2013 (7) TMI 227 - HC - Income Tax

Deduction u/s 10B - Re-asssessement - Excess deduction granted than entitlement - Held that - quite apart from the reasons recorded for re-assessement, even from the record, nothing emerges to permit the Assessing Officer to form a belief that income chargeable to tax had escaped assessment for the reason of the assessee s failure to disclose truly and fully all material facts - There was no failure on the part of the assessee to disclose true and full facts - Therefore, beyond the period of four years to the relevant assessment year, the assessment could not have been reopened - Decided in favour of Assessee. Reasons of re assessement not given - Held that - upon receipt of notice for reopening dated 9.3.2012, the petitioner had requested the Assessing Officer under its communication dated 19.3.2012 for supplying the reasons recorded by him. Since the reasons were not supplied, the petitioner reiterated the request under communication dated 18.7.2012. The reasons were ultimately communicated under letter dated 6.3.2013 - Entire sequence of events will demonstrate that the Assessing Officer effectively frustrated the directives contained in the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd v. I.T.O. 2002 (11) TMI 7 - SUPREME Court - The entire purpose to supply reasons recorded by the Assessing Officer to the petitioner-assessee is that the the assessee would have a fair opportunity of raising objections and an expectation that such objections would be considered objectively - Though the reasons were very much available with the Assessing Officer, he consumed nearly one year in supplying the same leaving less than four weeks before the assessment was to become time-barred. - Notice quashed - Decided in favor of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Excess deduction under Section 10B of the Income Tax Act.
3. Accounting for unutilized CENVAT credit under Section 145A of the Income Tax Act.
4. Taxability of excise duty rebate not offered to tax.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 9.3.2012 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the year 2005-06. The petitioner contended that the notice was issued beyond the permissible period of four years without any failure on their part to disclose fully and truly all material facts necessary for assessment. The court noted that the Assessing Officer had previously scrutinized the return and framed the assessment under Section 143(3) on 30th December 2008. The court emphasized that there was no failure on the part of the petitioner to disclose material facts, and thus, reopening the assessment beyond four years was not permissible.

2. Excess Deduction Under Section 10B:
The Assessing Officer claimed that the petitioner was allowed an excess deduction of Rs. 55,86,880 under Section 10B of the Act. The court observed that during the original assessment, the entire claim under Section 10B was scrutinized in detail. The Assessing Officer had raised several queries regarding the allocation of expenses between the EOU unit and the DTA unit, and the petitioner had provided detailed explanations and documents. The court concluded that the Assessing Officer had already examined the claim thoroughly, and there was no failure on the part of the petitioner to disclose material facts. Therefore, reopening the assessment on this ground was unjustified.

3. Accounting for Unutilized CENVAT Credit:
The Assessing Officer initially claimed that the petitioner did not properly account for the unutilized CENVAT credit while valuing the closing stock by applying the inclusive method as provided under Section 145A of the Act. However, during the proceedings, this ground was dropped by the Assessing Officer, who accepted the petitioner's submission that the net effect on profit was nil, as per the decision of the Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. The court noted that this ground was no longer relevant for consideration.

4. Taxability of Excise Duty Rebate:
The Assessing Officer contended that the petitioner had received a rebate on excise duty amounting to Rs. 1,77,66,236 on export sales, which was not offered to tax. The court observed that the petitioner had disclosed this rebate in the return of income under the head "amounts not credited to the profit and loss account." The Assessing Officer had raised a specific query regarding this rebate during the original assessment, and the petitioner had provided a detailed explanation. The court found that the Assessing Officer had considered this aspect during the original assessment and made no addition. Therefore, reopening the assessment on this ground was also unjustified.

Conclusion:
The court quashed the impugned notice dated 9.3.2012, holding that there was no failure on the part of the petitioner to disclose truly and fully all material facts necessary for the assessment. The court criticized the delay in supplying the reasons for reopening the assessment, which effectively frustrated the directives of the Supreme Court in the case of GKN Driveshafts (India) Ltd v. I.T.O. The petition was disposed of accordingly.

← Previous Next →