United States Pharmacopeia India Pvt. Ltd., Hyd, Hyderabad V. DCIT, Circle-3(3), Hyderabad, Hyderabad

ITA 1164/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2575 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Keywords: Reopening of assessment; Depreciation; Wholly owned subsidiary; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1164/HYD/2016 ASSESSMENT YEAR: 2006-07 UNITED STATES PHARMACOPEIA INDIA PVT. LTD., HYDERABAD. PAN AAACU 7542 C VS DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(3), HYD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S.P. CHIDAMBARAM FOR REVENUE : SHRI A. SITARAMA RAO DATE OF HEARING : 13-03-2017 DATE OF PRONOUNCEMENT : 05-05-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, HYDERABAD, DATED 31-05-2016 FOR THE AY. 2006-07 ON THE ISSUE OF REOP ENING OF ASSESSMENT AND CONSEQUENT DISALLOWANCE OF LOSS CLAI MED DURING THE YEAR. 2. BRIEFLY STATED, ASSESSEE-COMPANY IS ENGAGED IN T HE BUSINESS OF RESEARCH AND ANALYTICAL TESTING IN CONN ECTION WITH PHARMACOPEIAL AND OTHER RELATED PROCESS AND TE STING HIGHLY CHARACTERIZED SPECIMENS OF DRUG SUBSTANCES A ND DIETARY SUPPLEMENTS AND THEIR INGREDIENTS ETC. THE ASSESSEE IS A 100% SUBSIDIARY OF USP HOLDING LLC, USA AND PE RFORMS SERVICES ENTIRELY FOR THE HOLDING COMPANY. ASSESSEE WAS INCORPORATED ON 27 TH MAY, 2005 AND HAS ENTERED INTO A MASTER SERVICE AGREEMENT WITH THE HOLDING COMPANY O N I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 2 -: 01/06/2005. IT INAUGURATED ITS FACILITY AT ICICI KN OWLEDGE PARK ON 8 TH FEBRUARY, 2006 AND CLAIMED THAT THE LABORATORY WAS FULLY FUNCTIONAL BY 8 TH FEBRUARY, 2006. FOR THE YEAR ENDING 31/03/2006, ASSESSEE FILED ITS RETURN OF INC OME DECLARING A LOSS OF RS. 2,04,42,891/-. THE AO ORIGI NALLY COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON NOVEMBER 25, 2011 ALLOWING SUCH LOSS SUBJECT TO FEW DISALLOWANCES. LATER, ASSESSMENT WAS REOPENED ON TH E REASON THAT THE ANNUAL REPORT OF THE COMPANY MENTIO NED THAT BUSINESS ACTIVITY OF THE COMPANY COMMENCED ON 1 ST APRIL, 2006 AND HENCE, THERE IS NO BUSINESS ACTIVIT Y DURING THE FY 2005-06. DUE TO THIS, AO WAS OF THE VIEW THA T LOSS OF RS. 1,98,46,456/- HAS TO BE TREATED AS PREOPERATIVE EXPENSES AND THE ENTIRE EXPENSES HAS TO BE DISALLOW ED. IN RESPONSE TO THE REASONS RECORDED FOR INITIATION OF REASSESSMENT PROCEEDINGS, ASSESSEE FILED ITS OBJECT IONS STATING THAT THERE IS NO FRESH MATERIAL AVAILABLE O N RECORD TO FORM AN OPINION THAT THE INCOME HAS ESCAPED ASSESSM ENT. IT WAS SUBMITTED THAT ALL THE INFORMATION WAS ALREADY SUBMITTED AT THE TIME OF ORIGINAL ASSESSMENT PROCEE DINGS. HOWEVER, AO REJECTED THE OBJECTIONS BY A SPEAKING O RDER DATED 12/06/2011 AND COMPLETED REASSESSMENT U/S 143 (3) R.W.S. 147 OF THE ACT ON AUGUST 29, 2011, DISALLOWI NG THE ENTIRE EXPENDITURE CLAIMED BY THE COMPANY AS PREOPE RATIVE EXPENDITURE. 3. ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE REOPENING IS BAD IN LAW AND IT IS BASED ON MERE CHA NGE OF OPINION AND RELIED ON VARIOUS CASE LAW. WITH REFERE NCE TO I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 3 -: THE MERITS OF THE CASE, IT WAS SUBMITTED THAT ASSES SEE IS IN TESTING SERVICES AND FULLY FUNCTIONAL LABORATORY WA S INAUGURATED ON 8 TH FEBRUARY, 2006 AND MAJORITY OF THE EQUIPMENT WAS INSTALLED AND DUE TO LATE ARRIVAL OF MATERIAL FOR TESTING, TESTS STARTED ON 1 ST APRIL, 2006, WHICH IS THE DATE OF STARTING OF COMMERCIAL OPERATIONS, BUT, ASS ESSEES BUSINESS HAS COMMENCED DURING THE YEAR UNDER CONSIDERATION. IT ALSO MADE ALTERNATION CONTENTION THAT THE COMMENCEMENT OF THE BUSINESS HAS TO BE TAKEN INTO CONSIDERATION FROM THE DATE OF ENTRY INTO AGREEMENT WITH THE FOREIGN COMPANY I.E. 01/06/2005 OR FROM THE DATE OF STARTING LABORATORY I.E. ON 8 TH FEBRUARY, 2006. 4. CIT(A) DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE AND REJECTED THE GROUNDS RAISED BY THE ASS ESSEE AND UPHELD THE ACTION OF THE AO. LD. CIT(A) ALSO DI D NOT AGREE THAT THE AMOUNT DISALLOWED SHOULD BE CAPITALI ZED TO THE ASSETS AND DEPRECIATION SHOULD HAVE BEEN ALLOWE D ON THE ASSETS PUT TO USE BY THE ASSESSEE COMPANY ON TH E REASON THAT IT IS PREMATURE TO GIVE SUCH DIRECTION WHEN ASSETS ARE NOT YET USED. 5. ASSESSEE IS AGGRIEVED AND RAISED THE FOLLOWING SUBSTANTIVE GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS)-5 ['CIT(A)'], DATED 31 MAY 2016 IN UPHOLD ING THE DISALLOWANCES MADE BY THE DEPUTY COMMISSIONER O F INCOME TAX, CIRCLE 3(3), HYDERABAD ('AO') IS CONTRA RY TO LAW AND FACTS OF THE CASE. I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 4 -: 2. THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION O F THE LD. AO FOR REOPENING THE ASSESSMENT WITHOUT APPRECIATIN G THE FACTS OF THE CASE. 3. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LD. C IT (A), IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ERRED I N UPHOLDING THE ORDER OF THE LD. AO IN DISALLOWING TH E ENTIRE EXPENDITURE CLAIMED BY THE APPELLANT. 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LD. CIT(A), IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ERRED I N DISMISSING THE ALTERNATIVE PLEA OF THE APPELLANT TO ALLOW THE EXPENDITURE INCURRED FROM 8 FEBRUARY 2006 TO 31 MARCH 2006. 5. WITHOUT PREJUDICE TO ALL THE ABOVE GROUNDS, THE LD. CIT(A) ERRED IN NOT DETERMINING THE CAPITALIZATION OF THE EXPENDITURE TO THE COST OF THE ASSETS FOR ALLOWING DEPRECIATION UNDER SECTION 32 OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING OF THE APPEAL. 6. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE OR IGINAL ASSESSMENT ORDER SUBMITTED THAT ASSESSEES BUSINESS HAS COMMENCED DURING THE YEAR AND THE AO HAS EXAMINED A LL THE ISSUES AND ALLOWED LOSS AS CLAIMED. HE REFERRED TO THE ASSESSMENT ORDER WHERE AO HAS DISALLOWED CERTAIN EXPENDITURE LIKE PAYMENT FOR SHARE CAPITAL, PENALTY U/S 201(1A) TO SUBMIT THAT AO HAS EXAMINED ALL THE ISSU ES AND THEN ONLY HE HAS COMPLETED THE ASSESSMENT, THEREFOR E, THERE IS NO TANGIBLE MATERIAL TO REOPEN THE ASSESSMENT SUBSEQUENTLY BY THE AO AND FACTS DO