Sun Pharmaceutical Industries Ltd V. Assistant Commissioner of Income Tax, Central Circle - I

SCA/14226/2008

AI Insights

The case involves Sun Pharmaceutical Industries Ltd, the petitioner, challenging a notice issued by the Assistant Commissioner of Income Tax, Central Circle - I, for reopening their assessment for the year 2002-03. The notice was issued beyond the four-year period allowed for reopening assessments and was based on a change in judicial interpretation regarding the netting of interest for disallowance under section 80HHC of the Income Tax Act, which had been decided in favor of the petitioner in previous assessments and appeals. The court found that the reopening was not justified as there was no undisclosed income and the issues had been previously adjudicated in favor of the petitioner.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 794629 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 02-07-2012
• Assessment Year: misc
• Other Referred Cases: Rani Paliwal v. CIT, ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M R BHATT; MAUNA BHATT
• Assessee Lawyers: S N SOPARKAR; SWATI SOPARKAR; B S SOPARKAR
• Keywords: Income Tax; Netting of interest; Reopening of assessment; Section 80HHC
• Section: 148; 143(3); 80HHC

Judgement Text

"SCA/14226/2008 1/6 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 14226 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MS.JUSTICE HARSHA DEVANI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 T o be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= SUN PHARMACEUTICAL INDUSTRIES L TD, SPARC - Petitioner(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - I - Respondent(s) ========================================= Appearance : MR SN SOPARKAR, SR. ADVOCATE with MRS SWATI SOPARKAR with MR B.S.SOPARKAR for Petitioner MR M.R.BHATT, SR. ADVOCATE with MRS MAUNA M BHATT for Respondent ========================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS.JUSTICE HARSHA DEVANI Date : 02/07/2012 ORAL JUDGMENT SCA/14226/2008 2/6 JUDGMENT (Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged the notice u/s 148 of the Income T ax Act, 1961 (“the Act” for short) dated 31.3.2008 as at Annexure “A” to the petition. By the said notice, the Assessing Officer seeks to reopen the assessment for the assessment year 2002-03. Such notice is, thus, issued clearly beyond the period of four years from the end of the relevant assessment year. 2. The petitioner is a Company incorporated under the Companies Act, 1956 and is regularly assessed to tax. For the assessment year 2002-03, the petitioner filed its original return of income on 29.10.2002. Such return of income was taken in scrutiny by the Assessing Officer who framed assessment under section 143(3) of the Act on 31.3.2005. Such assessment was reopened in the past. Thereafter, yet again fresh notice which is impugned in the present petition came to be issued. At the request of the petitioner, the Assessing Officer supplied his reasons recorded for such reopening which read as under : “Giving benefit of Netting of Interest to the assessee while calculation of deduction u/s 80HHC : For the A.Y. 2002-03, in the original assessment order u/s 143(3), the benefit of netting was disallowed to the assessee while calculating deduction u/s 80HHC. However, Ltd. CIT(A) deleted the above addition. Department has filed an appeal before Hon'ble ITAT wherein the decision is pending till date. Meanwhile, the case was reopened u/s 147 for SCA/14226/2008 3/6 JUDGMENT both the years, and following the order of Ld. CIT (A), netting benefit was allowed to the assessee in calculations. These orders u/s 147 were audited by the Revenue Audit Party wherein it was objected that the benefit of netting should not have been allowed to the assessee as Hon'ble Punjab & Haryana High Court in the case of Rani Paliwal v. CIT, [2003] (185) CTR 333) (P&H) had decided in favour of revenue, and that this decision had come after the decision of Ld. CIT (A). Under these circumstances, and as per instruction No.09 of 2006 dated 07.11.2006 of CBDT, remedial action needs to be initiated as a precautionary measure, to safeguard the interest of revenue. Hence, the case is fit for issue of notice u/s 148.” 3. The petitioner raised its objections to such reopening vide letter dated 10.7.2008. Such objections were, however, rejected by the Assessing Officer Officer vide his order dated 17.11.2008. Hence, the petition. 4. Counsel for the petitioner submitted that the notice for reopening lacks jurisdiction. There was no failure on the part of the assessee to disclose truly and fully all material facts which occasioned escapement of income chargeable to tax. He submitted that in the reasons recorded, all that is stated is that the question of netting of interest for disallowance under section 80HHC of the Act came to be decided by the Punjab & Haryana High Court subsequently. He submitted that this cannot be a ground for reopening and that too, beyond a period of four years. Counsel pointed out that in case of the petitioner itself, for the same assessment year, the issue of netting of income was decided in favour of the petitioner by the SCA/14226/2008 4/6 JUDGMENT Appellate Commissioner. 5. Learned counsel Shri Manish Bhatt for the Department relied on reasons recorded and opposed the petition. 6. We may record that in case of this very petitioner, for the assessment year 2001-02, the Assessing Officer had issued notice for reopening on two grounds, one of them was pertaining to netting of interest for disallowance under section 80HHC of the Act. We allowed the petition and quashed the notice making, besides other, following observations. “[6] Appearing on behalf of the petitioner, learned counsel Shri Saurabh Soparkar, taking us through the reasons recorded by the Assessing Officer, contended that there was no failure on the part of the assessee to disclose truly and fully all material facts which occasioned escapement of income chargeable to tax. In absence of this requirement being fulfilled, the impugned notice was wholly without jurisdiction. [10] With respect to second issue raised by the Assessing Officer in the reasons recorded, counsel submitted that this question also was discussed in the original assessment order. On appeal, the CIT (Appeals) ruled in favour of the assessee. In that view of the matter, reopening on such an issue also was wholly impermissible. Counsel submitted that merely because subsequently a particular view is expressed by the High Court in another case, would not be a ground to reopen SCA/14226/2008 5/6 JUDGMENT the assessment in the case of the petitioner. [11] Counsel pointed out that this issue, namely, while denying deduction under section 80HHC of the Act towards interest income, the question whether the net interest or the gross interest should be disallowed, has now been settled by the Apex Court in the case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax, reported in (2012) 343 ITR 89. [13] Having thus heard the learned counsel for the parties and having perused the documents on record, we are clearly of the opinion that the notice for reopening the assessment is wholly without jurisdiction. This is so for several reasons. Firstly in the reasons recorded, it is not even an allegation that any income chargeable to tax escaped assessment on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for such assessment. In absence of any such ground, reopening of assessment beyond a period of four years from the end of relevant assessment year would be wholly impermissible. [14] In the present case, in fact, there was not only full disclosure on the part of the petitioner, both the issues which form foundation for the reasons for reopening, were at issue in the original assessment framed in case of the petitioner for the same assessment year. With respect to the first issue, namely, giving benefit of MAT credit to the assessee, the final decision was in favour of the assessee, SCA/14226/2008 6/6 JUDGMENT [18] With respect to the second issue also, the same was discussed by the Assessing Officer in the original assessment. The decision of the Assessing Officer was adverse to the petitioner. The petitioner carried the matter in appeal and the CIT (Appeals) allowed the assessee's appeal on this point. Here also, without any further development, the Assessing Officer could not have taken a view different form that of the CIT (Appeals). This ground also must fail on both the counts, namely, no failure on the part of the assessee to disclose material particulars, and the issue having been decided in favour of the assessee. [19] Looking from any angle, the notice for reopening the assessment cannot be allowed to stand. The same is, therefore, quashed. Rule is made absolute with no order as to costs.” 7. The facts being identical, without recording separate reasons, we proceed to allow this petition by quashing the impugned notice dated 31.3.2008, at Annexure “A” to the petition. Rule is made absolute with no order as to costs. [AKIL KURESHI, J.] [HARSHA DEVANI, J.] parmar* "