9911796707
TMI Blog2013 (4) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... dings with respect to which we are not concerned. 3. It is this assessment which was framed after scrutiny that the Assessing Officer seeks to reopen under section 147 of the Act for which the impugned notice dated 25-2-2004 came to be issued. This is, therefore, a case where the assessment is sought to be reopened beyond a period of four years from the end of relevant assessment year. 4. At the request of the petitioner, the Assessing Officer supplied the reasons recorded by him for issuing the notice for reopening the assessment. Such reasons read as under:- Reasons for reopening the assessment U/s.147 of the I.T. Act I. The scrutiny assessment U/s. 143(3) was completed in this case on 26.03.2001. While scrutinizing the return of income for assessment of subsequent years, it is seen that the assessee's claims are not proper. It is seen that the assessee has submitted voluminous details along with the return of income which are not at all required to be filed along with the return of income. What is required is the Tax Audit Report, Profit and Loss Account and Balance Sheet, Other Statutory Reports pertaining to deductions U/s.80HHC and 80IA, Computation of Income, Proof of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls by Aditya Medisales Ltd. Aditya Medisales Ltd. has been given the task of distributing the formulation drugs produced by the units at Silvasa and Vapi of Sun Pharma Industries Ltd. It pays the interest @ 24% to the latter on the overdue bills which is much more than the prevailing market rate of interest in this line of business which varies from 15% to 18%. By adopting this modus operandi, the Sun Group has reduced the taxable profit of M/s. Aditya Medisales Ltd. and at the same time it has increased the profit of Silvasa Unit because the interest income is directly added to the sales figure, on which the deduction u/s 80 IA is available. These facts are not clear from the working of deduction u/s 80IA given by the assessee along with the return of the income. This is not permissible as per the provisions of Section 80IA (10) of the Act and the rate of interest payable to SPIL has to be restricted @ 15% to 18% which will automatically reduce the profits of units entitled for 80IA deduction and consequently the deduction u/s.80IA claimed by the assessee will be reduced. IV. In the assessment year 1999-2000, the A O had allocated 10% of the weighted deduction u/s. 35(1) to the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar reasons came up for consideration before us in the assessee's own case in Special Civil Application No. 12468/2004. By our judgment dated 31-7-2012, we had found that such reasons were not germane and would not give jurisdiction to the Assessing Officer to reopen the assessment on the basis of such reasons. Relevant observations of the said judgment read as under:- "18. Insofar as ground Nos. 1 and 2 are concerned, they overlap. We, therefore, discuss them together. In response to such reasons recorded, the petitioner had in connection with these grounds, specifically raised objections and pointed out that all figures tally and that there was no double deduction claimed. It was contended that there was no failure on the part of the assessee to fully and truly disclose all material facts. In particular, with respect to the claim of double deduction of the fixed assets and R & D expenses by way of depreciation and thereafter under section 35 of the Act, it was pointed out that the assessee had claimed deduction under section 35 of the Act towards R & D expenses. On such expenses, no depreciation by way of fixed assets was claimed. In short, the case of the assessee is that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 448.35 Assessment Year : 1997-1998 Financial Year : 1996-1997 Reconciliation of Addition to Fixed Assets as per Working of Book Depreciation-[Schedule 5 of Annual Accounts] and as per Income Tax Depreciation workings and as per R & D additions as per Form No. 3CD: [1] Additions to Buildings as per Schedule 5 of Audited Annual Report: 711.15 Less Addition to R & D building as per Annexure No. III of the Form No. 3CD 302.63 Balance addition to Building which are considered in working of dep. As per Income Tax Act 408.52 Break up: [1] Addition to Housing Quarters 40.51 [2] Addition to Fac. & Off. Building 280.69 [3] Depreciation @ 100% claimed on Additions to P & M at Nagar of Rs. 132.97 lacs which includes additions to ETP building of Rs. 87.32 Lacs 87.32 408.52 [2] Additions to Plant & Machineries as per Schedule 5 of Annual Report: 1157.65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a higher amount. As per Schedule-5 of Annual Accounts, the addition in plant and machinery is Rs.1157.65 lacs. As per 3 CD Report, addition of plant and machinery pertaining to R & D is Rs. 143.44 lacs. Hence, the depreciation u/s.32 should have been claimed on addition of plant and machinery worth Rs.1157.65 lacs (-) Rs. 143.44 lacs = Rs. 1014.21 lacs. However, in the depreciation chart as per Income-tax Act, the depreciation has been wrongly claimed on addition of Rs. 1101.29 lacs (Rs. 857.06 lacs + Rs. 111.26 lacs + Rs. 132.97 lacs)." To our mind, this line of reasoning that the Assessing Officer took in the order disposing of the objections was entirely different from what emerged from the reasons recorded. As already noted, in the reasons recorded, he raised two contentions with respect to certain claims of deduction. Firstly, he contended that certain figures do not match with the Tax Audit Report and, secondly, that with respect to certain expenditure of R & D, double benefits were claimed in the form of depreciation as well as deduction under section 35AB of the Act. When the assessee objected to such grounds and pointed out in detail that the claims were valid and that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of which he could be stated to have reason to believe that excess deduction under section 80IA of the Act was granted. More importantly, the assessee had disclosed all facts in the original return. Such claim was scrutinised and even partly disallowed. In our opinion, therefore, assessment previously framed after scrutiny could not be reopened beyond a period of four years from the end of the relevant assessment year. This ground also, therefore, must fail. 9. Coming back to the sole surviving ground No. III, in essence, it pertains to the deduction under section 80IA of the Act. The Assessing Officer noted that the assessee