9911796707
TMI Blog2015 (7) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... ated into two groups. One group in which the reopening has taken place beyond the period of 4 years from the end of the concerned / relevant assessment year and another group in which the reopening has taken place within the period of 4 years from the end of the concerned/relevant assessment year. The statement of particulars with respect to each petitioner falling under the first group and second group in the tabular form are as under: Reopening beyond the period of 4 years from the end of the relevant assessment year Sr. No. SCA No. Assessment Year Name (1) (2) (3) (4) 1 17773/2014 2007-08 Shree Khedut Sahkari Khand Udyog Mandli Ltd. 2 17870/2014 2007-08 Shree Chalthan Vibhag Khand Udyog Mandli Ltd. 3 18784/2014 2007-08 Shree Mahuva Pradesh Sahkari Udyog Mandli Ltd. 4 18785/2014 2007-08 Shree Sayan Vibhag Sahkari Khand Udyog Mandli Ltd. 5 18787/2014 2007-08 Shree Kamrej Vibhag Sahkari Khand Udyog Mandli Ltd. 6 18795/2014 2007-08 Shree Madhi Vibhag Sahkari Khand Udyog Mandli Ltd. 7 2638/2015 2007-08 Shree Maroli Vibhag Khand Udyog Sahkari Mandli Ltd. 8 2639/2015 2007-08 Shree Sahkari Khand Udyog Mandli Ltd. 9 4446/2015 2007-08 Shree Vad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar out of sugarcane supplied by its members and has been assessed to tax under the Act for last several years. That the assessee filed its return of income for AY 2007-08 on 23.10.2007 declaring NIL income after set off of brought forward business loss of Rs. 1,15,65,482/- and unabsorbed depreciation of Rs. 2,18,71,543/-. That the return income was accepted and NIL income assessed under Section 143(3) of the Act on 24.12.2009. [3.3] That thereafter beyond the period of 4 years from the end of the relevant assessment year AY 2007-08, the Assessing Officer has issued the impugned notice dated 27.03.2014 under Section 148 of the Act to reopen the assessment for the AY 2007-08 alleging inter alia that there has been escapement of income atleast of Rs. 44,90,71,133/-on account of the original assessment. [3.4] That immediately on receipt of the said notice under Section 148 of the Act, the petitioner - assessee vide communication / letter dated 31.03.2014 requested to treat the original return of income under Section 139(1) of the Act filed on 23.10.2007 as the return of income filed in response to the notice under Section 148 of the Act. Simultaneously, the petitioner - assessee also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to find out whether by making the payment to the crane growers in excess to the SMP declared by the Government under the Control Order whether the society had really passed on the profits to its members in the form of payment of final price and thereafter the Assessing Officer had held that there was no such passing of a profit. It was submitted that therefore even Rule of Constituency would also demand that the department in a later year should not somersault. It was also further submitted on behalf of the assessee that as such there was no failure on the part of the petitioner - assessee in not disclosing truly and fully all the necessary materials relevant for assessment and therefore, reopening of the assessment beyond the period of 4 years is not permissible and justified. [3.7] That vide letter dated 14.10.2014 the Assessing Officer has rejected the objections of the petitioner to notice under Section 148 of the Act. Hence, the petitioner - assessee has preferred the present Special Civil Application under Article 226 of the Constitution of India. [4.0] Shri J.P. Shah, learned Advocate has appeared on behalf of the respective petitioners - assessees in Sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for assumption of jurisdiction to reopen the completed assessment beyond the period of 4 years as provided under Section 147 of the Act is not satisfied at all. [4.4] It is submitted that as per proviso to Section 147 of the Act, only in a case where the Assessing Officer is of the opinion that there was any failure on the part of the assessee to disclose truly and fully all necessary material for assessment, the reopening of the assessment beyond 4 years is permissible. It is submitted that in none of the cases it is alleged in the notice that there was any failure on the part of the assessee to disclose fully or truly all necessary material for assessment. It is submitted that therefore the assumption of jurisdiction to reopen the assessment in the present case is wholly without jurisdiction. In support of his above submissions, Shri Shah, learned Advocate appearing on behalf of the assessees has relied upon the following decisions of this Court. 1. Austin Engineering Co. Ltd. v. Joint Commissioner of Income Tax [2009] 312 ITR 70 (Guj.) 2. Gujarat State Co-op. Agri. and Rural Development Bank Ltd. v. Deputy Commissioner of Income-tax 337 ITR 447 (Guj.) 3. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered as invalid since they do not meet the statutory preconditions/prerequisites. In support of his above submissions he has relied upon the following decisions of the Delhi High Court. 1. Commissioner of Income-tax-V v. Orient Craft Ltd. (2013) 354 ITR 536 (Del) 2. G.S. Engineering & Construction Corporation v. Deputy Director of Income-tax (International Taxation) & Ors. 357 ITR 335 (Del) [5.2] It is further submitted by Shri Soparkar, learned Advocate appearing on behalf of some of the petitioners that in the present case even the formation of opinion by the Assessing Officer that he has reason to believe that the income has escaped assessment is a borrowed satisfaction from another officer. It is submitted that a look at the provisions of Section 147 of the Act shows that prerequisite condition, which can be said to be sine qua non is that the Assessing Officer "has reason to believe" that the income chargeable to tax has escaped assessment. It is submitted that Assessing Officer does not have any jurisdiction to review its own order, and that, the opinion formed by the Assessing Officer, on the opinion of another Assessing Officer, could not be made basis to initiate the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid the prices in excess to the SMP fixed by the State Government under the Control Order, the amount paid in excess to the SMP is considered to be parting of the profits and/or distributing the profits and chargeable to tax. It is vehemently submitted that as such there was no material whatsoever before the Assessing Officer that what was the prevailing price paid to the cane growers by other co-operative societies at the relevant time and/or whether the price paid in excess to the SMP declared by the State under the Control Order was so exorbitant and/or too excessive which can be said to be passing of the profit and/or distributing the profits. It is submitted that any amount paid in excess to the SMP declared by the State under the Control Order ipso facto cannot be said to be passing of the profits and/or distributing the profits. It is submitted that therefore in absence of any tangible material available with the Assessing Officer, the formation of opinion by the Assessing Officer that the income has escaped assessment is vitiated. Shri Shah, learned Advocate appearing on behalf of some of the petitioners has taken us to relevant provisions of the Control Order and the mecha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's claim was processed at length and after calling for detail explanation same was accepted, merely because certain element or angle was not in the mind of Assessing Officer while accepting such a claim, could not be a ground for issuing notice under Section 148 of the Act for reassessment, where the Assessing Officer allowed the assessee's claim after making a detail inquiry, thereafter he cannot initiate reassessment proceedings on the basis of the same material, taking a view that the said claim was wrongly allowed. In support of above submissions, Shri Soparkar, learned Advocate appearing on behalf of some of the petitioners has relied upon the following decisions of this Court. 1. Cliantha Research Ltd. v. Deputy Commissioner of Incometax (2013) 35 taxmann.com 61 (Gujarat) 2. Sarla Rajkumar Verma v. Assistant Commissioner of Incometax (2014) 43 taxmann.com 372 (Gujarat) 3. Niko Resources Ltd. v. Assistant Director of Incometax (2015) 51 taxmann.com 568 (Gujarat) [6.2] Shri Shah, learned Advocate appearing on behalf of some of the petitioners has further submitted that even in the case of most of the petitioners co-operative societies for number of decades, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akari Mandli Ltd., the reasons itself record "Scrutiny of statement of unabsorbed business loss and depreciation allowance revealed that the brought forward unabsorbed depreciation of Rs. 12,32,03,579/-(before set off from current year's profit) includes unabsorbed depreciation of Rs. 7,80,40,419/- pertaining to the period prior to AY 1997-98. Since the unabsorbed depreciation for the period prior to AY 1997-98 was allowed to be carry forward & set off for eight assessment years only, as per provisions of Income Tax Act, set off of the unabsorbed depreciation pertaining to the period prior to 1997-98 against the income of AY 2007-08 was incorrect and is required to be withdrawn". It is further submitted that in Special Civil Application No.2638/2015 in the matter of Shree Maroli Vibhag Khand Udyog Sahakari Mandli Ltd. in the reasons recorded it is stated that on verification of record, it is observed that the assessee was allowed to carry forward business loss and unabsorbed depreciation pertaining to different preceding AYs (i.e. from AY 1978-79 to 1996-97 and AY 1997-98 to AY 2008-09)".It is submitted that therefore, on the second reason also the reopening of the assessment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners have requested to allow the present Special Civil Applications and quash and set aside the impugned notices under Section 148 of the Act to reopen the completed assessment of respective assessment years. [7.0] All these petitions are opposed by Shri Sudhir Mehta, learned Advocate and Shri K.M. Parikh, learned Advocate appearing on behalf of the Revenue in respective petitions. Learned Advocates appearing on behalf of the Revenue have vehemently submitted that in the facts and circumstances of the case and more particularly when the notices under Section 148 of the Act have been issued and the assessments have been reopened on recording the reasons and having satisfied that the income chargeable to tax has been escaped, it is requested not to entertain the present petitions at this stage. [7.1] It is vehemently submitted that when the State Government declared the final purchase price under the Control Order after due procedure as required and after considering the element of profit, expenditure etc., it was not open for the sugarcane society to pay more than the SMP declared and therefore, any amount paid in excess to the SMP is nothing but sharing the profits and/or distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd set off for 8 assessment years only, as per the provisions of the Act, set off of the unabsorbed depreciation pertaining to period prior to 1997-98 is allowed and set off against the income of AY 1997-98, was incorrect and required to be withdrawn. It is submitted that failure to do so has resulted in incorrect carry forward of unabsorbed depreciation on which short levy of tax has been worked out and therefore, on the aforesaid reason/ground reopening the assessment is absolutely just and proper as the income chargeable to tax has escaped assessment. Making above submissions, it is requested to dismiss the present Special Civil Applications. [8.0] Heard learned Advocates appearing for respective parties at length. In all these petitions under Article 226 of the Constitution of India, the respective petitioners - co-operative societies have challenged the impugned notices under Section 148 of the Act reopening the assessment for respective assessment years and the assumption of jurisdiction under Section 147 of the Act. [8.1] As observed hereinabove as such this group of petitions can be bifurcated into two groups. One group in which the reopening of the assessment for respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed u/s.143(3) of I.T. Act 1961 on 24.12.2009. The assessee claimed to carry forward of Unabsorbed depreciation of Rs. 10,13,32,036/. It was noticed from the statement of computation of income and statement showing the carry forward and set off of Business losses and Unabsorbed depreciation attached with the Return of Income that the assessee had set off Business loss of Rs. 1,15,65,482/- and Unabsorbed depreciation of Rs. 2,18,71,543/- (Total Rs. 3,34,37,025/-) against the current year income of Rs. 3,34,37,025/-. Scrutiny of statement of unabsorbed business loss and depreciation allowance revealed that the brought forward unabsorbed depreciation of Rs. 12,32,03,579/-(before set off from current year's profit) includes unabsorbed depreciation of Rs. 7,80,40,419/pertaining to the period prior to A.Y. 1997-98. Since the unabsorbed depreciation for the period prior to A.Y. 1997-98 was allowed to be carry forward & set off for eight assessment years only, as per provisions of Income Tax Act, set off of the unabsorbed depreciation pertaining to the period prior to 1997-98 against the income of A.Y. 2007-08 was incorrect and is required to be withdrawn. Failure to do so has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a practice of deciding the purchase price of sugarcane after finalization of its accounts and its profits in the financial year subsequent to procurement of sugarcane. Till the time of finalization of the purchase price, adhoc payments are distributed amongst the sugarcane farmers. The final purchase price is declared after arriving at the profits earned by the co-operative sugar factories during the year of procurement of sugar cane. Thus, the ad hoc payments and the final payments contain an element of profits of the co-operative sugar factories, which are distributed amongst the sugar cane growers in the guise of 'cane price', without payment of any income tax on the profits so earned. Payment of sugarcane prices by sugarcane factories to sugarcane growers is governed by 'The Sugarcane (Control) Order (SCO), 1966' made by the Central Government, by virtue of the powers vested with it under 'The Essential Commodities Act, 1955'. By this order, fixation of a Statutory Minimum Price (SMP) by the Central Government every year, for every sugar factory, came into place. This price is fixed as per the recommendations of the Commission for Agricultural Costs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y suppress the profits of the co-operative sugar societies by the distribution of profit as purchases from its members. The entire profits of the sugar factories, which otherwise would have been taxed in their hands, are distributed amongst its members, in the guise of 'cane price'. It is also noted that a sugar unit cannot pay purchase price for sugar cane below the SMP/FRP decided by the Central Government. Thus, it is reasonable to consider that in absence of any purchase price fixed by the co-operative sugar factories for sugar cane, it would be reasonable to adopt the SMP/FRP as the purchase price. The case of the assessee for the year under consideration was also perused from this angle. It was seen that the assessee has purchased 1049359.71 Metric tons of sugarcane during the year. The average sugarcane purchase price of the assessee for the year is Rs. 1332.15 per M.T., as against the MSP/FRP of Rs. 982.5/- per M.T. declared by the Central Government. All the sugarcane is purchased by the assessee from its members. All the members of the co-operative society are shareholders of the society and are interested in the co-operative society. In order to avoid incidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disclose fully and truly all material facts and nothing was brought on record and by filing of affidavit in reply for the first time such escapement was indicated, the Division Bench of this Court has held that notice of reopening beyond 4 years must fail. "5.06. Identical question came to be considered by the Division Bench of this Court in the case of Niko Resources Ltd. (supra) and while considering the scope and ambit of powers to be exercised under section 147 of the Income Tax Act by the Assessing Officer, while reopening the assessment beyond the period of 4 years, the Division Bench of this Court while considering its decisions in the case of Gujarat Lease Financing Limited (supra), has