TaxTMI 
TaxTMI 
2014 (10) TMI 208
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....-objections, the assessee has challenged the reopening of the assessment by raising the following common grounds in all three assessment years: 1. The learned Commissioner of Income Tax (Appeals) has erred in holding that the reopening of assessment is valid in as much as the reassessment proceedings are bad in law since: (a) The Notice under section 148 has not stated in what manner the assessee has failed to disclose fully and truly all material facts for the purpose of assessment since the notice is issued after completion of four years from 143(3) assessment. (b) The Notice under section 148 is issued, it appears, on the basis of audit query. There is no tangible material to come to a conclusion that the income has escaped assessment. 4. The brief facts of the case are that the assessee filed return of income claiming deduction u/s. 80IB(10) of Rs. 38,07,493/- in Assessment Year 2003-04, Rs. 37,13,631/- in Assessment Year 2004-05 and Rs. 44,22,737/- in Assessment Year 2005-06. The original assessment was completed for Assessment Year 2003-04 u/s. 143(3) read with section 147 on 30.01.2006, for Assessment Year 2004-05 u/s. 143(3) on 18.12.2006 and for Assessment Year....
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....sp; Rs. 38,07,493 A.Y. 2004-05 Rs. 37,13,631 A.Y. 2005-06 Rs. 44,22,731 Even otherwise the assessee is a SSIU and therefore the deduction under Sec. 80IB was rightly allowed. 2. Reopening is bad in law - change of opinion: 2.1 The appellant company commenced the production in pharmaceutical drugs on 15-09-1997 i.e. after 31-03-1995. The assessee is entitled to deduction under Sec. 80IB, if it is SSIU as provided in Section 80IB(3)(ii). The deduction under Section 80IB was granted from A.Y. 1998-1999 onwards. The assessment was framed under Sec. 143(1) for A.Y. 1999-2000. Thereafter, it was reopened for the purpose of deduction under Sec.8OHHC and the order was passed on 30-09-2005 under Sec. 80IB was accepted. Similarly, the deduction was also granted for A.Y. 2001-2002 by Order dated 15-03-2004 passed under Sec.l43(3)(ii) [Please refer Page-5 of the Asst. Order]. 2.2 It may please be noted that the AO issued Notice under Sec.148 dated 24-02-2009 for A.Y. 2003-2004 and Notice under Sec. 148 dated 17-03-2009 issued for A.Y. 2004-2005 and 2005-2006. The satisfaction that the income h....
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.... The attention is drawn to the reasons recorded for reopening the assessment. It is stated in the reasons recorded that the investment limit for SSI unit as per Notification No. SO 857(E) dated 10th December, 1997 is Rs. 1.00 Crore and that the investment in Plant & Machinery as on 31-03-2002 is Rs. 4.73 Crore and therefore the assessee is not SSI Unit and thereby the income has escaped assessment. The learned AO failed to appreciate 1he Notification No. SO 857(E) dated 10th December, 1997. In fact, the limit as per the said Notification is Rs. 3.00 Crore which is to be calculated after excluding the items of machinery referred to in Note No.2 of the said notification. If the calculation is made then the assessee is well within the investment limit, therefore the reopening is bad in law. In the present case, there is no tangible material to show that the assessee is not a SSI unit. The absolute figures stated in the balance sheet are of no relevance. The calculation has to be done as per the Notification No. SO 857(E) dated 10th December, 1997. Even if there is some material it is nothing but a change of opinion therefore, the reassessment is bad in law. 3. Merits: 3.1 The as....
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....d having granted the final eligibility certificate, the commercial tax department could not go behind it. The SC while deciding this case has followed the ratio laid down by the SC course in case of Apollo Tyres Ltd. 255 ITR 273. Without prejudice to whatever stated above, the investment limit of Plant & Machinery is fixed by Ministry of Commerce and Industries from time to time for treating the industrial undertaking as Small Scale Industrial Undertaking is given in the table below- Sr. No. Notification No. Reference to page of assessment order Investment limit Exclusion 1. 857(E) dated 7 3 crores As per note No. 2 (page 8 of the assessment order) 2. 1288(E) dated 12 Reduce to Rs. 1 crore Do. 3. 4(I)-2000-SSI dated 14-3-2000 6/12 Limit of 3 crores will continue if the unit has increased the limit up to Rs. 3 crores as per Notification No 857(E), dated 10-12-1997 Do. 4. S. O. 655(E) dated 5-6-2003 12 5 crores Do. 5. 14-1-2005 (clarification) 12 5 crores Do. The copies of the Notifications referred to in Table are enclosed. 3.5 It may now please be seen from the notifications....
