ACIT, Pune V. Serum Institute Of India Ltd, Pune

ITA 1240/PUN/2012

• Counselvise Citation: 124024514 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-12-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: H P MAHAJANI
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 10B; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NOS.1239 & 1240/PN/2012 (A.YS. 2002-03 & 2003-04) ADDL.CIT, RANGE-6, PUNE APPELLANT VS. SERUM INSTITUTE OF INDIA LTD., 212/2, PUNE SOLAPUR ROAD, HADAPSAR, PUNE - 411028 PAN: AABCS4225M RESPONDENT ASSESSEE BY : SHRI H.P. MA HAJANI DEPARTMENT BY : SHRI P.L. PATHADE DATE OF HEARING : 06.03.2014 DATE OF ORDER : 30.04.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH THE APPEALS FILED BY THE REVENUE ARISEN FROM THE CONSOLIDATED ORDER OF CIT(A)-III, PUNE PERTAIN TO T HE SAME ASSESSEE FOR DIFFERENT ASSESSMENT YEARS. SO THESE WERE HEAR D TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. 2. IN ITA NO.1239/PN/2012, THE REVENUE HAS FILED TH E APPEAL ON THE FOLLOWING GROUNDS: 01. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN ALLOWING ASSESSEE'S APPEAL HOLDING THAT THE ASSESSING OFFICER IS NOT JUSTIFIED TO REOPEN THE ASSESSMENT U/S. 147 OF THE I. T. ACT, IGNORING THE FACT THAT T HE ASSESSING OFFICER HAD RECORDED PROPER REASONS FOR REOPENING THE ASSESSMENT. 2 02. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN ALLOWING ASSESSEE'S APPEAL HOLDING THAT THE REOPENING OF ASSESSMENT U/S. 147 IS NOT JUSTIFIED AFTER EXPIRY OF FOUR YEARS IGNORING THAT THE ASSESSING OFFICER WAS WELL WITHIN HIS POWERS TO REOPEN THE ASSESSMENT AS PER THE PROVISIONS OF SECT ION 149(B) OF THE I. T. ACT, 1961. 03. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN ALLOWING ASSESSEE'S APPEAL IGNORING THE FACT THAT THERE WAS DEFINITE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATED TO THE ISSUE OF REALIZATION OF EXPORT PROCEEDS AND THAT OF PROCESSING CHARGES RELEVANT FOR COMPUTATION OF DEDUCTION U/S. 10B OF THE I. T. ACT, 1961. 04. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN ALLOWING ASSESSEE'S APPEAL IGNORING THE FACT THAT THE ASSESSMENT WAS NOT BASED ON CHANGE OF OPINION. 3. THE ASSESSEE IS CLOSELY HELD DOMESTIC COMPANY, E NGAGED IN THE MANUFACTURING OF VACCINES, ANTI-SERA, PLASMA, HORMO NAL PRODUCTS, ETC. THE ASSESSMENT PROCEEDINGS FOR A.Y. 2002-03 W ERE COMPLETED U/S.143(3) ON 18.03.2005 WHILE THE ASSESSMENT FOR A .Y. 2003-04 WAS COMPLETED ON 28.03.2006. THE ASSESSMENT FOR BO TH THE YEARS WERE REOPENED U/S.147 AND PROCEEDINGS WERE CONCLUDE D VIDE ORDERS PASSED ON 31.12.2007. HOWEVER, ON THE BASIS OF CER TAIN OBJECTIONS RAISED BY THE AUDIT PARTY, THE PROCEEDINGS U/S.147 WERE AGAIN INITIATED FOR BOTH THE YEARS AND NOTICE U/S.148 WAS ISSUED ON 26.03.2009 WHICH WAS CHALLENGED BY THE ASSESSEE BEF ORE THE FIRST APPELLATE AUTHORITY, WHEREIN, VARIOUS CONTENTIONS W ERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAD DECIDED THE ISSUE OF REOPENING. SECTION 147 OF I.T . ACT CONFERS JURISDICTION ON THE ASSESSING OFFICER TO REOPEN SUB JECT TO THE CONDITIONS LAID DOWN THEREIN. THE RELEVANT PROVISI ONS OF SECTION 147 OF ACT ARE AS UNDER: 3 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEV E THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS UNDER THIS SECTION, OR RE-COMPUTE THE L OSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEV ANT ASSESSMENT YEAR). PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUBSECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR.' 4. SECTION 148 OF THE ACT PROVIDES THAT BEFORE MAKI NG ANY ASSESSMENT OR REASSESSMENT OR RE-COMPUTATION U/S.14 7, THE ASSESSING OFFICER HAS TO SERVE A NOTICE THEREUNDER AND BEFORE ISSUING ANY NOTICE UNDER THE SAID PROVISIONS HE HAS TO RECO RD REASONS FOR DOING SO. THE RELEVANT PROVISIONS OF SECTION 148 A RE REPRODUCED AS UNDER: 148.(1). BEFORE MAKING THE ASSESSMENT, REASSESSMEN T OR RE- COMPUTATION UNDER SECTION 147, THE ASSESSING OFFICE R SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM TO FUR NISH WITHIN SUCH PERIOD AS MAY BE SPECIFIED IN THE NOTICE, A RE TURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR CORRESPONDING TO THE RELEVANT ASSESSMENT YEAR, IN T HE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANN ER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRES CRIBED; AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRE D TO BE FURNISHED UNDER SECTION 139. (2) THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NOTICE UNDER THIS SECTION, RECORD HIS REASONS FOR DOING SO.' 4 5. THE PROVISIONS OF SECTION 151 OF THE ACT ENJOINS THAT IN CERTAIN SITUATIONS, NO NOTICE U/S.148 WAS TO BE ISSUED BY T HE ASSESSING OFFICER UNLESS ON THE REASONS RECORDED BY HIM, THE CHIEF COMMISSIONER OR THE COMMISSIONER OR THE JOINT COMMI SSIONER WAS SATISFIED THAT IT IS A FIT CASE FOR ISSUE OF SUCH N OTICE. THE RELEVANT PROVISIONS OF SECTION 151 ARE REPRODUCED AS UNDER: '151. (1) IN A CASE WHERE AN ASSESSMENT UNDER SUB-S ECTION (3) OF SECTION 143 OR SECTION 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO NOTICE SHALL BE ISSUED UNDER SE CTION 148 BY AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF A SSISTANT COMMISSIONER OR DEPUTY COMMISSIONER, UNLESS THE JOI NT COMMISSIONER IS SATISFIED ON THE REASONS RECORDED B Y SUCH ASSESSING OFFICER THAT IT IS A FIT CASE FOR THE ISS UE OF SUCH NOTICE. PROVIDED THAT, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH NOTICE SHALL BE I SSUED UNLESS THE CHIEF COMMISSIONER OR COMMISSIONER IS SATISFIED , ON THE REASONS RECORDED BY THE ASSESSING OFFICER AFORESAID , THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. (2) IN A CASE OTHER THAN A CASE FALLING UNDER SUB-S ECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSE SSING OFFICER, WHO IS BELOW THE RANK OF JOINT COMMISSIONE R, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, UNLESS THE JOINT COMMISSIONER IS SATISFIED, O N THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FI T CASE FOR THE ISSUE OF SUCH NOTICE.' 6. THUS, BEFORE INITIATION OF ANY PROCEEDING U/S.14 7 OF THE ACT FOR ASSESSMENT OR REASSESSMENT, THE ASSESSING OFFICER W AS REQUIRED TO RECORD HIS REASONS IN WRITING U/S.148 AND OBTAIN NE CESSARY SANCTION IN TERMS OF SECTION 151, WHEREVER NECESSARY, AND TH EREAFTER ISSUE NOTICE U/S.148 OF THE ACT. ANALYZING THE FACTS OF THE PRESENT CASE UNDER THE PROVISIONS OF SEC.147 AS APPLICABLE FOR T HE YEAR UNDER CONSIDERATION, IT WAS FOUND THAT THE ASSESSMENT WAS ALSO REOPENED EARLIER U/S.147 AND THE REASSESSMENT ORDER WAS PASS ED ON 31.12.2007 FOR BOTH THE YEARS. THIS IS THE SECOND TIME THE ASSESSMENT WAS REOPENED U/S.147 FOR BOTH THE YEARS UNDER APPEAL. ON VERIFICATION OF THE ASSESSMENT RECORD, IT WAS FO UND THAT THE NOTICE U/S.148 OF THE ACT FOR THE ASSESSMENT YEARS UNDER C ONSIDERED WAS 5 ISSUED ON 26.03.2009 AFTER RECORDING THE REASONS BY THE ASSESSING OFFICER, WHICH ARE REPRODUCED HEREUNDER: REASONS FOR REOPENING - A.Y. 2002-03 'THE ASSESSES COMPANY ABOVE-NAMED IS IN THE BUSINES S OF MANUFACTURING AND SALE OF LIFE SAVING DRUGS AND VAC CINES ETC. THE OPERATIONS OF THE COMPANY ARE BIFURCATED INTO T WO SEPARATE UNITS I.E. EXPORT ORIENTED UNIT & DTA UNIT. 2. THE ASSESSEE HAD FILED RETURN OF INCOME SHOWING TOTAL INCOME AT RS.29,97,23,580/- ON 31/10/2002. THE ORIGINAL AS SESSMENT IN THIS CASE WAS COMPLETED U/S.143 (3) ON 22/03/200 5, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.33,71,86,300/-. THE ASSESSEE HAD FILED APPEAL AG AINST THE SAID ORDER AND ON DECISION OF CIT(A) S THE ASSESSED INCOME WAS REVISED TO RS.33,26,62,127/- VIDE ORDER GIVING EFFE CT TO THE ORDER OF THE CIT(A) DATED. 20/11/2006. SUBSEQUENTLY , INFORMATION WAS RECEIVED FROM THE BOARD, CALLING FO R AN ENQUIRY IN THIS CASE ON THE BASIS OF VOLCKER COMMITTEE REPO RT. BASED ON THE INFORMATION RECEIVED AND ON CONDUCTING PRELIMIN ARY ENQUIRIES, THE ASSESSING OFFICER HAD ISSUED NOTICE U/S.148 ON 28/02/2007 (AFTER RECORDING THE REASONS). DURING TH E REASSESSMENT, IT WAS NOTICED BY THE ASSESSING OFFIC ER (ADDL.CIT, RANGE-6, PANE) THAT THE ASSESSEE HAD CLAIMED EXPEND ITURE OF RS.16,98,413/- TOWARDS PAYMENT OF COMMISSION TO M/S . AL- TAISEER DRUGSTORE AND M/S. AL-QAK PHARMACY OF JORDA N, CLAIMED TO BE AGENTS OF THE ASSESSEE. IN THE REASSE SSMENT U/S. 143(3) R.W.S. 147 DATED. 31/12/2007, THE TOTAL INCO ME WAS COMPUTED BY THE ASSESSING OFFICER AT RS.33,43,60,54 0/-, WHEREIN THE AFORESAID EXPENDITURE WAS DISALLOWED. 3.1 ON GOING THROUGH THE RECORD, IT WAS NOTICED THA T THE ASSESSEE HAS CLAIMED DEDUCTION U/S.10B AMOUNTING TO RS.68,79,69,081/- WHICH WAS ALLOWED IN FULL IN THE ORIGINAL ASSESSMENT. IN THE COMPUTATION OF DEDUCTION U/S.10B , THE EXPORT TURNOVER WAS TAKEN AT RS.140,57,99,454/- AND THE TOTAL TURNOVER WAS TAKEN AT RS.147,45,79,782/-. WHILE WOR KING OUT THE DEDUCTION, THE EXPORT SALES AMOUNTING TO RS. 1, 34,07,682/- WHICH WAS NOT REALIZED TILL 30/09/2002 WERE INCLUDE D IN THE EXPORT TURNOVER. IN THE ANNEXURE TO AUDIT REPORT U/ S.10B IN FORM 56-G, IT HAS BEEN STATED BY THE AUDITORS THAT THE COMPANY HAD MADE APPLICATION TO THE RBI FOR EXTENSION OF TI ME. THERE WAS NO CLARIFICATION ON RECORD AS TO WHETHER THE AS SESSEE HAS RECEIVED APPROVAL FROM RBI OR HOW MUCH OF THOSE SAL ES PROCEEDS HAVE BEEN REALIZED. THE ASSESSEE WAS, THER EFORE, ASKED TO SUBMIT A DETAILED NOTE ALONG WITH DATE OF REALIZ ATION OF EXPORT SALES AND THE AMOUNT REALIZED. ON PERUSAL OF THE NO TE, THE DATE 6 OF EXTENSION GRANTED BY RBI