observed and held in paragraph Nos.16, 17 and 27 as under :- 16. The Assessing Officer is authorized to make reassessment in the event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per the 1st proviso to section 147 of the Act, assessment can be reopened under section I47 of the Act after expiry of 4 years only if (1) the assessee failed to make a return under section I39 of the Act or in response to notice issued und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponsibility of the Assessing Officer. Once having revealed from the record that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error earlier on the part of the Assessing Officer himself or because he choose not to opine on the issue or even when he changes his mind and interprets the material or law otherwise than what was done by him. 5.07. Applying the decision of the Division Bench of this Court in the case of Niko Resources Ltd. (supra) as well as Gujarat Lease Financing Limited (supra), to the facts of the case on hand and as observed hereinabove, there does not appear to be failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment with respect to the additional depreciation claimed, the initiation of the impugned reassessment proceedings which are initiated beyond the period of four years, are not permissible and the same cannot sustain and on that ground alone, the impugned reassessment proceedings deserve to be quashed and set aside." [8.5] Under the circumstances and in ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. (Supra), decisions of this Court in the case of Cliantha Research Ltd. (Supra), Sarla Raj Verma (Supra) and Niko Resources Ltd. (Supra). In the case of Kelvinator of India Ltd. (Supra), the Hon'ble Supreme Court in para 6 has held as under: "6. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April , 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be noted that the reasons to believe must necessarily show, indicate and communicate why and on what grounds / cause any income has escaped assessment. Reasons recorded must be germane, prudent and disclose prima facie belief that income has escaped assessment. Even for formation of the opinion and/or reason to believe that any income has escaped assessment, there must be some tangible new material available with the Assessing Officer on the basis of which the reassessment proceedings are permissible. In the present case as such except the allegation that cane price / price has been paid to the cane growers more than the purchase price determined / declared by the Government under the Control Order and therefore, the difference between the same is distributing the profits and therefore, the income liable to tax has escaped assessment. However, mere payment of cane price paid in excess to the SMP cannot by ipso facto and/or per se can be said to be distributing the profits. There must be tangible material available with the Assessing Officer, such as the amount or cane price paid to the cane growers in excess to the SMP either is exorbitant or too excessive and is not justifiable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted by the Assessing Officer. In the present case no such inquiry has been done and/or conducted by the Assessing Officer before having a reasonable belief and/or forming an opinion that the income chargeable to tax has escaped assessment on the aforesaid ground. [9.3] At this stage it is required to be noted that in some of the cases the Assessing Officer has formed an opinion on the basis of the order passed by the learned CIT (Appeals) which were pursuant to the order of Hon'ble Supreme Court in the case of Shri Satpuda Tapi Parishar SSK Ltd. (Supra). However, it is required to be noted that on the basis of the order passed by the learned CIT(Appeals) in the case of some other assessee the satisfaction of the Assessing Officer and formation of opinion in the case of present assessee cannot be sustained and the same can be said to be a borrowed satisfaction from another officer. Such borrowed satisfaction in absence of any application of mind and any real finding in the case of the assessee do not constitute valid reason to believe that the income has escaped assessment. Under the circumstances on the aforesaid ground also the impugned reassessment proceedings within 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serves to be quashed and set aside. [10.0] Now, so far as the reopening of the assessment on other grounds viz. 1) unabsorbed depreciation permitted to be carried forward beyond a period of 8 years raised in Special Civil Application Nos.17870/2014 and 2638/2015; 2) wrong adjustment u/s.145A of the Act raised in Special Civil Application Nos.17875/2014, 18787/2014 and 2369/2015 and 3) with regard to section 43B of the Act raised in Special Civil Application Nos.2364/2015 and 2373/2015 are concerned, considering the respective assessment orders it appears that at the relevant time after due inquiry the same was allowed by the Assessing Officer and therefore, the reopening on the aforesaid reasons/grounds can be said to be change of opinion which is not permissible. [11.0] In view of the above and for the reasons stated above, on the aforesaid ground alone and without expressing any opinion on merits / on the issue whether any amount of purchase price paid in excess to the SMP declared by the Government can be said to be distributing the profits and/or passing of the profits or not, impugned notices under Section 148 of the Act to reopen the completed assessment for the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
