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NAREN SADASHIV BURADE Versus INCOME TAX OFFICER

2015 (9) TMI 1048 - GUJARAT HIGH COURT

Validity of reopening of assessment - assessee has not fulfilled the conditions laid down in clause (II) & (III) of subsection (2) of Section 10 A of the Act, the income chargeable to the tax has escaped assessment - contention on behalf of the petitioner that as in the first assessment year i.e. assessment year 2006-07 the assessee was allowed the deduction / exemption under Section 10A and therefore, in the subsequent assessment years the assessee is eligible for deduction / exemption under Se .....

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/ reassessment and at that time, the assessee shall have ample opportunity to put forward its case. Even while disposing of the objections against reopening, the AO is not required to observe anything in detail on merits of the case and with respect to eligibility of the petitioner assessee regarding deduction / exemption under Section 10 A of the Act.

When in the respective assessment years, there were intimation under Section 143(1) of the Act and as such there do not appear to be a .....

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(II) & (III) of subsection (2) of Section 10 A of the Act have not been fulfilled and therefore, the petitioner assessee is / was not eligible for deduction/ exemption under Section 10 A of the Act and therefore, income chargeable to tax has escaped assessment, in the facts and circumstances of the case, it cannot be said that the impugned notices under Section 148 of the Act are invalid and / or wholly without jurisdiction and / or assumption of jurisdiction under Section 147 of the Act is ille .....

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58 of 2015 With SPECIAL CIVIL APPLICATION NO. 2359 of 2015 TO SPECIAL CIVIL APPLICATION NO. 2361 of 2015 - Dated:- 12-6-2015 - MR. M.R. SHAH AND MR. S.H.VORA, JJ. For The Petitioner : MR. JP SHAH, LD. ADV. FOR MR MANISH J SHAH, ADVOCATE For The Respondent : MR SUDHIR M MEHTA, ADVOCATE JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. As common question of law and facts arise in this group of petitions, however with respect to different assessment years, all these petitions are decided and di .....

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der: 3.1. That the petitionerassessee filed return of income for AY 200607 claiming exemption under Section 10 A of the Act and submitted the return of the balance of income as total income at ₹ 3,89,982/. It is the case on behalf of the petitioner that in the year 200203, the petitioner started business of software development and export. He obtained import export certificate on 28.11.2002. Thereafter, he obtained letter of permission for the same business as 100% Export Oriented Unit und .....

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d the computation of income at ₹ 3,89,982/post 10A deduction and added thereto the disallowance of expenditure of ₹ 79,604/and passed assessment order taxing income at ₹ 4,69,586/. 3.2. That thereafter with respect to subsequent AY i.e. AY 2006 to 2011 AO has mechanically allowed the exemption claimed under Section 10 A of the Act i.e. in the subsequent assessment years solely on the ground that exemption under Section 10 A of the Act was allowed in the earlier assessment year .....

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e part of the assessee within the meaning of Section 147 of the Act. 3.4. That on the request made by the assessee, the petitioner has been served with the copy of the reasons recorded for reopening of the assessment for respective assessment years 200708, 200809, 200910 and 201011. That the petitioner filed his objections against the reopening of the assessment on merits as well as on the ground that once assessee was allowed the exemption under Section 10 A of the Act in the first year, he can .....

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petitioner has preferred present Special Civil Applications under Article 226 of the Constitution of India challenging the impugned notices under Section 148 of the Act reopening the assessments for Assessment Years 200708, 200809, 200910 and 201011. 4.0. Shri J.P. Shah, learned advocate for the petitionerassessee has vehemently submitted that as such the impugned notices under Section 148 of the Act are absolutely illegal, invalid and unjustifiable. 4.1. It is submitted that formation of opini .....

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year i.e. AY 200607 which has not been challenged and / or questioned and therefore, the assessee is entitled to exemption under Section 10 A of the Act in the subsequent years and while passing the original assessment orders for AY 200708, 200809, 200910 and 201011 the AO had rightly allowed the exemption under Section 10 A of the Act in the subsequent years. It is submitted that therefore, with respect to subsequent years, it is not open for the AO to contend and / or allege that as the condi .....

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A of the Act cannot be denied and / or doubted. In support of his above submission, he has heavily relied upon the decision of the Division Bench of this Court in the case of Saurashtra Cement & Chemical Industries Ltd vs. Commissioner of Income Tax, GujaratV reported in (1980) 123 ITR 669 (Guj) as well as decision of the Bombay High Court in the case of Commissioner of Income Tax vs. Paul Brothers reported in (1995) 216 ITR 548 (B0m). He has also relied upon the recent decision of the Hon&# .....

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e decision of the Madras High Court in the case of Nagesh Chundur vs. Commissioner of Income Tax reported in (2013) 358 ITR 521 (Mad) and the decision of the Karnataka High Court in the case of Commissioner of Income Tax and Another vs. Expert Outsource Pvt. Ltd reported in (2013)358 ITR 518 (Kar). Relying upon the above decisions, it is vehemently submitted that even on merits also the AO is not justified in observing that condition nos. (II) and (III) of subsection (2) of Section 10 A has not .....

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6.1.2005 issued by the CBDT as well as to extract clause of Foreign Trade Policy 20092014 (page 59 of the petition), in support of his submission that even as per the Foreign Trade Policy, DTA units may also apply for conversion into an EOU/EHTP/STP/BTP unit and income tax benefits under Section 10 A and 10 B will be available for plant machinery and equipment already installed. It is therefore, vehemently submitted that formation of opinion by the AO and his reason to believe that the income ch .....

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rits considering the decisions cited in the objections and even circular issued by the CBDT relied upon by the assessee. Making above submissions and relying upon the above decisions, it is requested to allow the present Special Civil Applications and quash and set aside the impugned notices under Section 148 of the Act. 5.0. All these petitions are opposed by Shri Sudhir Mehta, learned advocate for the revenue. It is vehemently submitted that impugned notices under Section 148 of the Act are ab .....

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f India. 5.1. It is vehemently submitted by Shri Mehta, learned advocate for the revenue that as such it is prima facie found by the AO that in the case of assessee conditions no. (II) & (III) of subsection (2) of Section 10 A of the Act has not been fulfilled and therefore, the assessee was not entitled to exemption / deduction under Section 10 A of the Act and despite the same solely on the basis of exemption allowed under Section 10 A of the Act in the earlier year and in the subsequent y .....

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mption / deduction allowed in the assessment year 200607, however it was noticed that before any reassessment proceedings are initiated for AY 200607, time limit provided for initiation of the reassessment proceedings under the Act has expired and therefore, though the department wanted to reopen the assessment for AY 200607 because of statutory bar, the department could not reopen the assessment for AY 200607. It is submitted that therefore, with respect to subsequent years, it is always open f .....

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ed that therefore, reopening is valid and even there is no question of change of opinion arise. In support of his above submissions, he has relied upon the following decisions. (i) Raj Commissioner of Income Tax vs. Mahavir Rubber Works reported in 256 ITR 667 (Raj). (ii) Siemens Information Systems Ltd vs. Assistant Commissioner of Income Tax reported in 343 ITR 188 (Bom). (iii) Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers (P) Ltd reported in 291 ITR 500 (SC). (iv) Indu .....

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nal assessment of the assessee, was accepted under Section 143(1) of the Act without any scrutiny, condition of income having escaped assessment due to failure on the part of assessee to disclose truly and fully all material facts, is not necessarily required to be established and revenue can reopen the assessment beyond four years under Section 147 of the Act. It is submitted that as held by this Court in the case of Rhythm Chemicals (P) Ltd (supra) and Kiranbhai Jamnadas Sheth (HUF) (supra) in .....

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is submission that as observed and held by the Hon'be Supreme Court in the fiscal statute the principle of res judicata does not stricto senso apply. 5.6. It is further submitted by Shri Mehta, learned advocate for the revenue that as such while deciding the objections against reopening of the assessment, the AO is not required to enter into the merits in detail as if he is passing the assessment order. It is submitted that even in the case of GKN Driveshafts (India) Ltd vs. Income Tax Offic .....

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e opportunity to put forth his case. Making above submissions and relying upon the above decisions, it is requested to dismiss the present Special Civil Applications. 6.0. Heard the learned advocates for the respective parties at length. At the outset, it is required to be noted that in the present case assessment for 200708, 200809, 200910 and 201011 are reopened by impugned notices under Section 148 of the Act on the ground that as the assessee has not fulfilled the conditions laid down in cla .....

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claim exemption u/s. 10 A of the Act the unit should be new and independent unit. The assessee has not complied with the condition laid down in clause (III) of subsection 2 of Section 10 A of the I.T. Act. It was inter alia observed during the course of assessment proceedings for the AY 201112 that the assessee has not fulfilled condition laid down in clause (II) & (III) of subsection 2 of Section 10 A of the I.T. Act, 1961. It is noticed that during FY 200607 relevant to AY 200708, the asse .....

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at income of ₹ 3,68,736/has escaped assessment within the meaning of Section 147 of the I.T Act. It is therefore, necessary to initiate action u/s. 147 of the I.T. Act, 1961, in the case of the assessee for AY 200708. I issue notice U/s. 148 of the Act accordingly. 6.2. It is the case of the petitioner that as the exemption was granted to the assessee under Section 10 A of the Act in the first AY 200607, which is not disturbed, however in subsequent years, it is proposed to be disturbed by .....

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nt and the intimation under Section 143(1) does not amount to assessment and therefore, impugned notices under Section 148 of the Act to reopen such assessment is justified and valid. 6.3. Therefore, the short question which is posed for consideration of this Court is whether the impugned notices under Section 148 of the Act to reopen the respective assessments on the ground / reasons that as the assessee has not fulfilled the conditions mentioned in clause (II) & (III) of subsection (2) of .....

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ion / exemption claimed and allowed under Section 10 A of the Act. It appears that mechanically and probably as the exemption / deduction under Section 10 A of the Act was allowed in the previous year i.e. in the year 200607 in subsequent years, the same has been permitted to be allowed. In the respective assessment years, there is only intimation under Section 143(1) of the Act, which as per the catena of decisions do not amount to assessment and therefore, the question of change of opinion doe .....

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147 of the Act even otherwise. 7.1. In the case of Rhythm Chemicals (P) Ltd (supra), the Division Bench of this Court has observed that since the intimation under Section 143 of the Act does not amount to assessment question of change of opinion does not arise and therefore, reopening of assessment based on sufficient material forming reason to believe that income had escaped assessment, is valid. In the aforesaid decision, the Division Bench has considered and followed the decision of the Hon& .....

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t year i.e. assessment year 200607 the assessee was allowed the deduction / exemption under Section 10 A of the Act and therefore, in the subsequent assessment years the assessee is eligible for deduction / exemption under Section 10 A of the Act and assessee cannot be denied / doubted in the subsequent years such eligibility under Section 10 A of the Act and reliance placed upon the decision of the Division Bench of hits Court in the case of Saurashtra Cement & Chemical Industries Ltd (supr .....

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Act, as per Section 149 of the Act has expired, the assessment for AY 200607 being beyond 6 years, the same has not been reopened and the case has been reopened and notices under Section 148 of the Act have been issued for AY 00708, 200809, 200910 and 201011. Therefore, in light of the above facts and so stated in the affidavit in reply, the decision of the Division Bench of this Court in the case of Saurashtra Cement & Chemical Industries Ltd (supra) and other decisions on the point relied .....

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he relief of tax holiday under Section 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. Under the circumstances, the said decision would not be applicable to the facts of the case on hand and / or would not be of any assistance to the petitioner assessee. 8.1. Now, so far as reliance placed upon the decision of this Court in the case of Gujarat Narmada Vally Fertilizers Co. Ltd (supra) which has been confi .....

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f the case on hand and / or the same shall not be of any assistance to the petitionerassessee. 8.2. Similarly, the decision of the Bombay High Court in the case of Paul Brothers (supra) relied upon by the learned advocate for the petitioner shall not be applicable to the facts of the case on hand. In the case before the Bombay High Court special deduction under Sections 80HH and 80J was granted / allowed in the assessment year 198081 and in the subsequent years it was sought to be withheld and t .....

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the Act, more particularly, relying upon the decision of the Madras High Court in the case of Nagesh Chunder (supra) and the decision of the Karnataka High Court in the case of Expert Outsource P. Ltd (supra) and relying upon the CBDT circular No. 1/05 dated 6.1.2005 and notification issued by the Government of India, Ministry of Commerce and Industry, Department of Commerce vide Notification No.1/20092014 is concerned, at the outset, it is required to be noted at this stage and in the present .....

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sment / reassessment and at that time, the assessee shall have ample opportunity to put forward its case. Even while disposing of the objections against reopening, the AO is not required to observe anything in detail on merits of the case and with respect to eligibility of the petitioner assessee regarding deduction / exemption under Section 10 A of the Act. 10. In view of the above and for the reasons stated above, more particularly, when in the respective assessment years, there were intimatio .....

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