Sun Pharmaceutical Industries Ltd. V. Asst. Commissioner of Income Tax

SCA/8343/2007

AI Insights

The case involves Sun Pharmaceutical Industries Ltd., the petitioner, challenging a notice issued by the Assistant Commissioner of Income Tax, the respondent, to reopen their assessment for the year 2000-01. The original assessment was scrutinized and deductions under section 80HHC of the Income Tax Act were discussed and partially allowed. Subsequently, the assessment was reopened, and a second notice was issued, which led to further deductions being disallowed. The petitioner contended that the reopening was beyond the four-year limit and constituted a mere change of opinion, not supported by any failure to disclose material facts. The court found that the reopening was unjustified as it did not meet the legal requirements for such an action, particularly the lack of any undisclosed income that had escaped assessment.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 672865 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 02-07-2012
• Assessment Year: misc
• Other Referred Cases: IPCA Laboratory Ltd. v. Dy. CIT, Austin Engineering Co. Ltd. v. Joint CIT
• 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: Change of opinion; Deduction under section 80HHC; Jurisdiction; Reopening of assessment; Unabsorbed Business Loss; Unabsorbed Business Loss
• Section: 148; 143(3); 80HHC; 115JA; 80AB

Judgement Text

"SCA/8343/2007 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 8343 of 2007 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 To 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 LTD. - Petitioner(s) Versus ASST. COMMISSIONER OF INCOME TAX - Respondent(s) ========================================================= Appearance : MR SN SOPARKAR, SR. ADV WITH MRS SWATI SOPARKAR WITH MR B.S.SOPARKAR, for Petitioner(s) : 1, MR MR BHATT, SR. ADV. WITH MRS MAUNA M BHATT for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS.JUSTICE HARSHA DEVANI Date : 02/07/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE AKIL KURESHI) SCA/8343/2007 2/8 JUDGMENT 1. Petitioner has challenged the notice dated 8.9.2006 as at Annexure A to the petition by which the Assessing Officer, sought to reopen the assessment of the petitioner for the assessment year 2000-01. 2. The petitioner is a company registered under the Companies Act and is regularly assessed to tax. For the assessment year 2000-01, the petitioner filed its return of income on 30th November 2002 declaring total income of 15,92,21,260/- under section 115JA of the Income Tax Act, 1961 ('Act' for short). Such assessment was taken in scrutiny. The Assessing Officer framed assessment under section 143(3) of the Act on 27.11.2002. The assessment order contained detailed discussion with respect to the petitioner's claim for deduction under section 80HHC of the Act. Part of the claim made by the petitioner was allowed. Certain parts were disallowed. The petitioner, to the extent aggrieved by such order of assessment, preferred appeal before the Commissioner of Appeals. Be that as it may, the Assessing Officer on 25.2.2004 issued notice under section 148 of the Act proposing to reframe the assessment for the said year. Despite the petitioner's objection, he proceeded to do so and framed a fresh assessment pursuant to such notice. Such order was passed on 31.3.2005. It is not necessary for us to go into the details of such order. 3. Thereafter, once again, the present notice came to be issued on 8.9.2006. The notice thus was issued clearly beyond the period of four years from the end of relevant assessment year. Though along SCA/8343/2007 3/8 JUDGMENT with the notice, the reasons for reopening of assessment recorded by the Assessing Officer were not supplied, at the request of the petitioner, such reasons were supplied. Such reasons read as under: “2. The Finance No.2 Act 1980 has inserted Section 80AB to provide that for the purpose of calculating deduction u/s.80HH to 80TT, the net income as computed in accordance with the provisions of I.T.Act, 1961 shall alone be regarded as the income which is received by the assessee and which is included in the gross total income. The Hon'ble Supreme Court of India has also held in the case of IPCA Laboratory Ltd., v. Dy. CIT (266 ITR 521 (SC) that Section 80HHC is governed by Section 80AB of the I.T.Act 1961. 3. You were allowed deduction u/s.80HHC from the gross total income computed before allowance of set off of unabsorbed business loss of Rs.24,22,56,080/-. The deduction u/s.80HHC was ought to be allowed on gross total income after set off of unabsorbed business loss. 4. In view of above, you are required to give reasons as to why the deduction u/s.80HHC should not be allowed on gross total income after set off of unabsorbed business loss of Rs.24,22,56,080/-.” 4. The petitioner vide its communication dated 19.2.2007 raised several objections to such reopening. Principally, the petitioner contended that the notice for reopening which is issued beyond the period of four years from the end of relevant assessment year lacked jurisdiction since there was no failure on the part of the petitioner to disclose truly and fully all material facts for such assessment. The petitioner also contended that reopening is sought to be made on SCA/8343/2007 4/8 JUDGMENT mere change of opinion. The petitioner contended that on the strength of a decision rendered by the Supreme court, reopening was not permissible. The petitioner relied on several decisions of various High Courts, including this Court on the point. 5. The Assessing Officer, however, was not convinced by such reasons. He disposed of the objections of the petitioner vide his order dated 15.3.2007. At that stage, the petitioner approached this Court and sought intervention of the Court against the reopening of assessment second time. 6. Learned counsel Shri Bandish Soparkar for the petitioner vehemently contended that the notice for reopening was wholly without jurisdiction. He pointed out that in the original assessment framed by the Assessing Officer, there was detailed discussion with respect to the petitioner's claim for deduction under section 80HHC of the Act. Thereafter, once more, the entire assessment was reopened and claim for deduction under section 80HHC were examined and certain disallowances were made in the final order passed by the Assessing Officer upon such reopening. He, therefore, contended that fresh notice for reopening of the assessment was wholly without jurisdiction. Counsel contended that there was no failure on the part of the petitioner to disclose truly and fully all material facts necessary for assessment. Notice which was issued beyond the period of four years from the end of relevant assessment year was, therefore, without authority of SCA/8343/2007 5/8 JUDGMENT law. In this regard, counsel pointed out that in the reasons recorded by the Assessing Officer for issuance of such notice, it is not even mentioned that any income chargeable to tax had escaped assessment due to failure on the part of the petitioner to disclose truly and fully all material facts. He further contended that even in the order passed by the Assessing Officer disposing of the objections of the petitioner, no such assertion has been made. Taking us through the affidavit in reply filed by the respondent, the counsel contended that in such affidavit also, no such averment has been made. 7. Counsel further contended that from the reasons recorded, it is clear that the sole ground on which the assessment previously framed after scrutiny is sought to be reopened is the decision of the Apex Court in the case of IPCA Laboratory Ltd v. Dy. CIT, 266 ITR 521 (SC). Counsel submitted that this would clearly be a case of change of opinion and in any case reopening merely on the strength of decision rendered by the Apex Court subsequently was not permissible. In this respect, counsel relied on the decision of this Court in the case of Austin Engineering Co. Ltd. v. Joint CIT, (2009) 312 ITR 70 (Guj.). 8. On the other hand, learned counsel Shri Manish Bhatt for the respondent opposed the petition contending that the assessee had made a claim for deduction under section 80HHC of the Act without taking into consideration the deduction under section SCA/8343/2007 6/8 JUDGMENT 80AB of the Act. Since by virtue of the decision of the Apex Court in the case of IPCA Laboratory Ltd. (supra) the issue is no longer open to debate, reopening was fully justified. Counsel submitted that the petitioner-assessee during the course of original assessment never brought this aspect on record or to the notice of the Assessing Officer. 9. Having thus heard the learned counsel for the parties and having perused the documents on record, we may recall that in the present case, assessment which was previously framed after scrutiny is sought to be reopened beyond the period of four years from the end of relevant assessment year. In that view of the matter, apart from the Assessing Officer forming a belief that income chargeable to tax had escaped assessment, also had to satisfy the other condition, viz., that such escapement of income was due to failure on the part of the assessee to disclose truly and fully all material facts necessary for such assessment. 10. In the present case, we are of the opinion that essential requirement was not fulfilled. We may recall that the assessment was taken in scrutiny and after detailed discussion, the Assessing Officer granted the claim of the assessee for deduction under section 80HHC of the Act to the extent he was convinced about such claim. Even thereafter, at one stage, within four years, the Assessing Officer reopened the issue and revisited the claim of the petitioner for deduction under section 80HHC of the SCA/8343/2007 7/8 JUDGMENT Act. Thereafter, the second notice came to be issued in which such claim was sought to be partially disallowed on the ground that by virtue of decision of the Apex Court in the case of IPCA Laboratory Ltd. (supra), the assessee had received higher deduction than what was otherwise justified. In the reasons recorded, there is not even a suggestion that such escapement of income was due to failure on the part of the assessee to disclose truly and fully all material necessary for such assessment. 11. It is by now well settled that for reopening of assessment, the Assessing Officer can rely only on the reasons recorded and that such reasons cannot be augmented or supplemented through other materials, such as affidavit in reply, etc. In the present case, reasons recorded nowhere demonstrate failure on the part of the assessee to disclose truly and fully all material facts. Even otherwise, the petitioner when raised detailed objections to such reopening, the Assessing Officer passed order rejecting such objections. In such order also, the Assessing Officer, nowhere touched on the aspect of failure on the part of the petitioner to disclose truly and fully all material facts. Even in the affidavit which came to be filed before us no such aspect has been brought on record. Under the circumstances, we are convinced that the notice for reopening of assessment in the present case was wholly without jurisdiction. 12. In the case of Austin Engineering Co. Ltd. (supra), the Division Bench of this Court was of the SCA/8343/2007 8/8 JUDGMENT opinion that even if one proceeds on the footing that the Apex Court judgment constitutes information, yet if the period of four years has expired, unless and until the prerequisite conditions stipulated by the proviso to section 147 of the Act are shown to be fulfilling, no action can be initiated for reassessment. 13. In view of the above discussion, the impugned notice dated 8.9.2006 is hereby quashed. Rule is made absolute. No costs. (Akil Kureshi J.) (Harsha Devani, J.) (vjn) "