NOT COME WITH I N THE PURVIEW OF TANGIBLE INFORMATION AS HELD BY THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., [2010] 187 TAXMAN 312. I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 5 -: 6.1 WITH REFERENCE TO THE MERITS, LD. COUNSEL REFER RED TO VARIOUS EXPLANATIONS GIVEN TO THE AO IN THE COURSE OF PROCEEDINGS TO SUBMIT THAT ASSESSEES LABORATORY WA S FULLY FUNCTIONAL AND DUE TO NON-AVAILABILITY OF CERTAIN R AW MATERIAL, THE COMMERCIAL OPERATIONS CONSIDERED WERE FULLY OPERATIONAL FROM 1 ST APRIL, 2006, BUT, IT DOES NOT MEAN THAT ASSESSEE WAS NOT READY BEFORE THAT DATE. HE HAS SUB MITTED THAT IN CASE OF OMNIGLOBE OBE INFORMATION TECH INDI A P. LTD. VS. CIT, [2014] 369 IT 0001 (DELHI), THE HONB LE DELHI HIGH COURT HAS CONSIDERED SETTING UP OF BUSINESS AN D COMMENCEMENT OF BUSINESS AND HELD THAT UPON RECRUIT MENT OF EMPLOYEES AND EXPENDITURE UNDER DIFFERENT HEADS WAS INCURRED IS INDICATIVE THAT BUSINESS WAS SET UP. IT WAS CONCLUDED THAT BUSINESS AS SERVICE PROVIDER, CANNOT EXIST WITHOUT SAID ACTIVITY BEING UNDERTAKEN BOTH AT VERY INITIAL STAGE AND AFTER BUSINESS HAS COMMENCED. 6.2 LD. COUNSEL ALSO RELIED ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESPN SOFTWARE IND IA (P.) LTD., [2009] 184 TAXMAN 452 (DELHI) FOR A SIMILAR PROPOSITION THAT ASSESSEE HAS COMMENCED ITS BUSINES S WHEN IT ACQUIRED LICENCE, THEREFORE, THERE IS NO INFIRMI TY WITH REGARD TO THE FINDINGS OF THE AUTHORITIES BELOW. 6.3 LD. COUNSEL ALSO RELIED ON THE DECISION OF PREM CONDUCTORS PVT. LTD. VS. CIT, [1977] 108 ITR 654 (G UJ.) FOR THE PROPOSITION THAT WHEN A BUSINESS IS ESTABLISHED AND IS READY TO START BUSINESS, IT CAN BE SAID TO BE SET U P. ALL THE I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 6 -: ACTIVITIES WHICH GO TO MAKE UP THE BUSINESS NEED NO T BE STARTED SIMULTANEOUSLY IN ORDER THAT THE BUSINESS M AY COMMENCE. THE BUSINESS WOULD COMMENCE WHEN THE ACTI VITY WHICH IS FIRST IN POINT OF TIME AND WHICH MUST NECE SSARILY PRECEDE ALL THE OTHER ACTIVITIES IS STARTED. 6.4 LD. COUNSEL ALSO RELIED ON THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CLUB RESOR TS (P) LTD., [2006] 287 ITR 552 TO SUBMIT THAT FOR THE PUR POSE OF DEVELOPMENT OF THE PROJECTS OF CONSTRUCTION, THE AS SESSEE HAS TO NECESSARILY MAINTAIN REGULAR STAFF MEMBERS A ND INCUR EXPENDITURE ON THE SAME. THEREFORE, THE SAID EXPEND ITURE IS REVENUE IN NATURE AND ALLOWABLE AS DEDUCTION AS IT WAS HELD THAT THERE WAS COMMENCEMENT OF BUSINESS. FIRST STAG E OF DEVELOPMENT OF TIME SHARE UNIT INVOLVES SETTING UP OPERATING OFFICES FOR SOLICITING CUSTOMERS. 6.5 IN A NUTSHELL, IT WAS SUBMITTED THAT ORIGINAL ASSESSMENT WAS COMPLETED BY THE AO AFTER DUE EXAMIN ATION AND HAS CORRECTLY ALLOWED LOSS AS CLAIMED, AS BUSIN ESS WAS SET UP DURING THE YEAR AND ANY OTHER VIEW WOULD BE WITHIN THE PURVIEW OF CHANGE OF OPINION, WHICH DOES NOT PERMIT REOPENING OF ASSESSMENT. 6.6 THUS, BOTH ON MERITS AS WELL AS ON LAW, LD. COU NSEL SUBMITTED THAT ACTION OF THE AUTHORITIES BELOW IS N OT PROPER/VALID. I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 7 -: 7. LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE AO HAS NOT FORMED ANY OPINION, THEREFORE, THE PRINCIPLES L AID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINA TOR OF INDIA LTD. (SUPRA) DOES NOT APPLY. HE REFERRED TO T HE DETAILED ORDER OF CIT(A) TO SUBMIT THAT REOPENING OF ASSESSM ENT IS JUSTIFIED AND HE ALSO REFERRED TO NATURE OF EXPENDI TURE CLAIMED BY THE ASSESSEE, AS DISCUSSED BY THE CIT(A) , AND THAT ASSESSEE HAS NOT COMMENCED THE BUSINESS DURING THE CURRENT ASSESSMENT YEAR, BUT, HAS COMMENCED ON 1 ST APRIL, 2006 PERTAINING TO THE NEXT ASSESSMENT YEAR. 7.1 IN REPLY, LD. COUNSEL HOWEVER SUBMITTED THAT ST AFF FOR TECHNICAL LAB WAS ALSO EMPLOYED AND SALARY EXPENDI TURE WAS CLAIMED. IN ADDITION, THERE ARE ORDERS PLACED F OR OBTAINING RAW MATERIAL WHILE MISCELLANEOUS RAW MATE RIAL WAS ALREADY PURCHASED AND PUT TO USE. ALL ACTIVITI ES ARE ACTIVATED MUCH BEFORE FEBRUARY 8, 2006, BUT, ASSESS EE HAS ONLY STATED COMMERCIAL OPERATION ON 1 ST APRIL, 2006 AS FULL- FLEDGED BUSINESS ACTIVITY. 8. I HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS ON RECORD. THE ASSESSMENT IN THIS CASE HA S BEEN COMPLETED U/S 143(3) AND AS SEEN FROM THE ORDER OF THE AO, HE HAS EXAMINED VARIOUS EXPENDITURE CLAIMS AND DISA LLOWED TWO OF THE ITEMS, WHICH WOULD NOT HAVE COME TO THE KNOWLEDGE BUT FOR THE VERIFICATION OF THE EXPENDITU RE CLAIMS. NOT ONLY THAT, ANNUAL REPORT AND OTHER DOCUMENTS PL ACED ON RECORD INDICATE THAT ASSESSEE HAS CORRECTLY CLAIMED THE REVENUE EXPENDITURE. THE ISSUE OF COMMENCEMENT OF I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 8 -: BUSINESS IS NECESSARY TO EXAMINE FOR ALLOWING EXPEN DITURE. IT IS THE FIRST YEAR OF BUSINESS COMMENCEMENT AND T HE AO WILL CERTAINLY EXAMINE THE COMMENCEMENT OF BUSINESS BEFORE ALLOWING LOSS OR PROFIT OF THE YEAR. THEREFORE, IT CANNOT BE SAID THAT AO HAS NOT APPLIED HIS MIND WHEN HE ALLOW ED THE LOSS AS CLAIMED WITH CERTAIN DISALLOWANCES. 8.1 THE HONBLE SUPREME COURT IN THE CASE OF KELVIN ATOR OF INDIA LTD. (SUPRA) HAS HELD AS UNDER: PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, RE OPENING COULD BE DONE UNDER TWO CONDITIONS AND FULFILLMENT OF THE SAID CO NDITIONS ALONE CONFERRED JURISDICTION ON THE AO TO MAKE A BACK ASSESSMENT, B UT IN S. 147 (W.E.F. 1ST APRIL, 1989), THEY ARE GIVEN A GO BY AND ONLY ONE C ONDITION HAS REMAINED, VIZ., THAT WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THER EFORE, POST 1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS T O GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAI LING WHICH, S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON T O REOPEN. THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REA SSESS SHOULD ALSO TO BE KEPT IN MIND. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS C ONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSE SSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPI NION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1ST AP RIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO CO ME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REAS ONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN S. 147. HOWEVER, ON RECEIPT OF RE-PRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'R EASON TO BELIEVE', PARLIAMENT RE-INTRODUCED THE SAID EXPRESSION AND DE LETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS I N THE AO. APPEALS ARE THEREFORE DISMISSED CIT VS. KALVINATOR OF INDIA LTD. (2002) 174 CTR (DEL)(FB) 617 AND CIT VS. EICHER LTD. (2007) 213 CTR (DEL) 57 AFFIRMED. 8.2 THE HONBLE DELHI HIGH COURT (FULL BENCH) IN TH E SAME CASE REPORTED AT [2002] 256 ITR 0001 HAS EXAMINED T HE CONTENTION OF THE REVENUE THAT AO HAS NOT EXPRESSED ANY OPINION AND ISSUE THAT HE HAS NOT EXPRESSLY STATED THE I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 9 -: OPINION. THE FINDINGS OF THE HONBLE DELHI HIGH COU RT IN PARAS 22 & 23 ARE AS UNDER: 22. WE ARE UNABLE TO AGREE WITH THE SUBMISSION OF M R. JOLLY TO THE EFFECT THAT THE IMPUGNED ORDER OF REASSESSMENT CANNOT BE FAULTED AS THE SAME WAS BASE D ON INFORMATION DERIVED FROM THE TAX AUDIT REPORT. T HE TAX AUDIT REPORT HAD ALREADY BEEN SUBMITTED BY THE ASSESSEE. IT IS ONE THING TO SAY THAT THE AO HAD RE CEIVED INFORMATION FROM AN AUDIT REPORT WHICH WAS NOT BEFO RE THE ITO BUT IT IS ANOTHER THING TO SAY THAT SUCH INFORMATION CAN BE DERIVED BY THE MATERIAL WHICH HA D BEEN SUPPLIED BY THE ASSESSEE HIMSELF. 23. WE ALSO CANNOT ACCEPT SUBMISSION OF MR. JOLLY T O THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN RECORDED ON ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY JUSTIFY T HE AO TO INITIATE A PROCEEDING UNDER S. 147 OF THE ACT. THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASSESSMENT CA N BE PASSED EITHER IN TERMS OF SUB-SO (1) OF S. 143 OR S UB-SO (3) OF S. 143. WHEN A REGULAR ORDER OF ASSESSMENT I S PASSED IN TERMS OF THE SAID SUB-SO (3) OF S. 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BE EN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THA T A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT I N TERMS OF D. (E) OF S. 114 OF THE INDIAN EVIDENCE ACT THE JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDL Y WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE AO TO REOPEN THE PROCEEDING W ITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING PREMIUM TO AN AUTHORITY EXERCISING QUASI JUDICIAL F UNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 8.3 IN CONCLUSION, THE HONBLE DELHI HIGH COURT HAS HELD THAT AN ASSESSMENT CANNOT BE REOPENED ON A MERE CHA NGE OF OPINION; REASON TO BELIEVE THAT THE INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT IS ONE OF THE CONDITIONS PRE CEDENT I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 10 -: FOR INVOKING THE JURISDICTION OF THE AO FOR REOPENI NG ASSESSMENT U/S 147. CONSIDERING THE PRINCIPLES LAI D DOWN BY THE HONBLE SURPEME COURT, IT CANNOT BE STATED T HAT AO HAS NOT EXAMINED THIS ISSUE, WHICH IS VERY OBVIOUS NOT ONLY FROM THE ANNUAL REPORT BUT ALSO FROM VARIOUS EXPEND ITURE CLAIMS MADE DURING THE YEAR. THUS, I AM OF THE OPIN ION THAT THERE IS NO TANGIBLE MATERIAL TO COME TO A DIFFER ENT OPINION OR TO TAKE A DIFFERENT OPINION. THE VERY BASIS OF E ARLIER OPINION BEING REVIEWED BY THE AO IN THE REASSESSMEN T PROCEEDINGS WILL CERTAINLY COME INTO THE DOMAIN OF THE REVIEW OF THE ORDER BY THE SUCCESSIVE OFFICER. RE VIEW OF THE ORDER CANNOT BE DONE IN THE FORM OF REOPENING OF ASSESSMENT WITHOUT THERE BEING ANY TANGIBLE MATERIA L TO FORM A DIFFERENT OPINION, WHEN THE ASSESSMENT IS RE OPENED WITHIN THE FOUR YEARS FROM THE END OF THE ASSESSMEN T YEAR. IN THIS CASE, SINCE THE ASSESSMENT BEING REOPENED I S WITHIN THE FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT T HAT THERE SHOULD BE TANGIBLE MATERIAL TO FORM A DIFFE RENT OPINION WOULD CERTAINLY COME INTO PLAY, SINCE THE V ERY SAME MATERIAL, WHICH WAS EXAMINED AT THE TIME OF ORIGINA L ASSESSMENT, IS THE BASIS FOR RECORDING REASONS BY T HE AO BEFORE THE REOPENING OF ASSESSMENT. I AM OF THE VIE W THAT THE CONDITIONS OF SECTION 147 HAVE NOT BEEN SATISFI ED IN THIS CASE. ACCORDINGLY, REOPENING PER SE IS BAD IN LAW. 8.4 EVEN COMING TO THE MERITS, IT CANNOT BE STATED THAT ASSESSEE HAS NOT COMMENCED BUSINESS DURING THE IMPU GNED AY. THIS IS A FACT ON RECORD THAT ASSESSEE COMMENCE D ITS LAB I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 11 -: FACILITY, WHICH IS ITS MAIN ACTIVITY ON 8 TH FEBRUARY, 2006 I.E. ALMOST 50 DAYS PRIOR TO THE CLOSE OF THE ACCOUNTING YEAR. NOT ONLY THERE IS AN EVIDENCE THAT EMPLOYEES HAVE BEEN RECRUITED AND PAID SALARIES TO THEM, BUT ALSO ORDER S FOR PROCUREMENT OF RAW MATERIAL HAVE BEEN PLACED AND S OME OF THE RAW MATERIAL PURCHASED AND UTILIZED DURING THE YEAR AND ASSESSEES CLAIM OF DEPRECIATION WAS ALLOWED BY THE AO IN THE ORIGINAL ASSESSMENT. IN VIEW OF THAT FACTS, AS PLACED ON RECORD AND FOLLOWING THE PRINCIPLES OF LAW AS ESTAB LISHED IN VARIOUS DECISIONS SOME OF WHICH RELIED ON BY THE LD . COUNSEL IN HIS ARGUMENTS, I AM OF THE VIEW THAT ASSESSEE HA S COMMENCED ITS BUSINESS ACTIVITY DURING THE YEAR UND ER CONSIDERATION AND ON MERITS, ASSETS HAVE BEEN PUT T O USE. 8.5 IN VIEW OF THE FACTS AND LAW INVOLVED, I AM OF THE OPINION THAT REOPENING OF ASSESSMENT IS BAD IN LAW AND ACCORDINGLY, IMPUGNED ORDERS OF AO AND CIT(A) ARE S ET ASIDE AND THE ORIGINAL ASSESSMENT IS RESTORED. THUS, GROU ND NOS. 2 & 3 ARE ALLOWED AND GROUND NOS. 4 & 5 ARE ALTERNA TIVE IN NATURE, NEEDS NO ADJUDICATION SEPERATELY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 5 TH MAY, 2017. SD/- (B . RAMAKOTAIAH) ACCOU NTANT MEMBER HYDERABAD, DATED: 5 TH MAY , 2017. KV I.T.A. NO. 1164/HYD/2016 UNITED STATES PHARMACOPEIA INDIA PVT. LTD. :- 12 -: 1 UNITED STATES PHARMACOPEIA INDIA PVT. LTD., PLOT NO. D6 & D8, ICICI KNOWLEDGE PARK, GENOME VALLEY, TURKAPALLY , SHAMIRPET, HYDERABAD 500 078 2 DCIT, CIRCLE 3(3), HYDERABAD. 3 CIT (A)-5, HYDERABAD. 4 PR. CIT 5, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE