TMI Blog2016 (7) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same cannot be understood easily, inasmuch as, he has, after hearing the assessee, framed the assessment. Besides, if any facts are put in a manner which the Assessing Officer cannot understand, it is always permissible for the concerned Assessing Officer to call upon the assessee to explain the same. Thus, when the Assessing Officer who passed the original assessment order did not find the facts to be difficult to understand, it is not permissible for the successor Assessing Officer to seek to reopen the assessment on the ground that the facts were presented in a manner which could not be easily understood. Insofar as the claim of deductions under section 80IA of the Act, which according to AO have wrongly been claimed by the assessee are concerned, it is an admitted position that at the time of framing the original assessment, deductions under section 80IA of the Act had been computed by the Assessing Officer and the claims of the assessee had been partly allowed, against which, the assessee had approached the Commissioner (Appeals), who had partly granted the reliefs. Under the circumstances, as rightly submitted by the learned counsel for the respondent – assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax has escaped assessment if the assessee had shown inflated profits. Thus on overall perusal of the reasons recorded for reopening the assessment, it is evident that the Assessing Officer seeks to correct the mistakes which according to him had been made by the earlier Assessing Officer while framing the original assessment, which is nothing but a mere change of opinion. As decided in the case of Commissioner of Income Tax v. (1) Kelvinator of India Ltd., (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) an assessment cannot be reopened on a mere change of opinion. - Decided in favour of assessee - Tax Appeal No. 128 of 2016, Tax Appeal No. 129 of 2016 - - - Dated:- 1-4-2016 - Harsha Devani And G. R. Udhwani, JJ. For the Appellant : Mr KM Parikh, Advocate For the Respondent : Mr SN Soparkar, SR. Advocate with Mr B S Soparkar, Caveator Date : 01/04/2016 JUDGMENT ( Per Honourable Ms. Justice Harsha Devani ) 1. By these appeals under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act ), the appellant revenue has called in question the common order dated 21.08.2015 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee s case for A.Y. 1997-98 and 1999-2000, and that identical issue was involved in assessee s case for A.Y. 2000-01? [4] Whether the Income Tax Appellate Tribunal committed substantial error of law in quashing reassessment proceedings, ignoring the fact that the assessment was reopened within 4 years from the end of relevant assessment year, which can be reopened even though there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year? 2. The assessment years are 2000-01 and 2001-02. The assessee Company filed its return of income for assessment year 2000-01 on 30.11.2000 declaring total income at ₹ 15,92,260/- under section 115JA of the Act. The return was processed under section 143(1) of the Act on 09.03.2000. The assessee Company filed a revised return of income declaring total income under section 115JA of the Act at ₹ 15,92,21,250/- on 01.06.2001. The Assessing Officer finalized the assessment under section 143(3) of the Act on 27.11.2002 under normal provisions determining total income at ₹ 11,84,80,295/- and computed income under section 115JA of the Act at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed have not been considered in the original assessment order. It was submitted that the non-assessed items can always be looked into. It was submitted that none of the items on which the assessment is sought to be reopened forms part of the earlier assessment order and that there is no specific discussion by the Tribunal in this regard. It was, accordingly, urged that the impugned order passed by the Tribunal is perverse to the record of the case and therefore, the appeals require consideration on the questions of law as proposed or as may be forumlated by the court. 6. Opposing the appeals, Mr. S. N. Soparkar, Senior Advocate, learned counsel for the respondent-assessee, submitted that the Assessing Officer has reopened the assessment on the ground that certain items have not been considered while considering the deduction under section 80IA of the Act. It was submitted that the issue was gone into in great detail by the Assessing Officer and hence, it is not permissible to reopen the assessment on the ground that the very same issue can be examined from another angle. In support of such contention, the learned counsel placed reliance upon the decision of this court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act has merged with the order passed by the Commissioner (Appeals) and it is now not open for the Assessing Officer to say that there was a mistake and therefore, he wants to reopen the assessment on this ground. It was submitted that for the purpose of granting deduction under section 80IA of the Act, a large number of items are required to be satisfied and that the Assessing Officer after having considered the items and having granted deduction, it is not permissible for the Assessing Officer to seek to reopen the assessment on the ground that a particular angle in respect of the claim of deduction under section 80IA of the Act was not examined. It was, accordingly, urged that there is no legal infirmity in the impugned order passed by the Tribunal giving rise to any question of law and therefore, the appeals being devoid of merit, deserve to be dismissed. 7. Before examining the merits of the rival submissions, it may be germane to refer to the reasons recorded by the Assessing Officer for the purpose of reopening the assessment, which read thus: I. The scrutiny assessment u/s. 143(3) was completed in this case on 27.11.02. While scrutinising the return of income fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch varies from 15% to 18%. By adopting this modus operandi, the Sun Group has reduced the taxable profit of M/s. Aditya Medisales Ltd. and at the same time it has increased the profit of Silvasa Unit because the interest income is directly added to the sales figure, on which the deduction u/s. 80IA is available. These facts are not clear from the working of deduction u/s. 80IA given by the assessee along with the return of the income. This is not permissible as per the provisions of Section 80IA(10) of the Act and the rate of interest payable to SPIL has to be restricted @ 15% to 18% which will automatically reduce the profits of units entitled for 80IA deduction and consequently the deduction u/s. 80IA claimed by the assessee will be reduced. III. In the earlier assessment year 1999-2000, the A.O. had allocated 10% of the weighted deduction u/s.35(1) to the Silvasa Units (which are engaged in the manufacturing of formulation products) while working out the deduction u/s. 80IA. This allocation was accepted by the assessee before the CIT(A). However, in A.Y. 2000-01 the assessee has wrongly debited only 10% of the Revenue expense shown under the head R D to its Silvasa Unit. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various unit. Since, the profitability of Silvasa Units I II re very high, the allocation of R D expense should be more in these two units because there is a direct nexus between the profitability of a unit and R D expenses (because a better R D means more profit margin in pharmaceutical line) rather than allocating only 10% of the R D expenses. IV. In the assessment order passed, the A.O. had not added the following amounts. a) The assessee has shown export of ₹ 35.46 lacs out the goods produced from the Silvasa I Unit. This amount has been considered for working out the deduction u/s 80HHC. Again, deduction u/s. 80IA has been claimed on this amount. This means that more than 100% deduction has been claimed on the export of ₹ 35.46 lacs from the Silvasa I Unit, which is not correct as per the provisions of section 80AB. b) While working out the deduction u/s. 80HHC of the Act, the assessee has taken the total profit of the business at ₹ 71,40,20,133/-. However, it is seen that this figure has been wrongly taken by the assessee because in the relevant assessment year, the assessee has amalgamated Gujarat Lyka Organics Ltd. which had unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Authority easily; (iii) While completing the assessment under section 143(3) of the Act in the case of Aditya Medisales Ltd., a sister concern of the Sun Group, it was found that the profit of the Industrial Unit of Silvasa of the assessee has been inflated because the same is exempt under section 80IA, by giving more interest on overdue bills by Aditya Medisales Ltd.; (iv) By adopting this modus operandi, the Sun Group has reduced the taxable profit of M/s. Aditya Medisales Ltd. and at the same time it has increased the profit of the Silvasa Unit because the interest income is directly added to the sales figure, on which the deduction under section 80IA is available; (v) The assessee has claimed weighted deduction under section 35(1) of ₹ 23,04,83,379/- in the computation of income. However, despite the fact that the turnover of Silvasa I Unit and Silvasa II Unit is in the ratio of 58.6% and 41.4%, and accordingly, the allocation of 10% of weighted deduction under section 35(1) between the two units should be ₹ 1,35,06,326/- and ₹ 95,42,012/- respectively, the assessee has allocated ₹ 18,72,973/- and ₹ 13,20,088/- only in the two units r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not appear to be the case of the then Assessing Officer at the time of framing the original assessment that the details were confusing, inasmuch as, the Assessing Officer at the relevant time, could have very well called upon the assessee to explain the details which were confusing. Thus, once the Assessing Officer, at the relevant time while framing the assessment under section 143 of the Act, has been satisfied with the details provided by the assessee and did not find the same to be confusing, the successor Assessing Officer cannot be permitted to contend that such details were very confusing and complicated the matter. 11. The second ground for reopening the assessment is that the assessee had deliberately presented the facts in such a manner so that it is not understood by the Tax Authority easily. Here, the Assessing Officer who framed the original assessment under section 143(3) of the Act, has not found the facts to have been presented in such a manner that the same cannot be understood easily, inasmuch as, he has, after hearing the assessee, framed the assessment. Besides, if any facts are put in a manner which the Assessing Officer cannot understand, it is always p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act had been processed at length by the Assessing Officer. The mere fact that such claim was not examined from a particular angle, therefore, cannot be a ground for reopening the assessment. 14. Another ground for reopening the assessment is that according to the Assessing Officer, there is intermixing of R D expenses of all the products, therefore, the best way to allocate the expense under these circumstances should be on the basis of profitability ratio of various units. In the opinion of this court, once the Assessing Officer while framing the assessment under section 143(3) of the Act has accepted the R D expenses of all products, the successor Assessing Officer cannot claim to be wiser and seek to reopen the assessment merely because according to him there is a better way of allocation of expenses. 15. Yet another ground on which the assessment is sought to be reopened is that while framing the original assessment, the assessee has been granted deduction under section 80HHC and 80IA of the Act, which is not correct. Thus in effect and substance, the Assessing Officer wants to sit in appeal over the order passed by the predecessor Assessing Officer and seeks to disal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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