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

SCA/14219/2008

AI Insights

The case involves Sun Pharmaceutical Industries Ltd., which challenged a notice issued by the Assistant Commissioner of Income Tax, Central Circle - I, seeking to reopen the assessment for the year 2001-02. The notice was based on two issues: the calculation of interest under section 234B after giving effect to MAT credit, and the netting of interest while calculating deduction under section 80HHC. The petitioner argued that these issues had been previously decided in their favor and that the reopening was unjustified as it was based solely on audit objections without new material facts. The court agreed with the petitioner, emphasizing that the principles of res judicata and the finality of appellate decisions prevent the reopening of issues already settled.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 794619 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 02-07-2012
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Tulsyan Nec Ltd., ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax, Rani Paliwal v. 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: Audit objection; Income Tax; MAT credit; Reopening of assessment
• Section: 147; 148; 143(3); 234B

Judgement Text

"SCA/14219/2008 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 14219 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/14219/2008 2/8 JUDGMENT (Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged a notice dated 31.3.2008 as at Annexure “A” to the petition, by which the Assessing Officer sought to reopen the assessment of the petitioner for the assessment year 2001-02. Brief facts may be noted at the outset. 2. The petitioner is a company incorporated under the Companies Act, 1956. The petitioner is regularly assessed to tax. For the assessment year 2001-02, the petitioner filed its return of income on 31.10.2001 declaring income of Rs.92.81 crores (rounded off). The petitioner thereafter filed a revised return of income of Rs.92.60 crores (rounded off). 3. The case of the petitioner was taken in scrutiny. The Assessing Officer framed assessment under section 143(3) of the Income T ax Act, 1961 (“the Act” for short) on 28.3.2003 determining total income at Rs.112.47 crores (rounded off). The assessment was thereafter reopened on two occasions and such fresh assessments were also framed on 31.3.2005 and 29.12.2006. 4. By the impugned notice, the Assessing Officer seeks to reopen such assessment third time. Such notice is issued clearly beyond a period of four years from the end of the relevant assessment year. T o reopen such assessment, the Assessing Officer recorded reasons as under: “Giving benefit of MAT credit before calculation of SCA/14219/2008 3/8 JUDGMENT interest u/s 234B. For the A.Y. 2001-02, in the original assessment order passed u/s 143(3), interest u/s 234B was calculated without giving benefit of MAT credit to the assessee. However, the went before CIT (A) who decided in order passed u/s 154, that interest u/s 234B was to be calculated after giving effect of MAT credit. Aggrieved, the department appealed before the Hon'ble ITAT against the order u/s 154, who vide order No.125/AHD/2004 dated 22.3.2007 confirmed the decision of the Ld. CIT(A). Subsequently, the case was reassessed u/s 147, and following the decision of Hon'ble ITAT, benefit of MAT credit was given to the assessee before calculation of interest u/s 234B. This order u/s 147 was audited by the Revenue Audit Party wherein it was objected that this MAT credit benefit should not have been given to the assessee on the ground that the amendment of section 234B in favour of the assessee comes into effect only from 1.4.2007. Giving benefit of Netting of Interest to the assessee while calculation of deduction u/s 80HHC : For the A.Y. 2001-02, 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 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). SCA/14219/2008 4/8 JUDGMENT 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.” 5. On 10.7.2008, the petitioner raised several objections to the proposal on the part of the Assessing Officer to reopen the assessment. Such objections, however, were rejected by the Assessing Officer vide his order dated 17.11.2008. The petitioner, at that stage, approached this Court challenging the notice for reopening the assessment. 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. 7. Counsel pointed out that the first issue with respect to giving benefit of MAT credit before calculation of interest under section 234B of the Act, was not only discussed in the original assessment, the same was concluded in favour of the petitioner for the same assessment year by virtue of a decision of the Tribunal. It was, therefore, not open to the Assessing Officer to reopen the same question, that too, without challenging the decision of the SCA/14219/2008 5/8 JUDGMENT Tribunal. 8. Counsel further contended that the question of giving benefit of MAT credit for the purpose of calculation of interest under section 234B of the Act has since been decided by the Apex Court in the case of Commissioner of Income Tax v. Tulsyan Nec Ltd., 330 ITR 226. 9. Counsel further submitted that even otherwise, the sole reason for reopening the assessment was an objection raised by the audit party. This by itself would not form sufficient ground for reopening the assessment. 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 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. SCA/14219/2008 6/8 JUDGMENT 12.On the other hand, learned counsel Shri Manish Bhatt for the Department relied on reasons recorded by the Assessing Officer and opposed the petition. 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. 15.The CIT (Appeals) in an order under section 154 of the Act, ruled in favour of the assessee. Such decision, though was carried by the revenue before the Tribunal, the view of the CIT (Appeals) was confirmed. SCA/14219/2008 7/8 JUDGMENT 16.Thus, in addition to no failure on the part of the assessee to disclose full facts, even on merits, this issue was decided in favour of the petitioner by the Tribunal. Surely, when the Tribunal had already rendered its decision on a particular issue, the Assessing Officer could not have taken a different view, unless of course such order of the Tribunal was reversed by the High Court. Even otherwise, when such an issue is not only decided by the Assessing Officer, but is also carried further in appeals, we fail to see how Assessing Officer could hold that the assessee failed to disclose fully and truly all material facts. 17.Additionally, we are also of the opinion that, as held by several decisions, mere objection of the audit party, without there being any additional material on record, on the Assessing Officer's own belief that income chargeable to tax has escaped assessment, cannot form the basis for reopening of the assessment. 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. SCA/14219/2008 8/8 JUDGMENT 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. [AKIL KURESHI, J.] [HARSHA DEVANI, J.] parmar* "