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2017 (7) TMI 499 - GUJRAT HIGH COURT

2017 (7) TMI 499 - GUJRAT HIGH COURT - Tmi - Reopening of assessment - the audit party had raised an objection of the freight and insurance charges being included in the export turnover for computation of benefit under Section 10A - Held that:- Notice for reopening came to be issued which was passed solely on the ground of the assessee’s claim of deduction under Section 10A of the Act and reduction of the freight and insurance charges from the export turnover. Thus, clearly the notice for reopen .....

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cate ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioner has challenged the notice dated 27.01.2014 as at Annexure A to the petition issued by the respondent - Assessing Officer for reopening the petitioner s assessment for the assessment year 2009-10. 2. Brief facts are as under: 2.1 Petitioner is a company registered under the Companies Act and is engaged in the business of manufacturing pharmaceuticals and formulations. The company has manufacturing units located in Kheda a .....

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e Act. The Assessing Officer passed order under Section 143(3) of the Act on 29.12.2010 making certain additions. The claim of deduction under Section 10A of the Act was, however, accepted. 2.2 To reopen such assessment, the Assessing Officer issued impugned notice which, as can be seen, was done within a period of four years from the end of the relevant assessment year. In order to issue the notice, the Assessing Officer had recorded various reasons : It is seen that the assessee had claimed ex .....

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253173/- (15047262+205911) in the export turnover which resulted in over statement of export turnover to that extent and incorrect computation of deduction u/s.10A. Statement showing the details of Freight & Insurance included in enclosed. The correct computation of exemption u/s.10A, would be as under: Profit of business(33,47,92,754/-) X Export Turnover (Rs 416114637-Rs15253173) Total Turnover (Rs 44,65,04,479/-) =Rs.30,05,46,749/- Thus there was excess allowance of deduction to the tune o .....

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tions to the notice of reopening under a communication dated 05.11.2014 in which the assessee interalia took the following objections: (i) That the claim of deduction under Section 10A of the Act which is the subject matter of reopening was scrutinized during the original assessment. Reassessment would, therefore, amount to change of opinion; (ii) The entire issue of the deduction in view of the Act is subject matter of appeals before the Commissioner of Income Tax (Appeals) (CIT(A)) and the Tri .....

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d, the Assessing Officer has objected to the freight and insurance charges forming part of the numerator in the formula for working out deduction under Section 10A of the Act. If at all, such amount would have to be removed both from the export turnover i.e. the numerator and from the total turnover i.e. the denominator. He submitted that this principle is laid down through series of judgements of different courts. The reason on which the notice for reopening is issued, lacks validity. (II) The .....

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e Assessing Officer was not inclined to accept such a stand, he was compelled to issue notice for reopening the assessment. 6. On the other hand, learned counsel Shri Nitin Mehta submitted that the issue of removing freight and insurance charges from the export turnover was never examined by the Assessing Officer in the original assessment proceedings. He, therefore, had not formed any opinion on this aspect. The principle of change of opinion would, therefore, not apply. This issue was therefor .....

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n in the objections raised by the petitioner and the order passed by the Assessing Officer rejecting such objection did not deal with this ground at all. Therefore, we had called upon the counsel for the revenue to produce the original file to put this factual aspect beyond controversy. Upon perusal of the file, we notice that the audit party had raised an objection of the freight and insurance charges being included in the export turnover for computation of benefit under Section 10A of the Act. .....

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he export turnover and total turnover. The RAP has adopted the figure of ₹ 1,52,53,173/- as the amount of freight and insurance included in the export turnover. It is observed that the said figure is the difference of export turnover and FOB value mentioned in note No.10 forming the part of the audited financial statement. This amount is not the actual amount of freight and insurance because the FOB value mentioned in the notes is a consolidated amount of the 100% EOU and the non-EOU unit. .....

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ight and insurance expenditure incurred on the sales. Therefore, profit of the eligible business remains unaffected. Also if the freight and insurance is excluded from E.T.O., the same should be excluded from the T.T.O, as the ETO & TTO of the eligible undertaking being the same, as the undertaking is a 100% EOU and the freight and insurance is included in both the ETO and TTO. Therefore, if the freight and insurance is to be excluded from the export turnover the same should also be excluded .....

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s of the case, the most appropriate remedial action to set-right RAP Audit objection is to take action u/s.263 of the Act. However, kind instructions in the matter, if any, are solicited. 8. It can, thus, be seen that the Assessing Officer, then incharge of the assessment of the petitioner, did not accept the audit objection. In fact he gave detailed reasons why the stand was incorrect. He pointed out that the amount in question is really not in the nature of freight and insurance charges. In an .....

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