TMI Blog2016 (9) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... ve therefore no hesitation in coming to the conclusion that neither the reasons recorded by the Assessing Officer, nor the decision to issue notice for reopening were those of the Assessing Officer himself. He had acted under the compulsion of the audit party which held a belief that on account of discrepancy in the turnover figures, income chargeable to tax had escaped assessment. The Assessing Officer was inclined to believe the petitioner's explanation that such discrepancy could be reconciled. If the department was not convinced about the opinion of the Assessing Officer, it was always open for the Commissioner to take the order of assessment in revision. The action of reopening of assessment however, stands on entirely different footing and as per settled law, can be resorted to by the Assessing Officer only if he has tangible material at his command to form a reasonable belief that income chargeable to tax had escaped assessment. Such belief of the Assessing Officer cannot be substituted by that of the opinion of the audit party. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 3503 of 2016 - - - Dated:- 31-8-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Uttranchal unit of Paras Pharmaceuticals Pvt. Ltd. Income from which is eligible for deduction u/s 80IC. However, assessee had furnished turnover at ₹ 24783.89 lakhs in its P L Account for claiming deduction u/s 80IC. Therefore, I have reason to believe that income has escaped assessment for AY 2010-11 equivalent to turnover difference of ₹ 2841.77 lakhs and accordingly assessment is required to be reopened u/s 147 of the I.T.Act. Necessary approval for reopening of assessment u/s 147 of the Act has been granted by Addl. CIT, Range 3(1), Ahmedabad vide letter No. Addl CIT/R3( 1)/Audit/201415 dated 02/03/2015. Issue notice u/s 148 of the Income Tax Act, 1961. 5. Upon receipt of the notice and the reasons recorded with the Assessing Officer, the petitioner raised detailed objections to the reopening of the assessment under communication dated 10.07.2015. In such objections, the assessee interalia contended that there was no escapement of income chargeable to tax. In this regard, the assessee contended as under: 2.3 No escapement of income 2.3.1 It is submitted that in the reasons recorded your goodself has noted that there is difference of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the products manufactured by RBHIL during the year, Government of India has notified abatement of 35 percent. The relevant notification is attached as Annexure 2 for your ready reference. 2.3.7 Accordingly, turnover as per Excise Records was required to be reported at MRP less abatement of 35 percent which made the turnover value equal to 65 percent of MRP (10035). However, turnover as per audited financials is recorded at actual sales price at which products are sold by RBHIL to its customeRs. The actual sale price is generally above 65% of MRP. Copies of sample invoices, reflecting MRP and actual sale price, are enclosed as Annexure 3 for your reference. 2.3.8 However, turnover as per audited financials is recorded at actual sales price at which products are sold by RBHIL to its customeRs. The actual sale price is generally above 65% of MRP. Copies of sample invoices, reflecting MRP and actual sale price, are enclosed as Annexure 3 for your reference. 2.3.9 Since, the standard abated value of the products is lower than the actual sale price, the turnover recorded in the audited financial statements is higher than turnover as per the excise rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent belief that income chargeable to tax has escaped assessment. Under compulsion from the audit party, he had issued notice for reopening, which was wholly impermissible. He relied on the following decisions. I. In case of Indian and Eastern Newspaper Society v. Commissioner of Income Tax, New Delhi , reported in [1979] 119 ITR 996 II. In case of Adani Exports v. Deputy Commissioner of IncomeTax (Assessments) reported in [1999] 240 ITR 224 Though in the petition other grounds are raised, counsel for the petitioner, after some discussion at the bar, pressed only the above contention. 8. On the other hand, learned counsel Shri Nitin Mehta for the department opposed the petition contending that the Assessing Officer has recorded independent reasons and the petition may therefore be rejected. 9. The law on the question is sufficiently clear. The Supreme Court in case of Indian and Eastern Newspaper Society (supra), held and observed that the statute does not support the conclusion that an audit party can pronounce on the law and that such pronouncement amounts to information within the meaning of section 147(d) of the Act. In every case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of such authority. As the aforesaid decision of the Supreme Court indicates that though audit objection may serve as information, the basis of which the ITO can act, ultimate action must depend directly and solely on the formation of belief by the ITO on his own where such information passed on to him by the audit that income has escaped assessment. In the present case, by scrupulously analysing the audit objection in great detail, the AO has demonstrably shown to have held the belief prior to the issuance of notice as well as after the issuance of notice that the original assessment was not erroneous and so far as he was concerned, he did not believe at any time that income has escaped assessment on account of erroneous computation of benefit under section 80HHC. He has been consistent in his submission of his report to the superior officeRs. The mere fact that as a subordinate officer he added the suggestion that if his view is not accepted, remedial actions may be taken cannot be said to be belief held by him. He has no authority to surrender or abdicate his function to his superiors, nor the superiors can arrogate to themselves such authority. It needs hardly to be stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party, we had called for the original files to satisfy ourselves as to in what background the Assessing Officer had recorded reasons and issued notice for reopening of assessment. Before taking note of the contents of the file documents, we may recall, as per the reasons recorded by the Assessing Officer, the assessee had claimed deduction under section 80IC of the Act of ₹ 72.67 crores. The record showed that the assessee had furnished a turnover of ₹ 247.87 crores (rounded off) in P L account for claiming such deductions in respect of unit eligible for exemption. These figures were not verified with the Central Excise Authorities. On verification, it was found that the assessee had shown a turnover of ₹ 219.42 crores to the Excise Department in respect of the same unit. According to the reasons, it is this difference in turnover of ₹ 28.41 crores resulted into excess claim of deduction under section 80IC of the Act. We may also recall, in the objections raised by the assessee, it was contended that the discrepancy was on account of discounted price being shown for excise clearances which came close to 35% of the MRP price. If such discounted price is ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Healthcare India Ltd. (herein and after referred to as RBHIL) during the year under consideration, Government of India had notified abatement of 35% vide Notification No.49/2008Central Excise (N.T.) dated 24/12/2008 ( copy enclosed at Annexure 'A'). Now for reporting turnover to excise authorities, the excise records have to be reported at MRP minus 35% abatement, which would reduce the annual turnover to 65% of the MRP in Central Excise records. 4.1 Contrary to this, the Audited P L account of the assessee submitted to Department of Income Tax reports turnover in terms of actual sale prices. The verification of the bills of the assessee reveals that the actual sales for relevant A.Y. had taken place at prices more that 65% of the MRP ( Copies of sample sales bills attached at Annexure 'B' ). Since the analysis of highly voluminous unit wise data of each and every product is unviable, a ramdom verification of sales bill had been done. On averaging the same over multiple products manufactures and sold by the assessee, their prices and unit sold during the relevant year the 'Sales Turnover' reported to Income Tax Department would converge down to appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e eligible unit would match the correct figures. 15. We have therefore no hesitation in coming to the conclusion that neither the reasons recorded by the Assessing Officer, nor the decision to issue notice for reopening were those of the Assessing Officer himself. He had acted under the compulsion of the audit party which held a belief that on account of discrepancy in the turnover figures, income chargeable to tax had escaped assessment. The Assessing Officer was inclined to believe the petitioner's explanation that such discrepancy could be reconciled. If the department was not convinced about the opinion of the Assessing Officer, it was always open for the Commissioner to take the order of assessment in revision. The action of reopening of assessment however, stands on entirely different footing and as per settled law, can be resorted to by the Assessing Officer only if he has tangible material at his command to form a reasonable belief that income chargeable to tax had escaped assessment. Such belief of the Assessing Officer cannot be substituted by that of the opinion of the audit party. 16. In the result, impugned notice dated 12.03.2015 is set aside. The petition i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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