Smt. Prabhadevi Singhvi, Proprietor M/s Bombay Mills Exports and Ummed Textile Mills through its Prop Khim raj and Mahashankar Industries through its Proprietor Ram Gopal and PTM Industries through its partner Suresh Kumar Bindal and Minaxi Industries through its Prop Suresh Kumar and Kishori Lal Ratanchand (HUF), Proprietor M/s Rohit Fabrics V. Union of India, Through the Secretary, Ministry of Finance, Department of Revenue and The Additional Commissioner of Income-tax, Barmer Range, Income Tax Department and The Income Tax officer, Ward \\u2013 Balotra, Income Tax Department

CW/11538/2010

AI Insights

The case involves a batch of writ petitions filed by various petitioners, all engaged in the business of manufacturing finished cloth, against the Union of India and income tax authorities. The petitioners, located in Balotra, claimed tax deductions under Section 80IB of the Income Tax Act, 1961, for the assessment year 2006-2007. Initially, their claims were accepted, but later, notices were issued under Section 148 proposing to disallow these deductions. The petitioners contested the reopening of their assessments, arguing that it was based on a mere change of opinion and lacked jurisdiction. The court examined the precedents and the specific circumstances of each case, ultimately deciding in favor of the petitioners.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 701475 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 09-03-2017
• Assessment Year: misc
• Other Referred Cases: GKN Drive Shaft vs. ITO & Ors., Commissioner of Income Tax-II, Jodhpur vs. M/s PTM Industries, Balotra, Jeans Knit (P) Ltd. Vs. Deputy Commissioner of Income Tax & Ors., Calcutta Discount Co. Ltd. vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SUNIL BHANDARI
• Assessee Lawyers: ANIL BHANSALI; ANJAY KOTHARI
• Keywords: Assessment Order; Income Tax; Manufacturing; Reopening of assessment; Tax Deduction
• Section: 148; 143(3); 80IB

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR 1. S.B.Civil Writ Petition No. 11538 / 2010 Smt. Prabhadevi Singhvi, Proprietor M/s Bombay Mills Exports, F-1,2,3, IIIrd Pase, Industrial Area, BALOTRA. ----Petitioner Versus 1. Union of India, Through the Secretary, Ministry of Finance, Department of Revenue, North Block, NEW DELHI 2. The Additional Commissioner of Income-tax, Barmer Range, Income Tax Department, Rai Colony, Barmer. 3. The Income Tax officer, Ward – Balotra, Income Tax Department, Balotra ----Respondents 2. S.B.Civil Writ Petition No. 11532/ 2010 Ummed Textile Mills F-207, Industrial Area, Balotra through its Prop Khim raj S/o Jaikh Chand ----Petitioner Versus (2 of 9) 1. Union of India, through the Secretary, Finance Department, Government of India, North Block, New Delhi 2. Additional Commissioner of Income Tax Barmer Range, Rai Colony, Barmer 3. The Income tax officer Balotra ----Respondents 3. S.B.Civil Writ Petition No. 11534/ 2010 Mahashankar Industries E-249, 3rd Phase Industrial Area, Balotra Through its Proprietor Ram Gopal S/o Shri Rameshwarlalji, aged about 58 years ----Petitioner Versus 1. Union of India, through the Secretary, Finance Department, Government of India, North Block, New Delhi 2. Additional Commissioner of Income Tax Barmer Range, Rai Colony, Barmer 3. The Income tax officer Balotra ----Respondents 4. S.B.Civil Writ Petition No. 11535/ 2010 PTM Industries E-301, 3rd Phase Industrial Area, Balotra Through its partner Suresh Kumar Bindal S/o Shri Nenuramji, aged about 45 years ----Petitioner Versus (3 of 9) 1. Union of India, through the Secretary, Finance Department, Government of India, North Block, New Delhi 2. Additional Commissioner of Income Tax Barmer Range, Rai Colony, Barmer 3. The Income tax officer Balotra ----Respondents 5. S.B.Civil Writ Petition No. 11536/ 2010 Minaxi Industries F-86A, 3rd Phase Industrial Area, Balotra through its Prop Suresh Kumar S/o Asha Ramji ----Petitioner Versus 1. Union of India, through the Secretary, Finance Department, Government of India, North Block, New Delhi 2. Additional Commissioner of Income Tax Barmer Range, Rai Colony, Barmer 3. The Income tax officer Balotra ----Respondents 6. S.B.Civil Writ Petition No. 11537/ 2010 Kishori Lal Ratanchand (HUF), Proprietor M/s Rohit Fabrics, G-185A, Industrial Area, BALOTRA. ----Petitioner Versus (4 of 9) 1. Union of India, Through the Secretary, Ministry of Finance, Department of Revenue, North Block, NEW DELHI 2. The Additional Commissioner of Income-tax, Barmer Range, Income Tax Department, Rai Colony, Barmer. 3. The Income Tax officer, Ward – Balotra, Income Tax Department, Balotra ----Respondents _____________________________________________________ For Petitioner(s) : Mr.Anil Bhansali & Mr.Anjay Kothari. For Respondent(s) : Mr.Sunil Bhandari. _____________________________________________________ HON'BLE MR. JUSTICE SANDEEP MEHTA Judgment 9/03/2017 Heard learned counsel for the parties. The instant batch of writ petitions involves common questions of facts and law and is thus being decided by this single order. Facts in brief :- The petitioners herein are regular income tax assessees involved in the business of manufacturing of finished cloth after the process of bleaching, dyeing, printing and padding. (5 of 9) The petitioners industrial undertakings are located in Balotra town of District Barmer which is a backward area and thus, the petitioners claim themselves to be entitled for tax deduction under Section 80IB of the Income Tax Act, 1961 (for short, ‘the IT Act’). The petitioners further claim that as they satisfy all the requisite conditions stipulated under Section 80IB of the IT Act and thus, the concerned assessing authorities conducted assessment of the petitioners for the corresponding years and allowed their claim for deduction under Section 80IB of the IT Act while issuing assessment orders under Section 143(3) of the IT Act. The assessment year from which the controversy involved in these writ petitions originates is 2006-2007. The original assessment order was passed by the assessing authority recording a categoric finding as to the fulfillment of the requisite conditions prescribed under Section 80IB of the IT Act observing that the petitioners were involved in manufacturing and number of workers in each unit was more than 10 and units were undertaking manufacturing process with the aid of power. Accordingly, the benefit of deduction under Section 80IB was allowed to each of the petitioners for AY 2006-2007. However, thereafter the assessing officer seems to have taken a different view and issued notices to the petitioners under Section 148 of the IT Act proposing to disallow the deduction already granted to the petitioners for the AY 2006-2007. The petitioners herein filed their replies to the notices and demanded reasons for purported reopening of the proceedings in reference to the law as laid down by the Hon’ble (6 of 9) Supreme Court in the case of GKN Drive Shaft vs. ITO & Ors. reported at 259 ITR 19 (SC). The assessing officer intimated the petitioners that the reasons for reopening, conveying inter alia that the activity of the petitioners could not be termed to be manufacturing and that number of employees engaged in the process should be more than 20. The petitioners filed detailed objections against the reasons recorded by the assessing authority and sought annulment of the notices issued to them under Section 148 of the IT Act claiming that the activity of bleaching, dyeing, printing etc. was covered in the definition of manufacture as held in numerous judgments of the Hon’ble Supreme Court and that number of minimum workers required for claiming the benefit of deduction under Section 80IB was only ten. The petitioners further claimed that mere change of opinion would not entitle the assessing authority to reopen the proceedings and sought dropping thereof on the ground of lack of jurisdiction and colourable exercise of power. However, the objections raised by the petitioners were rejected by the assessing authority vide orders dated 25.11.2010. Hence, these writ petitions. Learned counsel Shri Anil Bhansali and Shri Anjay Kothari for the petitioners vehemently urged that the entire endeavour of the assessing authority in reopening concluded assessments of AY 2006-2007 against