2013 (3) TMI 36 - HC - Income Tax

Re-opening of assessment - As per AO assessee was not entitled to deduction u/s 801C as the petitioner s product namely PET bottles fall within the negative list stipulated in serial No. 20 of the 13th schedule of the said Act - AY 2005-06 - assessee contested against invoking extended period - Held that - As noted the arguments the petitioner that the product manufactured by them falls under 3923.30.90 of the Central Excise Classification which is not within the range of products specified in serial No.20 of the 13th schedule of the said Act that is within headings 39.09 to 39.15. Therefore clearly the submission of the petitioner is correct. The petitioner s product does not fall within the negative list stipulated in the 13th schedule of the said Act. If that be the case then the answer given by the petitioner in serial No. 14(ii)(e) of form 10 CCB filed along with the return is not wrong false or inaccurate. Therefore the petitioner cannot be held to have failed to fully and truly disclose all material facts necessary for its assessment. Insofar as the other assessment years are concerned where the issue of limitation of four years does not arise the position would not be any different because on a reasonable interpretation of the provisions of section 80-IC(2) read with serial No. 20 of the 13th schedule of the said Act read with the first schedule to the Central Excise Tariff Act 1985 it would be clear that the petitioner s product does not fall within the negative list and therefore the petitioner had rightly claimed deduction under section 80-IC of the said Act which the assessing officer in the years in which the assessment had been completed under section 143(3) had allowed after examining the necessary evidence. Even in respect of the year in which there was no assessment order under section 143(3) that is the assessment year 2007-08 the same cannot be re-opened because no reasonable person can be attributed with any reason to believe that income had escaped assessment when the petitioner s product clearly does not fall within the negative list. Thus AO could not even have taken the prima facie view that there were reasons to believe that income had escaped assessment - the issuance of notices under section 148 was not warranted - in favour of assessee.

Summary

Issues:
Challenging notices for re-opening assessments under section 148 for assessment years 2005-06 to 2008-09 based on alleged income escaping assessment due to incorrect deduction claims under section 80-IC.

Analysis:
1. The writ petitions contested notices issued under section 148 for re-opening assessments for the years 2005-06 to 2008-09. For the assessment year 2007-08, only an intimation under section 143(1) had been sent, while regular assessment orders were framed for the other three years under section 143(3) of the Income-tax Act, 1961.

2. Notices for the years 2005-06 and 2006-07 were issued beyond the four-year period from the end of the respective assessment years, invoking the proviso to section 147. The petitioner claimed deduction under section 80-IC for the first time in 2005-06 due to substantial expansion in plant and machinery.

3. The assessing officer's belief that income escaped assessment was based on the petitioner's alleged failure to disclose fully or truly material facts, particularly regarding the eligibility of PET bottles for deduction under section 80-IC.

4. The petitioner argued that PET bottles manufactured did not fall within the negative list of the 13th schedule of the Act, as they were classified differently under the Central Excise Tariff Act, supporting their claim for deduction under section 80-IC.

5. The court noted that the assessing officer's reasoning for re-opening assessments was solely based on the misinterpretation that PET bottles were ineligible for deduction under section 80-IC, which was unfounded considering the correct classification of the product.

6. The court agreed with the petitioner's contentions, emphasizing that the product's classification did not align with the negative list specified in the Act, thus rejecting the notion that the petitioner failed to disclose all material facts for assessment.

7. Even for years not subject to the four-year limitation, the court upheld the petitioner's claim for deduction under section 80-IC, as the product did not fall within the negative list criteria, warranting the quashing of the re-opening notices and subsequent proceedings.

8. Ultimately, the court allowed the writ petitions, quashed the notices under section 148, and disposed of all pending applications, with no costs imposed on either party.