ACIT 9(3), MUMBAI V. SAMRUDDH PHARMACEUTICALS P. LTD, MUMBAI

ITA 6722/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8957 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2003-2004
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 80IB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.6722/MUM/2011 ASSESSMENT YEAR-2003-04 THE ACIT 9(3), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. SAMRUDDH PHARMACEUTICALS PVT. LTD., A/101, PRATHANA BLDG., PLOT NO. 15, JAWAHAR NAGAR,S.V. ROAD, GOREGAON (W), MUMBAI- 400 062 PAN-AABCS 4538H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V. KRISHNAMOORTHY RESPONDENT BY: SHRI VIJAY MEHTA DATE OF HEARING :06.09.2012 DATE OF PRONOUNCEMENT: 12.9.2012 O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- 20 DT. 26.7.2011 PERTAINING TO ASSESSMENT YEAR 200 3-04. 2. THE REVENUE HAS RAISED FOLLOWING TWO SUBSTANTIVE GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT REASSESS MENT PROCEEDINGS U/S. 147/148 OF THE I.T. ACT, 1961 AS B AD IN LAW IN VIEW OF THE EXPLANATION 1 TO SEC. 147 OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLO WANCE OF DEDUCTION U/S. 80IB(3)(II) OF THE I.T. ACT, 1961 WITH OUT ITA NO. 6722/M/2011 2 VERIFYING THE FACT THAT THE ASSESSEES UNIT WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(3)(II) OF THE I.T. ACT, 196 1. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT F OR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 75,34,480/-. THE RETURN WAS SELECTED FOR SCRUT INY ASSESSMENT WHICH WAS COMPLETED ON 16.11.2005 ACCEPTING THE INCOME RETURN ED BY THE ASSESSEE. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S. 148 OF THE ACT. IN RESPONSE TO THE NOTICE, THE ASSESSEE F ILED A REPLY WHEREIN IT HAS STATED THAT THE ORIGINAL RETURN FILED ON 22.10.2003 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S. 148 OF THE ACT. THEREAFTER, THE ASSESSEE SOUGHT COPY OF THE REASONS RECORDED FOR RE OPENING OF THE ASSESSMENT WHICH WAS PROVIDED TO THE ASSESSEE VIDE LETTER DT. 31.5.2010. THE ASSESSEE QUESTIONED THE VALIDITY OF THE REOPENING S TATING THAT IT IS NOTHING BUT A CHANGE OF OPINION. THE SUBMISSION OF THE ASSESSE E WAS CONSIDERED AND THE SAME WAS REJECTED BY ORDER DT. 21.12.2010. THEREAFT ER THE AO WENT ON TO COMPLETE THE REASSESSMENT PROCEEDINGS. 4. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB OF THE ACT AS IT CLAIMED TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING. HOWEVER, ACCORDING TO THE AO, THE ASS ESSEE HAS NOT FULFILLED ALL THE CONDITIONS WHICH COULD ENTITLE IT TO BE ELIGIBL E FOR A SSI AND THEREFORE WENT ON TO REJECT THE CLAIM OF DEDUCTION U/S. 80IB OF THE ACT CLAIMED AT RS.32,29,062/- AND ASSESSED THE INCOME AT RS. 1,07, 64,540/-. 5. THE MATTER WAS AGITATED BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE FIRST RAISED THE QUESTION OF THE LEGA LITY OF THE PROCEEDINGS INITIATED U/S. 147 OF THE ACT AND CLAIMED THAT THE REOPENING WAS DONE ONLY ON THE BASIS OF THE CHANGE OF OPINION. DURING THE COU RSE OF THE FIRST ASSESSMENT PROCEEDINGS, THE AO HAS EXAMINED ALL THE EVIDENCES ON RECORD AND AFTER SATISFYING HIMSELF ABOUT THE GENUINENESS AND CORREC TNESS OF THE CLAIM MADE U/S. 80IB((3)(II) OF THE ACT ALLOWED THE DEDUCTION. ITA NO. 6722/M/2011 3 6. AFTER CONSIDERING THE DETAILED SUBMISSION MADE B Y THE ASSESSEE, THE LD. CIT(A) WAS CONVINCED THAT THE AO HAS EXAMINED T HE CLAIM OF DEDUCTION U/S. 80IB OF THE ACT AT LENGTH DURING THE INITIAL AS SESSMENT PROCEEDINGS. THEREFORE THERE WAS NO FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS. THE LD. CIT(A) F URTHER OBSERVED THAT NONE OF THE CONDITIONS PROVIDED U/S. 147 OF THE ACT WERE SA TISFIED TO REOPEN THE ASSESSMENT. THE LD. CIT(A) CONCLUDED THAT REOPENIN G WAS SOLELY ON THE BASIS OF THE MERE CHANGE OF OPINION AND THEREFORE IT IS N OT VALID. ALLOWING THE APPEAL ON THE POINT OF LAW, THE LD. CIT(A) WENT ON TO DECIDE THE GRIEVANCE OF THE ASSESSEE ON MERIT AND HELD THAT THERE IS NO CAS E FOR DISALLOWING THE CLAIM OF DEDUCTION AMOUNTING TO RS. 32,29,062/-. 7. REVENUE IS AGGRIEVED BY THIS FINDINGS OF THE LD. CIT(A) AND IS BEFORE US. LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPP ORTED THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HAS NOT TRULY AND FULLY DISCLOSED ALL MATERIAL FACTS RELATING TO ITS CLAIM OF DEDUCTION U /S. 80IB OF THE ACT DURING THE INITIAL ASSESSMENT PROCEEDINGS WHICH PROMPTED THE A O TO REOPEN THE ASSESSMENT. THEREFORE, FINDING OF THE LD. CIT(A) TH AT CONDITIONS PROVIDED U/S. 147 OF THE ACT HAVE NOT BEEN FULFILLED BY THE AO, I S NOT CORRECT ON THE FACTS OF THE CASE. 8. PER CONTRA, LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY ARGUED THAT DURING THE INITIAL ASSESSMENT PROCEEDINGS ALL THE F ACTS AND DETAILS AND ALSO RELEVANT DOCUMENTS PERTAINING TO THE CLAIM OF THE A SSESSEE U/S. 80IB OF THE ACT WERE PLACED BEFORE THE AO. THE LD. COUNSEL FUR THER SUBMITTED THAT THE AO HAD CAREFULLY CONSIDERED THE MATERIALS PLACED BE FORE HIM AND THEREAFTER ACCEPTED THE RETURNED INCOME AND ALLOWED THE DEDUCT ION AS CLAIMED BY THE ASSESSEE U/S. 80IB OF THE ACT. THE LD. COUNSEL SUBM ITTED THAT THIS REASSESSMENT IS SOLELY BASED ON THE CHANGE OF OPINI ON WHICH CANNOT BE THE BASIS FOR REOPENING OF THE ASSESSMENT. ITA NO. 6722/M/2011 4 9. WE HAVE HEARD THE SUBMISSIONS OF THE RIVAL PARTI ES AND PERUSED THE ASSESSMENT ORDER AND THE ORDER OF THE LD. CIT(A). WE FIND THAT ON 2.4.1991, THE GOVERNMENT CAME OUT WITH A NOTIFICATION PRESCRI BING UPPER CEILING OF INVESTMENT IN PLANT AND MACHINERY AT RS.ONE CRORE F OR SSI UNIT. THE ASSESSEE OBTAINED PROVISIONAL REGISTRATION AS SSI UNIT ON 16 .1.1992. HOWEVER, ON 10.12.1997, THE GOVT. ENHANCED THE UPPER LIMIT FROM ONE CRORE TO 3 CRORES ON 20.5.1998. THE ASSESSEE GOT PERMANENT SSI REGISTRA TION WHEREIN THE INVESTMENT IN PLANT AND MACHINERY WAS CLAIMED AT RS . 