AND THE REALIZATION DAT E GIVEN BELOW:- FROM THE ABOVE CHART, IT IS APPARENT THAT AN AMOUNT OFRS.54,83,460/- WAS NOT REALIZED BEFORE 31/12/2002 (EXTN. GRANTED BY RBI), THE SAME WAS REALIZED ON 13/06/200 3. THUS, AS PROVIDED IN SEC. 10B(3], THE AMOUNT OF RS.54,83, 346/- IS REQUIRED TO BE DEDUCTED FROM THE EXPORT TURNOVER WH ILE WORKING OUT THE EXEMPTION U/S.10B. 3.2 IT WAS FURTHER NOTICED THAT PROCESS CHARGES AMO UNTING TO RS. 4,80,98,505/- WAS NOT INCLUDED, IN THE TOTAL TU RNOVER OF RS.147,45,79,782/-. IN THE REPORT IN FARM NO.56G, T HE AUDITORS HAVE CONTENDED THAT THE PROCESS CHARGES DO NOT FORM PART OF THE TURNOVER. THESE PROCESS CHARGES WERE CHARGED BY EOU FOR FILLING AMPOULES AND VIALS FROM DTA UNIT. THE PROFI T ON PROCESSING ACTIVITY WAS INCLUDED WHILE ARRIVING AT THE PROFIT OF THE EOU. SINCE PROCESSING CHARGES ARE IN THE NATURE OF RECEIPTS LIKE JOB WORK, IT IS REQUIRED TO BE INCLUDED IN THE TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S.10B. 3.3 THE REDUCTION OF UNREALIZED FOB VALUE HAS RESUL TED IN EXCESS ALLOWANCE OF EXEMPTION U/S.10B TO THE EXTENT OF RS.2,43,30,358/-. 4. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS.2,43,30,358/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF CLAUSE (C) UNDER E XPLN. (2) TO SEC. 147 OF THE ACT'. REASONS FOR REOPENING - A.Y. 2OO3-O4 'THE ASSESSES COMPANY ABOVE-NAMED IS IN THE BUSINES S OF MANUFACTURING AND SALE OF LIFE SAVING DRUGS AND VAC CINES ETC. THE OPERATIONS OF THE COMPANY ARE BIFURCATED INTO T WO SEPARATE UNITS I.E. EXPORT ORIENTED UNIT (EOU) & DTA UNIT. 2. THE ASSESSEE HAD FILED RETURN OF INCOME SHOWING TOTAL INCOME AT RS.53,81,21,634/- ON 14/11/2003. THE ORIGINAL AS SESSMENT S. INVOICE INV. VALUE DATE OF DUE DATE DT. UP TO WHICH DATE OF REALIZATION WHETHER AMT. AMOUNT REALIZED N NO. INVOIC E AS PER 10B EXTN. WAS REALIZED AS PER 0. GRANTED COL.7 B Y RBI 1 2 3 4 5 6 7 8 9 ; 1 17105127 2447100 13.10,01 30.09.02 13.01.03 04.12.02 YES 2859098 2 17105204 5427187 15.03.03 -DO- 31.12.02 13.06.03 NO 5483460 3 17105205 5533395 17.03.02 -DO- 31.12.02 01.10.02 YES 5702350 7 IN THIS CASE WAS COMPLETED U/S. 143(3) ON 31/03/200 6, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.58,36,09,870/-, THE ASSESSEE HAD FILED APPEAL AG AINST THE SAID ORDER AND ON DECISION OF CIT{A), THE ASSESSED INCOME WAS REVISED TO RS.55,41,29,611 /- VIDE ORDER GIVING EFF ECT TO THE ORDER OF THE CIT(A) DATED. 20/11/2006. SUBSEQUENTLY INFORMATION RECEIVED FROM THE BOARD, CALLING FOR AN ENQUIRY IN THIS CASE ON THE BASIS OF VOLCKER COMMITTEE REPORT. BASED ON THE INFORMATION RECEIVED AND ON CONDUCTING PRELIMIN ARY ENQUIRIES, THE ASSESSING OFFICER HAD ISSUED NOTICE U/S. 148 ON 28/02/2007 (AFTER RECORDING THE REASONS). DURING TH E REASSESSMENT, IT WAS NOTICED BY THE ASSESSING OFFIC ER (ADDL.CIT, RANGE-6, PUNE) THAT THE ASSESSEE HAD CLAIMED EXPEND ITURE OF RS.16,35,406/- TOWARDS PAYMENT OF COMMISSION TO M/S . AL- TAISEER DRUGSTORE AND M/S. AL-QAK PHARMACY OF JORDA N (CLAIMED TO BE AGENTS OF THE ASSESSEE). IN THE REAS SESSMENT U/S. 143(3) R.W.S. 147 DATED. 31/12/2007, THE TOTAL INCO ME WAS COMPUTED BY THE ASSESSING OFFICER AT RS.55,57,65,01 7/-, WHEREIN THE AFORESAID EXPENDITURE WAS DISALLOWED. 3.1 ON GOING THROUGH THE RECORD, IT WAS NOTICED THA T THE ASSESSEE HAS CLAIMED DEDUCTION U/S.10B AMOUNTING TO RS.103,04,00,859/- WHICH WAS ALLOWED IN FULL IN THE ORIGINAL ASSESSMENT AT RS. 102,98,01,640. IN THE COMPUTATION OF DEDUCTION U/S.10B, THE EXPORT TURNOVER WAS TAKEN AT RS.218,36,26,586/- AND THE TOTAL TURNOVER WAS TAKEN AT RS.230,69,16,249/-. WHILE WORKING OUT THE DEDUCTION , THE EXPORT SALES AMOUNTING TO RS.L,65,51,433/- WHICH WA S NOT REALIZED TILL 30/09/2003 WERE INCLUDED IN THE EXPOR T TURNOVER. IN THE ANNEXURE TO AUDIT REPORT U/S.10B IN FORM 56- G, IT HAS BEEN STATED BY THE AUDITORS THAT THE COMPANY HAD MA DE APPLICATION TO THE RBI FOR EXTENSION OF TIME. SINCE THERE WAS NO CLARIFICATION ON RECORD AS TO WHETHER THE ASSESSEE HAS RECEIVED APPROVAL FROM RBI OR HOW MUCH OF THOSE SALES PROCEE DS HAVE BEEN REALIZED ARE ON RECORD. THE ASSESSEE WAS, THER EFORE, ASKED TO SUBMIT A DETAILED NOTE ALONG WITH DATE OF REALIZ ATION OF EXPORT SALES AND THE AMOUNT REALIZED. ON PERUSAL OF THE NO TE, THE DATE OF EXTENSION GRANTED BY RBI AND THE REALIZATION DAT E GIVEN BELOW:- S. NO. INVOICE NO. INV. VALUE DATE OF INVOICE DUE DATE AS PER DT. UP TO WHICH EXTN. WAS DATE OF REALIZATION WHETHER AMT. REALIZED AS PER AMOUNT REALIZED 10B GRANTED BY RBI COL.7 1 2 3 4 5 6 7 8 9 1 171055043 1630218 5 15/05/02 30/09/03 31/08/03 19/05/04 NO 16336629 2 171052127 249248 08/01/03 30/09/03 NO EXTN WAS GRANTED 20/01/03 NO 259400 8 FROM THE ABOVE CHART, IT IS APPARENT THAT THE ENTIR E PROCEEDS WERE NOT REALIZED BEFORE 30/09/2003 OR WITHIN THE E XTENSION GRANTED BY THE RBI. THUS, AS PROVIDED IN SEC.10B(3) , THE AMOUNT OF RS.L,65,51,433/- IS REQUIRED TO BE DEDUCT ED FROM THE EXPORT TURNOVER WHILE WORKING OUT THE EXEMPTION U/S .10B. 3.2 IT WAS ALSO NOTICED THAT PROCESS CHARGES AMOUNT ING TO RS.3,63,95,633/- WAS NOT INCLUDED IN THE TOTAL TURN OVER OF RS.230,69,16,249/-, IN THE REPORT IN FORM NO.56G T HE AUDITORS HAVE CONTENDED THAT THE PROCESS CHARGES DO NOT FORM PART OF THE TURNOVER. THESE PROCESS CHARGES WERE CHARGED BY EOU FOR FITTING AMPOULES AND VIALS FROM DTA UNIT. THE PROF IT ON PROCESSING ACTIVITY WAS INCLUDED WHITE ARRIVING AT THE PROFIT OF THE EOU. SINCE PROCESSING CHARGES ARE IN THE NATURE OF RECEIPTS LIKE JOB WORK, IT IS REQUIRED TO BE INCLUDED IN THE TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S.10B. 3.3 THE REDUCTION OF UNREALIZED FOB VALUE HAS RESUL TED IN EXCESS ALLOWANCE OF EXEMPTION U/S.10B TO THE EXTENT OF RS. 2,36,79,025/-. 4. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS. 2,36,79,02S/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF CLAUSE (C) UNDER EXPLN. (2) TO SEC. 147 OF THE ACT. 7. IN THE PRESENT CASE, PRIOR TO ISSUE OF ABOVE NOT ICE U/S.148, ORIGINAL ASSESSMENT WAS MADE U/S.143(3) VIDE THE OR DER OF THE ASSESSING OFFICER DATED 22.03.2005 FOR THE A.Y. 200 2-03 AND THE ORDER OF THE ASSESSING OFFICER DATED 31.03.2006 FOR THE A.Y. 2003-04. IF THE PERIOD BETWEEN THE END OF THE RELEVANT ASSES SMENT YEARS UNDER CONSIDERATION I.E. 31.03.2002 AND 31.03.2003 AND TH E DATE OF ISSUANCE OF THE NOTICE U/S.148 ON 26.03.2009 IS REC KONED, IT WAS APPARENT FROM THE RECORD THAT THE NOTICE WAS ISSUED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSME NT YEAR. THE FIRST PROVISO TO SECTION 147 OF THE ACT, LAYS DOWN THAT W HERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TA KEN UNDER THE SECTION AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S.139 OR IN RESPONSE TO A NOTICE IS SUED UNDER SUB- 9 SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. TH US, FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 147 A FTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE INCOME CHARGEABLE TO TAX SHOULD HAVE ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE EITHER (I) TO MAKE A RETURN U/S. 139 OR IN RESPONSE TO A NOTIC E ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECT ION 148 OR (II) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR THE ASSESSMENT. IT IS UNDISPUTED THAT THERE WAS NO FAILURE ON THE P ART OF THE ASSESSEE INSOFAR AS THE FIRST CONDITION IS CONCERNE D. INSOFAR AS THE SECOND CONDITION, VIZ. FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT IS CONCERNED, ON A PLAIN READING OF THE REASONS RECORD ED AS EXTRACTED HEREINABOVE, IT WAS APPARENT THAT THE REASONS ARE T OTALLY SILENT WITH REGARD TO ANY FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSME NT FOR THE RELEVANT ASSESSMENT YEAR. FROM THE REASONS RECORDED IT IS AL SO APPARENT THE ASSESSMENT IS SOUGHT TO BE REOPENED ON THE GROUND T HAT WHILE COMPUTING THE DEDUCTION U/S. 10B, THE EXPORT PROCEE DS NOT REALIZED BEFORE THE SPECIFIED DATE WERE NOT DEDUCTED FROM TH E EXPORT TURNOVER AND PROCESSING CHARGES WERE NOT INCLUDED IN THE TOT AL TURNOVER AND HENCE THERE WAS REASON TO BELIEVE THAT INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEARS UNDER C ONSIDERATION. THERE IS NOTHING ON RECORD OF ASSESSMENT ORDER TO I NDICATE THAT THE PROCEEDINGS U/S.147 WERE SOUGHT TO BE REOPENED BY R EASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION. ALL THE MATERIAL FACTS I.E. UNREALI ZED CONVERTIBLE FOREIGN EXCHANGE BEFORE THE SPECIFIED DATE, NON-INC LUSION OF PROCESSING CHARGES IN THE TOTAL TURNOVER WERE DULY DISCLOSED BY THE 10 ASSESSEE IN THE COMPUTATION OF DEDUCTION U/S.10B, F ORM NO.56G FILED WITH THE ORIGINAL RETURN OF INCOME AND FROM T HE SAME MATERIAL FACTS, THE ASSESSING OFFICER IN THE PRESENT ORDER W ORKED OUT THE EXCESS CLAIM U/S.10B. THE DETAILS OF FOREIGN EXCHAN GE REALIZATION AND THE PROCESSING CHARGES WERE VERY MUCH AVAILABLE ON RECORD AT THE TIME OF PASSING THE ORIGINAL ASSESSMENT ORDER AND A LSO AT THE TIME OF PASSING THE REASSESSMENT ORDER. FOR READY REFERENC E, THE REPORT IN FORM NO.15G FILED WITH THE ORIGINAL RETURN OF INCOM E FOR THE YEARS UNDER CONSIDERATION WHEREIN THE SAID ENTRIES OF EXP ORT REALIZATIONS AND NOTE ON PROCESSING CHARGES ARE REPRODUCED AS UN DER: COMPUTATION OF DEDUCTION U/S 10B FOR A.Y. 2002-03: B EXPORT TURNOVER I.E. FOB VALUE EXPORT SALE I.E. GIF VALUE 147 55 18 532 LESS: EXPORT TO NEPAL 0 (BEING AMOUNT NOT REALISED I N CONVERTIBLE FOREIGN EXCHANGE ) _________________ 147 55 18 532 LESS: FREIGHT & INSURANCE ATTRIBUTABLE TO THE TRA NSPORT OF GOODS BEYOND CUSTOM STATION IN INDIA 1 FREIGHT 74340292 2 INSURANCE 87 86 468 __________ 8 31 26 760 _______________ EXPORT TURNOVER I.E. FOB VALUE 139 23 91 772 ADD: FOB NOT REALIZED INVOICE NO. AMOUNT 17105127 / 13.10.2011 24 47 100 17105204 / 15.03.2002 54 27 187 17105205 / 19.03.2002 55 33 395 __________ 1 34 07 685 ________________ EXPORT TURNOVER I.E. FOB VALUE 140 57 99 454 NOTE: THE FOB IN RESPECT OF ABOVE INVOICES YET TO BE REAL ISED. THE COMPANY IS IN THE PROCESS OF MAKING APPLICATION TO RBI FOR APPROVAL FOR EXTENSION OF TIME LIMIT IN RESPECT OF THE SAID AMOUNT NOT REALISED TILL 30.09.2002 C DEDUCTION U/S 10B EXPORT TURNOVER (REALISED IN CONVERTIBLE FOREIGN EXCHANGE) = ________________ X PROFIT OF THE 100% EOU UNI T TOTAL TURNOVER 11 140 5799454 ______________ X 72 16 28 746 = 68 79 69 0 81 147 4579782 ____________ PROFIT CLAIMED EXEMPT U/S 10B 68 79 69 081 ____________ NOTE: IT IS CONTENDED BY THE COMPANY THAT THE PROCESSING CHARGES DOES NOT FORM PART OF THE TURNOVER. COMPUTATION OF DEDUCTION U/S 10B FOR A.Y. 2003-04: B EXPORT TURNOVER I.E. FOB VALUE EXPORT SALE I.E. GIF VALUE REALISED 229 39 73 506 EXPORT SALES NOT REALISED, APPLIED FOR EXTENTION INVOICE NO RS 17105043 1 63 02 185 17105127 2 49 248 1 65 51 433 ____________________________ 231 05 24 939 LESS . EXPORT TO NEPAL ( BEING AMOUNT NOT REALIZED IN CONVERTIBLE FOREIGN EXCHANGE) LESS : FREIGHT & INSURANCE ATTRIBUTABLE TO THE TR ANSPORT OF GOODS BEYOND CUSTOM STATION IN INDIA 1 FREIGHT 11 12 81 827 2 INSURANCE 1 56 16 326 _____________ 12 68 98 353 _______________ EXPORT TURNOVER I.E. FOB VALUE 218 36 26 586 _______________ EXPORT TURNOVER I.E. FOB VALUE 218 36 26 586 NOTES: 1. THE FOB IN RESPECT OF ABOVE INVOICES YET TO BE REAL IZED. THE COMPANY IS IN THE PROCESS OF MAKING APPLICATION TO RBI FOR APPROVAL FOR EXTENSION OF TIME LIMIT IN RESPECT OF THE SAID AMOUNT NOT REALIZED TILL 30.09.2003 2. IT IS CONTENDED BY THE COMPANY THAT THE PROCESSING CHARGES DOES NOT FORM PART OF THE TURNOVER DEDUCTION U/S 10B EXPORT TURNOVER (REALISED IN CONVERTIBLE FOREIGN EXCHANGE) = ________________ X PROFIT OF THE 100% EOU UNI T TOTAL TURNOVER 218 36 26 586 ______________ X 120 95 31 428 = 114 48 89 843 230 69 16 249 12 PROFIT CLAIMED EXEMPT U/S 10B 114 48 89 843 ______________ PROFIT CLAIMED EXEMPT U/S 10B-90% 103 04 00 859 ______________ 8. THUS, IN THE CASE OF ASSESSEE, PRIMA FACIE, THE REASONS RECORDED REVEALS THAT THE INCOME HAS ESCAPED ASSESSMENT IS B ASED ON THE DISCLOSURE MADE BY THE ASSESSEE ITSELF IN THE ORIGI NAL RETURN OF INCOME AND DOCUMENTS ACCOMPANYING THE RETURN OF INC OME. IN FACT, AS WHICH IS EVIDENT FROM THE REASONS EXTRACTED ABOV E, THE REASONS RECORDED BY THE ASSESSING OFFICER BEGIN WITH THE SE NTENCE ON GOING THROUGH THE RECORD', WHICH CLEARLY INDICATE THAT TH E FINDING IS BASED ON THE DETAILS FILED BY THE ASSESSEE IN THE COMPUTA TION OF TOTAL INCOME AS REPRODUCED HEREINABOVE. THE REASONS RECO RDED DO NOT CONTAIN A FINDING TO THE EFFECT THAT THERE WAS A FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL NECESS ARY FACTS, NECESSARY FOR THE PURPOSE OF ASSESSMENT. WHEN ALL MATERIAL FA CTS WERE