AI Drafter 
TaxTMI 
TaxTMI 
2015 (9) TMI 67
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.... is in this backdrop that he urges us to take up this issue first. 3. Learned Departmental Representative does not oppose this prayer, and leaves it to the bench to take a call on this prayer of the assessee. 4. We deem it fit and proper to, in the background, to begin with our adjudication on assessee's grievance against learned CIT(A)'s upholding the validity of reassessment proceedings. Grievances of the assessee, so far as this issue is concerned, for the Assessment Year 2000-2001, are as follows:- "1. Re: Reassessment u/s. 147 carried out without jurisdiction. 1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as 'the learned CIT(A)'] erred in upholding the reassessment made u/s. 147 by the Assessing Officer as the reassessment was based on a mere change of opinion on issues which had already been considered in the original assessment framed u/s. 143(3). 1.2 The learned CIT(A) erred not considering the judicial decisions relied by the Appellant." 5. Briefly stated, the relevant material facts are like this. In this case, assessment under section 143(3) of the Act was comp....
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....chedule 17 of the Annual Account shows R&D expenses of Rs. 292.38 lacs, whereas in the Tax Audit Report, the assessee has claimed R&D expenses of Rs. 18,80,05,080/-. Thus, it is not clear which figure is correct. II. While completing the assessment u/s 143(3) of the Act in the case of Aditya Medisales Ltd., a sister concern of the Sun Group, it was found that the profit of the Industrial Unit of Silvasa of the assessee has been inflated because the same is exempt u/s. 80IA, by giving more interest on overdue bills by Aditya Medisales Ltd. Aditya Medisales Ltd. has been given the task of distributing the formulation drugs produced by the units at Silvasa and Vapi of Sun Pharma Industries Ltd. It pays the interest @ 21% to the latter on the overdue bills which is much more than the prevailing market rate of interest in this line of business which varies from 15% to 18%. By adopting this modus operandi, the Sun Group has reduced the taxable profit of M/s Aditya Medisales Ltd. and at the same time it has increased the profit of Silvasa Unit because the interest income is directly added to the sales figure, on which the deduction u/s. 80IA is available. These facts are not clear from....
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....; Rs.21,10,82,681/- Less: R&D Expenses actually allocable Rs. 95,42,012/- Profit of Silvasa I Unit Rs.20,15,40,669/- Deduction u/s. 80IA allowable @ 100% Rs.20,15,40,669/- The assessee has claimed deduction u/s 80IA in the computation of income at Rs. 20,97,62,593/-. Hence, the assessee has claimed Rs. 20,97,62,593/- (-) Rs. 20,15,40,669/- = Rs. 82,21,924/- as extra deduction u/s.80IA on Silvasa Unit II, which is not allowable and should be added to the income of the assessee. It is seen that the assessee is allocating R&D expenses on arbitrary basis. There is intermixing of R&D expenses of all the products, therefore, the best way to allocate the expense under these circumstances should be on the basis of profitability ratio of various unit. Since, the profitability of Silvasa Units I & II re very high, the allocation of R&D expense should be more in these two units because there is a direct nexus between the profitability of a unit and R&D expenses (because abetter R&D means more profit margin in pharmaceutical line) rather than allocating only 10% of the R&D expenses. IV. In the assessment order passed, the A.O. had not added the following....
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....gh Court decision in the case of Sough India Shipping Corporation Ltd., 240 ITR 24 and also Kerala High Court decision in the case of Vai Kundam Rao Co. 241 ITR 50 (Kerala). V. In view of the above, I have reason to believe that the above incomes chargeable to tax have escaped assessments. Hence, notice u/s. 148 of the Act is issued." 6. In effect thus, the reopening was done on the following grounds:- (a) Voluminous details submitted and the same were not easily understandable by tax authority. (b) Receipt of higher interest from Aditya Mediasles Limited and consequent higher deduction u/s.80IA (c) Receipt of higher interest from Aditya Mediasles Limited and consequent higher deduction u/s.80IA. (d) Reduced allocation of R&D expense to new industrial undertakings u/s. 80IA. (e) Reduction of brought forward depreciation of GLOL merged with the Company for computing the profits u/s. 80HHC. (f) Double deduction on exports of new industrial undertaking u/s. 80HHC (g) Netting of interest income and expenditure for computing the profits u/s. 80HHC and interest income to be considered as income from other sources for computing the profits/deduction u/s. 80HHC."....
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.....O. in the original assessment proceedings, so the plea that the reopening is bad in law in view of mere change of opinion is not valid. 4.4 Proviso to section 147 of the Act says that "where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year". 4.5 In connection with the above, the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel and Vasant Chunilal Patel v/s. ACIT [236 ITR 832] has observed that : "The power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance, and whether it is an er....
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....he bungalow was valued at Rs. 56,00,000/- by the registered valuer and the converted property was sold on September 19, 1990 to the firm. It was found that the said transfer on September 19, 1990, by which the stock-in-trade was sold to the firm, remained to be taxed as capital gains in the case of the assessee in the A.Y. 1991-92. The assessment of the assessee for the A.Y. 1991-92 was completed on January 31, 1994, but the capital gain arising from the transfer of his share in the immovable property to the partnership firm was not subjected to tax although the assessee had informed the Income Tax Officer by his letter dated December 29, 1993 about the conversion of the capital asset being his share in the immovable property into stock-in-trade and its consequential effect, in view of the query raised by the A.O. The A.O., therefore, clearly had a reason to believe that the income chargeable to tax in the form of capital gains in respect of the transfer that took place on September 19, 1990, had escaped assessment in the relevant assessment year 1991-92. The initiation of the proceedings u/s. 147 by notice dated March 29, 1996, could not, therefore, be assailed on the ground that ....
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.... stand of the authorities below and submit that a particular aspect of the deduction was not specifically considered by the A.O. and the ld. CIT(A). That aspect of the matter is, however, not really relevant because once we come to the conclusion that order of the A.O. stood merged in the order of the ld. CIT(A) on the issue of deduction under section 80IA and 80HHC of the Act, as we are obliged to hold in the light of law laid down by Hon'ble jurisdictional High Court, these aspect of the matter are wholly academic. 12. For the reasons set out above, we hold that the reassessment proceedings were vitiated in law. The impugned reassessment order stands quashed, accordingly. 13. As the reassessment order stands quashed for the technical reasons set out above, we see no need to address ourselves to other erudite contentions advanced before us or to other issues raised in the cross appeals. Given our above conclusions, all these things are rendered infructuous and academic. 14. In the result, appeal of the assessee in ITA No.1199/Ahd/2006 for Assessment Year 2000-01 is allowed and appeal of the Assessing Officer in ITA No.1279/Ahd/2006 for Assessment Year 2000-01 is dismissed....