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2016 (9) TMI 860 - GUJARAT HIGH COURT

2016 (9) TMI 860 - GUJARAT HIGH COURT - TMI - Reopening of assessment - Held that:- There is no failure on the part of the petitioner, to fully and truly disclose all material aspects, we have no hesitation to hold that the impugned action in the form of notice under section 148 and order of rejection of petition being not sustainable in the eye of law. - Therefore, in view of the aforesaid set of circumstances, we are of the opinion that the said action challenged in the petition is require .....

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petition is filed for challenging the validity of the impugned notice issued under section 148 of the Income Tax Act (for short 'the Act') dated 28.03.2011 and an order dated 01.07.2011 issued rejecting the objection filed by the petitioner. 2. The brief facts of the case are that the petitioner is a cooperative society engaged in the business of procuring and supplying processing and marketing of milk products, tea products. The petitioner had initially filed its return of income for a .....

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essment was framed on 30.12.2005. In the next assessment year, 2004-05, the petitioner filed the return of income under section 139(1) of the Act declaring total income at ₹ 3,15,13,990/- after claiming deduction under section 80E(2)(c) as also under section 80P(2)(d) and under section 80IB in respect of cattle feed as well as BanasII dairy plants. The said return was accompanied by the statement of income, as audited accounts and audit reports which was under section 44AB of the Act. Asse .....

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which deduction under section 80IB has been claimed and after considering these bills and particulars provided by the petitioner, the assessment was framed on 28.12.2016 under section 143(3) of the Act. While framing such assessment, the claim of deduction in respect of cattle feed, plant as well as BanasII expansion undertakings of ₹ 2,83,68,423/- under section 80IB of the Act disallowed. 3. It appears from the record that feeling aggrieved by the said assessment order, an appeal came to .....

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appellant fulfills the conditions laid down by the provisions of the act u/s 80IB, barring filing of proper Audit report. It also fulfills the conditions laid down by the Hon'ble SC in 107 ITR 195, therefore, it is entitled to the deduction claimed by it in the return, with initial AY 2002-03 for BanasII, the appellant is eligible for deduction at 100% for 3 years including the initial AY that is for 2002-03, 2003-04 and 2004-05. 4. It is against this order passed by CIT(A), the petitioner .....

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ribunal dismissed the appeal of the Revenue and so far as appeal filed by the petitioner, the deduction claimed under section 80IB of the Act in respect of industrial undertaking manufacturing cattle feed, the Tribunal held thus, the assessee is primarily entitled to claim deduction under section 80IB of the Act in respect of all units including the units earlier set up and by way of such common order, the Tribunal disposed of the appeals filed by both the sides. It is against this order passed .....

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ter more than four years of the end of relevant assessment year, the impugned notice came to be issued by the department under section 148 of the Act on 28.03.2011 with respect to the assessment year 2004-05. 5. On receipt of the said notice came to be issued by the department vide letter dated 28.04.2011, a request was made by the petitioner to the department to furnish the reasons which have been recorded for assuming jurisdiction under section 148 of the Act and under the letter dated 02.06.2 .....

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gainst the said reassessment. The said objection came up for consideration before the authority and under an order dated 01.07.2011, the objections came to be dealt with and rejected and it is against this order as well as the impugned notice issued under section 148 of the Act, the present petition came to be filed. Before dealing with the contentions of the respective sides, the basis for issuance of notice under section 148 i.e. the reasons which have been recorded by the authority are worth .....

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s and Finance Pvt. Ltd (2008) (Ahmedabad) (SB) has stated 65. To Conclude we answer the question referred in the affirmative, in the favour of the Revenue and against the assessee, in the terms that in view of the specific provisions of Section 80IA(5) of the Income Tax Act, 1961, the profit from the eligible business for the purpose of determination of the quantum of deduction Under Section 80IA of the Act has to be computed after deduction of the notional brought forward losses and depreciatio .....

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already answered that the losses will not lapse and the provisions of Section 79 will not apply in view of the provisions of Section 80IA(5) of the Act. We find that the lower authorities have rightly taken the view that in view of Section 80IA(5) of the Act which starts with non obstante clause, it is wide enough to override the provisions of Section 79 and thereby ignore the past losses. There is no doubt that Section 80IA(5) starts with non obstante clause which overrides the applicability of .....

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5. Therefore, I have reason to believe that the income chargeable to tax have been escaped assessment for A.Y. 2004-05 within the meaning of section 147 of the I.T.Act. 6. The essence of the aforesaid reason is that the assessee had not set off the previous year losses as per section 80IA(5) and in view of latest judgment which has been incorporated, reported in 2008 113 ITD 209, Ahmedabad Bench, and in view of this decision, the authority was of the opinion that there is a reason to believe th .....

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eopening is done after four years, condition precedent of this exercise has not fulfilled, hence it is not open for the department to reopen the assessment. The learned counsel further contended that during the scrutiny assessment, with respect to both the claims, detailed material came to be produced as demanded before the authority and the assessing authority has examined the same and dealt with. Counsel has drawn attention of this Court about relevant material which is attached with the petit .....

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tion of this aspect about the claim which has been made for cattle feed as well as made for BanasII expansion project. Counsel while submitting has drawn attention to page 94 of the petition compilation wherein there is a clear reflection with respect to this issue which has been gone into. In addition there to, on page 98 of the petition compilation, the counsel submitted that on 15.12.2006, the Chartered Accountant who represented the petitioner, has attended the hearing before the Assessing O .....

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on page 106 which was then the subject matter of the further appeal and right upto the High Court of Gujarat and therefore, during this entire process, the material was examined and dealt with by the Assessing Officer. Even in addition thereto, on page 147, there is a specific reference which has been brought to the notice of this Court about the claim which has been made under section 80IB of the Act. Learned counsel by relying upon such documents, have submitted that during the course of asses .....

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t proviso to section 147 of the Act and has submitted that in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for impugned assessment year, the assumption of jurisdiction is impermissible. Simultaneously, the learned counsel has further drawn attention and relied upon the second proviso to section 147 of the Act and submitted that the income which was under consideration before the Assessing Officer since was the subject matter of appea .....

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d in 320 ITR 561 and also relied upon decision reported in case of Sadbhav Engineering Ltd. v. Deputy Commissioner of Incometax reported in 333 ITR 483, which are also attached to the petition compilation and submitted that in the background of these facts, it is not open for the respondent authority to reopen the assessment. Learned counsel has further contended that with respect to the assessment year 2002-03, the authority has already considered and granted the said deduction and therefore, i .....

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rities deserves to be quashed and set aside. 8. To oppose the petition, learned counsel for the Revenue Mr.Nitin K. Mehta has submitted that there is specific element of non disclosure of primary facts while claiming deduction on the part of the petitioner. Learned counsel submitted that there was a nondisclosure of unabsorbed loss of previous year and the nature of allowance was not substantiated by any cogent material. Learned counsel further submitted that what was scrutinized was an issue of .....

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y to reopen the issue, more particularly when the basic issue pertaining to computation in respect of the claim has never been the subject matter of scrutiny and therefore, by contending this, learned counsel has submitted to dismiss the petition. 9. Having heard the advocates appearing for the respective parties and having gone through the material on record of the petition, which was stated to be a part of the assessment proceedings as well and on the basis of such, few facts are clearly emerg .....

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have been recorded what transpires is that the reopening is attempted to be made by the authority is only on account of the fact that there is one later decision delivered by Ahmedabad Bench, reported in (2008) 113 ITD 209, in which it was held that for computing the deduction under section 80IB, the provisions of section 80IA have to be complied with and while dealing with such a situation, the Tribunal in that case, has delivered the decision and based upon the said later decision, the reopen .....

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ssment year. 10. In the background of the aforesaid facts which are reflecting from the record, two situations are emerging that one; the reopening attempt is made by the department after a period of more than four years, and secondly; in the entire proceedings, there appears to be no allegation with respect to non disclosure of any material on the part of the petitioner. Keeping these circumstances in mind, the decisions which have been relied upon by the learned counsel for the petitioner are .....