FURNISHED BY THE ASSESSEE, EVEN IF THE ASSESSEE ERR ONEOUSLY CLAIMED EXCESS DEDUCTION U/S.10B, IT WOULD NOT BE A CASE OF FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS UNLESS CERTAIN ADDITIONAL INFORMATION HAS COME TO THE NOTICE OF THE ASSESSING OFFICER SUBSEQUENT TO PASSING OF ORIGINAL ASSESSMENT ORDER. THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY NEW MATERIAL HAD COME ON RECORD ON THE DATE OF RECORDING THE REASONS, IF NO NEW INFORMATION HAD BEEN RECEIVED BY THE ASSESSING OFFICER IN THIS REGARD. SO IT COULD NOT BE INFERRED THAT THERE IS FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE MATERIAL FACTS. IN THESE CIRCUMSTANCES, TH E CONDITION PRECEDENT FOR A VALID EXERCISE OF THE POWER TO REOP EN THE ASSESSMENT, AFTER A LAPSE OF FOUR YEARS FROM END OF THE RELEVAN T ASSESSMENT YEAR, IS MISTAKE IN THE PRESENT CASE. AN EXCEPTIONAL POWE R HAS BEEN CONFERRED UPON THE REVENUE TO REOPEN AN ASSESSMENT AFTER A LAPSE OF FOUR YEARS. THE CONDITIONS WHICH ARE PRESCRIBED BY THE STATUTE FOR THE EXERCISE OF SUCH A POWER MUST BE JUDICIOUSLY FOLLOW ED. 13 IT IS A SETTLED LEGAL POSITION THAT U/S.147 OF I.T. ACT, FOR ASSESSING OFFICER TO REOPEN AN ASSESSMENT, HE MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR ANY ASSESSMENT YEAR. UNDER THE PROVISO TO SECTION 147, WHERE AN ASSESSMENT HAS BEEN MADE U/S.143(3), NO ACTION SHAL L BE TAKEN UNDER THAT SECTION AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESS MENT YEAR. THIS IS A JURISDICTIONAL REQUIREMENT WHICH MUST BE FULFILLE D WHEN THE ASSESSMENT HAS SOUGHT TO BE REOPENED BEYOND FOUR YE ARS. THE EXISTENCE OF JURISDICTIONAL CONDITION MUST BE INDIC ATED IN THE REASONS WHICH ARE FURNISHED TO THE ASSESSEE. THE FULFILLME NT OF THE CONDITION IS A PRE-REQUISITE AND IF IT IS ABSENT, AN ASSESSME NT CANNOT BE REOPENED BEYOND FOUR YEARS. THE ASSESSING OFFICER CANNOT IMPROVE UPON THE REASONS FOR REOPENING ASSESSMENT OR BRIDGE THE LACUNAE LATER. IF REASONS DISCLOSED DO NOT INDICATE FULFIL LMENT OF JURISDICTIONAL REQUIREMENT, THE REOPENING IS INVALID. IN VIEW OF ABOVE, THE ASSESSING OFFICER WAS NOT LEGALLY JUSTIFIED TO REOP EN THE ASSESSMENT U/S.147 OF ACT ON THE BASIS OF REASONS RECORDED AFT ER EXPIRY OF FOUR YEARS UNDER THE RELEVANT ASSESSMENT YEAR. ACCORDIN GLY, THE IMPUGNED NOTICED ISSUED U/S.148 OF ACT FOR ASSESSME NT YEARS UNDER APPEAL WAS BAD IN LAW AND RIGHTLY QUASHED BY CIT(A) . CONSEQUENTLY, THE ASSESSMENT ORDER PASSED ON THE BASIS OF INVALID REOPENING OF ASSESSMENT STANDS RIGHTLY ANNULLED. THIS REASONED FACTUAL FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE FOR WHO HAS QUASHED THE ORDER OF ASSESSING OFFICER BOTH THE ASSESSMENT YEAR S. WE UPHOLD THE SAME. THE ISSUE BEING SIMILAR IN BOTH YEARS, THE O RDERS OF CIT(A) ON THE ISSUE IN BOTH YEARS ARE UPHELD. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED AS INDICATED ABOVE. 14 PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF APRIL, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH APRIL, 2014 GCVSR COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE DR, A BENCH, I.T.A.T., PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE