Gujarat High Court
Commissioner Of Income Tax vs Torrent Pharmaceuticals ... on 4 August, 2016
Author: Ks Jhaveri
Bench: Ks Jhaveri, G.R.Udhwani
O/TAXAP/976/2007 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 976 of 2007
With
TAX APPEAL NO. 940 of 2007
With
TAX APPEAL NO. 1870 of 2008
With
TAX APPEAL NO. 1693 of 2009
TO
TAX APPEAL NO. 1694 of 2009
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE G.R.UDHWANI
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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 or any order made thereunder ?
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COMMISSIONER OF INCOME TAX....Appellant(s)
Versus
TORRENT PHARMACEUTICALS LTD.....Opponent(s)
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Appearance:
MR NITIN K MEHTA, ADVOCATE for the Appellant(s) No. 1
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MR SN SOPARKAR, SENIOR ADVOCATE with MRS SWATI SOPARKAR,
ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE G.R.UDHWANI
Date : 04/08/2016
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE KS JHAVERI)
1. As the questions referred to this Court in all these appeals are common, at the request of learned advocates, the appeals are heard together and are disposed of by this common judgement.
2. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as 'the Tribunal'), the revenue has preferred the present Tax Appeals assailing the following orders:
Tax Appeal Date of ITA No. Assessment
No. Tribunal's Year
order
976 of 2007 05/01/07 3681/Ahd/2003 1997-98
940 of 2007 05/01/07 3680/Ahd/2003 1996-97
1870 of 2008 26/06/08 3517/Ahd/2003 1996-97
1693 of 2009 26/06/08 1357/Ahd/2006 1996-97
1694 of 2009 26/06/08 1519/Ahd/2006 1996-97
3. The following questions of law were raised for
consideration by this Court:
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TAX APPEAL NO. 976 OF 2007
"(A)Whether the Appellate Tribunal was justified in holding that the Assessing Officer had no jurisdiction to intimate proceedings u/s.147 of the Act, when no appeal was preferred by the assessee against the CIT(A)'s order upholding the jurisdiction of the Assessing Officer to initiate reopening proceedings?
(B)Whether the Appellate Tribunal was right in law and on facts in confirming the order passed by the CIT(A) directing the Assessing Officer to allow deduction u/s. 80HH on income not derived from industrial undertaking?"
TAX APPEAL NO. 940 OF 2007 "(A)Whether the Appellate Tribunal was justified in holding that the Assessing Officer had no jurisdiction to initiate proceedings u/s.147 of the Act, when no appeal was preferred by the assessee against the CIT(A)'s order upholding the jurisdiction of the Assessing Officer to initiate reopening proceedings?
(B)Whether the Appellate Tribunal was right in law and on facts in confirming the order passed by the CIT(A) directing the Assessing Officer to allow deduction u/s.80HH on income not derived from industrial undertaking?"
TAX APPEAL NO. 1870 OF 2008 "Whether the Appellate Tribunal is right in law and on Page 3 of 10 HC-NIC Page 3 of 10 Created On Thu Aug 11 00:00:24 IST 2016 O/TAXAP/976/2007 JUDGMENT facts in allowing the appeal of the assessee on the ground that, in the revenue's appeal it had held the re- assessment to be bad in law and thereby deleting the addition made?"
TAX APPEAL NO. 1693 OF 2009 "Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in cancelling the penalty levied u/s 271(1)(c) of the I.T. Act?"
TAX APPEAL NO. 1694 OF 2009 "Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in cancelling the penalty levied u/s 271(1)(c) of the I.T. Act?"
4. Tax Appeal No. 976 of 2007 is being taken as lead matter in these set of appeals and therefore we advert to the facts of the said case. The original assessment was completed in this case u/s 143(3) of the Act determining the total income at Rs. 21,58,02,400/- as against the return income of Rs. 2,41,09,803/-. The MAT income declared by the assessee was Rs. 10,21,36,660/-. Thereafter, the assessment was reopened u/s 147 of the Act on the basis of information received from the DDIT(Inv.) regarding bogus purchases made from Shri Nikunj Shah and Jitendra Shah. The reopened assessment was completed on 31.03.2003 determining the income as per order u/s 154 dated 28.10.2002. It is the case of the revenue that in the reassessment order no addition was made in respect of the bogus purchases from the parties mentioned above because the assessee himself offered Rs. 20,00,000/- in Page 4 of 10 HC-NIC Page 4 of 10 Created On Thu Aug 11 00:00:24 IST 2016 O/TAXAP/976/2007 JUDGMENT the revised return filed on 26.12.1997. On appeal, the CIT(A) set aside the reassessment order. On appeal by the revenue before the Tribunal, the Tribunal rejected the appeal and confirmed the order passed by CIT(A).
4.1 The main grounds of appeal in these appeals are with regard to the jurisdiction of the Assessing Officer to initiate reopening proceedings u/s 147 of the Income Tax Act, 1961 (for short 'the Act') and allowing deduction u/s 80HH of the Act on income not derived from industrial undertaking.
5. Mr. Nitin Mehta, learned advocate appearing for the revenue submitted that the reassessment was opened on the basis of information received from the DDIT(Inv) regarding bogus purchase made by the assessee company from Shri Nikunj Shah and Shri Jitendra Shah. He submitted that the reasons recorded by the Assessing Officer have been reproduced at para 28 of the Tribunal's order and that from the reasons recorded, it is evident that the assessment was reopened on the basis of definite information. He submitted that the Tribunal, however, concluded that since no addition has been made in the income as a result of reassessment, the reopening is illegal. He submitted that the Tribunal has grossly erred in concluding that initiation of proceedings was invalid merely because no addition was finally made in the income on the reasons on which the assessment was reopened.
5.1 Drawing attention to the provisions of Section 147 of the Act, Mr. Mehta submitted that for initiation of proceedings u/s 147 of the Act, at the initiation stage, what is required is Page 5 of 10 HC-NIC Page 5 of 10 Created On Thu Aug 11 00:00:24 IST 2016 O/TAXAP/976/2007 JUDGMENT 'reason to believe' but not the establishment of factum of escapement of tax. He submitted that at the initiation stage, the final outcome of the proceedings is not relevant. He submitted that the scope of the Tribunal was limited in such cases but the Tribunal erred in travelling beyond the scope of its jurisdiction.
5.2 Mr. Mehta submitted that even the CIT(A) as well as the Tribunal erred in allowing the assessee's claim of deduction u/s 80HH of the Act. He submitted that the Tribunal ought to have seen that the Assessing Officer had proceeded on the footing that the revenue had not accepted the decision of the CIT(A) for earlier years.
6. Mr. S.N. Soparkar, learned Senior counsel appearing with Mr. B.S. Soparkar, learned advocate for the assessee submitted that so far as Section 80HH is concerned, the deduction is rightly allowed after bifurcating its activity into two components; namely trading activities and manufacturing activities on the business of total turnover as shown in the books of account. He has relied upon decision of the Apex Court in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. vs. Commissioner of Income Tax reported in [2006] 282 ITR 321 and a decision of this Court rendered in Special Civil Application No. 3352 of 2001 on 08.03.2011. He has also relied upon another decision of this Court in the case of Commissioner of Income Tax- II vs. Mohmed Juned Dadani reported in [2014] 355 ITR 172 (Gujarat) and submitted that the assessee's claim of deduction u/s 80HH of the Act having been allowed by the CIT(A) as per order dated 13.12.2001 and the same having become final because of Page 6 of 10 HC-NIC Page 6 of 10 Created On Thu Aug 11 00:00:24 IST 2016 O/TAXAP/976/2007 JUDGMENT Revenue's failure to file the appeal against that order the Assessing Officer had no jurisdiction to deal with the issue, once again during proceedings u/s 147 of the Act.
7. We have gone through the order passed by the Tribunal and considered the arguments advanced by both the sides. The Tribunal in para 32.1 of the impugned order has observed as under:
"32.1Further, we, after having gone through the facts and circumstances of the case, are of the opinion that so far as transactions of so-called bogus purchases entered into by the assessee with S/Shri Nikunj Shah and Jitendra Shah are concerned, the Revenue has alleged the escapement of an income of Rs. 1 lac, but there being no addition on this account, the only conclusion which can be arrived at is that proceedings u/s 147 of the Act were initiated only for the sake of reopening of the completed assessment, more so because the assessee had already disclosed an income of Rs. 20 lacs from such transactions in the revised return before completion of regular assessment which stood accepted (while completing the re-assessment). In view of the facts and circumstances of the case, we are of the opinion that though there was no escapement of any income but, even if it is assumed for the sake of consideration that there was any difference in income disclosed by the assessee and as per Assessing Officer on this account, the Assessing Officer should have taxed the same in the regular assessment because revised return was valid return and had been taken note of or could rectify the figure of income. Recourse to section 147 was not the legal course."
