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TMI Blog2014 (10) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... Pottery Works Co. Ltd. Vs. ITO [1976 (11) TMI 1 - SUPREME Court] - in the alleged reasons as recorded, no material external to the record which was available has been brought on record for issuance of notice u/s. 148 of the Act - the issuance of notice u/s 148 for AY 2003-04, 2004-05 and 2005-06 cannot be upheld and are to be set aside – Decided in favour of assessee. - ITA Nos. 2687, 2688 & 2689/Ahd/2010 CO Nos. 153, 154 & 155/Ahd/2013 - - - Dated:- 5-9-2014 - SHRI N.S. SAINI, AND SHRI KUL BHARAT, JJ. Revenue by : Shri M.K. Singh, Sr. D.R. Assessee(s) by : Shri A.C. Shah, AR O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: These are the appeals filed by the Revenue and Cross-Objections filed by the Assessee against the consolidated order of the Commissioner of Income Tax (Appeals)-XX, Ahmedabad dated 12.07.2010 for Assessment Years 2003-04, 2004-05 and 2005-06. 2. The issue involved in Revenue s appeals for Assessment Years 2003-04, 2004-05 and 2005-06 is that the Ld. Commissioner of Income Tax(A)-XX, Ahmedabad has erred in law and on facts in directing the Assessing Officer to allow deduction u/s. 80IB of the Income Tax Act, 1961 amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2002-03 relevant to AY 2003-04, ₹ 4,80,33,282/- as on 01-04-2003 i.e. at the beginning of the Financial Year 2003-04 relevant to AY 2004-05, and ₹ 4,97,88,775/- as on 01-04-2004 i.e. at the beginning of the Financial Year 2004-05 relevant to AY 2005-06 which exceeded the limit fixed for investment in Plant and Machinery and thereby the assessee ceased to be an SSI Unit and thus not eligible for deduction u/s. 80IB of the Act. However, the assessee claimed and was allowed deduction u/s. 80IB of the Act of ₹ 35,40,963/-, ₹ 37,13,631/- and ₹ 44,22,737/- for Assessment Years 2003-04, 2004-05 and 2005-06 respectively. Thus, the income chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. 5. The assessment for all three Assessment Years was completed on 29.10.2009 wherein the deduction allowed to the assessee in the original assessment u/s. 80IB(10) was withdrawn. 6. Being aggrieved against the said orders of the Assessing Officer, the assessee filed appeal before the Commissioner of Income Tax (Appeals) wherein the assessee submitted as under: The learned AO has reopened the assessment and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the particulars truly and fully at the time of reassessment and therefore the assessment cannot be reopened after four years as provided in proviso to Section 147. Similarly, the orders for A.Y. 2004-2005 and 2005-2006 and also for A.Y, 2003-2004 are passed after considering the claim under Sec. 80IB in details [The copy of Orders are enclosed]. Therefore, since the assessee is allowed the deduction under Sec.8OIB by Orders passed under Sec, 143(3) it is nothing but change of opinion. The SC in case of CIT V/s. Kelvinator India Ltd. 320ITR 561held as under: The concept of change of opinion on the part of the AO to reopen an assessment does not stand obliterated after the substitution of Sec.147 of the I.T. Act, 1961 by Direct Tax Laws (Amendment) Act, 1987 1989. After the amendment, the AO has to have reason to believe that income has escaped assessment, but this does not imply that the AO can reopen an assessment on mere change of opinion. The concept of change of opinion must be treated as an in-built test to check the abuse of power. Hence, after April 1, 1989, the AO has power to reopen an assessment, provided there is tangible material to come to the conclusion that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11B of the Industrial (Development and Regulation) Act, 1951. It therefore follows that if any industrial undertaking is registered as a SSIU by District Industries Centre, Mehsana then it is a SSIU. The certificate of registration dated 01-07-1998 issued by District Industries Centre, Mehsana and revalidated on 25-07-2002 by District Industries Centre, Gandhinagar is enclosed herewith. The assessee furnished the registration certificate from District Industries Centre as SSIU to the AO during assessment proceedings. The learned AO cannot embark upon the inquiry about the genuineness of certificate issued by another central government authority. The reliance is placed in following cases: Apollo Tyres Ltd. V/s. CIT 255 ITR 273 (SC) Vadilal Chemicals Ltd. V/s. State of Andhra Pradesh and Others. 