(Per : HONOURABLE MR.JUSTICE V. M. SAHAI) 1. We have heard Mr. S.N. Soparkar, learned Senior Counsel assisted by Mr. Bandish Soparkar for the petitioners and Ms. Paurami B. Sheth, learned Central Government Standing Counsel appearing for the respondent.
2. Though this petition has been listed for admission hearing, since the legal question on the admitted facts is involved, with the consent of learned counsel for the parties, this petition is taken up for final disposal at the admission stage. Rule. Ms. Paurami B. Sheth, learned Central Government Standing Counsel waives service of rule on behalf of respondent.
3. The brief facts are that for assessment year 2004- 05, the assessee filed its return and claimed deductions under Section 80IA of the Income-tax Act, 1961 (for short 'the Act') which was allowed by the Assessing Officer. After the expiry of the period of four years, on 17.3.2011, a notice has been issued by the Assistant Commissioner of Income-tax (OSD) Circle-5, Ahmedabad to the petitioner giving reasons for reopening the assessment under Section 148 of the Act. The reasons given for reopening under Section 148 of the Act dated 17.3.2011 is extracted below :-
“In the case of the assessee, assessment was originally completed u/s. 143(3) at the income of Rs.15,38,47,640/- on 28.12.2006 as against income declared by the assessee of Rs.11,21,93,730/- after making various additions. During the course of assessment proceedings, deduction u/s. 80IA of Rs.16,71,703/- allowed.
It is come to the notice that the assessee company has wrongly claim deduction u/s.80IA. As per the condition laid down u/s.80IA, the company is not eligible for deduction due to following reasons :-
1. The assessee company is already in existence and in production prior to 1984. The present opening of branch for its convenience of business can not establish that it is a commencement of new industrial undertaking. It is continuation of old and established business.
2. It is produce articles and things prohibited under eleventh schedule and it is not now Small Scale Undertaking.
During assessment year wrongly claim of deduction u/s.80IA amounting to Rs.16,71,703/- has been allowed.
In view of the facts discussed above, I have reason to believe that income of Rs.16,71,703/- being the amount of disallowable u/s.80IA chargeable to tax has escaped assessment for A.Y. 2004-05 and accordingly it is the fit case for reopening the assessment u/s.147 for the A.Y. 2004-05. Accordingly, Notice u/s.148 of the I.T. Act, 1961 is issued.”
4. The notice for reopening the assessment has been issued on the ground that the assessee has wrongly claimed deductions under Section 80IA of the Act though it was not eligible to claim such deductions as the assessee Company was in existence and in production prior to 1984 and it was an old established business. The other ground was that the assessee produced articles and things prohibited under 11th Schedule and it is not now a small scale undertaking and, therefore, deductions under Section 80IA amounting to Rs.16,71,703/- has wrongly been allowed. Therefore, the Assessing Officer was of the opinion that the deductions allowed was chargeable to tax which has escaped assessment and, therefore, the Assessing Officer recorded reasons dated 17.3.2011 for reopening the assessment under Section 147 of the Act and also issued notice under Section 148 of the Act.
5. It is not in dispute that in the return, the assessee has claimed deductions which was before the Assessing Officer when the assessment order was made and he has considered the deductions claimed by the assessee in paragraph 9.4 of the assessment order dated 28.12.2006. Paragraph 9.4 is extracted below :-
“9.4 The second contention cannot be accepted as the deduction u/s. 80IA is to be allowed on eligible profit of an industrial undertaking is to be allowed of the profits and gains derived from the industrial undertaking subject to the fulfillment of the certain conditions. Here the provisions permit the deduction in respect of profit derived from the Industrial undertaking which has direct nexus over the income. Therefore, the receipts from truck hiring charges are not directly coming from the manufacturing activities but the immediate source of income is hiring of trucks which is an independent activities. Similarly, computer rent income, rent income and misc. incomes are also found to be not generated from manufacturing activities. It is undisputed fact that the manufacturing activities is rolling of Bidis as mentioned in the SSI registration certificates. Therefore, these types of income is held not to be derived from the industrial undertaking carrying out eligible business.”
6. Against the assessment order dated 28.12.2006, an appeal being Appeal No.CIT(A)-XI/284/2006-07 was filed by the assessee Company against some disallowances including quantification of deductions under Section 80IA of the Act. The said appeal of the assessee was partly allowed by the CIT (Appeals) on 13.3.2007. The Revenue carried the matter further in Second Appeal being ITA No.2121/Ahd/2007 before the Income Tax Appellate Tribunal. The Tribunal has dismissed the said appeal on 2.7.2010.
7. It is also relevant to point out over here that with regard to the petitioner – assessee, for the assessment year 2002-03, the assessee had claimed deductions under Section 80IA of the Act which was disallowed by the Assessing Officer. Against the said order, an appeal was filed by the assessee which was allowed by the CIT (Appeals). Against that order, the Revenue filed Second Appeal before the Income Tax Appellate Tribunal which was dismissed on 30.4.2010. Thereafter, Revenue filed Tax Appeal No.2488 of 2010 which has been dismissed by a Division Bench of this Court on 18.1.2012.
8. The law on this point is settled by various decisions of the Apex Court as well as Division Bench decisions of this Court. This Court in Parixit Industries (P) Limited v. Assistant Commissioner of Income-tax (OSD), Circle 5, (2012) 207 TAXMAN 140 (U.J.) after considering various decisions on the law with regard to reopening of the assessment and after considering the Circular of 1989, has held in paragraph 21 that it is not the case of revenue that the assessee had suppressed any material at the time of regular assessment and that any new document has come from which the above opinion was found for reopening the assessment on the ground that it has escaped assessment.
9. Admittedly, in the affidavit-in-reply, it has not been mentioned that any new material was discovered or was found by the Assessing Officer on the basis of which he issued notice under Section 148 of the Act.
10. Since the notice under Section 148 has been issued after four years and after the assessment order has become final upto the stage of the Tribunal and in view of the fact that in earlier assessment year 2002-03 also, deduction has been allowed in favour of the assessee. Therefore, we are of the considered opinion that the impugned notice dated 17.3.2011 issued by the Assessing Officer under Section 148 of the Act is illegal and deserves to be quashed.
11. In the result, this petition succeeds and is allowed. The notice dated 17.3.2011 issued by the Assessing Officer under Section 148 of the Act is quashed. Rule is made absolute. The parties shall bear their own costs.
Sd/-
[V. M. SAHAI, J.] Sd/-
[N. V. ANJARIA, J.] Savariya