2024 (10) TMI 997 - AT - Income Tax

Reopening of assessment - assessment after 4 years from the end of the assessment year - Deduction u/s 80IB(11A) - activities of the assessee would constitute the manufacturing and not processing eligible for deduction - HELD THAT - Once the AO has not alleged what information or material fact necessary for the assessment was not disclosed by the assessee then the reopening of the assessment for these assessment years falls in the category of change of opinion. Even otherwise this issue is a debatable issue whether the processing activity of the assessee would be in the ambit of eligible business as contemplated in the provisions of Section 80IB(11A) or not. Therefore, the question of failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment does not arise. Thus, in view of the undisputed fact that the assessment for Assessment Years 2012-13 and 2013-14 were completed u/s 143(3) of the Act and notice u/s 148 were issued after the expiry of 4 years from the end of the respective assessment years then the reopening of the reassessment is hit by the proviso to Section 147 as there is nothing brought on record by the AO to show that the income assessable to tax has escaped assessment due to the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Thus, the said mandatory condition in the case of the assessee has not been fulfilled. Accordingly the reopening of the assessment for Assessment Years 2012-13 and 2013-14 is quashed being invalid. Deduction u/s 80IB - whether this process of making potato based chips and snacks falls within the expression processing as provided in Sub Section 11A of Section 80IB of the Act or not? - The Hon ble Madras High Court in case of M/s Chamadhi Trades V/s Commercial Tax Officer 2018 (5) TMI 461 - MADRAS HIGH COURT as held that the products (chips) sold by the assessee are to be classified as processed vegetable and not to come under the residuary entry for the purpose of commercial tax. Once the chips is classified as processed vegetable for the purpose of commercial tax then it cannot be given a different classification for the purpose of Income Tax so far as the processing of vegetable is concerned. Similarly the Hon ble Uttarakhand High Court in case of M/s Shriya Enterprises 2011 (10) TMI 564 - UTTARAKHAND HIGH COURT has held that the potato chips is nothing but a preserved vegetable and in other words the potato chips is also a vegetable product. The contention of the revenue that the product is not a processed vegetable but is a snack item and in fact the manufacturing process and end product is a new item has not been accepted. Thus, the CIT(A) has allowed the claim of the assessee by following various decisions including the judgment of Hon ble Supreme Court, High Courts as well as this Tribunal. No contrary decision has been brought to our notice by the revenue except a decision of Vora-Food Specialities (P) Ltd v/s Income Tax Officer 1995 (3) TMI 126 - ITAT BOMBAY wherein the issue of allowability of investment allowance u/s 32A of the Act was decided in favour of the assessee and nothing adverse can be drawn from the said decision. Accordingly in the facts and circumstances of the case as discussed above we do not find any error or illegality in the order of the CIT(A) on this issue. The appeal of the revenue stand dismissed.

Summary

Issues Involved:

1. Validity of reopening of assessment under Section 147 of the Income Tax Act.
2. Eligibility of deduction under Section 80IB(11A) for the business of manufacturing potato-based snacks and namkeen.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment:

The primary issue was whether the reopening of assessments for the Assessment Years 2012-13 and 2013-14 under Section 147 was valid. The assessee argued that the reopening was based on a mere change of opinion and not on any new tangible material. It was contended that the original assessments were completed under Section 143(3), and the reassessment notices were issued beyond the four-year limitation period without any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Tribunal, after considering the submissions, found that the Assessing Officer (AO) did not indicate any new information or material that was not disclosed during the original assessment proceedings. The Tribunal emphasized that the reopening was based on a change of opinion, which is not permissible under the law, as held by the Supreme Court in CIT vs. Kelvinator of India Ltd. Thus, the reopening was quashed as invalid.

2. Eligibility of Deduction under Section 80IB(11A):

The second issue was whether the assessee was eligible for deduction under Section 80IB(11A) for its business activities. The Revenue contended that the assessee's activities constituted manufacturing rather than processing, preservation, and packaging of vegetables, which are the conditions for eligibility under Section 80IB(11A). The assessee argued that its business involved processing potatoes into chips and snacks, which included steps like sorting, slicing, frying, and packaging with nitrogen gas for preservation. The Tribunal examined the process and concluded that the activities involved constituted processing, preservation, and packaging of vegetables. It relied on various judicial precedents, including the Authority for Advance Ruling and High Court decisions, which supported the view that such activities fall within the ambit of Section 80IB(11A). The Tribunal upheld the CIT(A)'s decision to allow the deduction, stating that the assessee's business activities met the requirements for deduction under the said section.

In conclusion, the Tribunal dismissed the Revenue's appeals and allowed the assessee's cross-objections, affirming the CIT(A)'s order granting the deduction under Section 80IB(11A) and invalidating the reopening of assessments.