2.08 CRORES WHICH WAS WELL WITHIN THE UPPER CEILING PRESCRIBED BY THE GOV ERNMENT. HOWEVER, ON 24.12.1999, THE GOVERNMENT ONCE AGAIN CAME OUT WITH A NOTIFICATION AND REDUCED THE UPPER CEILING FROM 3 CRORES TO ONE CROR E FOR SSI UNIT. TO MITIGATE THE HARDSHIP, THE GOVT. CLARIFIED THAT THE REGISTRA TION OF THE OLD UNITS GRANTED AS PER OLD NOTIFICATION WILL CONTINUE. THE CLARIFI CATIONS WERE REITERATED ON 27.3.2000 AND 19.10.2000, COPIES OF THESE CLARIFICA TIONS ARE EXHIBITED AT PAGES 53, 58 AND 59 OF THE PAPER BOOK. WITH THIS F ACTUAL MATRIX RELATING TO THE GOVT. NOTIFICATIONS FOR THE ELIGIBILITY ON SSI U NIT, WE FIND THAT DURING THE COURSE OF THE INITIAL ASSESSMENT PROCEEDINGS, THE A SSESSEE HAS EXPLAINED IN DETAIL ITS CLAIM FOR DEDUCTION U/S. 80IB (INITIALLY IT WAS U/S. 80IA(2)(II) OF THE ACT). THE REPLY DT. 11.7.2005 IS EXHIBITED FROM PA GES 5 TO 10 OF THE PAPER BOOK. THE ASSESSEE FURTHER EXPLAINED ITS POSITION TO THE AO IN THE INITIAL ASSESSMENT PROCEEDINGS VIDE ITS LETTER DT. 9.11.200 5 BY WHICH THE ASSESSEE GAVE ALL THE RELEVANT FACTUAL DETAILS PERTAINING TO ITS CLAIM OF BEING AN SSI UNIT, NOTIFICATIONS ISSUED BY THE GOVERNMENTS CLAR IFICATION THAT UNITS THAT HAVE OBTAINED PERMANENT REGISTRATION PRIOR TO THE DATE O F NOTIFICATION WOULD CONTINUE TO REMAIN AS SSI UNIT. THIS DETAILED REPL Y DT. 9.11.2005 IS EXHIBITED FROM PAGES-15 TO 17 OF THE PAPER BOOK. 10. AFTER CONSIDERING ALL THESE MATERIALS PLACED DU RING THE INITIAL ASSESSMENT PROCEEDINGS, THE AO ALLOWED DEDUCTION U/ S. 80IB OF THE ACT. FROM THE MATERIALS PLACED BEFORE US, WE FIND THAT T HE ASSESSEE HAS ALSO EXPLAINED THE FACTUAL MATRIX RELATING TO ITS CLAIM U/S. 80IB OF THE ACT. IN ITA NO. 6722/M/2011 5 RESPONSE TO, SOME AUDIT QUERIES RAISED BY THE AO. THE REPLY DT. 15.3.2010 IS EXHIBITED AT PAGES 35 TO 37 OF THE PAPER BOOK. 11. AFTER CONSIDERING ALL THESE FACTUAL ASPECTS AND THE MATERIALS PLACED BEFORE US, WE HAVE NO HESITATION TO SAY THAT THE VE RY BASIS FOR REOPENING THE ASSESSMENT IS BASED ON CHANGE OF OPINION BY THE AO AS WHATEVER HAS BEEN CONSIDERED IN THE REASSESSMENT PROCEEDINGS HAVE ALR EADY BEEN EXAMINED IN THE FIRST ASSESSMENT PROCEEDINGS AND NO NEW MATERIA LS HAVE BEEN BROUGHT ON RECORD. THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA 320 ITR 561 (SC) SQUARELY APPLIE S. WE ACCORDINGLY HOLD THAT REOPENING WAS BAD IN LAW WHICH VITIATE THE REA SSESSMENT PROCEEDINGS, THEREFORE, FINDINGS OF THE LD. CIT(A) ARE CONFIRMED . 12. AS WE HAVE HELD THAT REOPENING IS BAD IN LAW, W E DO NOT PROPOSE TO DISCUSS THE CASE ON MERIT. ACCORDINGLY, REVENUES APPEAL IS DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF SEPTEMBER, 2012 SD/- SD/- (D.K. AGARWAL) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 12 TH SEPTEMBER, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI