Tonira Pharma Ltd.,, Baroda vs Department Of Income Tax

ITO, Ward-4(4) M/s.Tonira Pharma Ltd. Baroda. Vs Plot No.23-24 GIDC Estate, Nandesari Baroda 390 001.

PAN: AABCT 0638 F

अपीलाथ&/ (Appellant) '(यथ&/ (Respondent)

Assessee by : Shri S.N. Soparkar Revenue by : Shri J.P. Jangid

सन ु वाई क तार ख/ Dateof Hearing : 08/07/2015 घोषणा क तार ख / Date of Pronouncement: 17/07/2015

आदे श/O R D E R

PER RAJPAL YADAV, JUDICIAL MEMBER:

The Revenue is in appeal before us against the order of the ld.CIT(A) dated 5.7.2011.

2. Ground no.1 is solitary substantial ground of appeal, out of three grounds taken by the assessee. It exhibits the grievance of the Revenue as under:

"1. On the facts and in the circumstances of the case and in law theld.CIT(A) has erred in quashing the order u/s.143(3) r.w.s. 147 of the Act, overlooking the fact that the assessee had made wrong claim of deduction u/s.10B (100% instead of 90% of total income) and also without set off of brought forward unabsorbed depreciation."

ITA No.2448/Ahd/2011 2 3. Brief facts of the case are that the assessee at the relevant time was engaged in manufacturing and exporting of bulk drugs, drug intermediates and fine chemicals. It has filed its return of income on 29.9.2003, declaring total income at NIL, after claiming exemption of Rs.2,63,37,459/- under section 10B of the Income Tax Act. This deduction was computed at 100% of profits claimed to have been derived from its export oriented unit (EOU). The learned AO has passed assessment order under section 143(3) on 31.10.2007 whereby he disallowed exemption claimed by the assessee under section 10B. The assessee carried the appeal before CIT(A), who had partly allowed the appeal of the assessee, vide order dated 29.8.2008.

4. The AO thereafter issued notice under section 148 on 31.8.2009. He reopened the assessment by recording following reasons:

"On perusal of computation of income it is seen that the assessee had carried forward depreciation loss of Rs.69,20,306/- in aggregate. However, without claiming set off of the same, the assessee had wrongly claimed exemption u/s.10B to the tune of Rs.2,63,37,459/-.

In this case, order u/s.143(3) r.w.s. 147 of the I.T.Act was passed on 31.10.2007. While finalizing the assessment, the then AO had not considered the above facts. Therefore likely escapement of income would be more than Rs.one lakh."

Date : 11.08.2009 Sd/- (Rajeev Chhabra) Income Tax Officer, Wd-4(4) Baroda."

5. The learned AO has passed the assessment order under section 143(3) r.w.s. section 147 on 22.12.2010.

6. Dissatisfied by the reopening of the assessment, the assessee carried the matter in appeal and submitted that there is no failure in ITA No.2448/Ahd/2011 3

disclosing the material facts fully and truly at the end of the assessee, and therefore, the AO cannot reopen the assessment after four years of end of the assessment year. The ld. First Appellate Authority considered the submissions of the assessee and concurred with the contentions of the assessee. The finding recorded by the ld. First Appellate Authority is worth to note. It reads as under:

"9. I have gone through the submissions made by the appellant, order of the A.O. disposing the objection of the appellant against the issue of notice u/s 148 and also the assessment order. From the computation of income filed by the assessee in its original return for A.Y. 2003-04, it is seen that assessee had provided complete details of depreciation of its general unit as well as the Export Oriented Unit. Also, in the computation, the depreciation of the general unit had not been set off against the profit of the EOU for the purpose of computation of exemption u/s 10B. From the computation of income it is seen that the assessee had claimed the entire depreciation on account of EOU against the profit of this unit. Similarly, the depreciation of the general unit had been claimed against the profit of this unit and the unabsorbed depreciation of the current year as well as past years had been claimed to have been carried forward. Thus, all the details relevant for the assessment had been disclosed in the computation of income. Since the notice u/s 148 has been issued beyond 4 years from the end of the A.Y.2003-04, hence, it was mandatory on the part of the A.O. to establish that the income has escaped assessment on account of non-disclosure of all material facts necessary for the assessment, fully and truly. The A.O., in the order disposing off the objection of the assessee, has himself stated that for the purpose of reopening, the information available on record which has escaped attention during the course of assessment proceedings, as also while giving effect to the order of the appellate authorities, have been utilized.

10. In such circumstances, the notice u/s 148 cannot be said to have adhered to the law laid down by first provisio to section 147. In such circumstances, the reassessment cannot be held to be valid. Accordingly, it is held that notice u/s 148 was not validly issued and as a consequence, the order u/s 143(3) r.w.s. 147 passed in this case is quashed."

7. With the assistance of the learned representative, we have gone through the material on record.

ITA No.2448/Ahd/2011 4 8. Section 147 of the Income Tax Act provides that if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of section 148 to section 153, assess or reassess such income and also any other income chargeable tax which has escaped the assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. Thus, if AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, then subject to conditions enumerated in sections 148 to 153, he can reopen an assessment. However, interdiction provided in the proviso, appended to this section puts an embargo upon the powers of the AO. It contemplates that if an assessment under section 143(3) or section 147 has been made for the relevant assessment year, then no action shall be taken under this section after expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year, by reason or failure on the part of the assessee to make a return under section 139 or in response to notice under section 142(1) or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In other words, if an assessee has filed a return, the learned AO has passed assessment order under section 143(3) or under section 147 and four years have been expired from the end of that assessment year, then the AO has been precluded to reopen that assessment year unless it is proved that income chargeable to tax has escaped on account of failure of the assessee to disclose all material facts fully and truly necessary for his assessment for that year. We have extracted the reasons recorded by the AO. The learned AO has nowhere alleged, which particular fact the assessee has failed to disclose fully and truly. Admittedly, four years have already ITA No.2448/Ahd/2011 5

been expired before the issuance of notice under section 148. The notice under section 148 was issued on 31.8.2009 and the assessment year involved is Asstt.Year 2003-04. The AO nowhere demonstrated that the income was escaped assessment on account of failure of the assessee to disclose all material facts fully and truly. He has also not recorded any information which could goad him to observe that a particular fact disclosed by the assessee was factually incorrect. The learned First Appellate Authority took into consideration this aspect, and thereafter, quashed the reassessment. In our opinion, the learned First Appellate Authority has appreciated the facts and circumstances in right perspective, and we do not see any reason to interfere in the order of the ld.CIT(A). Consequently, the appeal of the Revenue is devoid of any merit, and accordingly dismissed.

9. In the result, appeal of the Revenue is dismissed.

Order pronounced in the Court on 17th July, 2015 at Ahmedabad.

Sd/- Sd/- (PRAMOD KUMAR) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER