TMI Blog2022 (1) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... lly material facts. There is no reference of any tangible material available with AO for reopening of the assessment which is also mandatory requirement for reopening of the assessment thus the reasons itself says that there is no failure on the part of the assessee to disclose fully and truly all metal facts necessary for its assessment and the allegation of nondisclosure is merely a ritual. In fact when the assessment is reopened beyond the period of four years when originally assessed u/s 143 (3) it is the duty of the assessing officer to show in the reasons recorded for reopening of the assessment that how the information originally submitted by the assessee has resulted into escapement of income by not disclosing certain things/information. Further if such things/information would have been disclosed the assessee would not have been allowed the claim of deduction is claimed by him in the original return of income - we find that the reopening of the assessment made by the learned assessing officer is not on account of the failure on part of the assessee to disclose fully and truly material facts for assessment of income as well as there is no tangible material available with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic limited company engaged in the manufacture and supply of enzymes. It filed return of income on 24/9/2010 declaring a total income of ₹ 94,465,631/ . Assessment u/s 143 (3) of The Act was completed on 28th of March 2013 at the total income of ₹ 296,264,220/ . Subsequently the case of the assessee was reopened by issue of notice u/s 148 of the income tax act on 31st of March 2017. Consequent to that the examination of the deduction claimed by the assessee u/s 10 AA of the Act took place, Ld AO noted that the assessee has sold goods of ₹ 91,581,539 to its another SEZ unit and also purchased raw material from that particular unit, he compared the turnover of the two SEZ units and thereafter came to a conclusion that only a small proportion of the exported goods on which deduction u/s 10 AA has been claimed, were manufactured in the SEZ unit. Accordingly, he came to the conclusion that the deduction should have been limited to only 14.92% of what has been claimed by the assessee (₹ 192 59,726/ ) and therefore it resulted into excess deduction amounting to ₹ 163,86,175/ as claimed by the assessee. 04 During the course of hearing, the assessee was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings u/s 143 (3) of the act. He referred to the letter dated 13 August 2012 and 8 February 2013 wherein the complete details with respect to the deduction u/s 10 AA of the act is submitted before the assessing officer. He also referred to page no. 64 of Paper Book where in assessee has specifically claimed the deduction of ₹ 1,92,59,726/- as per Form no 56 F being certificate of auditors filed before the assessing officer. He further submitted that assessee submitted as per letter dated 11/2/2013 complete details of the purchases and sales made by the assessee. He therefore submitted that there is no failure on the part of the assessee to disclose fully and truly material facts necessary for the computation of the total income. He submitted that after making proper verification of the eligible claim u/s 10 AA of the income tax act learned assessing officer has accepted the quantification and passed the assessment order granting deduction to the assessee. He also referred to the reasons recorded for reopening of the assessment proceedings stating that same has been made on perusal of the details filed during original assessment proceedings and therefore there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Nasik plant because SE jet plant has no fermentation facility. Procured from Nasik plant about total quantity of 1,05,000 Liters and converted into a powder after the process of lending and mixing and thereafter it is sold in the overseas market. He further submitted that goods meant for export were required to be consistent in its quality as per stringent international norms and shall meet specification of international customers and therefore recovery and formulation activities were performed in SE jet unit which was set up and begin commercial production in April 2008. He also stated that during financial year 2009 the SE jet unit incurred the losses and therefore no claim of deduction u/s 10 AA was made however for all subsequent years the deduction is allowed to the assessee he therefore submitted that the basis of calculation made by the learned assessing officer based on the purchase value is erroneous because of the reason that value addition has been made on material transferred from Nasik unit to SEZ unit. He submitted that goods worth 915.81 lakhs procured from sinnar factory by SE jet unit for further carrying out recovery and formulation activities for further expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the act supported by the certificate of the chartered accountant which has been placed before the learned assessing officer during the original assessment proceedings as well as during the reassessment proceedings. The learned CIT A without any basis stated that the assessee is not engaged in manufacturing activity despite the fact that the products manufactured by the assessee have a different marketing ability. He further submitted that the value addition made by the assessee SEZ unit of the assessee is also not controverted. 13 We have carefully considered the rival contention and perused the orders of the lower authorities. Assessee is a company who filed its return of income on 24/9/2010 declaring a total income of ₹ 94,464,631/ . As the assessee was having special economic June unit which is eligible for deduction u/s 10 AA of the income tax act, assessee claimed deduction u/s 10 AA of the act of ₹ 192,59,726/ . The above deduction was supported by a certificate in form number 56F dated 17th of September 2010 whereas per column number 17 of the annexure A the above deduction of the quantum was certified. This deduction was further explained by the profita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed it. Subsequently notice u/s 148 of the income tax act was issued on 31st of March 2017 the reason recorded shows as under :- (iii) excessive deduction u/s 10 AA On perusal of records it is seen from the statement of sales (statement of sales party when sales above ₹ 5 lakh) that goods worth ₹ 91,581,539/ was shown as sale sold to Pithampur (SEZ) unit (sale code CA0131). Further from the statement of purchases (statement of purchases above ₹ 5 lakhs unit/location -wise) it is seen that the raw material purchases for Pithampur SEZ unit was only for ₹ 160.63 lakhs, after excluding purchases on account of plant and machinery and capital work in progress. The turnover of Pthampur SEZ unit was shown at ₹ 150,865,122/ . On comparing the turnover and purchase for Pithampur with that of sale of finished goods to Pithampur SEZ unit, it could be seen that only a small portion of the exported goods on which exemption u/s 10 AA claimed were manufactured in the SEZ unit. The value-based the ratio of good shown as sold by the assessee to the SEZ unit and raw material purchased and consumed in the goods manufactured at SEZ unit to total cost of raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tangible material. In the present case purchases worth ₹ 91,581,539/ are purchased from other units whereas the goods sold by the assessee as export is ₹ 150,865,122. It is not the case of the assessee that the goods purchased from noneligible unit are transferred to the eligible unit below the market rate. Therefore the formula suggested by the learned assessing officer in reasons recorded are as such not supported by the provisions of Section 10 AA of the act read with Section 8 and 10 of Section 80 IA of the act. Thus, on this aspect the reasons recorded by the learned assessing officer are not sustainable. 18 On careful reading of the reasons recorded by the assessing officer, it is apparent that he has perused the same material, which was available before him during the course of assessment proceedings. He further referred to the statement of party by sales above ₹ 5 lakhs and statement of purchases above ₹ 5 lakhs we find that the above information was submitted by letter dated 13 August 2012 as per serial list number 11 of that letter. There is no other reference of any other material available before the assessing officer based on which reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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