TMI Blog2010 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... present case as well the Assessing Officer appears to have relied exclusively on an audit objection, which has already been dealt with while considering the facts of Writ Petition no.269 of 2010. There was hence a total absence of “tangible material”, as explained in the judgment of the Supreme Court in Kelvinator to justify the conclusion that income had escaped assessment. Finally, it would be necessary to note, as we have observed earlier, that mere existence of the land and building since 1988 is not a circumstance which would disentitle the assessee to the benefit of a deduction under Section 80IB of the Act, once other requirements of the provisions are fulfilled – notice u/s 147 quashed - 268 OF 2010 AND 269 OF 2010 - - - Dated:- 8-2-2010 - Dr.D.Y. Chandrachud J.P. Devadhar, JJ. Mr.S.E. Dastoor, senior Advocate with Mr.Nishant Thakkar and Mr.Rajesh Poojari i/by Mint Confreres for the petitioner. Mr.J.S. Saluja for the respondents. ORAL JUDGMENT (Per Dr.D.Y. Chandrachud, J.) 1. Rule, returnable forthwith. By consent of the learned counsel for the parties, the Petition is taken up for hearing and final disposal. 2. The challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(1)(a).For A.Y. 2002-2004, an order of assessment was passed under Section 143(3). During the course of the assessment proceedings, the Petitioner inter alia submitted its Certificate of Registration as an SSI Unit and an Audit Report in Form 10 CCB. Among the details disclosed included the circumstance that a license to work had been issued by the local Authority. A copy of the license to work the factory issued on 14th August 2000 by the Chief Inspector of Factories, Daman was annexed to the Form 10CCB. The license contains a specific endorsement to the effect that the plans had been approved by the Sarpanch on 12th September 1988. Further details were filed by the Petitioner by a letter dated 25th January 2005 during the course of assessment proceedings for A.Y. 2003-2004, including the Certificate of Registration as an SSI Unit and the power connection release order. On 28th February 2005, an assessment order was passed under Section 143(3) of the Act for A.Y. 2003-2004. The assessment order duly notes that the assessee had claimed a deduction under Section 80IB of the Act for the unit which was set up in an industrially backward area and that Form 10CCB was availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer had no reason to believe that income had escaped assessment. 7. The objections were dealt with by the Assessing Officer and disposed of by an order dated 13th November 2009. The Assessing Officer has once again reiterated that during the course of subsequent proceedings, a copy of the license was filed by the assessee, which states that the plan for the factory was approved by the Sarpanch on 12th September 1988. According to the Assessing Officer, this document was not produced or submitted by the assessee during the course of the assessment proceedings for earlier years. Consequently, according to the Assessing Officer, there was valid reason to believe that income had escaped ssessment inasmuch as the information showed that the industrial undertaking was in existence prior to the date of the lodging of the claim for deduction under Section 80IB of the Act by the assessee for A.Y. 2001-2002. 8. Two Petitions under Article 226 of the Constitution have been instituted by the assessee to challenge the reopening of the assessment for A.Ys. 2003-2004 and 2004-2005. The assessment for A.Y. 2003-2004 has been reopened beyond a period of four years after the expiry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was available before the Assessing Officer to come to the conclusion that the income had escaped assessment, having regard to the fact that for the earlier assessment years, the assessment had been completed after the assessee had placed on record all the circumstances including the fact that the plans had been approved on 12th September 1988. It was urged that there was no reason to believe that income had escaped assessment since it is only on the basis of an audit objection that the assessment was sought to be reopened. Finally it was urged that the Revenue was not entitled to reopen the assessment for A.Y. 2004-2005, once the assessment for the earlier years had attained finality. 11. On behalf of the Revenue, it has been submitted, based on the reply, that during the course of the subsequent proceedings a copy of the license was filed by the Petitioner which state that the plan for the factory had been approved by the Sarpanch on 12th September 1988. This information, according to the Revenue, was not produced during the course of the assessment proceedings for the earlier years. The information showed that the industrial undertaking was in existence much before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen an assessment and there must be tangible material before the Assessing Officer to come to the conclusion that income has escaped assessment. The Supreme Court held thus: ....... , one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to reopen, provided there is tangible material to come to the onclusion that there is escapement of income from assessment. Reasons m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances and as recorded by the Assessing Officer, it cannot possibly be postulated that the industrial undertaking of the assessee was formed either by the splitting up or by the reconstruction of a business already in existence. As already noted, it is an admitted position that the land and building was sold by MSFC in exercise of its statutory powers and the purchaser in turn has leased out the land and building to the assessee. It is not the case of the Revenue in the reasons for reopening the assessment that the plant and machinery installed by the assessee has been previously used. Section 80IB(2)(ii) provides that the industrial undertaking should not be formed by transfer to a new business of plant and machinery or a plant previously used for any other purpose. It is not the case of the Revenue in the reasons for reopening the assessment that the industrial undertaking of the assessee has been formed by transfer of plant and machinery which has been previously used for any other purpose. The assessee has annexed to the petition before the Court a copy of the Deed of Conveyance under which MSFC transferred the right of the defaulter only in respect of the land and bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer did not have before him any additional material at all to form a belief that income had escaped assessment. The assessee had admittedly placed on record before the Assessing Officer for A.Y. 2003-2004 the circumstance that the plans have been approved for the building on 12th September 1988. There was no material before the Assessing Officer, that would lead to a formation of belief that the income had escaped assessment. We may also note that in the present case as well the Assessing Officer appears to have relied exclusively on an audit objection, which has already been dealt with while considering the facts of Writ Petition no.269 of 2010. There was hence a total absence of tangible material , as explained in the judgment of the Supreme Court in Kelvinator (supra) to justify the conclusion that income had escaped assessment. Finally, it would be necessary to note, as we have observed earlier, that mere existence of the land and building since 1988 is not a circumstance which would disentitle the assessee to the benefit of a deduction under Section 80IB of the Act, once other requirements of the provisions are fulfilled. 17. For all these reasons, we quash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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