TaxTMI 
TaxTMI 
2012 (9) TMI 18
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....uting total income at Rs.5,10,02,030/-. 3. It is this assessment which the respondent Assessing Officer seeks to reopen for which the impugned notice came to be issued on 25.2.2004. Present is therefore a case where the assessment previously framed after scrutiny is reopened within a period of four years from the end of relevant assessment year. 4. At the request of the petitioner, the Assessing Officer supplied reasons recorded by him, for reopening such assessment. Such reasons read as under: "I. The scrutiny assessment U/s.143(3) was completed in this case on 22.03.2000. While scrutinizing the return of income for assessment of subsequent years, it is seen that the assessee's claims are not proper. It is seen that the assessee has submitted voluminous details along with the return of income which are not at all required to be filed along with the return of income. What is required is the Tax Audit Report, Profit and Loss Account and Balance Sheet, Other Statutory Reports pertaining to deductions u/s.80HHC and 80IA, Computation of income, Proof of payment of Advance Tax and TDS Certificates. The various details submitted by the assessee are very confusing and complicate ....
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.... automatically reduce the profits of units entitled for 80IA deduction and consequently the deduction u/s.80IA claimed by the assessee will be reduced. III. In the assessment order passed, the A.O. had not added the following amounts. a) The assessee has shown export of Rs.80.09 lacs out of the goods produced from the Silvasa Unit. This amount has been considered for working out the deduction u/s.80HHC. Again, deduction u/s.80IA has been claimed on this amount. This means that more than 100% deduction has been claimed on the export of Rs.69.09 lacs from the Silvasa Unit, which is not correct as per the provisions of section 80AB. b) The assessee has claimed that it has two businesses viz. Pharmaceutical and finance. The assessee has set off interest payment against the gross interest receipt. This netting off is not proper. The details of interest paid clearly indicates that borrowed funds for which interest has been paid were utilised for the purpose of pharmaceutical business. Therefore, interest paid has to be considered against the receipt from pharmaceutical business and gross interest has to be taxed under the head "income from other sources". Please refer ACIT vs. S....
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....her rate of interest under section 80IA(10) of the Act or under any other provision. Any attempt on his part now to reopen the assessment would only amount to change of opinion. 7. We have perused the documents on record. As noted, the reasons recorded by the Assessing Officer for reopening the assessment contained several grounds. There were as many as 4 different grounds on which the Assessing Officer desired to reopen the assessment previously framed after scrutiny. However, while disposing of the objections of the petitioner with respect to such grounds, the Assessing Officer, in his order specifically rejected only one of them, viz. the action on the part of the assessee to have charged 24% interest on the overdue payments from its sister concern. Quite apart from this significant development, we had, in the case of this very assessee, an occasion to examine the remaining three grounds recorded by the Assessing Officer in his reasons. We had found that none of the grounds were valid. In our order dated 31st July 2012 passed in Special Civil Application No.12468 of 2004, we have given detailed reasons for coming to such conclusion. It is not necessary, therefore, to go into ....
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....ncome earned by the assessee was offered to tax. 26. Such objections of the petitioner were disposed of by the Assessing Officer in following manner : "2.3 Regarding the claim of higher deduction u/s.80IA by recovering higher interest from M/s.Aditya Medisales Ltd., it is stated that all the details are on record and there is no non-disclosure on this account. However, this is not correct. M/s.Aditya Medisales Ltd., a group concern, had paid interest @24% on the overdue bills, which is much more than the prevailing market rate of interest in in this line of business which varies from 15% to 18%. By adopting this modus operandi, the taxable profits of M/s.Aditya Medisales Ltd. on the one hand has been reduced and the profits of 'Silvasa Unit' of M/s.Sun Pharmaceuticals Industries Ltd. has been inflated which is exempt u/s.80-IA. This is a clear cut violation of section 80-IA(10) of the Act. The fact that M/s.Aditya Medisales Ltd. had paid interest @24% on over due bills is not available from the record of M/s.Sun Pharmaceuticals Industries Ltd. The interest component has been merged in the figure of sales of the Silvasa Units making it difficult for the A.O. to discover this m....
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....m such dealing. In exercise of such powers, therefore, when the Assessing Officer finds that there is exaggeration of income by an assessee, which is eligible for deduction 80IA of the Act dealing with closely associated entity, he would make necessary adjustments in this regard. 27. Thus, it cannot be said that belief of the Assessing Officer that income chargeable to tax had escaped assessment is baseless. As noted, at this stage, it is not necessary for this Court to ascertain whether such addition would ultimately succeed or not. Sufficiency of the reason on which the Assessing Officer forms such belief is also not for the Court to decide. 28. In the case of Sri Krishna Pvt. Ltd. v. I.T.O., 221 ITR 538, the Apex Court reiterated the ratio laid down in the case of Phool Chand Bajrang Lal and observed that inquiry at the stage of finding out whether the reassessment notice is valid is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escapement of income is established. Since the belief is that the Income Tax Officer, the sufficiency of reasons for forming the belief is not for the court to ju....
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....e person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [1999 (236) ITR 34 (SC)]." 32. In the case of Phool Chand Bajrang Lal (supra), the Apex Court observed as under : "From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under S. 147(a) read with S. 148 of the Income-tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts co....
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....disales was a sister concern of the petitioner Company and that such interest was charged at the rate of 24% per annum, were not discernible from the record at all. 34. Under the circumstances, from the material on record, it was not possible for the Assessing Officer to make adjustment under section 80IA(10) even if it was required. It may be that the petitioner did give the total figure of interest received. However, from such figures, it was not possible for the Assessing Officer to ascertain these vital facts. Section 147 of the Act, explanation 1 provides that "production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of foregoing proviso". In the present case, even from the account books and other evidence which the assessee had produced, even after due diligence, it was not possible for the Assessing Officer to discover these three vital facts. 35. In the case of Sri Krishna Pvt. Ltd. (supra), the Apex Court observed that obligation of the assessee is to disclose all material facts necessary fo....