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2016 (7) TMI 1005 - AT - Income TaxValidity of reopening of assessment - Held that - From the entire reading of the order of assessment we are of the considered view that the Assessing Officer has dealt with the objections in the assessment order itself in a composite manner. The Assessing Officer should have passed a speaking order before proceeding for assessment, and in this case, the Assessing Officer has not passed a well-reasoned speaking order which was required as per the principles of natural justice as well as the principles laid down by the above judicial pronouncements. Apart from this, as per the entire order of assessment u/s 143(3) r.w.s. 147 there was no new tangible material on record before the Assessing Officer, and in the absence of any new tangible material on record, the order of the Assessing Officer for reopening is bad in law After considering the entire facts of the case and the legal position in the aforementioned cases, we are of the considered view that there is no need to go further in this case when once we are convinced that principles of natural justice as well as the principles laid down by the above judicial pronouncements have not been fully complied with by the Assessing Officer while passing the order of assessment u/s 143(3) r.w.s. 147 of the Act. Therefore, in our considered view the order passed by the Assessing Officer is bad in law and therefore stands quashed. - Decided in favour of assessee
Issues Involved:
1. Re-opening of assessment under section 147. 2. Addition of advance license value for deduction under section 80-IB. Issue-wise Detailed Analysis: Re-opening of Assessment: The assessee challenged the re-opening of the assessment under section 147, arguing that it was based on a mere change of opinion without any new tangible material. The Assessing Officer (AO) had recorded reasons for re-opening, stating that the assessee's deduction under section 80-IB was incorrectly calculated by excluding export incentives from the profits of the Rifampicin unit. The AO believed this resulted in an excessive deduction and thus, income had escaped assessment. The assessee argued that the AO did not pass a separate speaking order disposing of the objections raised by the assessee before proceeding with the reassessment, which is required by law. The assessee relied on several judicial pronouncements, including GKN Driveshafts India Ltd. (2003) 259 ITR 19 (SC), which mandates that the AO must dispose of the objections by passing a speaking order before proceeding with the assessment. The Tribunal referred to multiple judgments, including Tupperware India Pvt. Ltd., ITA 415 of 2015 (Del. HC), and Multiplex Trading & Industrial Co. Ltd., (2015) 94 CCH 30 (Del HC), which emphasized the necessity of passing a speaking order to ensure that reopening is done based on lawful reasons and not merely on whims. The Tribunal found that the AO did not adhere to these principles, as the objections were addressed in a composite manner within the assessment order itself, rather than through a separate speaking order. Additionally, the Tribunal noted that there was no new tangible material available to the AO, which is a prerequisite for reopening an assessment based on a change of opinion, as established in Kelvinator India Ltd., (2010) 320 ITR 561 (SC). Addition of Advance License: The CIT(A) had confirmed the AO's decision that the value of the advance license amounting to ?74.17 lakhs should not be reduced from the raw material cost of the Rifampicin undertaking and should be excluded from the profits and gains of the industrial undertaking while computing deduction under section 80-IB. The CIT(A) held that the advance license value is not a profit or gain derived from the industrial undertaking and thus, not eligible for deduction under section 80-IB. The assessee contended that the advance license scheme is meant to reduce the cost of goods to be exported and is directly related to the activity of the industrial undertaking. Therefore, it should be considered for determining the profit under section 80-IB. The Tribunal did not delve deeply into this issue, as the primary ground of appeal regarding the reopening of assessment was decided in favor of the assessee. Since the reopening itself was quashed, the Tribunal did not need to address the merits of the addition of the advance license value. Conclusion: The Tribunal concluded that the AO's failure to pass a separate speaking order disposing of the objections raised by the assessee, combined with the lack of new tangible material, rendered the reopening of the assessment under section 147 invalid. Consequently, the reassessment order was quashed, and the appeal of the assessee was allowed. The Tribunal did not address the specific issue of the addition of the advance license value due to the quashing of the reopening order.
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