7.1 This Court in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. (supra), this Court has observed as under:
Page 7 of 10HC-NIC Page 7 of 10 Created On Thu Aug 11 00:00:24 IST 2016 O/TAXAP/976/2007 JUDGMENT "24. Applying the aforesaid principles to the facts of the case, it is apparent that the assessee's contention that it had no malafide intention or mens rea has not been found to be untrue by any of the authorities. The finding by the Tribunal in this context that the assessee had made separate claim in the profit and loss account for deduction of gratuity on the basis of actual payment to non-suit the assessee as regards the explanation offered is based on a misconception of facts and law. It was never the assessee's case that, out of the amount received from the Insurance Company, such amount was actually paid out and claimed as a deduction. In fact, this becomes clear when one reads the assessment order and the penalty order wherein the assessing officer has stated that the assessee cannot claim the sum of Rs.68,332/- as a deduction on due basis. The assessee has never claimed any deduction qua this amount. The deduction claimed is qua a separate amount, and that too, on actual payment basis. There is no claim for deduction on due basis. The entire premise, therefore, is incorrect.
25. Once there is absence of mens rea, mere omission from the return of income of an item of receipt neither amounts to concealment, nor deliberate furnishing of inaccurate particulars of income, as laid down by the Apex Court, unless and until there is some evidence or some circumstances to show that the omission was attributable to an intention or desire on part of the assessee to conceal the income so as to avoid imposition of tax thereon. In the present case, the assessee is a cooperative society managed through a governing board and as stated by the society, there is no personal interest involved. The omission has occurred not with an intention but due to oversight. As held by this Court, absence of proof acceptable to the department cannot be equated with fraud or willful default. The circumstances must show that there was a conscious act of concealment or furnishing of inaccurate particulars on part of the assessee. There is nothing on record to show that any particular individual has any Page 8 of 10 HC-NIC Page 8 of 10 Created On Thu Aug 11 00:00:24 IST 2016 O/TAXAP/976/2007 JUDGMENT personal interest in committing the act of omission of showing the amount received from Insurance Company as income of the assessee, a cooperative society. In fact, the entries in the books of account reflect that the assessee had credited the said sum to the fund account directly and the said entry appeared in the balance sheet without going through the profit and loss account. "
7.2 Even in the case of Mohmed Juned Dadani(supra), this Court has held that when on ground on which reopening of assessment was based no addition was made by Assessing Officer in order of reassessment, he could not make additions on some other grounds which did not form part of reasons recorded by him.
8. On the totality of the facts and circumstances of the case, we are of the view that the Tribunal as well as CIT(A) are justified in passing the impugned order. The proceedings u/s 147 of the Act were initiated solely on the ground that Shri Nikunj Shah and Shri Jitendra Shah had issued bogus bills to various parties including the assessee and escaped income was stated to be only Rs. 1 lakh. Considering the assessee's revised return which was taken into account while completing the regular assessment as well as the reassessment, it is borne out that the assessee itself had disclosed income of Rs. 20 lakhs from the transactions carried on with said Shri Nikunj Shah and Shri Jitendra Shah in revised return which stood taxed and the Assessing Officer had not made any addition in the reassessment on this account. We are of the view that the Tribunal has rightly held that the Assessing Officer has travelled beyond the scope of Section 147 proceedings. The view taken by the Tribunal is just and proper and does not call for any interference by this Court.
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Even otherwise, the fact that no appeal has been preferred by the assessee against the order of CIT(A) nor any cross objection has been filed in one of the appeals will be covered by the decision of this Court in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. (supra). In that view of the matter, we are of the view that the Tribunal is justified in holding that the Assessing Officer had no jurisdiction to initiate proceedings against the CIT(A)'s order upholding the jurisdiction of the Assessing Officer to initiate reopening proceedings. Accordingly, the said question is answered in favour of assessee. The second issue with regard to deduction u/s 80HH on income not derived from industrial undertaking is not being decided in view of the fact that we have already answered the question with regard to section 147 proceedings in favour of the assessee. So far as questions with regard to penalty proceedings are concerned, we are of the opinion that the same shall not survive in view of the fact that the substantial question has already been decided in favour of the assessee.
9. Accordingly, present appeals are dismissed. The impugned order passed by the Tribunal is confirmed. No costs.
(K.S.JHAVERI, J.) (G.R.UDHWANI, J.) divya Page 10 of 10 HC-NIC Page 10 of 10 Created On Thu Aug 11 00:00:24 IST 2016