had received interest on overdue bills of Aditya Medisales Ltd. at the rate of 24% per annum. He was of the opinion that such interest rate was much more than the prevailing market rate in this line of business which varies between 15% to 18%. He noticed that Aditya Medisales and the present assessee were sister concerns. He was, therefore, of the opinion that such excess interest should have been adjusted as provided in section 80IA(10) of the Act. We had occasion to deal with this very ground in our judgment dated 31-7-2012 in assessee's own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing market rate of interest in in this line of business which varies from 15% to 18%. By adopting this modus operandi, the taxable profits of M/s. Aditya Medisales Ltd. on the one hand has been reduced and the profits of 'Silvasa Unit' of M/s. Sun Pharmaceuticals Industries Ltd. has been inflated which is exempt u/s.80-IA. This is a clear cut violation of section 80-IA(10) of the Act. The fact that M/s. Aditya Medisales Ltd. had paid interest @ 24% on over due bills is not available from the record of M/s. Sun Pharmaceuticals Industries Ltd. The interest component has been merged in the figure of sales of the Silvasa Units making it difficult for the A.O. to discover this modus operandi. This fact could be detected while verifying/examining the records for Assessment Year 2001-02 of M/s. Aditya Medisales Ltd. This issue is discussed in detail in the Assessment Order u/s. 143(3) in the case of M/s. Aditya Medisales Ltd." It is not in dispute that Aditya Medisales is the sister concern of the petitioner Company. It is also not in dispute that on the delayed payments of sales proceeds, Aditya Medisales paid interest at the rate of 24% to the petitioner Company. Section 80IA of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely succeed or not. Sufficiency of the reason on which the Assessing Officer forms such belief is also not for the Court to decide. 28. In the case of Sri Krishna Pvt. Ltd. v. I.T.O., 221 ITR 538, the Apex Court reiterated the ratio laid down in the case of Phool Chand Bajrang Lal and observed that inquiry at the stage of finding out whether the reassessment notice is valid is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escapement of income is established. Since the belief is that the Income Tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge. 29. In the case of I.T.O. v. Selected Dalurband Coal Co. P. Ltd., 217 ITR 597, the Apex Court held that the formation of belief by the Income Tax Officer is essentially within his subjective satisfaction. At the stage of issue of notice, the only question is whether there was relevant material on which the reasonable person could have formed the requisite belief. 30. In the case of Raymond Woollen Mills Ltd. v. ITO, 236 ITR 34, the Apex Court observed that "in this case, we do not have to give a final decision as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under S. 147(a) read with S. 148 of the Income-tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, explanation 1 provides that "production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of foregoing proviso". In the present case, even from the account books and other evidence which the assessee had produced, even after due diligence, it was not possible for the Assessing Officer to discover these three vital facts. 35. In the case of Sri Krishna Pvt. Ltd. (supra), the Apex Court observed that obligation of the assessee is to disclose all material facts necessary for his assessment for that year fully and truly. It was further observed that the idea is to save the assessee from harassment resulting from mechanical reopening of reassessment. This protection avails only to those assessees who disclose all material facts truly and fully. 36. In the case of Phool Chand Bajrang Lal (supra), the Apex Court held as under: "Where the transaction itself, on the basis of subsequent information was found to be a bogus transaction, mere disclosure of that transaction at the time of original proceedings cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest was paid. Alongwith such affidavit, the petitioner has also produced a communication dated 14-3-2001 made by Aditya Medisales to the Assessing Officer supplying various details during the course of the assessment for the year 1998-99 in which at item No. 8 appears "Details of interest paid is as per Annexure - 4". Counsel for the petitioner took us to such annexure in which at Sr. No.8, the following entry is mentioned:- DETAILS OF INTEREST PAID DURING ACCOUNTING YEAR 1997-98 SR PARTY'S NAME AMOUNT RATE 8 SUN PHARMA. IND.LTD. - OVER DUE 33338762 @ 24% 11. Counsel also drew our attention to the assessment order passed by the Assessing Officer in case of Aditya Medisales for the same assessment year to highlight that the Assessing Officer was common in both cases and in fact, several dates of hearing were also common. On the basis of such additional materials, the counsel would contend that in the present case, when full details regarding the rate of interest paid to Aditya Medisales had come on record, the Assessing Officer now cannot reopen such assessment beyond a period of four years. 12. On the other hand, learned counsel for the revenue opposed this content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judged on the basis of several factors. For example, we do not have the queries in response to which Aditya Medisales had occasion to address a communication dated 14-03-2001 to the Assessing Officer and make several disclosures and in particular with respect to details of interest paid during the assessment year. What was the purpose for which the Assessing Officer had called for such details and what was the angle from which such details were being examined by him may be relevant factors for deciding whether he was conscious of the excess interest paid to the present petitioner by a sister concern for which adjustments were required to be made under section 80IA(10) of the Act. This and several other facts may have to be examined before giving any final conclusion or opinion on such aspect. We are, therefore, advised not to decide this issue in the present petition but leave it open to the assessee to urge the same before the Assessing Officer in the pending assessment and before the appellate forum in future, if need so arises.
14. In the result, subject to above rider, the petition is dismissed. Rule discharged. Interim relief vacated. No costs. X X X X Extracts X X X X X X X X Extracts X X X X
|