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could be termed to be neither lacking in material particulars nor could be termed to be untrue so as to justify reopening of assessment on basis of Apex Court decision after expiry of four years from relevant assessment year. Relevant extract of the said decision deserves to be quoted here. 7. The two decisions of the Supreme Court on which reliance has been placed on the respondentauthority are both in context of the provisions of Section 147 (b) of the Act as it then stood before 01-04-1989 a .....

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roviso to Section 147 of the Act are shown to be fulfilled, no action can be initiated for reassessment. 8. Reference to provisions of Explanation 2 of the Act also cannot assist the case of the Revenue. The language employed by the Proviso itself indicates that the legislature has consciously laid down a time frame within which reassessment proceedings in relation to escaped income can be initiated, and beyond the prescribed period of limitation, even if income has escaped assessment, if the re .....

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t when the plain reading of the reasons recorded, if there is no allegation of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year, then subsequent change would not alter the situation and after the period of four years by applying such change, the reopening is not permissible. The relevant extract of the said decision is worth to be quoted here and the relevant paragraph is quoted hereinafter. 8. In the .....

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ur years from the end of the relevant assessment years. The first proviso to section 147 of the Act, lays down that where an assessment under subsection (3) of section 143 or the said section has been made for the relevant assessment year, no action shall be taken under the section after expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return under section 1 .....

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of section 142 or section 148, or (ii) to disclose fully and truly all material facts necessary for his assessment. In the facts of the present case, it is an undisputed position that there is no failure on the part of the assessee insofar as the first condition is concerned. Insofar as the second condition, viz. failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is concerned, on a plain reading of the reasons recorded, it is apparent .....

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on 80IA would not be admissible to an assessee who carries on business which is in the nature of works contract. That the petitioner assessee being a civil contractor working for the Government is not eligible for deduction under section 80IA as claimed by the assessee, hence there was reason to believe that income chargeable to tax has escaped assessment for the assessment years under consideration. The record of the case does not in any manner indicate that proceedings under section 147 are so .....

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t the petitioner has failed to disclose the correct facts. As to whether or not there is any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment, is a matter of fact and there can be no deemed failure as is sought to be contended on behalf of the respondents. In the circumstances, in absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment years .....

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eyed with respect to a concept of change of opinion it was submitted on the basis of said decision, that after 01.04.1989, the Assessing Officer has no power to reopen provided there is a tangible material to come to the conclusion of escapement of income and therefore, it appears from the record that the reasons which have been recorded, reflects only sole ground about subsequent change in law. 14. In the reasons it is reflected an issue pertaining to computation of deduction under section 80IB .....

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he effect of subsequent change in law and in the context of reopening of the assessment referred to above, dealt with and held that reopening on such premise is impermissible. We have no reason to deviate from the ratio mentioned in the said decisions. 16. So far as the contention raised on behalf of the Revenue that primary facts have not been disclosed by the petitioner during the course of assessment, and on account of that a belief was formulated that the reopening is required to be done. In .....

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be reopen in the absence of fulfillment of prerequisit condition contained under proviso to section 147. The relevant paragraph containing the said decision are reproduced hereinafter. 9. It is evident from communication dated 2842008 that the Assessing Officer has drawn an inference,belatedly, on the basis of the assessment for the year 2005-2006 that the amount of ₹ 1,09,47,296/- assessed under the head of Capital Gains for the relevant assessment year 2001-02, has incorrectly been asses .....

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ulfillment of the prerequisite conditions,as contained in the proviso to Section 147 of the Act. 10. The objections raised by the petitioner have been rejected by order dated 28082008. A perusal of the said order discloses that the respondent has relied upon Explanation 1 to Section 147, stating that the assessee has not disclosed details and other related facts as to the volume of transaction, buying and selling of shares/securities, which would enable the Assessing Officer to ascertain and det .....

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in in case on hand the assessee petitioner has even disclosed all primary facts so element of non disclosure is not reflecting on record. 17. In view of above situation, yet another decision of this Court, in case of Patel Alloy Steel (P.) Ltd. v. Assistant Commissioner of Incometax (OSD) Circle - 5, Ahmedabad, reported in [2013] 35 taxmann.com 353 (Gujarat) was cited by the learned counsel for the petitioner which is also covering the issue and it is culled out from the aforesaid facts and circ .....

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