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....tatus is surrendered) 3.8 The investment: in plant & machinery as per the methodology of calculation given in notification dated 10th December, 1997 for the financial year ended on 31st March, 2003, 31st March, 2004 and 31st March, 2005 is given below. The status of SSI and the investment thereof needs to be seen as on the last day of the previous year as per the definition of SSI u/s. 80IB(14)(g). It may please be seen that the investment in plant and machinery as on 31st March, 2003 was Rs. 272.3 lacs, as on 31st March, 2004 was Rs. 282.82 lacs and it was Rs. 307.08 lacs as on 31st March, 2005. 3.9 It may also be noted as per Note 2 of the Notification dated 10th December, 1997 the cost of generation set, transformers, cost involved in installations of cable, wirings, electric control panel, circuit breakers needs to be excluded while calculating the value of investment in plant and machinery for being regarded as SSI undertaking. Therefore, the cost of electric installation as per the balance sheet which includes all this items has not been considered for the purpose of calculating the value of investment in plant and machinery. 3.10 From the above, it may be seen th....
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....dition was made during A.Y. 2003-2004 to 2005-2006 and after exclusion the investment is below the limit specified and stated in Para 3.5 above. In other words, if the assessee is regarded as SSIU in earlier years as accepted by the Department, the same status should be continued for A.Y. 2003-2004 to 2005-2006 since the investment in plant & 5. Our Company is a SSI Unit all three relevant assessment years. The Company has made major expansion at Trimul Estate, village Khatraj, Vadsar Road, Tal. Kalol, Dist. Gandhinagar in the Financial Year 1997-1998. The company has provided all the Fixed Assets, details of addition during the assessment proceeding 1998-1999. The company is granted depreciation claim after verification of all assets submitted by the company. Therefore, all the details of Plant & Machinery are already on records. 5.1 It may please be noted that in the year 2000, there was a heavy rain of 20 inches in a day in Ahmedabad city and our all major records of the company are remain in water for 3-4 days, majority of records are completely destroyed and damaged in heavy rains. This facts, we have already intimated to the Income Tax Department vide letter dated 21st ....
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.... proportionally allocated into all assets account in the proportion of value of assets. The share of allocation of preoperative expenses is Rs. 11,46,360. This amount is already debited to our plant & machinery account. A copy of plant machinery account is enclosed. 5.6 D.G. SET OF 250 KVA Of Rs. 9,32,000: The company has purchased Diesel Generating Set of 250 KVA at total cost of Rs. 9,32,000 for water treatment as per the requirement of Gujarat Pollution Control Board. The copy of Effluent Treatment Plant account in the year 1999-2000 is enclosed. 5.7 Effluent Treatment Plant (ETP) of Rs. 3,17,000: The company has set up an Effluent Treatment Plant at a total cost of Rs. 3,17,000 for water treatment as per the requirement of Gujarat Pollution Control Board. The copy of Effluent Treatment Plant account in the year 1999-2000 is enclosed. 5.8 Erection & Commissioning of Rs. 34,70,000: The company has made huge investment in expansion unit. The company has installed so many types of machines for tablets, capsules, ointment, syrup, injectable etc. having in various type, size & model etc. The total erection &. commissioning expenses are Rs. 34,70,000 as per C.A. Cert....
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....ons each year as per the calculation in Para-4 the investment limit is below the limit prescribed by the notifications. 6.7 It is stated by the AO that the limit of Rs. 3.00 Crore is reduced to Rs. 1.00 Crore. This is not correct. The AO failed to appreciate the clarification No. 4(I)-2QOO-SSI dated 14/03/2000. It is clarified that the Unit which has already acted upon, the Notification No. SO857(E) dated 10th December, 1997 will continue to enjoy the limit of Rs. 3.00 Crore. 6.8 It is already stated to the AO which is reproduced on Page No.15 of Asst. Order to the effect that the records have been destroyed due to rain in July 2000 and that the intimation to that effect was also given to CCIT by letter dated 21-07-2000 and therefore the Invoices have been destroyed. However, the copy of accounts and other supporting evidences whatever available have been furnished. The fact that the claim of depreciation is accepted supports the claim of the assessee. 6.9 The assessee furnished the CA Certificate dated 28-01- 2003. It is obvious that CA issued the certificate after verification of relevant records. 6.10 The assessee has already furnished the copy of Notification dated ....
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....er Notification No. S.O. 857(E) dated 10 December 1997 the limit of investment in plant & machinery for treating the undertaking as SSIU is Rs. 3.00 Crore. The Note No. 2(b) of the said notification also provides the mode of calculating the value of plant & machinery. The said note provides exclusion from the plant & machinery while calculating the limit for investment. In other words, certain machinery such as jigs, dies, moulds, generator, electric fitting, pre-operative expenses etc. are to be excluded. 9. The limit of Rs. 3.00 Crore was reduced to Rs. 1.00 Crore by Notification No. S.O. 1288(E) dated 24th December 1999. However, the clarification is issued by Notification No. 4(I)/2000-SSI B dated 14th March 2000 to the effect that "the units which had switched to the SSI status based on the order dated 10th December 1997 would continue to remain as SSI units inspite of the order dated 24th December 1999." 10. It is seen that the assessee has already switched over to the SSI status based on order dated 10th December 1997 and therefore the limit of Rs. 1.00 Crore as per Order No. S.O. 1288(E) dated 24th December 1999 is not applicable to The appellant has brought to my not....
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....& machinery. Therefore, in my opinion the exclusions made is in order. 12.2 Accordingly, it is seen that the appellant is well within the limits fixed by the government and therefore the appellant remained as an SSIU for all the 3 years. I have also considered the reasons given by the AO in Para No. 8 of the Asst. Order and reply to it given in the written submission in Para No. 6 giving explanation for each item. It thus, clarifies that the appellant is entitled to deduction under Sec. 80IB as SSIU. 13. Further, the AR also submitted that the appellant is registered as SSIU as per certificate dated 25th July 2002 issued by Functional Manager, District Industries Centre, Gandhinagar in which the value of machinery mentioned is Rs. 2,55,81,000. The AR submitted that when another central government authority certifies that the appellant's undertaking is a SSIU then it is not proper for the AO to make further inquiry about the limit of plant & machinery and to hold that the assessee is not a SSIU. For this proposition the assessee has placed reliance on the following cases. Apollo Tyres Ltd. V/s. CIT 255 ITR 273 (SC) Vadilal Chemicals Ltd. V/s. State of Andhra Pradesh and....
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....Income Tax (Appeals). 9. On the other hand, the Departmental Representative supported the order of the Assessing Officer. 10. We have heard the rival submissions and perused the orders of lower authorities and material available on record. In the instant case, the assessee claimed deduction u/s. 80IB(10) of the Act amounting 38,07,493/- in Assessment Year 2003-04, Rs. 37,13,631/- in Assessment Year 2004-05 and Rs. 44,22,737/- in Assessment Year 2005-06 which was allowed by the Assessing Officer in the assessment orders passed u/s. 143(3) of the Act. Thereafter, the Assessing Officer reopened the assessment for all the three years under consideration by issuing notice u/s. 148 of the Act on the ground that as per section 11 of the Industrial (Development & Regulation) Act, 1951 as amended vide SO 857(E) dated 10.12.1999, Small Scale Undertaking is an industrial undertaking in which investment in fixed assets in plant and machinery does not exceed Rs. 1 crore. As per Schedule 5 of the Balance Sheet, the Auditors have certified that for Assessment Years 2003-04, 2004-05 and 2005-06, the total value of plant and machinery was Rs. 4,73,81,571/-, Rs. 4,80,33,282/- and Rs. 4,97,88,7....
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....the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment." 13. The Hon'ble Delhi High Court, after taking into consideration the decision of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Limited (2010) 320 ITR 561 (SC), decisions of the Hon'ble Delhi High Court in the case of CIT Vs. Usha International Ltd. (2012) 348 ITR 485 (FB)(Del.) and in the case of CIT Vs. Orient Craft Ltd. (2013) 354 ITR 536 (Del.), has held in its recent decision dated 14.08.2014 in the case of Madhur Khosla Vs. ACIT in Writ Petition(C) 1320/2014, C.M. NO.2744/2014 & 2745/2014 as under: "11. The foundation of the AO's jurisdiction and the raison d'etre of a reassessment notice are the "reasons to believe". Now this should have a relation or a link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority ....