Income Tax Appellate Tribunal - Ahmedabad
Asstt. Cit vs Gujarat Flurochemicals Ltd. on 2 February, 2005
Equivalent citations: [2006]6SOT264(AHD)
ORDER
I.P. Bansal, J.M. This is an appeal filed by the revenue and is directed against the order of Commissioner (Appeals) dated 28-6-2004 for assessment year 1996-97.
2. Only one effective ground has been taken up by the revenue which reads as under:
"1. On the facts and the in the circumstances of the case and in law, the learned Commissioner (Appeals) has erred in
(i) in cancelling the reassessment proceedings under section 143(3) read with section 147 of the Act despite the fact that the Explanation 1 below the proviso to section 147 is applicable to the facts of the case of the assessee."
3. In respect of assessment year 1996-97, the assessment was framed under section 143(3) vide order dated 30-3-1999. The assessment was reopened vide notice issued on 15-4-2002 and reassessment was framed on 12-11-2003. The assessee vide letter dated 6-6-2002 requested the assessing officer to provide the reasons for reopening the assessment. It was intimated that in the original assessment while computing deduction under sections 80HH and 80-I, the assessing officer considered the income from sale of import licence and interest on bank deposits as business income. These incomes were not derived from industrial undertaking and were, therefore, ineligible for the purpose of computation of deduction under sections 80HH and 80-I, therefore, the assessment was reopened. The assessee, apart from the merits, objected the reopening on the ground that reopening is barred by limitation and the action of reopening being change of opinion could not be done under section 147. It was the main contention of the assessee that since there was no failure on the part of the assessee to disclose fully and truly all material facts, necessary for its assessment, in the original assessment, the assessment cannot validly be reopened as per proviso to section 147 as the same could be reopened only up to 31-3-2001. The assessing officer did not consider the said objection of the assessee as according to him, as per the decision of Honble Calcutta High Court in the case of Simplex Concrete Piles (India) (P) Ltd. v. Dy. CIT (2002) 255 ITR 491, subsequent decision of Honble Supreme Court in the case of CIT v. Sterling Foods (1999) 237 ITR 579, entitled the department to initiate reassessment proceedings. Therefore, the assessing officer proceeded to make reassessment and accordingly reduced the deductions. Apart from merits, the reassessment was agitated on technical ground that according to the proviso to section 147, no reassessment could be framed as the same is time-barred. The Commissioner (Appeals) has held that reassessment proceedings were not valid as they were time-barred. The relevant observations of the Commissioner (Appeals) are contained in para 2.5 to para 3 of his appellate order. For the sake of convenience relevant observations of Commissioner (Appeals) are reproduced below:
"2.5 During hearings, the record was perused and the DCIT also attended the hearing. The facts as stated by the appellant were found to be correct inasmuch as the period of four years has elapsed prior to issue of notice. Secondly, the issue of deduction under sections 80HH, 80-I and 80HHC had been discussed in the original assessment order prior to allowance of amounts claimed. The figure utilized in the reassessment and details required were part of the assessment record during the original assessment in the accounts and computation also. Therefore, it is clear that the reassessment is only due to the decision of the Supreme Court in the case of Sterling Foods which was held to supersede other decisions on the subject.
2.6 I find that the Supreme Court rendered its decision on 15-4-1999 and that the section 148 notice was issued on 15-4-2002. This means that there was sufficient time prior to 31-3-2001 when notice could have been issued without it being out of time. I am in agreement with the appellant that the courts decision may provide sufficient ground for a belief that the income has escaped assessment but such reassessment has to be made within the time-limit specified. The time-limit cannot be extended automatically merely because there is Supreme Court decision subsequent to assessment especially when there was time available for such reassessment to be made after issue of Supreme Court order and prior to four years from the end of the relevant assessment year. Therefore, it is clear that the notice has been issued beyond the time-limit allowed and no extended time can be considered in this case as the matter has clearly been disclosed in the original assessment order and the reassessment was occasioned only by a Supreme Court decision on the subject. There would appear to be no reason why the reassessment could not have been done within the prescribed time-limit on the basis of the Supreme Court decision. Section 150(1) does not extend the time-limit to cover any general Supreme Court order but applies only to specific cases where any appellate order etc. has been received. Reassessment due to Supreme Court decisions is subject to the time-limits prescribed. I would, therefore, hold there appears to be no justification for taking action under section 147 in this case. In a recent decision of the Bombay High Court in the case of Grindwell Norton Ltd. v. CIT 267 ITR 673 it was held that there was no failure to disclose material facts and hence reopening beyond the period of four years was not valid. Hence in the present case also, similar view is held and the assessment is cancelled.
3. As the order itself stands cancelled, the other grounds of appeal do not exist."
4. At the outset Shri S.N. Soparkar, the learned Counsel appearing on behalf of the assessee pleaded that the issue raised by the revenue in this appeal is squarely covered by the two following decisions of the jurisdictional High Court (1) CIT v. Bipin Vadilal (1999) 23 8 ITR 1022 (Guj).
(2) Denish Industries Ltd. v. Income Tax Officer (2004) 271 ITR 340 (Guj).
5. Referring to these decisions he contended that where there is no failure on the part of assessee to disclose fully and truly all material facts, notice cannot validly be issued under section 148 after the expiry for four years from the end of the assessment year. He contended that in the case of Bipin Vadilal (supra), an identical issue was involved where according to law declared by the Supreme Court, the department reopened the assessment and it was held that no such course was available to the department beyond the period of four years after the close of the assessment year. Thus he pleaded that learned Commissioner (Appeals) has rightly held that reassessment proceedings were not validly initiated.
6. On the other hand, the learned Departmental Representative vehemently contended that reassessment proceedings were validly initiated as the income of assessee had escaped and mere disclosure of material facts, on the part of assessee is not sufficient to hold that there was no failure on the part of assessee as discoloring or mis-projection of facts tentamounts to non-disclosure. He contended that deductions under sections 80HH, 80-I and 80HHC was claimed by the assessee on the income on which the deduction was not available, according to the decision of Honble Supreme Court. Therefore, the assessee discolored and mis-projected the facts while it made claim in respect of income which cannot be considered eligible for deduction under sections 80HH, 80-I and 80HHC. He contended that the assessee also retained the due tax, therefore, also the assessment was validly reopened,
7. We have carefully considered the rival submissions in the light of material placed before us. Certain incomes were considered eligible for deductions under sections 80HH, 80-I and 80HHC by the department in the original assessment proceedings. Later on due to declaration of law by Honble Supreme Court, those incomes were not found eligible for deduction under sections 80HH, 80-I and 80HHC, therefore, the department initiated reassessment proceedings. The dates are not in dispute. The original assessment in the present case was framed vide order under section 143(3) on 31-3-1999. The assessment year involved is 1996-97. Four years from 31-3-1997 ended on 31-3 -2001. Notice under section 148 was issued on 15-4-2002 and reassessment has been framed on 12-11-2003. Thus the notice under section 148 has been issued beyond the period prescribed in proviso to section 147. The proviso to section 147 read as under:-
"Provided that where an assessment under sub-section (3) of section 143 of this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."
From the plain reading of the proviso it is clear that where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action shall be taken under this section after expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped for such assessment year by reason of failure on the part of assessee to disclose fully and truly all material facts, necessary for his assessment for that assessment year.
8. Undisputedly the reassessment proceedings in the present case, have been initiated beyond the period prescribed in the proviso. The proviso put specific restrictions on initiation of reassessment proceedings where there is no failure on the part of assessee to disclose fully and truly all necessary facts for assessment. It has been specifically found by learned Commissioner (Appeals) that the issue of deductions under sections 80HH, 80-I and 80HHC had been discussed in the original assessment order prior to allowance of amounts claimed. The figures utilized in the reassessment and details required were part of the assessment record during the original assessment in the accounts and computation also. This finding of learned Commissioner (Appeals) has not been controverted by the department. It has not been brought to our notice that any particular fact or material was not part of the original assessment record based on which the reassessment proceedings were initiated. In absence of any such material we are unimpressed with the arguments of learned Departmental Representative that there was discoloring or mis-projection of facts. The mandate of law is clear that what is necessary for the assessee is to disclose fully and truly all material facts, and not the inference of facts or law to the assessing officer. It is only for the assessing officer to draw inferences on fact or law from the disclosure made by the assessee regarding full and true material facts for his assessment. Therefore, taking into consideration the facts of the present case, and the case law relied upon by the learned counsel of the assessee we are of the opinion that the learned Commissioner (Appeals) has rightly held that reassessment proceedings were not validly initiated as the same were not within the prescribed time as per the proviso to section 147. We are also in agreement with the findings of Commissioner (Appeals) that the decision of Honble Supreme Court in the case of Sterling Foods (supra) was rendered on 15-4-1999 and there was ample time available with the department to reopen the assessment, had the department been vigilant to do so. The time was available with the department up to 31-3-2001 and the department did not choose to initiate reassessment proceedings within the prescribed time. In such a position the department has missed the bus and its action for initiation of reassessment proceedings beyond the said time is unacceptable in law. Thus we decline to interfere in the order of Commissioner (Appeals) and dismiss the appeal filed by the department.