Case Law Details
Jayant Agro Chemicals Ltd Vs ITO and Others
As per the proviso to s 147 of the Act, the assessment can be reopened beyond four years from the end of the relevant assessment year, only if there is failure on the part of the assessee to disclose fully and truly all material facts. In the present case, the assessment is sought to be reopened beyond the period of four years and there is no material on record to suggest that there was failure on the part of the assessee to disclose fully and truly all material facts. From the reasons recorded for reopening of the assessment, it cannot even remotely be said that there is failure to disclose fully and truly all material facts. Presumption on the part of the AO that the assessee has failed to achieve 82% value addition is not even case of the licensing authority who has imposed the condition regarding value addition. The notice impugned in the petition for reopening of the assessment cannot be sustained.
High Court of Bombay
Writ Petition No. 118 of 2011
J P Devadhar and Mrs R S Dalvi, JJ
Decided on: 14 March 2011
Counsel appeared:
Mr. P J Pardiwala, Sr. Adv with Mr. M Agrawal and Ms. Mayusha Bodhe, Adv. for the appellant Mr. Suresh Kumar for the respondent
Judgment
Per: J P Devadhar, J:
1. Rule, made returnable forthwith. By consent, petition is taken up for final hearing.
2. This petition is filed to challenge the notice dated 29/3/20 10 issued under section 148 of the Income Tax Act, 1961 seeking to reopen the assessment for assessment year 2003-04 and also the order dated 10/11/2010 whereby the objections raised by the petitioner for reopening of the assessment have been rejected.
3. The petitioner is a Limited company engaged in the business of manufacture and export of castor oil and castor oil derivatives. In the assessment year in question, the petitioner had claimed deduction of Rs. 1,60,25,876/- in respect of the profits from Unit-I and Unit-II under section 10B of the Income Tax Act, 1961 (‘the Act’ for short). During the course of the assessment proceedings, the assessing officer called upon the petitioner to show cause as to why the claim under section 10B of the Act should not be disallowed. The petitioner vide letter dated 27/2/2006 gave reasons for eligibility to claim deduction under section 10B of the Act. Thereafter, by an order dated 22/3/2006 passed under section 143(3) of the Act, the assessing officer after recording detailed reasons allowed the claim under section 10B of the Act.
4. By the impugned notice dated 29/3/2010 the above assessment year for AY 2003-04 is sought to be reopened by recording following reasons :-
” On perusal of the records filed by during the assessment proceedings, it is revealed that the Ministry of Industry, Department of Industrial Development (EOU Section) under their letter dated 22-03-1993 granted permission for establishment of EOU-I with the condition that entire productions shall be exported and value addition shall be minimum of 25.14%.
The Ministry of Industry under their letter dated 27th January, 1995 granted permission for manufacturing 12 Hydroxstearic Acid and in the paragraph 3 of the said letter fixed minimum value addition of 82% as against original 25.14%.
In the Profit & Loss Account for the year ended 31st March, 2003, total expenditure of EOU-I and EOU-II is Rs.84,53,69,961/- with the minimum value addition of 82%, the sale value was required to be Rs. 153,85,73,329/-. As against targeted above sale value, total sale of EOU-I and EOU-II works out to Rs. 86,13,49.187/- and thus achieved value addition is merely 1.89%, say 2%.
Since the permission of establishment of EOU was subject to achievement minimum value, addition of 82% and achieved value addition 2% is far below of targeted value addition manufacturing unit no longer hold status or hundred percent Export Oriented Unit required for availing deduction u/s.10B of Income Tax Act, 1961.
In view of the above, excess deduction of Rs. 1,65,27,785/- u/s. 10B of the IT Act has been allowed to the assessee.
4. Now you are requested to furnish the following details for completing the assessment proceedings on the above mentioned address on or before 10th May, 2010.
(i) Details of Bank Accounts with Name & address of the Bank.
(ii) Details of Sundry Debtors and Sundry Creditors with names & addresses for the period 1- 4 -2002 to 31-4 -2003.
(iii) Please give the reason why should not deduction claimed u/s.10B of the I.T. Act of Rs. 1,65,27,785/- disallowed on the basis and facts mentioned above.
5. From the aforesaid reasons, it is clear that the assessment is sought to be reopened solely on the ground that in the assessment year in question the assessee has not achieved the value addition of 82% and has in fact achieved value addition of only 2% which is far below the targeted value addition imposed upon by the licensing authority. It is the contention of the petitioner that the value addition to the extent of 82% on the value of imports has in fact been achieved by the assessee and even the licensing authority has accepted that the petitioner has fulfilled the export obligations with the value addition as required under the licence. It is contended that the method of computing value addition adopted by the assessing officer is faulty and in any event, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts, reopening of the assessment beyond four years from end of the relevant assessment year cannot be sustained.
6. In the present case, the assessment is sought to be reopened beyond four years from the end of the relevant assessment year. From the reasons recorded for reopening of the assessment, it cannot even remotely be said that there is failure to disclose fully and truly all material facts. Presumption on the part of the assessing officer that the assessee has failed to achieve 82% value addition is not even case of the licensing authority who has imposed the condition regarding value addition.
7. As per the proviso to section 147 of the Act, the assessment can be reopened beyond four years from the end of the relevant assessment year, only if there is failure on the part of the assessee to disclose fully and truly all material facts. In the present case, the assessment is sought to be reopened beyond the period of four years and there is no material on record to suggest that there was failure on the part of the assessee to disclose fully and truly all material facts. In this view of the matter, the notice impugned in the petition for reopening of the assessment cannot be sustained.
8. Accordingly, the notice dated 29/2/2010 issued under section 148 of the Income Tax Act, 1961 as well as the order dated 10/11/2010 rejecting the objections raised by the petitioner are quashed and set aside.
9. Rule is made absolute in the above terms with no order as to costs.
