TaxTMI 
TaxTMI 
2016 (9) TMI 338
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..... One of the major claims of the petitioner was of deduction under section 80IC of the Income Tax Act, 1961 ('the Act' for short) relating to its unit eligible for exemption situated in Himachal Pradesh. Such claim was examined by the Assessing Officer in the scrutiny assessment. Many other issues came up for consideration. Eventually, the Assessing Officer passed the order of assessment on 28.03.2014, assessing the petitioner's total income at Rs. 65.87 crores (rounded off). 4. In order to reopen such assessment, the Assessing Officer issued impugned notice which, as can be seen, was done within a period of four years from the end of relevant assessment year. In order to do so, he has recorded following reasons: "The assessee company engaged in the business of production of pharmaceutical and cosmetic products. The assessee filed its return of income for AY 2010-11 on 15/10/2010 declaring total income at Rs. 25,17,45,874/- The case was selected for scrutiny and assessment u/s 143(3) r.w.s. 144 completed on 28/03/2014 determining total income at Rs. 47,62,72,774/- The assessee ie M/s Paras Pharmaceuticals Pvt Ltd had claimed deduction u/s 80IC of Rs. 72,67,34,8....
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....15 types of products (in the form of Tablets, cream, powder and liquid) in different Stock Keeping Units (SKUs). The products sold by RBHIL are subject to Legal Metrology Act, 2009 and accordingly, it is required to disclose Maximum Retail Price ('MRP') on the products. 2.3.4 Levy of Excise Duty in India is governed by the provisions of Central Excise Act, 1944. Excise Duty is levied on manufacture of goods and collected at the time of removal of goods from the registered unit as per the provisions of the said Act. In the instant case, the moment the manufactured products are cleared from Baddi unit, the same are reflected in the excise records. However, the same may not have been sold and hence, may not be recorded as sales in the audited financial statements, at a given point of time. 2.3.5 Valuation of excisable goods for purposes of charging of duty of excise is governed by Section 4 of the said Act. However, valuation in respect of those notified goods, on which declaration of retail sale price is mandatory under Legal Metrology Act, 2009 is governed by Section 4A of the said Act which overrides Section 4. As per the section 4A, excise duty is leviable on MRP dec....
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....anufactured at Baddi unit, it can be observed that actual sale price is generally above 65% of MRP, which broadly correspondto 70% being the percentage of actual sales to MRP. Accordingly, it can be understood that sales of Baddi unit as per audited financial statements is correct. 2.3.14 Further, it is also submitted that the excise records can be basis of reassessment proceedings in a situation where turnover as per excise is higher than the turnover as per the financial statements. In other words, proceedings under excise laws showing clandestine removal of stocks outside books of account may be basis for reassessment proceedings under the Incometax Act, 1961. 2.3.15 However, in an opposite scenario, there has to be definite or material information showing or indicating traded products or products manufactured at Kalol unit being considered by RBHIL, which contains no such comment/remark, in absence of any tangible / material information and merely on the basis of difference in two separate records, reassessment proceedings is bad in law." 6. The Assessing Officer however, by an order dated 08.02.2016, rejected the objections. The petitioner thereupon filed this petitio....
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....t if the view is not acceptable, recourse may be had to section 147 or section 263 of the Act. In such background, the Court relying upon and referring to the decision of Supreme Court in case of Indian and Eastern Newspaper Society (supra) observed as under: " The ratio fully governs the present case and the record illuminates the failure of the AO to adhere to this principle while issuing notice under section 148 in the present case. It is true that satisfaction of the AO for the purpose of reopening is subjective in character and the scope of judicial review is limited. When the reasons recorded show a nexus between the formation of belief and the escapement of income, a further enquiry about the adequacy or sufficiency of the material to reach such belief is not open to be scrutinised. However, it is always open to question existence of such belief on the ground that what has been stated is not correct state of affairs existing on record. Undoubtedly, in the face of record, burden lies, and heavily lies, on the petitioner who challenges it. If the petitioner is able to demonstrate that in fact the AO did not have any reason to believe or did not hold such belief in good f....
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....oint out a factual error or omission in the assessment. It was observed as under: " We are of the view that both the Tribunal and the High Court were in error in holding that the information given by internal audit party could not be treated as information within the meaning of Section 147(b) of the Income Tax Act. The audit party has merely pointed out a fact which has been overlooked by the Income Tax Officer in the assessment. The fact that the recognition granted to this charitable trust had expired on 2291992 was not noticed by the Income Tax Officer. This is not a case of information on a question of law. The dispute as to whether reopening is permissible after audit party expresses an opinion on a question of law is now being considered by a larger Bench of this Court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of the case on the basis of a factual error pointed out by the audit party is permissible under law. In view of that we hold that reopening of the case under Section 147(b) in the facts of this case was on the basis of factual information given by the internal audit party and was va....
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....us show a letter dated 13.07.2015 which was written by the Assessing Officer after the issuance of notice for reopening, nevertheless, reflects his consistent thought process leading to only one possible conclusion viz. that at no point of time, he agreed with the point of view of the audit party that on account of discrepancy in the two sets of turnover data, there had been under assessment of income. In the said letter, the Assessing Officer after reproducing the opinion of the audit party regarding escapement of income, he conveyed as under: "3. Vide an earlier letter of even number dated 01/06/2015 that the objection was not acceptable in principle but the remedial action had been initiated in consonance of CBDT instruction no.6 of the 2006. Subsequently, new facts have come to the knowledge of this office, in light of which the nonacceptance of the objection in reiterated. 4. The levy of Excise Duty in India is governed by the provisions of Central Excise Act, 1944. Excise Duty is levied on manufacture of goods and collected at the time of removal of goods from the registers unit as per the provisions of the said act. Valuation of excisable goods for purposes of charging....
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....to consideration the error of sampling, the actual data and figures reported by you are almost identical. 7. In view of the discussion above, the objection should be dropped and an acknowledgment regarding same may be sent to this office immediately." 14. The above quoted portion of the Assessing Officer's letter dated 13.07.2015 makes it abundantly clear that he was not agreeable to the objection of the audit party from the beginning and even during the process between issuance of notice for reopening and rejecting the objections of the petitioner, he had satisfied himself about the correctness of the petitioner's contention in this regard. We have reproduced the relevant portion of the petitioner's objections. The explanation of the petitioner in such objections to the discrepancy in the turnovers convinced the Assessing Officer that there had been no escapement of income chargeable to tax. He accepted the petitioner's ground that the excise turnover would show MRP price less 35% discount. If the turnover figures are adjusted accordingly, there would be hardly a discrepancy of 8% which in case of such a large turnover could easily occur. He in fact argued th....