M/S Miles India Ltd ( Now Known As Bayer Diagnostic India Ltd ), Baroda V. The Dycit ( Asstt) Sr-2, Baroda

ITA 3784/AHD/2002

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0155 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 29-10-2009
• Assessment Year: 1991-1992
• Appeal Filed On: 09-12-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: J P SHAH
• Keywords: Reopening of assessment
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING:29.10.2009 DRAFTED ON: 29.10.2 009 ITA NO.3784/AHD/2002 ASSESSMENT YEAR : 1991-1992 MILES INDIA LTD. (NOW KNOWN AS BAYER DIAGNOSTICS INDIA LTD.) 589, SAYAJIPURA, AJWA RD. BARODA. VS. DY. COMM. OF I. TAX (ASSTT.) SPL. RANGE 2, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. PAN/GIR NO. : 31603CN2282 (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI J.P.SHAH A.R. RESPONDENT BY: C.K.MISHRA SR.D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD.CIT(APPEALS)-I, BARODA, DATED 16.09.2002. 2. GROUND NO.1 OF THE APPEAL OF THE ASSESSEE CHALLE NGES THE JURISDICTION OF THE LEARNED ASSESSING OFFICER IN REOPENING THE A SSESSMENT UNDER SECTION 147 OF THE ACT ON THE BASIS OF ALLEGED WRON G ALLOWANCE OF DEDUCTION UNDER SECTION 80-I WHEN AT THE TIME OF FI LING THE RETURN FULL DETAILS AND INFORMATION RELATING TO SAID CLAIM WAS FILED ALONG WITH THE RETURN OF INCOME. THE INSTANT PROCEEDINGS ARE AN AT TEMPT ON THE PART OF THE LEARNED ASSESSING OFFICER TO REDO THE ASSESSMENT BA SED ON A CHANGE OF AN OPINION THEREFORE SUCH REOPENING IS BAD IN LAW. ITA NO. 3784/AHD/2002 M/S.MILES INDIA LTD. ASST.YEAR -1991-92 - 2 - 3. THE BRIEF FACTS ARE THAT ASSESSEE FILED RETURN O F INCOME ON 30.12.1991 DECLARING INCOME OF RS.64,15,439/- CLAIM ING DEDUCTION UNDER SECTION 80-I FOR RS.14,04,668/- ON PROFIT OF INSTRU MENT MANUFACTURING UNIT. THE SAME WAS ALLOWED DEDUCTION TO THE ASSESSEE IN A N ASSESSMENT FRAMED UNDER SECTION 143(3) ON 15.03.1994. THEREAFTER, THE LEARNED ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT WHICH READS AS UNDER:- OFFICE OF THE DY.CIT(ASST.), SR.2, 6 TH FLOOR, AAYAKAR BHAVAN, R.C.CIRCLE, BARODA. DATE: 25-2-98 SAYER DIAGNOSTICS INDIA LTD. (MILES INDIA LTD.) 589, SAYAJIPURA, AJWA ROAD, BARODA. SIRS, SUB: ASSESSMENT FOR A.Y. 1991-92 . PLEASE REFER TO THE NOTICE U/S.148 ISSUED ON 22-3- 96. THE ASSESSMENT WAS FINALIZED ORIGINALLY ON 15-3-94 ON T HE TOTAL INCOME OF RS.64,50,440/- AND DEDUCTION U/S.80-I OF THE ACT OF RS.14,04,668/- WAS ALLOWED. IT IS SEEN THAT DURING THE YEAR MEDICAL DI AGNOSTIC EQUIPMENTS (IMU) WAS MANUFACTURED AT 2120 NUMBERS OUT OF WHICH 1742 NUMBERS OF INSTRUMENTS HAD BEEN SOLD FOR RS.2.22 CRORES. AS PE R PARA-13(4) OF THE AUDIT REPORT, THE ASSESSEE HAD ALSO PURCHASED MEDIC AL DIAGNOSTIC EQUIPMENTS AND SUCH RE-SALE OF FINISHED GOODS HAD B EEN SHOWN AT RS.1,82,37,000/-. THE PROFIT ON THE FINISHED GOODS PURCHASED FOR RE-SALE HAD NOT BEEN DEDUCTED BY YOU SEPARATELY. THE DEDUCT ION U/S. 80-I IS AVAILABLE IN RESPECT OF PROFIT ON GAIN DERIVED FROM THE INDUSTRIAL ACTIVITY. THEREFORE, THE PROFIT EARNED ON SALE OF GOODS WHICH HAD BEEN PURCHASED FOR RE-SALE IS NOT ENTITLED TO DEDUCTION U/S. 80-I OF THE ACT. YOU ARE, THEREFORE, REQUESTED TO EXPLAIN WHY A CORRECT WORKI NG U/S.80-I OF THE ACT SHOULD NOT BE MADE IN YOUR CASE. YOU ARE REQUESTED TO ATTEND THE OFFICE ON 12-3-98. YOUR