the petitioners is perverse and arbitrary and craved quashment of the impugned notices and orders issued against the petitioners as being without jurisdiction and amounting to colourable exercise of power. They submitted that (7 of 9) the issue regarding admissibility of the deductions under Section 80IB is no longer res integra in view of the judgment dated 17.3.2015 rendered by the Division Bench of this Court in ITA Nos.52/2013 (Commissioner of Income Tax-II, Jodhpur vs. M/s PTM Industries, Balotra), 53/2013 (Commissioner of Income Tax- II, Jodhpur vs. M/s PTM Industries, Balotra) and 54/2013 (Commissioner of Income Tax-II, Jodhpur vs. M/s PTM Industries, Balotra) whereby, identical controversy was decided against the revenue for the assessment years 2005-2006, 2008-2009 and 2007-2008 respectively. They thus urged that the writ petitions should be accepted in the terms prayed for. Per contra, Shri Sunil Bhandari learned counsel for the respondents vehemently opposed the submissions advanced by the petitioners’ counsel and urged that effective and efficacious alternate remedy of approaching the assessing authority and filing returns to the impugned notices is available to the petitioners who can very well contest the matter before the assessing authority who if satisfied is competent to drop the same and thus, the writ petitions should be dismissed as being pre-mature and not maintainable. However, Shri Bhandari could not dispute the fact that the controversy decided by the Division Bench in the cases of M/s PTM Industries (referred to supra) is on all fours applicable to the case at hand. The deduction under Section 80IB of the IT Act afforded to M/s PTM Industries (petitioner in writ petition no.11535/2010 herein) by the I.T.A.T. for the assessment years 2005-2006, 2007- (8 of 9) 2008 and 2008-2009 received the stamp of authority from the Division Bench while deciding the aforesaid appeals. Thus, the only issue which needs to be examined by this Court is regarding the preliminary objection raised by Shri Bhandari against the maintainability of these writ petitions. In this regard, learned counsel for the petitioners placed reliance on the Hon’ble Supreme Court judgment in the case of Jeans Knit (P) Ltd. Vs. Deputy Commissioner of Income Tax & Ors. reported in (2017) 145 DTR (SC) 16 and urged that when the notice under Section 148 and the reasons recorded by the assessing officer for reopening the assessment is without jurisdiction, a writ petition can be entertained against the same. The Hon’ble Supreme Court whilst deciding the issue relied upon the earlier Supreme Court’s judgment rendered in the case of Calcutta Discount Co. Ltd. vs. ITO reported in (1961) 41 ITR 191 (SC) and upheld this contention and repelled the preliminary objection raised against maintainability of the writ petitions. In this background, this Court is of the firm opinion that aforesaid preliminary objection is not sustainable. The Hon’ble Division Bench in ITA Nos.52/2013, 53/2013 and 54/2013 (Commissioner of Income Tax-II, Jodhpur vs. M/s PTM Industries, Balotra) affirmed the order passed by the Income Tax Appellate Tribunal upholding the grant of deduction to the assessee PTM Industries (one of the petitioners herein) under Section 80IB of the IT Act for the assessment years 2005-2006, 2007-2008 and 2008-2009. Since for the assessment years preceding and following the questioned assessment year, the issue (9 of 9) has already been decided in favour of the assessee, this Court is of the firm opinion that the assessing officer was not at all justified in reopening the matter by exercising the powers under Section 148 of the IT Act. The impugned orders apart from being totally perverse and laconic, also suffer from total non-application of mind and also amount to colourable exercise of power and thus, cannot be sustained. As a consequence of the discussion made herein above, all the writ petitions are allowed. The impugned orders and notices being bad in eye of law and cannot be sustained and are hereby quashed and set aside. A copy of this order be placed in each file. (SANDEEP MEHTA)J. S.Phophaliya/- "