2015 (5) TMI 222

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....he present Special Civil Application in nutshell are as under :- 2.01. That the petitioner - assessee filed return of income for A.Y. 2009-2010 on 29/9/2009 declaring total income at Rs. 2,12,24,180/-. The same was process under section 143(1) of the Income Tax Act. 2.02. That the case was selected for scrutiny and notices under section 142(2) of the Income Tax Act was issued by the assessee on 25/9/2010. The petitioner - assessee was called upon to furnish necessary details / documents as mentioned in the communication dated 4/2/2011, which include underutilized balance of Modvat. The petitioner assessee replied to the same vide communication dated 19/9/2011 and furnished explanation as to why underutilized balance of Modvat of Rs. 9.53 Lacs should not be added back. It was submitted that they have followed exclusive method of accountancy wherein purchase cost of raw materials were shown net of excise duty. It was submitted that if they added Modvat credit of Rs. 39.53 Lacs to the valuation of raw materials then the same has to be added to purchase cost of raw-materials and consequently net profit remains unchanged. It was the case on behalf of the assessee that if they foll....

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....R.K. Patel, learned advocate appearing on behalf of the petitioner - assessee has further submitted that as such the case was selected for scrutiny assessment under section 143(3) of the Income Tax Act and before finalization of the assessment by the Assessment Officer, detailed query was sent to the assessee to submit the documents as required including the question with respect to unutilized balance of Modvat. It is submitted that thereafter the Assessing Officer framed the assessment accepting the method of accounting adopted by the assessee. It is submitted that therefore, reopening after a period of 4 years is nothing but change of opinion which is not permissible. 3.04. Mr.R.K. Patel, learned advocate appearing on behalf of the petitioner - assessee has further submitted that in any case condition precedents for initiation of the reassessment proceedings beyond the period of four years, are not satisfied. It is submitted that as there was no failure on the part of the assessee to disclose truly and fully material facts necessary for the purpose of assessment, assumption of jurisdiction for the purpose of reopening of the assessment beyond the period of 4 years is illegal. ....

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....ted that the impugned reassessment proceedings are absolutely just and proper and in accordance with the provisions of the Act, more particularly section 147 read with section 148 of the Income Tax Act. 4.04. Mr.M.R. Bhatt, learned counsel appearing on behalf of the revenue has further submitted that it is not true that the petitioner had not defaulted in disclosing fully and truly all material facts necessary for the assessment. It is submitted that during the course of assessment proceedings under section 143(3) of the Income Tax Act, nowhere was the issue of inclusion of duty in the closing stock was discussed or details called for relating to this issue. It is submitted that therefore, the issue of non-inclusion of Modvat / Cenvat Credit in the closing stock was considered and allowed by the Assessing Officer. It is submitted that the reasons recorded for reopening the assessment are totally different issue discussed during the assessment proceedings under section 143(3) of the Income Tax Act. It is submitted that therefore, the initiation of the reassessment proceedings on the reasons recorded is absolutely just and proper and is not required to be set aside at this stage. ....

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....ge to the impugned reassessment proceedings are required to be considered. 5.05. In the present case, reassessment proceedings initiated under section 147 of the Income Tax for the A.Y. 2007-2008 are initiated beyond the period of 4 years. The reasons recorded for reopening of the assessment for A.Y. 2009-2010, which are communicated to the petitioner - assessee vide communication dated 22/7/2014 are as follows :- "The provisions of section 145A of the Act mandate inclusive method of accounting for the purpose of the Act in respect of duty, cess and taxes even though the assessee might be following exclusive method of accounting. The assessee engaged in the business of manufacturing and sale of Flexible Polyrethane Foam filed return of income for A.Y. 2009-10 on 29.09.2009 declaring total income of 2,12,24,180/-. The income was assessed at 2,14,96,266/- u/s. 143(3) of I.T. Act on 31.10.2011. As derived from the 'Schedule 'J' to the Profit and Loss account, it followed exclusive method of accounting CENVAT and VAT. As per Annexure E (Showing details required under Clause-22(a) the Auditors Report in Form 3CD the details of cenvat credit availed and utilized b....

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....that at the time of scrutiny assessment, a notice was issued upon the assessee under section 143(3) of the Income Tax Act and vide communication dated 4/2/2011, the Assessing Officer called upon the assessee to furnish necessary informations / details. 5.08. That the assessee replied to the same vide communication dated 19/9/2011 in which in para 11, the petitioner assessee has stated as under :- "With regard to explanations as to why unutilized balance of Modvat of Rs. 39.53 lacs should not be added back, the company followed exclusive method of MODVAT wherein purchase cost of raw materials are shown net of excise duty. Hence in our case, if we add MODVAT credit of Rs. 39.53 lacs to the valuation of Raw Materials then the same has to be added to purchase cost of raw materials and consequently the net profit remains unchanged. Hence if we follow either of the method the net profit and therefore the taxable income will remain same. We refer to the Guidance Note on Accounting Treatment for MODVAT issued by the Institute of Chartered Accountants of India wherein the institute has prescribed two alternative methods of treatment of MODVAT credit in accounts i.e. exclusive method a....

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.... assessing authority, no further assistance is required by way of disclosure. All inferences of facts and legal inference need to be drawn by the Assessing Officer. It is not for any one to guide the Assessing Officer in respect of inference "factual or legal", which requires to be drawn by him alone. 17. Once the case of the assessee is covered by the 1st proviso to section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Ltd. (supra), has held thus: "l0. It can be clearly noted from the reasons recorded that there is no mention at all of the assessee having not disclosed fully or truly material facts which were necessary for the purpose of computing the income of the assessee. Assuming that in the notice for reopening. such wordings are not specifically mentioned and they can be supplemented either while rejecting....