Case Law Details
CIT Vs Deepak Cables (India) Ltd. (Karnataka High Court)
Tribunal, in a cryptic and cavalier manner, has found that during the course of survey under Section 133A of the Act, no material was found and the reopening of the assessment is not valid in law. It is pertinent to mention here that it was admitted on behalf of the assessee in the statements recorded under Section 131 of the Act, that the unit at Tumkur was an old unit and the claim of deduction under Section 80IA of the Act was not correct and the assessee itself had withdrawn the claim under Section 80IA of the Act for the Assessment Year 200102. In the proceedings under Section 148 of the Act also, the assessee had filed the return stating that the return filed on 23.02.2004 should be treated as response to the notice under Section 148 of the Act and the assessee had filed revised return withdrawing the claim under Section 80IA of the Act in respect of the Assessment Year 1998-99.
For the aforementioned reasons, the Tribunal erred in holding that the reopening of the assessment under Section 147 of the Act was beyond 4 years and was barred by limitation.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Mr. K. V. Aravind, learned counsel for the revenue.
2. This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment Year 1998-99. The appeal was admitted by a Bench of this Court vide order dated 08.11.2011 on the following substantial questions of law:
1. Whether the Appellate Authorities were correct in holding that the reopening of assessment u/s.147 of the Act was beyond 4 years and barred by limitation as per the proviso, as the Assessing Officer had merely changed his opinion?
2. Whether the Appellate Authorities were correct in not taking into consideration the material detected in the course of survey dated 09-03-2004 (during AY 2001-02) that the Tumkur unit manufacturing electrical cables had commenced 20 years earlier and it was not a new unit as per section 80IA of the Act, which was confirmed by Mr. Subramanyam, Mr. Venkateshwara Rao in the statement recorded u/s. 131 of the Act and the withdrawal of claim u/s.80IA of the Act by the assessee and consequently recorded a perverse finding, which would have shown that proviso to section 147 of the Act was not applicable?
3. Whether the assessee is entitled to claim deduction u/s.80IA of the Act, in respect of old unit situated at Tumkur, manufacturing electrical cables, which claim was not considered by taking into account the entire evidence recorded by the Assessing Officer?
3. Facts giving rise to the filing of this appeal briefly stated are that the assessee is a Company carrying on the business of manufacture and supplying ACSR conductors for transmission / distribution of power lines. The assessee filed the return of income for the Assessment Year 1998-99 claiming deduction under Section 80IA of the Act. The Assessing Officer, by an order dated 16.03.2001, determined the assessee’s income at `1,39,66,050/-. The Assessing Officer, while computing the assessment for the Assessment Year 2001-02, conducted a survey under Section 133A of the Act at Tumkur unit of the assessee. It was found during the course of survey that the aforesaid unit had commenced production way back in the year 1996 and the claim for deduction under Section 80IA of the Act that the unit at Tumkur was a new unit during the current Assessment Year, is incorrect. Thereupon, on 09.03.2004, the statement of one Subramanyam was recorded under Section 131 of the Act. An additional statement of Mr.Venkateshwara Rao was recorded on 16.03.2004. Both the aforesaid persons admitted in their statement that the unit at Tumkur was an old unit and claim under Section 80IA of the Act was incorrect. In respect of the Assessment Year 2001-02, the assessee withdrew the claim under Section 80IA of the Act and paid self assessment tax. Thereupon, a notice under Section 148A of the Act was issued by the Assessing Officer on 08.04.2004 which was based on the material detected in the survey conducted in the course of assessment for the Assessment Year 2001-02. The Tumkur unit manufacturing electrical cables was found to be more than 20 years old unit and the same was not a new industrial undertaking as claimed by the assessee. Therefore, the assessee was not held entitled for deduction under Section 80IA of the Act. On 23.06.2004, the assessee filed the return stating that the return filed on 22.03.2004 should be treated as a response to the notice issued under Section 148 of the Act. The assessee filed revised return while withdrawing the claim under Section 80IA of the Act in respect of the Assessment Year 1998-99.
4. The Assessing Officer passed an order on 27.02.2007 in which the claim of the assessee under Section 80IA of the Act was disallowed. Being aggrieved, the assessee filed an appeal. The Commissioner of Income Tax (Appeals), by an order dated 25.03.2008, inter alia, held that the notice under Section 148 of the Act was issued on 08.04.2004 that is beyond a period of 4 years after 31.03.2003 which is in contravention of Section 147 of the Act as in the original return the aforesaid item of deduction was disclosed and the same only amounted to change of opinion which is impermissible in law. The Commissioner of Income Tax (Appeals), therefore, set aside the order by which the assessment was reopened. Being aggrieved, the revenue filed an appeal. However, the Tribunal upheld the order passed by the Commissioner of Income Tax (Appeals) by an order dated 27.11.2009 inter alia, on the ground that the order of reopening of assessment is valid in law as the same is barred by limitation and the same is based on mere change of opinion and therefore, the deduction under Section 80IA of the Act cannot be disallowed. In the result, the appeal preferred by the revenue was dismissed. In the aforesaid factual background, the revenue has filed this appeal.
5. Learned counsel for the revenue submitted that the substantial question of law Nos.2 and 3 are answered in favour of the revenue by a Bench of this Court by order dated 03.06.2014 passed in ITA No.205/2008. With regard to substantial question of law No.1, it is submitted by the learned counsel for the revenue that in the original order of assessment, the eligibility of the assessee for a claim under Section 80IA of the Act was not examined. It is also argued that though the assessment was completed under Section 143(3) of the Act, in the course of survey under Section 133A of the Act, material was found that the assessee is not eligible for deduction under Section 80IA of the Act. The assessee also accepted the same and filed revised return by withdrawing the claim under Section 80IA of the Act and therefore, reopening was based on fresh material and due to failure on the part of the assessee to disclose fully and truly the material facts necessary for assessment. It is also argued that the assessee while filing the return in compliance to the notice under Section 148 of the Act, has accepted its ineligibility to claim deduction under Section 80IA of the Act which shows that the original return was not true and correct. It is also contended that the condition for invocation of reopening of the assessment was complete in the facts of the case and the finding recorded by the Tribunal that no material was found during the course of survey under Section 133A of the Act is factually incorrect and is perverse. In support of his submissions, he has placed reliance on the decision of the Supreme Court in the case of ‘COMMISSIONER OF INCOME-TAX, DELHI Vs. KELVINATOR OF INDIA LTD.’ (2010) 320 ITR 561.
6. We have considered the submissions made by the learned counsel for the parties and have perused the record. From perusal of the record, it is evident that the Assessing Officer has recorded the satisfaction while reopening the assessment in the following terms:
“During the course of survey u/s 133A of the Income-tax Act on 09.03.2004 the factory premises of M/s. Deepak Cables (India) Limited, No.N-1, Industrial Estate, Tumkur. It was found that the assessee was wrongly claiming deduction u/s 80-IA to the tune of Rs.30,13,535/-
The same was put forth before the assessee. The assessee accepted the same and has filed the revised return on 22.3.2004 withdrawing the claim of Sec.80-IA.
In view of the above, I have reason to believe that by virtue of omission on the part of the assessee to disclose fully and truly all the material facts necessary for computation of income in as much as claim of deduction u/s 80-IA of the Income-tax act, 1961.
Hence, I have reason to believe that the assessee’s income assessable to tax has escaped assessment within the meaning of sec.147”.
7. However, the aforesaid aspect of the matter has not been taken into account by the Tribunal and the Tribunal, in a cryptic and cavalier manner, has found that during the course of survey under Section 133A of the Act, no material was found and the reopening of the assessment is not valid in law. It is pertinent to mention here that it was admitted on behalf of the assessee in the statements recorded under Section 131 of the Act, that the unit at Tumkur was an old unit and the claim of deduction under Section 80IA of the Act was not correct and the assessee itself had withdrawn the claim under Section 80IA of the Act for the Assessment Year 200102. In the proceedings under Section 148 of the Act also, the assessee had filed the return stating that the return filed on 23.02.2004 should be treated as response to the notice under Section 148 of the Act and the assessee had filed revised return withdrawing the claim under Section 80IA of the Act in respect of the Assessment Year 1998-99.
8. For the aforementioned reasons, the Tribunal erred in holding that the reopening of the assessment under Section 147 of the Act was beyond 4 years and was barred by limitation.
9. In view of the preceding analysis, the 1st substantial question of law No.1 is answered in the affirmative and in favour of the revenue.
For the reasons assigned in the order dated 03.06.2014 passed in ITA No.205/2008, the substantial question of law Nos.2 and 3 framed in this appeal are answered in favour of the revenue.
In the result, the order passed by the Tribunal is hereby quashed.
Accordingly, the appeal is allowed.
