98 is allowed and set off against the income of AY 1997-98, was incorrect and required to be withdrawn. It is submitted that failure to do so has resulted in incorrect carry forward of unabsorbed depre .....

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s have challenged the impugned notices under Section 148 of the Act reopening the assessment for respective assessment years and the assumption of jurisdiction under Section 147 of the Act. [8.1] As observed hereinabove as such this group of petitions can be bifurcated into two groups. One group in which the reopening of the assessment for respective AYs is beyond the period of 4 years and second group in which the reopening of the assessment is within the period of 4 years. [8.2] Now, so far as .....

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elief that any income chargeable to tax has escaped assessment for any assessment year. As per the first proviso to Section 147 of the Act, assessment can be reopened under Section 147 of the Act after expiry of 4 years only if the assessee had failed to make a return under Section 139 of the Act or in response to the notice issued under Section 142(1) or Section 148 of the Act, he failed to disclose truly and fully all material facts necessary for the assessment. Once all the primary facts were .....

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, a perusal of the reasons recorded show that there is not even a whisper to the effect that income has escaped assessment on account of any failure on the part of the petitioner assessee to disclose fully and truly all material facts necessary for its assessment. The reasons recorded to reopen the assessment reads as under: REASONS RECORDED TO REOPEN THE ASSESSMENT "The assessee engaged in the manufacturing and selling of sugar and its bye products and Absolute alcohol filed its return of .....

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rd and set off of Business losses and Unabsorbed depreciation attached with the Return of Income that the assessee had set off Business loss of ₹ 1,15,65,482/- and Unabsorbed depreciation of ₹ 2,18,71,543/- (Total ₹ 3,34,37,025/-) against the current year income of ₹ 3,34,37,025/-. Scrutiny of statement of unabsorbed business loss and depreciation allowance revealed that the brought forward unabsorbed depreciation of ₹ 12,32,03,579/-(before set off from current year .....

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n incorrect carry forward of unabsorbed depreciation to the tune of ₹ 7,80,40,419/- on which short levy of tax works out to ₹ 2,34,09,125/- (Potential) as per working provided hereunder: Brought forward as on 01.04.2006 (A.Y. 2007-08) Business loss Unabsorbed depreciation A.Y. Amount (Rs.) A.Y. Amount (Rs.) 2006-07 1,15,65,482/- Prior to 1997-98 7,80,40,419/- 1999-2000 31,13,019/- 2004-05 1,03,99,994/- 2006-07 3,16,90,147/- 12,32,03,579/- Set off in A.Y. 2007-08 1,15,65,482/- Set off .....

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ward 2,32,91,617 Actual carry forward allowed in original Order 10,13,32,036 Excess/Incorrect carry forward 7,80,40,419 The correct carry forward of unabsorbed depreciation after set off from balance profit of A.Y. 2007-08 worked out to ₹ 2,32,91,617/-. Further, it was noticed from the statement of computation of income filed along with Return of Income that the assessee had disallowed depreciation amounting to ₹ 1,82,00,000/- debited to Profit and Loss account of Sugar Unit, whereas .....

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has come to notice during the course of assessment proceedings in the cases of sugarcane growers that the co-operative sugar factories of South Gujarat are following a practice of deciding the purchase price of sugarcane after finalization of its accounts and its profits in the financial year subsequent to procurement of sugarcane. Till the time of finalization of the purchase price, adhoc payments are distributed amongst the sugarcane farmers. The final purchase price is declared after arrivin .....

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, 1966' made by the Central Government, by virtue of the powers vested with it under 'The Essential Commodities Act, 1955'. By this order, fixation of a Statutory Minimum Price (SMP) by the Central Government every year, for every sugar factory, came into place. This price is fixed as per the recommendations of the Commission for Agricultural Costs and Prices, after consulting the State Governments, associations of sugar industries and sugarcane growers and after considering all fact .....

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uring of sugar by a co-operative society is not eligible for any kind of deduction u/s.80P of the Act and the entire profits earned from such activity is liable to be taxed. During the course of assessment proceedings, made in the cases of M/s. Shree Chalthan Vibhag Khand Udyog Sahakari Mandli Ltd. and M/s. Shree Khedut Sahakari Khand Udyog Mandli Ltd., it was seen that those sugar factories had purchased sugarcane over and above the Minimum Support Price (MSP)/Fair and Remunerative Price (FRP) .....

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d on any formula or working. Generally, it is a trade practice that the purchase price is decided before the actual purchase of the commodity. In this case, the amount to be paid to sugarcane suppliers is neither before the crushing season nor during the crushing season. This practice of deciding the cane price after the end of crushing season at the time of finalization of their accounts, was being followed by them so that these sugar factories comes to know of the profits earned by it in that .....

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st its members, in the guise of 'cane price'. It is also noted that a sugar unit cannot pay purchase price for sugar cane below the SMP/FRP decided by the Central Government. Thus, it is reasonable to consider that in absence of any purchase price fixed by the co-operative sugar factories for sugar cane, it would be reasonable to adopt the SMP/FRP as the purchase price. The case of the assessee for the year under consideration was also perused from this angle. It was seen that the assess .....

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ve society has made excess payment of ₹ 349.65/- (1332.15982.5) per Metric tons. Since the total purchases of the assessee for the year is 1049359.71 M.T., the excess payment made during the year to its members works out to ₹ 36,69,08,623/- (349.65 x 1049359.71). The provisions of section 37(1) strengthened by several judicial pronouncements, like that in the cases of M/s. Rambahadur Thakur Ltd. vs. CIT (Kerala High Court), Travancore Titanium Products Ltd. vs. CIT (1966) 60 ITR 277 .....

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theory states that income that is taxable under the Income Tax Act is the income computed on ordinary commercial principles but subject to provisions of the Act. On these considerations, what is taxable in the case of the assessee is its commercial profits prior to its distribution to the members in the guise of 'Final Cane Price' and the same cannot be allowed as expenditure either under ordinary commercial principles or under the Income Tax Act and the excess payment of ₹ 36,69,0 .....

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sment. Therefore, on the facts of the case, the case of your concern for A.Y. 2007-08 has been reopened for reassessment of such income to tax, which has escaped assessment." [8.4] In the case of Aayojan Developers v. Income-Tax Officer reported in (2011) 335 ITR 234, where no foundation was laid in the reasons for reopening assessment that there was failure on the part of the assessee to disclose fully and truly all material facts and nothing was brought on record and by filing of affidavi .....

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of this Court while considering its decisions in the case of Gujarat Lease Financing Limited (supra), has observed and held in paragraph Nos.16, 17 and 27 as under :- 16. The Assessing Officer is authorized to make reassessment in the event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment 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 .....

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t of inference "factual or legal", which requires to be drawn by him alone. 17. Once the case of the assessee is covered by the 1st proviso to section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material 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, afte .....

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by way of affidavit of the Assessing Officer, then also, the revenue has failed to point out as to in what manner there has been non-disclosure on the part of the assessee." 27. From the ratio that can be culled out from all these decisions, it is amply clear that the Assessing Officer, who is authorized to issue notice under section 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 .....

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would be the responsibility of the Assessing Officer. Once having revealed from the record that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error earlier on the part of the Assessing Officer 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 .....

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e period of four years, are not permissible and the same cannot sustain and on that ground alone, the impugned reassessment proceedings deserve to be quashed and set aside." [8.5] Under the circumstances and in absence of any allegation in the notice under Section 148 of the Act that there was any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, considering first proviso to Section 147 of the Act, the assumption of jurisdiction is .....

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price of sugarcane more than the SMP. It is required to be noted that in all these cases the assessments were completed under Section 143(3) of the Act after holding necessary inquiry by the Assessing Officer. It also appears that the inquiry was made and the issue was gone into detail. It is also required to be noted that in some of the cases the practice of paying more prices to the cane growers than the SMP declared by the Government has been consistently followed since many years and the sam .....

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he case of Shri Satpuda Tapi Parishar SSK Ltd. (Supra). However it is required to be noted that once at the time of original assessment under Section 143(3) of the Act the Assessing Officer after applying the mind accepted the return, thereafter reopening of the assessment can be said to be on mere change of opinion of the Assessing Officer and as per the catena of decisions of the Hon'ble Supreme Court as well as this Court mere on change of opinion of the Assessing Officer, reassessment pr .....

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section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April , 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jur .....

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sess. But reassessment has to be based on fulfillment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible materia .....

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omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated October 31, 1989 [(1990) 182 ITR (St.) 1, 29), which reads as follows: "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. A number of represent .....

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Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however remain the same." [9.2] Even otherwise it is required to be noted that the reasons to believe must necessarily show, indicate and communicate why and on what grounds / cause any income has escaped assessment. Reasons recorded must be ger .....

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ent under the Control Order and therefore, the difference between the same is distributing the profits and therefore, the income liable to tax has escaped assessment. However, mere payment of cane price paid in excess to the SMP cannot by ipso facto and/or per se can be said to be distributing the profits. There must be tangible material available with the Assessing Officer, such as the amount or cane price paid to the cane growers in excess to the SMP either is exorbitant or too excessive and i .....

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assessment on the aforesaid ground, there must be some tangible material available with the Assessing Officer to have a reasonable belief and/or form such an opinion and in that case only the reassessment is permissible. At this stage it is required to be noted that as such the SMP declared by the Government, declared under the Control Order is as such in the larger interest of the cane growers and so as to see that the cane growers are not exploited and therefore, it is mandated that the sugar .....

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t date would constitute an expenditure under Section 37 of the Act and whether such differential payment would, applying the real income theory, constitute an expenditure or distribution of profits, the Assessing Officer is required to take into account the manner in which the business works, resolutions of the State Government, the modalities and the manner in which SAP and SMP are decided, the timing difference which will arise on account of the difference in the accounting years etc. Therefor .....

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e and/or conducted by the Assessing Officer before having a reasonable belief and/or forming an opinion that the income chargeable to tax has escaped assessment on the aforesaid ground. [9.3] At this stage it is required to be noted that in some of the cases the Assessing Officer has formed an opinion on the basis of the order passed by the learned CIT (Appeals) which were pursuant to the order of Hon'ble Supreme Court in the case of Shri Satpuda Tapi Parishar SSK Ltd. (Supra). However, it i .....

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ped assessment. Under the circumstances on the aforesaid ground also the impugned reassessment proceedings within 4 years and beyond 4 years deserves to be quashed and set aside. [9.4] At this stage even the provisions of Sugarcane Control Order, 1966 are also required to be referred to. Clause 3 provides for minimum price of sugarcane payable by the producer of the sugar and it provides that the Central Government may, after consultation with such authorities, bodies or associations as it may d .....

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sugar; and (e) the recovery of sugar from sugarcane. It is also required to be noted that even the Control Order provides for additional price for sugarcane purchased and it also further provides that no additional price determined under sub-clause (2) or sub-clause (3) of Section 5A shall become payable by a producer of sugar who pays a price higher than the minimum sugarcane price fixed under Clause (3) to the sugarcane growers, provided that the price so paid shall in no case be less than th .....

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