142 STC 76 (SC) Malayala Mamorama Co. Ltd. V/s. CIT 300 ITR 251 (SC) Once the one authority of central government has issued certificate as SSIU, another authority cannot embark upon the inquiry about the genuineness of the certificate. This view is held by the SC in case of Apollo Tyres Ltd. V/s. CIT 255 ITR 273. The SC in case of Vadilal Chemicals Ltd. V/s. State of Andhra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. SO 1288(E) dated 24th December, 1999 reducing the limit of investment in plant and machinery for being regarded as SSI from ₹ 3.00 Crore to ₹ 1.00 Crore. Subsequently a clarification No. 4(I)-2000-SSI was issued on 14th March, 2000 stating that the units that have obtained permanent registration on the order dated 10th would continue to remaining an SSI inspite of the order dated 24th December, 1997 reducing the investment limit to ₹ 1.00 Crore. The copy of the Notification and clarification is enclosed. Subsequently, a Notification dated 5th June, 2003 bearing No. SO 655(E) was issued, by virtue of which certain items under drugs and pharmaceutical category were included and under which the investment limit was increased upto ₹ 5.00 Crores. One of the items was paracitamole or Para amino phenol. The company manufactures all the items prescribed under drugs and pharmaceutical sector under this notification and ITA Nos 2687, 2688 2688/Ahd/2010 and therefore was governed by this notification and therefore limit for being regarded as SSI undertaking stands increased upto ₹ 5.00 Crores. Subsequently, again a clarification was issued on 14t Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lincoln Pharmaceuticals Ltd. 31-03-2003 31-03-2004 31-03-2005 Gross plant and machinery 480.33 497.88 516.93 Exempted plant and machinery Revaluation of machinery 46.19 46.19 46.19 Pre-operative exp. 11.46 11.46 11.46 R and D assets 65.68 66.71 67.50 Erection and commissioning 34.70 34.70 34.70 Freight and packing 11.51 11.51 11.51 Mould dies and jigs 26 26 26 D. G. set 9.32 9.32 9.32 ETP plant 3.17 3.17 3.17 Exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification of all assets submitted by the company. Therefore, all the details of Plant Machinery are already on records. 5.1 It may please be noted that in the year 2000, there was a heavy rain of 20 inches in a day in Ahmedabad city and our all major records of the company are remain in water for 3-4 days, majority of records are completely destroyed and damaged in heavy rains. This facts, we have already intimated to the Income Tax Department vide letter dated 21st July, 2000. A copy of aforesaid intimation letter is enclosed. The photographs of logging of water are enclosed. The original invoice was already destroyed and therefore it could not be produced during reassessment proceedings. However, the same were produced during A.Y. 1998-1999 assessment proceedings. The fact that the depreciation claim was allowed proves that all the invoices were produced at the relevant time. 5.2 The position of Plant Machinery as on 31/03/2002 as per C. A. Certificate as under: (Rs.) (Rs.) Gross plant and machinery (as per audited balance-sheet) 4,73,81,372 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal registration charges, consulting fees, interest on borrowed fund etc. All these expenses are proportionally allocated into all assets account in the proportion of value of assets. The share of allocation of preoperative expenses is ₹ 11,46,360. This amount is already debited to our plant machinery account. A copy of plant machinery account is enclosed. 5.6 D.G. SET OF 250 KVA Of ₹ 9,32,000: The company has purchased Diesel Generating Set of 250 KVA at total cost of ₹ 9,32,000 for water treatment as per the requirement of Gujarat Pollution Control Board. The copy of Effluent Treatment Plant account in the year 1999-2000 is enclosed. 5.7 Effluent Treatment Plant (ETP) of ₹ 3,17,000: The company has set up an Effluent Treatment Plant at a total cost of ₹ 3,17,000 for water treatment as per the requirement of Gujarat Pollution Control Board. The copy of Effluent Treatment Plant account in the year 1999-2000 is enclosed. 5.8 Erection Commissioning of ₹ 34,70,000: The company has made huge investment in expansion unit. The company has installed so many types of machines for tablets, capsules, ointment, syrup, injectable etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.5 to 5.11 hereinabove. 6.5 The calculation given in Para No.4 refers to only gross value and not WDV. 6.6 The assessee company fulfills the conditions each year as per the calculation in Para-4 the investment limit is below the limit prescribed by the notifications. 6.7 It is stated by the AO that the limit of ₹ 3.00 Crore is reduced to ₹ 1.00 Crore. This is not correct. The AO failed to appreciate the clarification No. 4(I)-2QOO-SSI dated 14/03/2000. It is clarified that the Unit which has already acted upon, the Notification No. SO857(E) dated 10th December, 1997 will continue to enjoy the limit of ₹ 3.00 Crore. 6.8 It is already stated to the AO which is reproduced on Page No.15 of Asst. Order to the effect that the records have been destroyed due to rain in July 2000 and that the intimation to that effect was also given to CCIT by letter dated 21-07-2000 and therefore the Invoices have been destroyed. However, the copy of accounts and other supporting evidences whatever available have been furnished. The fact that the claim of depreciation is accepted supports the claim of the assessee. 6.9 The assessee furnished the CA Certificate dated 28-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. Coming to the merits of the case, I find that the Ministry of Industry (Department of Industrial Policy and Promotion) issued orders / notification from time to time. As per Notification No. S.O. 857(E) dated 10 December 1997 the limit of investment in plant machinery for treating the undertaking as SSIU is ₹ 3.00 Crore. The Note No. 2(b) of the said notification also provides the mode of calculating the value of plant machinery. The said note provides exclusion from the plant machinery while calculating the limit for investment. In other words, certain machinery such as jigs, dies, moulds, generator, electric fitting, pre-operative expenses etc. are to be excluded. 9. The limit of ₹ 3.00 Crore was reduced to ₹ 1.00 Crore by Notification No. S.O. 1288(E) dated 24th December 1999. However, the clarification is issued by Notification No. 4(I)/2000-SSI B dated 14th March 2000 to the effect that the units which had switched to the SSI status based on the order dated 10th December 1997 would continue to remain as SSI units inspite of the order dated 24th December 1999. 10. It is seen that the assessee has already switched over to the SSI status ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 D. G. set 9.32 9.32 9.32 E.T.P. plant 3.17 3.17 3.17 Exempted assets 208.03 205.06 209.85 Net plant and machinery 272.30 288.82 307.08 SSI limit 300 500 500 12.1 From the table, it is seen that the revaluation reserve is reduced since it is not a part of the cost. The other machinery and expenses are excluded as per Note No. 2(b) as per Notification No. 857(E). Each item of exclusion is supported by the evidence including C.A. Certificate dated 28-01-2003 given in the paper book. I have considered the written submission given in Para No 5 in respect of each exclusion from the value of plant machinery. Therefore, in my opinion the exclusions made is in order. 12.2 Accordingly, it is seen that the appellant is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption was wrongly granted nor did he have the jurisdiction under section 20 of the State Act to go behind the eligibility certificate and embark upon a fresh enquiry with regard to the appellant's eligibility for the grant of 14. In the light of ratio laid down in the above quoted judicial pronouncements, the facts of the present case have been examined. The SC has held in the above referred cases that when another central government authority issues the certificate to the effect that the assessee is an SSIU it is not proper for the AO to make further inquiry in the matter. On this basis also the appellant is an SSI Unit. Therefore, I hold that the assessee is an SSI Unit for A.Y. 2003-2004 to A.Y. 2005-2006 and is entitled to deduction under section 80IB. The AO is accordingly directed to allow the said deduction to the appellant for all the three assessment years. 16. In the result all the three appeals are partly allowed. 8. Before us, the Authorized Representative of the assessee reiterated his submissions made before the Commissioner of Income Tax (Appeals). 9. On the other hand, the Departmental Representative supported the order of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r at the time of framing of the original assessment. It cannot be held that this material was not available. 12. The Hon'ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. Vs. ITO (1977) 106 ITR 1 (SC) held as under: It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realizing that price should familiarize themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. In other words, there was no objective trigger available with the Assessing Officer within the meaning of the recent decision of the Hon'ble Delhi High Court quoted above. Therefore, in the absence of the same, in our considered opinion, in view of the above decision of the Hon'ble Delhi High Court and the decision of Hon'ble Supreme Court, the issuance of notice u/s. 148 for Assessment Year 2003-04 on 12.06.2009, for Assessment Year 2004-05 on 17.03.2009 and for Assessment Year 2005-06 on 17.03.2009 cannot be upheld. Consequently, impugned reassessment orders for Assessment Years 2003-04, 2004-05 and 2005-06, all dated 29.10.2009 are unsustainable. Accordingly, we set aside the impugned reassessment orders. The Cross Objections of the assessee on jurisdictional ground stand allowed. 15. In view of our above decision on the jurisdictional ground taken by the assessee in Cross Objections, the appeals of the Revenue for all three years under consideration have become academic in nature and require no separate adjudication and accordingly, the same are dismissed. 16. In the result, the appeals of the Revenue for Assessment Year 2003-04, 2004-05 and 2005-06 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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