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M/s. Swarovski India Pvt. Ltd. Versus Deputy Commissioner of Income Tax

2015 (10) TMI 261 - DELHI HIGH COURT

Validity of reopening of assessment - assessee had debited an amount to the profit and loss account by way of provision for obsolete stock - Income of the trading unit was required to be assessed separately and could not be set off against the brought forward losses of the Pune unit - incorrect allowance of deduction had been given to the assessee when it was not eligible for the same - goods in transit as also stores and spares - Held that:- All the queries and issues have been specifically r .....

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e, which cannot be permitted.

For all the foregoing reasons, the impugned notice under Section 148 dated 28.03.2013 and the impugned order dated 18.02.2014 are set aside and the re-assessment proceedings in respect of the assessment year 2006-07 stand quashed. - Decided in favour of assessee. - W. P. (C) 1772/2014 & CM 3695/2014 - Dated:- 29-9-2015 - Badar Durrez Ahmed And Sanjeev Sachdeva, JJ. For the Petitioner : Mr M. S. Syali, Sr Advocate with Ms Husnal Syali, Mr Mayank Nagi and M .....

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rejected the objections taken by the petitioner. 2. The original assessment was completed under Section 143(3) of the said Act on 04.12.2009. Since the brought forward losses of the Delhi Unit had not been accounted for in the assessment order, the petitioner moved an application under Section 154 of the said Act seeking rectification, which was allowed by the Assessing Officer, by an order dated 05.03.2010 after verifying the records. This is where the matter rested for more than four years whe .....

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ompleted after scrutiny in December 2009, at 18712850/-u/s 143(3) as against the returned loss of Rs. (-) 9082195/-, and further assessed at Nil by way of rectification by order dated 05/03/2010. Perusal of records revealed that:- 1. The assessee had debited ₹ 27637716/- to the P&L account on account of provision for obsolete. As the provision made was not an ascertained liability, it should have been disallowed and added back to the total income of the assessee. The assessee has not d .....

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the trading unit was required to be assessed separately and cannot be set off against the b/ f losses of Pune unit. 3. The assessee company was running two units namely, 100% EOU undertaking at Pune & Trading unit at Delhi. The assessee has claimed and was allowed deduction of ₹ 108380645/- before set off unabsorbed depreciation and business losses of earlier year to the extent of income available. Had this loss been taken into account for computing the Profit of the business eligible .....

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and stores & spares of ₹ 1443503/- was not taken into account while crediting the closing stock in P& L account which resulted in under valuation of closing stock and consequently resulted in under assessment of income by like amount i.e. by ₹ 1,91,96,543/-. There is a failure on the part of the assessee to disclose the method of accounting followed by it in respect of the goods in transit and stores & spares. There is further failure on the part of the assessee in showin .....

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d. The assessment record is being submitted for kind perusal and approval u/s 151(1) of the IT Act, 1961 for issuance of notice u/s 148 of the IT Act, 1961. 4. The learned counsel for the petitioner submitted that the notice under Section 148 of the said Act and the proposed re-assessment of income in respect of the assessment year 2006-07 was bad in law because there was no failure on the part of the assessee to disclose particulars which were material for its assessment which was a requirement .....

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up for re-assessment because of failure on the part of the assessee to fully and truly disclose all the particular materials for its assessment. 6. After having heard the learned counsel for the parties, we are of the view that the impugned notice under Section 148 dated 28.03.2013 and the impugned order dated 18.02.2014 are liable to be set aside. The reasons for the same are given herein below. 7. The reason No. 1 pertains to an allegation that the assessee had debited an amount of ₹ 2, .....

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on of stock along with related computation. The details were provided by the assessee on 03.11.2009 by stating that the summary of stocks as on 31.03.2006 were enclosed as per Annexure-7. The said Annexure-7 clearly indicated the details of valuation of stock as on 31.03.2006. It disclosed that the assessee had deducted provision for obsolete goods in respect of both traded goods and manufactured goods to the extent of ₹ 2,73,11,377/- and ₹ 3,26,396/-, respectively. The sum of these .....

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essment proceedings. Therefore, this issue cannot now be raised as it would be a mere change of the opinion. Apart from this, there was full disclosure on the part of the assessee to the specific queries raised by the Assessing Officer and, therefore, the re-assessment proceedings, being beyond four years, even the conditions stipulated in the proviso have not been satisfied. 8. The second reason for initiating re-assessment proceedings indicates that income of the trading unit was required to b .....

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The said question No. 14 reads as under:- 14. Details of b/f assessed losses and unabsorbed depreciation longwith evidence. Also give the same details in respect of b/f book losses and unabsorbed depreciation. 9. The reply to this was given by the assessee in the following manner:- Point No.14: Regarding brought forward losses/deprecation allowance, your kind attention is drawn to Schedule X of the Tax Audit Report for AY 2006-07 filed by the assessee with your goodself. 10. A reference was mad .....

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d losses in detail and clearly noted as under:- After verifying the records and facts, the contention of the assessee is found to be correct. Since this is a mistake apparent from record, the same is being rectified under Section 154 of IT Act . As a result of the rectification, the income/loss of the assessee was re-computed as under:- Income assessed u/s 143(3) 1,87,12,850/- Less: B/f losses adjusted to the extent of 1,87,12,850/- Revised assessed income NIL 11. These facts also disclose clear .....

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al assessment. Therefore, there can be no failure on the part of the assessee to disclose full and true particulars of its income for the purposes of assessment. 12. The third reason given in the purported reasons to believe that income had escaped assessment pertains to an allegation that an incorrect allowance of deduction of ₹ 10,83,80,645/- had been given to the assessee when it was not eligible for the same. The learned counsel for the petitioner pointed out that the sum of approximat .....

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essential ingredient for invoking the provisions of Section 147 of the said Act. In any event, there is no failure on the part of the assessee to disclose full particulars with regard to its assessment of income. We agree with the submission made by the learned counsel for the petitioner on this aspect also. 13. Lastly, the fourth reason was with regard to goods in transit as also stores and spares of the amount of ₹ 1,77,53,040/- and ₹ 14,43,503/- respectively. In this connection al .....

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,875 2 PACKING MATERIAL 2,687,740.00 2,687,740 3 WIP 745,532.00 745,532 4 Finished Goods 3795050 928,196 2,866,854 5 Traded Goods 76468791 76,468,79 6 Goods in Transit 17753040 17,753,040 7 Stores and Spares 1443503 1,443,503 Grand Total 116,244,693 106,062,189 10,182,504 14. It is evident from the above extract that the goods in transit as well as the stores and spares had been clearly indicated. This aspect had, therefore, been specifically examined by the Assessing Officer during the original .....

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