FAITHFULLY, SD/- (S.H.SONI) DY. CIT (ASST.), SR-2, BARODA. THEREAFTER, THE LEARNED ASSESSING OFFICER PASSED O RDER UNDER SECTION 143(3) READS WITH SECTION 147 ON 20.03.1998, WHEREI N THE LEARNED ITA NO. 3784/AHD/2002 M/S.MILES INDIA LTD. ASST.YEAR -1991-92 - 3 - ASSESSING OFFICER AT PARA 4 OF THE ORDER HAS OBSERV ED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-I ON ACCOUNT OF INCOME EARNED FROM SERVICE CHARGES SHOWN IN THE PROFIT AND LOSS ACCOUN T AS PART OF OTHER INCOME AND HAS CLAIMED DEDUCTION UNDER SECTION 80-I ON THIS AMOUNT CONTENDING THAT SERVICE CHARGES ARE PART AND PARCEL OF THE BUSINESS ACTIVITY OF MANUFACTURING AND MARKETING OF ITS FINAL PRODUCT S WHICH IS DIRECTLY RELATABLE TO INDUSTRIAL UNDER TAKING. THE ASSESSEE S CONTENTION FOR CLAIMING DEDUCTION UNDER SECTION 80-I ON ACCOUNT OF INCOME F ROM OTHER SOURCES INCLUDING SERVICE CHARGES IS FOUND TO BE NOT ACCEPT ABLE BECAUSE OF CHANGE IN LAW WITH EFFECT FROM 1.04.1981 VIDE WHICH THE DE DUCTION HAS BEEN RESTRICTED TO INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND NOT ATTRIBUTABLE TO THE INDUSTRIAL UNDERTAKING. FURTH ER, IT IS ALSO TO BE NOTED THAT ON THE SAME BASIS ON ACCOUNT OF THE SAME FACTS , THE ACTION OF THE DEPARTMENT IN THIS REGARD HAS ALREADY BEEN CONFIRME D BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA, FOR THE A.Y.1992-93 VIDE HIS APPELLATE ORDER NO.CAB/I-1B3/95-96 DATED 2 2.12.1995. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE TURNOVE R OF THE MANUIFCATURING GOODS I.E. INSTRUMENT MANUFACTURING UNIT IS SHOWN BY THE ASSESSEE IN ITS RETURN OF INCOME FOR RS.2,22,42,000 /- AS AGAINST THE TOTAL TURNOVER OF RS.9,25,73,000/-. THE NET PROFIT OF THE WHOLE BUSINESS OF THE ASSESSEE IS SHOWN FOR A SUM OF RS.72,53,000/-. THE TOTAL TURNOVER ON ACCOUNT OF MANUFACTURING UNIT FOR WHICH DEDUCTION U NDER SECTION 80-I IS ELIGIBLE COMES TO 24.02% OF THE GROSS TURN OVER OF THE ASSESSEE. AS SUCH, ON THE SAME BASIS, THE ELIGIBLE NET PROFIT/ INCOME ON ACCOUNT OF INSTRUMENT MANUFACTURING UNIT WORKS OUT TO RS.17,42,600/-. THU S, THE NET DEDUCTION UNDER SECTION 80-I @ 25% ON THIS ELIGIBLE INCOME WO RKS OUT TO RS.4,35,650/- AS AGAINST THE SUM OF RS.14,04,667/- CLAIMED BY THE ASSESSEE. THUS, ON THIS ACCOUNT, A NET ADDITION OF RS.9,69,07 0/-(RS.14,04,667 MINUS 4,35,650/- IS MADE ON THIS ACCOUNT. ITA NO. 3784/AHD/2002 M/S.MILES INDIA LTD. ASST.YEAR -1991-92 - 4 - 4. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT IT WILL BE SEEN THAT IN THE REASONS RECORDED T HE LEARNED ASSESSING OFFICER HAS STATED THAT ASSESSEE HAS CLAIMED DEDUCT ION UNDER SECTION 80-I ON TRADING OF INSTRUMENT MANUFACTURING MACHINE BUT WHILE MAKING REASSESSMENT, THE LEARNED ASSESSING OFFICER HAS MAD E NO ADDITION ON THAT ACCOUNT AND HAS REDUCED DEDUCTION CLAIMED BY THE AS SESSEE UNDER SECTION 80-I ON THE GROUND THAT ASSESSEE HAS CLAIMED DEDUCT ION ON SERVICE CHARGES WHICH IS NOT ELIGIBLE UNDER SECTION 80-I. AS NO ADD ITION/DISALLOWANCE WAS MADE FOR THE REASONS FOR WHICH THE ASSESSMENT WAS R EOPENED THEREFORE, THE VERY BASIS OF REOPENING OF ASSESSMENT DOES NOT EXIS T AND THE ORDER FRAMED UNDER SECTION 147 BY THE LEARNED ASSESSING OFFICER IS BAD IN LAW AND REQUIRES TO BE QUASHED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF LEARNED ASSESSING OFFICER . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE THE UNDISPUTED FACTS ARE THAT THE ASSESSEE IS ELIGI BLE FOR DEDUCTION IN RESPECT OF PROFITS DERIVED FROM ITS INDUSTRIAL UNIT OF MANU FACTURING OF INSTRUMENTS. FURTHER, THE ASSESSMENT WAS ORIGINALLY COMPLETED UN DER SECTION 143(3) OF THE ACT ON 15.3.1994 WHERE DEDUCTION UNDER SECTION 80I WAS ALLOWED TO THE ASSESSEE AT RS14,04,668/- OUT OF GROSS TOTAL IN COME OF RS72,53,000/-. THE ABOVE ASSESSMENT WAS REOPENED BY ISSUING A NOTI CE ON 25.2.1998 AND THE REASONS RECORDED FOR SUCH REOPENING ARE QUOTED ABOVE. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE ARGUED BE FORE US THAT IN THE REASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER NO ADDITION WAS MADE IN RESPECT OF THE GROUNDS WHICH WAS RECORD ED FOR REOPENING OF THE ASSESSMENT AND THEREFORE THE CONSEQUENTIAL REAS SESSMENT ORDER IS BAD IN LAW. WE FIND THAT THE ABOVE ARGUMENT OF THE LEARNED AUTHORISED ITA NO. 3784/AHD/2002 M/S.MILES INDIA LTD. ASST.YEAR -1991-92 - 5 - REPRESENTATIVE OF THE ASSESSEE IS FACTUALLY ERRONEO US IN AS MUCH AS THE LEARNED ASSESSING OFFICER IN THE REASSESSMENT ORDER ALLOWED DEDUCTION IN RESPECT OF PROFIT DERIVED FROM SALE OF MANUFACTURED INSTRUMENT ONLY AND THEREBY DISALLOWED THE PROFIT DERIVED ON SALE OF PU RCHASED INSTRUMENTS ALSO. 7. THE PROVISION TO SECTION 147 READS AS UNDER:- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (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 RELEVA NT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE O N THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN R ESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR; IN THE INSTANT CASE IT IS OBVIOUS THAT THE NOTICE U NDER SECTION 148 DATED 25.2.1998 WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR 1991-92. FURTHER, THE ORIGINAL ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND THEREFORE SUCH NOTICE COULD NOT HAVE BEEN ISSUED UNLESS THERE WAS SOME FAILURE ON THE PA RT OF THE ASSESSEE OF THE NATURE MENTIONED IN PROVISO QUOTED HEREIN ABOVE. IN THE INSTANT CASE FROM A PERUSAL OF THE RECORDED REASONS IT IS CLEAR THAT TH ERE IS NO SUCH FAILURE ON THE PART OF THE ASSESSEE AND ONLY ON THE BASIS OF INFOR MATION WHICH WAS AVAILABLE BEFORE THE LEARNED ASSESSING OFFICER AT T HE TIME OF THE ORIGINAL ASSESSMENT THE NOTICE UNDER SECTION 147 WAS ISSUED IN THE INSTANT CASE. THUS, IN OUR CONSIDERED OPINION, SUCH NOTICE COULD NOT HAVE BEEN VALIDLY ISSUED AFTER 31.03.1996 I.E. AFTER EXPIRY OF 4 YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEARS. THEREAFTER, THE NOTICE W AS TIME BARRED AND BAD IN LAW. CONSEQUENTLY, THE REASSESSMENT ORDER PASSED IN PURSUANCE TO SUCH NOTICE IS ALSO BAD IN LAW AND IS UNSUSTAINABLE. WE THEREFORE, CANCEL THE ITA NO. 3784/AHD/2002 M/S.MILES INDIA LTD. ASST.YEAR -1991-92 - 6 - REASSESSMENT ORDER PASSED IN THE INSTANT CASE ON 20 .03.1998. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN VIEW OF OUR ABOVE FINDING, THE OTHER GROUNDS OF APPEAL TAKEN IN THIS APPEAL HAVE BECOME INFRUCTUOUS AND THEREFORE, REQUIRES NO ADJUDICATION BY US. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/10/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 30/10/2009 PREPARED AND COMPARED BY : PARAS ITA NO. 3784/AHD/2002 M/S.MILES INDIA LTD. ASST.YEAR -1991-92 - 7 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD