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2015 (8) TMI 570 - GUJARAT HIGH COURT

2015 (8) TMI 570 - GUJARAT HIGH COURT - TMI - Reopening of assessment - Valuation of closing stock - Adjustment under section 145A - inclusion of duty of excise / cenvat credit - Held that:- A.O. made addition on account of adjustment under section 145A of the I.T. Act and the same came to be deleted by the learned CIT(A), thereafter it is not open for the A.O. to reopen the assessment on the same ground. Considering the aforesaid facts and circumstances of the case, it cannot be said that the a .....

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is Court in the case of Niko Resources Ltd. (2014 (9) TMI 892 - GUJARAT HIGH COURT) as well as Gujarat Lease Financing Limited (2013 (10) TMI 101 - GUJARAT HIGH COURT), to the facts of the case on hand and as observed hereinabove, there does not appear to be any 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 .....

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sessee. - Special Civil Application No. 3485 of 2015 - Dated:- 8-4-2015 - M. R. Shah And S. H. Vora,JJ. For the Petitioner : Mr Hardik V Vora, Adv. For the Respondent : Mr Sudhir M Mehta, Adv. JUDGMENT (Per : Honourable Mr. Justice M. R. Shah) 1.00. By way of this petition under Article 226 of the Constitution of India, the petitioner - assessee has prayed for appropriate writ, order and/or direction to quash and set aside the impugned notice dated 15/11/2013 issued by the respondent department .....

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with tax audited report under section 44AB of the Act. 2.02. That the case was selected for scrutiny assessment. That during the assessment it was found that the assessee did not make any adjustment as required under section 145A of the Act. 2.03. That during the assessment proceedings, the assessee was asked to explain as to why the adjustment as required under section 145A of the Act should not be made and added to the total income. 2.04. That from the original assessment order, it appears tha .....

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half of the assessee and made addition of ₹ 28,94,837/- on account of adjustment under section 145A of the Act. It appears that feeling aggrieved and dissatisfied with the order passed by the A.O. making addition of ₹ 28,94,837/- made on account of adjustment under section 145A of the Act and other additions, the assessee preferred appeal before the learned CIT(A) and by order dated 28/6/2011 the learned CIT(A) allowed the said appeal and deleted addition of ₹ 28,94,837/- made .....

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titioner submitted objection to the reassessment proceedings submitting that as such there was on failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment and therefore, the assumption of jurisdiction for reopening of the assessment is absolutely illegal and invalid. It was further submitted that in fact the adjustment under section 145A of the Act was specifically dealt with by the A.O. while passing original assessment order and in fact the A. .....

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tion under Article 226 of the Constitution of India challenging the impugned notice under section 148 of the Act which has been issued for reassessment of the proceedings for the A.Y. 2008- 2009. 3.00. Mr.Hardik Vora, learned advocate appearing on behalf of the petitioner - assessee has vehemently submitted that the ground for reopening of the assessment is completely misconceived and baseless. It is submitted that in the present case reassessment proceedings have been initiated after a period o .....

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provided as and when sought and/or required by the Assessing Officer and the same was scrutinized by the Assessing Officer. It is submitted that therefore, now having allowed the claim, it is not open to the respondent - Assessing Officer to reopen the assessment, merely for the recomputation taking a different view on the same material available with him. 3.02. Mr.Hardik Vora, learned advocate appearing on behalf of the petitioner - assessee has further submitted that in the present case assess .....

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her observing that not following provisions of section 145A of the Act had resulted in under-assessment of Income of ₹ 97,83,767/-. 3.03. Mr.Hardik Vora, learned advocate appearing on behalf of the petitioner - assessee has further submitted that as such the case was selected for scrutiny. That the assessee was specifically asked to explain as to why the adjustment as required under section 145A of the Act should not be made and added to the total income. It is submitted that in response t .....

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inalizing the original assessment came to be challenged by the assessee before the learned CIT(A) and the learned CIT(A) vide order dated 28/6/2011 allowed the appeal preferred by the petitioner assessee and deleted even the additions made by the A.O. on account of adjustment under section 145A of the Act. It is submitted that thereafter it is not open for the A.O. to reopen the assessment on the grounds which in fact were dealt with by the A.O. as well as learned CIT(A). It is submitted that on .....

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sions and request to quash and set aside the impugned reassessment proceedings. 3.05. Mr.Vora, 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 Gujarat Lease Financing Limited Versus Deputy Commissioner of Income Tax, Circle-IV, Ahmedabad dated 24/6/2013 passed in Special Civil Application No. 3048 in support of his submissions that the initiation of the impugned reassessment proceedings .....

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od of valuation of closing stock, and thereby suppressed the income for the year under consideration, which is contrary to section 145A of the Act which clearly mandated that the valuation of the stock should be done by inclusive method, which means component of tax, cess, duty etc. should be included in addition to the cost of input and it was found that there was underassessment of ₹ 97,83,767/- and therefore, by recording the reasons, and after obtaining appropriate approval from the co .....

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ssessment made under section 143(3) of the Act wherein addition was made in respect of excise duty, however, CENVAT credit was not taken into consideration while finalizing the original assessment. It is submitted that therefore, the assessment has been reopened, which cannot be said to be mere change of opinion. Submitting accordingly, it is requested to dismiss the present petition. 5.00. Heard the learned advocates appearing on behalf of the respective parties at length. 5.01. At the outset, .....

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l it is observed 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 / justified to reopen the assessment even in the event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per the first proviso to section 147, assessment can be reopened under section 147 after expiry of 4 years o .....

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essee and there remained no 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. 5.02. Now, in the backdrop of the above legal provisions, challenge to the impugned reassessment proceedings are required to be considered. 5.03. In the present case, reassessment proceedings under section 147 of the Income Tax for the A.Y. 2008-2 .....

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77; 5,58,24,910/-. 2. Scrutiny of the assessment records revealed that the assessee followed exclusive method for accounting CENVAT as against inclusive method mandated u/s.145A of the Act. The profit and loss account was exclusive of Excise duty on purchases, closing stock of raw material and finished goods but inclusive of Excise duty on sales. In completing the assessment, A.O. made an addition of ₹ 28,94,837/- on account of difference on inclusion of Excise duty. However, it was observ .....

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by an amount of ₹ 97,83,767/- i.e. net of opening and closing balance of unutilized CENVAT credits of ₹ 43,26,420/- and ₹ 1,41,10,187/-, respectively. Not following the provisions of Sec.145A of the Act resulted in underassessment of income of ₹ 97,83,767/-. 3. In view of the above, I have reason to believe that there is escapement of income of more than ₹ 1 Lac in the hands of assessee which is required to be taxed by re-opening the assessment u/s.147 of the I.T. A .....

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mitted its explanation as under :- "The assessee is following exclusive method of accounting but for the purpose of adjustment u/s 145A of the Income Tax Act we enclose herewith the details required by you. We would further like to inform that the Sales is inclusive of Excise Duty whereas purchases, closing stock of raw materials / finished goods, opening stock of raw materials / finished goods are excluding excise duty. Further to inform that excise duty is higher on purchases whereas rate .....

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came to be challenged by the assessee before the learned CIT(A) and the learned CIT(A) deleted the aforesaid addition of ₹ 28,94,837/- made by the A.O. on account of adjustment under section 145A of the I.T. Act. Under the circumstances, it cannot be said that there was any failure on the part of the assessee in disclosing the truly and fully all material facts necessary for adjustment. 5.05. Even otherwise, once the A.O. made addition on account of adjustment under section 145A of the I. .....

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tances, the condition precedent for invoking powers under section 147 of the Income Tax Act to initiate reassessment proceedings beyond the period of 4 years are not at all satisfied. 6.00. Identical question came to be considered by the Division Bench of this Court in the case of Niko Resources Ltd. (supra) and while considering the scope and ambit of powers to be exercised under section 147 of the Income Tax Act by the Assessing Officer, while reopening the assessment beyond the period of 4 ye .....

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iry 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 disclosure. All inferences of facts and legal inference need to be drawn by the Assessing Officer. It is not for any one to guide t .....

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terial facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Ltd. (supra), has held thus: "10. 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 assessee. Assuming that in the notice for reopening. such wordings are not specifically mentioned and they can be supplemented either whi .....

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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 truly all material facts necessary for the purpose of such assessment. The onus is on the assessee to reveal the primary facts and .....

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