TaxTMI 
TaxTMI 
TaxTMI 
2014 (10) TMI 208
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....opening 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 2005-06 u/s. 143(3) on 28.03.2007 wherein the claim fo....
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.... 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 has escaped assessment was reached by the AO in the month of February-March,2009....
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....tated 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 assessee is a pharmaceutical drug manufacturing company. The company started manufacturing ....
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....t. 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 and table given herein above that the undertaking which is registered as SSI u/s. 11B of the IDR Act as on the last day the previous year shall be entitled for deduction ....
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....1st 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 that the investment value in plant and machinery for being regarded as SSI undertaking in drugs and pharmaceuticals sector are within the limit prescribed under the above referred notifications....
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....mpany 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 July, 2000. A copy of aforesaid intimation letter is enclosed. The photographs of logging of water are enclosed. The original invoice was already destroyed and therefore it could not be produced during reassessment proceedings. However, the same were produced during A.Y. 1998-1999 assessment proceedings. The fact that the depreciation claim was allowed pro....
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....eatment 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. Certificate. 5.9 Freight & Packing Charges of Rs. 11,51,000: At the same way, since company have purchased many machines having different size weight packing and also purchase from local as well as from out of Gujarat state as well as import of machinery. The company has incurred total freight & packing charges of Rs. 11,51,000 as per C.A. Certificate. 5.10 Mould, Jig, Dies of Rs. 26,00,000: The company is manufacturing unit and manufactures various segment products like Tablets. Capsules, Ointment, Syrup an....
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.... 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 14-01-2005. The said notification is applicable to the drugs and pharmaceuticals. The assessee manufactures the drugs and pharmaceuticals. The A 0 should have pointed out how the said notification is not applicable. 6.11 The assessee has demonstrated that he is eligible for deduction under Sec.8OIB by submissions with supporting evidences and notifications reproduced in the assessment order. Therefore, it is not correct to state that the assessee has not demonstrated the eligibility of claim under Sec. 80IB. 6 .12 The Investment Limit is....
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....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 notice the certificate dated 25th July 2002 issued by Functional Manager, District Industries Centre, Gandhinagar in which the value of plant & machinery is Rs. 2,55,81,000. 11. The another Notification No. S.O. 655(E) dated 5th June 2003 was issued in which it is stated that the category of items of drugs and pharmaceutical sector is covered by 5SIU. Another notification No. I(4)/2004-SSI Board & Policy dated 14th January 2005 was issued whereby the limit of investment in plant & machinery is undertaking, manufacturing drugs and pharmaceuticals. 12. It is seen ....
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....e 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 Others 142 STC 76 (SC) Malayala AAamorama Co. Ltd. V/s. CIT 300 ITR 251 (SC) 13.1 The SC in the case of Vadilal Chemicals Ltd. V/s. State of Aridhra Pradesh and Others 142 STC 76 (SC) followed the SC decision in the case of Apollo Tyres Ltd. V/S. CIT 255 ITR 273 and observed on Para No. 22 on Page No. 86-87 of AIR as under: "22. Furthermore, under the incentive scheme in question, there was only one method of verifying the eligibility for the various incentives granted including sales tax exemption. The procedure was for the matter to be scrutinized and District Level Committee and the certification by the Department of Industries and Commerce by issuing an eligibility certificate. There was no oth....
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....er 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. 4,97,88,775/- respectively which exceeds the limit fixed for plant and machinery and the assessee ceased to be a SSI unit and was not eligible for deduction u/s. 80IB of the Act. The assessee has claimed and was allowed deduction u/s. 80IB for the years under consideration. Therefore, the income chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. 11. A perusal of the reasons recorded shows that the original assessment in the instant case 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 2005-06 u/s. 143(3) on 28.03.2007. From a perusal of the above recordi....
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....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 to legitimately re-open the completed assessment. In absence of this objective "trigger", the AO does not possess jurisdiction to reopen the assessment. It is at the next stage that the question, whether the re-opening of assessment amounts to "review" or "change of opinion" arises. In other words, if there are no "reasons to believe" based on new, "tangible materials", then the reopening amounts to an impermissible review. Here, there is nothing to show what triggered the issuance of notice of reassessment - no information or new facts which led the AO to believe that full disclosure had not been made. The impugned notice, the AO's order rejecting the objections, and the arguments of the Revenue nowhere indicate how the ....