Holden Medical Laboratories Pvt. Ltd.,, Nashik v. Asst. Commissioner of Income - tax,,

ITA 1808/PUN/2013 | 2005-2006
Pronouncement Date: 30-04-2015 | Result: Allowed

Appeal Details

RSA Number 180824514 RSA 2013
Assessee PAN AABCH2172G
Bench Pune
Appeal Number ITA 1808/PUN/2013
Duration Of Justice 1 year(s) 6 month(s) 23 day(s)
Appellant Holden Medical Laboratories Pvt. Ltd.,, Nashik
Respondent Asst. Commissioner of Income - tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 30-04-2015
Date Of Final Hearing 15-04-2015
Next Hearing Date 15-04-2015
Assessment Year 2005-2006
Appeal Filed On 07-10-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 1808/PN/2013 (ASSESSMENT YEAR : 2005-06) HOLDEN MEDICAL LABORATORIES PRIVATE LIMITED C-35/36/37 MIDC MALEGAON SINNAR NASHIK 422 113 PAN NO. AABCH2172G .. APPELLANT VS. ACIT CIRCLE-1 NASHIK .. RESPONDENT ASSESSEE BY : SHRI SUBODH RATNAPARAKHI REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 15-04-2015 DATE OF PRONOUNCEMENT : 30-04-2015 ORDER PER R.K.PANDA AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 31-07-2013 OF THE CIT(A)-I NASHIK RELA TING TO ASSESSMENT YEAR 2005-06. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URING OF PHARMACEUTICAL PRODUCTS. IT FILED ITS RETURN OF IN COME DECLARING TOTAL INCOME OF RS.29 68 140/- ON 28-10-2005. THE AO PASSED THE ORDER U/S.143(3) ON 28-12-2007 DETERMINING TOTA L INCOME AT RS.1 26 20 114/-. THE ASSESSEE FILED AN APPEAL BEF ORE CIT(A) AND THE LD.CIT(A) VIDE ORDER 30-10-2008 GAVE CERTAI N RELIEF. 2 THE REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 11-02-2011 DISMISSED THE APPEAL FI LED BY THE REVENUE. SUBSEQUENTLY THE AO REOPENED THE ASSESSM ENT U/S.147 BY ISSUING NOTICE U/S.148 RECORDING THE FOLLOWING R EASONS WHICH HAS BEEN REPRODUCED BY THE AO AT PARA 2 OF THE ASSE SSMENT ORDER AND WHICH READ AS UNDER : DURING VERIFICATION OF THE CASE RECORDS IT IS NOTICE D THAT THE REFUND OF EXCISE DUTY PAID UPON THE EXPORTS IS SHOWN B Y THE ASSESSEE AS A PART OF INCOME UNDER INDEPENDENT HEAD. FO R YEAR UNDER CONSIDERATION THE TOTAL SALE SHOWN BY THE ASSESSEE I S RS.7.76CR. AND THE ASSESSEE HAS CLAIMED RS.61 45 457/- P AID AGAINST EXCISE DUTY. OUT OF THE TOTAL TURNOVER LOCA L SALES AFFECTED ARE ONLY RS.48.84 LACS IT MEANS THAT ASSESSEE IS HAVING EX PORT TURNOVER ABOUT 93% OF THE TOTAL TURNOVER. HENCE ON A PROPORTIONATE BASIS EXCISE DUTY PAID ON EXPORTS COMES T O RS.57 58 834/-. HOWEVER THE ASSESSEE HAS SHOWN ONLY RS.29 62 586/- AS INCOME ON ACCOUNT OF REFUNDABLE EXC ISE DUTY PAID ON EXPORT. THIS RESULTED INTO UNDER ASSESSMENT OF I NCOME OF RS.27 96 248/- OF THE ASSESSEE. FURTHER IT WAS SEEN FROM THE BALANCE SHEET THAT THE A SSESSEE HAD SHOWN SUM OF RS.26 97 998/- AS TDR WITH STATE BANK OF INDIA HOWEVER THE INTEREST ACCRUED WORKED OUT AT RS.2 15 8 40/- I.E. AT 8% P.A. ON SUCH TDR OF RS.26 97 998/- HAS NOT BEEN DUL Y OFFERED TO TAX BY THE ASSESSEE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO CONFRONTED THE ASSESSEE THAT ON PROPORTIONATE BASIS REFUNDABLE EXCISE DUTY ON EXPORT COMES TO RS.57 58 834/- WHERE AS THE ASSESSEE HAS SHOWN ONLY RS.29 62 586/- AS INCOME ON ACCOUNT OF REFUNDABLE EXCISE DUTY PAID ON EXPORT. REJECTING T HE EXPLANATION GIVEN BY THE ASSESSEE THE AO MADE ADDITION OF RS.2 5 03 772/- BEING THE REFUNDABLE EXCISE DUTY ON EXPORTS. THE A O SIMILARLY MADE ADDITION OF RS.34 159/- ON ACCOUNT OF INTEREST ACCRUED ON DEPOSIT WITH ICICI BANK AND RS.64 672/- ON ACCOUNT OF INTEREST ON FD WITH SBI. 3 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A) B UT WITHOUT ANY SUCCESS. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL BY FILING THE FOLLOWING GROUNDS : ON THE FACTS & IN LAW 1. THE ASSESSMENT FRAMED U/S 143(3) R.W.S. 147 OF THE I. T. ACT 1961 ON 07.01.2013 FOR ASST. YR. 2005-06 IS BAD-IN - LAW AND ACCORDINGLY REQUIRED TO BE QUASHED AS THE NOTICE U/S 1 48 ISSUED ON 25.01.2012 IS INVALID AS PER THE FIRST PROVISO TO SEC TION 147 THERE BEING NO REAL FAILURE ON THE PART OF THE APPE LLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AT THE TIME OF CO MPLETION OF ORIGINAL ASSESSMENT U/S 143(3) ON 28.12.2007. 2. THE HON. CIT (A) ERRED IN CONFIRMING THE ADDITIO N OF RS.25 03 772/- ON ACCOUNT OF REFUNDABLE EXCISE DUTY ON EXPORTS WHICH WAS NOT APPROVED BY THE EXCISE DUTY AUTHORITIES IN THE PREVIOUS YEAR RELEVANT TO THE ASST. YEAR UNDER APPEAL AND THEREFORE WAS NOT THE 'INCOME' OF THE APPELLANT FOR ASST. YR. 2005-06. 3. THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND A ND/OR VARY THE ABOVE GROUNDS AT ANY TIME BEFORE THE DECISIO N OF THE APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT ALTHOUGH GROUND OF APPEAL NO.1 WAS NOT RAISED BEFORE THE AO OR THE CIT(A) HOWEVER THIS GROUND BEING A LEGA L GROUND THEREFORE THE SAME SHOULD BE ADMITTED. HE SUBMITT ED THAT THE FACTS ARE ON RECORD AND NO FRESH INVESTIGATION IS R EQUIRED. RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT GROU ND OF APPEALNO.1 BEING LEGAL GROUND SHOULD BE ADMITTED. 7. AFTER HEARING BOTH THE SIDES AND AFTER CONSIDERI NG THAT GROUND OF APPEAL NO.1 IS A LEGAL GROUND THE SAME IS ADMITTED FOR ADJUDICATION. 4 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT YEAR INVOLVED IS 2005-06 AND THE ORIGINA L ASSESSMENT WAS COMPLETED U/S.143(3) ON 28-12-2007. THE NOTICE U/S.148 HAS BEEN ISSUED ON 25-01-2012. HE SUBMITTED THAT THERE IS NO MENTION WHATSOEVER IN THE NOTICE ISSUED U/S.148 THA T THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT. THEREFORE PROVISO TO SECTION 147 IS APPLICABLE AND THE NOTICE ISSUED U/S.148 HAS TO BE QUASHED AS VOID AB-INITIO. 9. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT AND ANOTHER VS. FORAMER FRANCE REPO RTED IN 264 ITR 566 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT PROVISO TO SECTION 147 IS APPLICABLE. THEREFORE WHEN THE NOTICE ISSUED AFTE R 01-04-1989 PROVISO TO SECTION 147 IS APPLICABLE. SINCE THE NO TICES WERE ISSUED AFTER 4 YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR SUCH NOTICES WERE BARRED BY LIMITATION. ACCORDINGL Y THE 148 NOTICES WERE QUASHED. 9.1 REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. VS. AC IT REPORTED IN 343 ITR 183 HE SUBMITTED THAT THE HONBLE HIGH C OURT IN THE SAID DECISION HAS HELD THAT WHEN THE AO DOES NOT RE CORD THAT THERE IS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS 5 NECESSARY FOR ASSESSMENT HE WOULD NOT BE ENTITLED TO PROCEED U/S.147 AFTER THE EXPIRY OF A PERIOD OF 4 YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR. POWER CONFERRED BY SECTI ON 147 DOES NOT PROVIDE A FRESH OPPORTUNITY TO THE AO TO CORREC T AN INCORRECT ASSESSMENT UNLESS THE MISTAKE IN THE ASSESSMENT SO MADE IS THE RESULT OF A FAILURE OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. WHERE THE AO DOES NOT RECORD THAT THERE IS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT HE WOULD NOT BE ENTI TLED TO PROCEED U/S.147. THE HONBLE HIGH COURT FURTHER OB SERVED THAT THERE IS A WELL KNOWN DIFFERENCE BETWEEN A WRONG CL AIM MADE BY AN ASSESSEE AFTER DISCLOSING ALL THE TRUE AND MATER IAL FACTS AND A WRONG CLAIM MADE BY THE ASSESSEE BY WITHHOLDING MAT ERIAL FACTS. THE AO WOULD BE ENTITLED TO PROCEED U/S.147 ONLY IN THE LATTER CASE. ACCORDINGLY 147 NOTICE ISSUED BY THE AO WAS QUASHED. 9.2 REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DYNACRAFT AIR CONTROLS VS. SNE HA JOSHI & OTHERS REPORTED IN 355 ITR 102 THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARA NOS. 12 AND 13 OF THE ORDER WHICH READS AS UNDER : 12. UNDER SECTION 147 FOR THE ASSESSING OFFICER TO RE- OPEN AN ASSESSMENT HE MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. UNDER THE PROVISO TO SECTION 147 WHERE AN ASSE SSMENT HAS BEEN MADE UNDER SECTION 143 (3) NO ACTION SHALL BE TAKEN UNDER THAT SECTION AFTER THE EXPIRY OF FOUR YEARS FROM TH E END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THIS IS NOW A JURISDICTIONAL REQUIRE MENT 6 WHICH MUST BE FULFILLED WHERE AN ASSESSMENT IS SOUGHT TO B E RE- OPENED BEYOND A PERIOD OF FOUR YEARS. THE EXISTENCE O F THE JURISDICTIONAL CONDITION MUST BE INDICATED IN THE REA SONS WHICH ARE FURNISHED TO THE ASSESSEE. THE FULFILMENT OF THE CO NDITION IS A PRE-REQUISITE AND IF IT IS ABSENT AN ASSESSMENT CANNOT BE REOPENED BEYOND FOUR YEARS. THE ASSESSING OFFICER CANNOT IMPROVE UPON THE REASONS FOR RE-OPENING THE ASSESSMENT OR BRIDGE THE LACUNAE LATER. IF THE REASONS DISCLOSED DO N OT INDICATE THE FULFILMENT OF THE JURISDICTIONAL REQUIR EMENT THE RE- OPENING IS INVALID. 13. THE REASONS WHICH HAVE BEEN DISCLOSED BY THE ASSESSING OFFICER TO THE ASSESSEE FOR REOPENING THE ASSESSMENT FOR A .YS. 2005-06 AND 2006-07 DO NOT INDICATE THAT THERE WAS A NY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. ON THE CONTRARY THE R EASONS REFER INTER ALIA TO THE ITEMS MENTIONED BY THE ASSESSEE AND ARE BASED UPON A PERUSAL OF THE SUBMISSION OF THE ASSESSEE. IF T HE BASIS FOR REOPENING AN ASSESSMENT BEYOND FOUR YEARS IS FOUN DED ON THE MATERIAL PRODUCED BY THE ASSESSEE THE CLEAR INF ERENCE IS THAT THERE IS NO SUPPRESSION OF FACTS MATERIAL TO THE ASSE SSMENT BY THE ASSESSEE. THE ATTENTION OF THE ASSESSING OFFICER WAS DRAWN TO THIS ASPECT WHEN THE ASSESSEE SUBMITTED ITS OBJECT ION TO THE RE-OPENING OF THE ASSESSMENT. YET HE DISREGARD ED THEM. 9.3 REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ALFA LAVAL (INDIA) LTD. VS. DCIT REPORTED IN 160 TTJ 41 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT IN ABSENCE OF ANY AVERMENT IN THE REA SONS RECORDED AS REQUIRED BY THE FIRST PROVISO TO SECTION 147 OF THE I.T. ACT TO THE EFFECT THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO FULLY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMEN T THE INITIATION OF PROCEEDINGS U/S.147 OF THE ACT IS LIABLE TO BE S ET ASIDE. 9.4 HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE AO DOES NOT SAY THAT THERE WAS ANY FAILURE ON THE PART OF T HE ASSESSEE. THE INTEREST ON FIXED DEPOSIT RECEIPT AND CLAIM OF EXCI SE DUTY ARE PART OF THE BALANCE SHEET. THEREFORE THE REOPENING OF THE ASSESSMENT BEYOND A PERIOD OF 4 YEARS IS VOID AB-INITIO AND TH EREFORE THE SAME IS LIABLE TO BE QUASHED. 7 9.5 WHILE ARGUING THE MERIT OF THE CASE HE SUBMITTE D THAT THE ASSESSEE EXPORTS PHARMACEUTICAL PRODUCTS AND GETS R EBATE OF EXCISE DUTY AT A SUBSEQUENT DATE WHICH HE ACCOUNTS FOR. REFERRING TO PAGE 28 OF THE PAPER BOOK THE LD. COUN SEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FOL LOWING ANNEXURE SHOWING THE CLAIM SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR DIFFERENT ASSESSMENT YEARS. HOLDEN MEDICAL LABORATORIES PVT LTD A.Y.2005-2006. ANNEXURE E : SR. NO. F.Y TOTAL CLAIM CLAIM SHOWN IN P&L ACCOUNT IN F.Y. DIFFERENTIAL 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 UNEXPLAINED 1 2002-03 18 37 888 18 34 083 - - - - - - 3 805 2 2003-04 27 86 121 - 27 86 123 - - - - - (2) 3 2004-05 54 62 215 - - 29 62 586 25 02 752 - - - (3 123) 4 2005-06 11 08 943 - - - 2 57 435 8 51 007 - - 501 5 2006-07 6 62 850 - - - - 6 64 864 - - (2 014) 6 2007-08 13 03 423 - - - - - - 13 03 367 56 7 *2008-09 46 87 772 - - - - - - 21 91 470 - 18 34 083 27 86 123 29 62 586 27 60 187 15 15 871 - 34 94 837 *NOTE: THE DIFFERENCE OF RS. 24 96 302/- (RS. 46 87 772 - RS. 21 91 470/-) RECEIVED IN F.Y. 2009-2010. 9.6 REFERRING TO THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. REPORTED IN 358 ITR 295 (SC) HE SUBMITTED THAT THE HONBLE SUPREME COUR T IN THE SAID DECISION HAS HELD THAT BENEFIT OF AN ENTITLEME NT TO MAKE DUTY FREE IMPORTS OF RAW MATERIALS OBTAINED BY THE ASSES SEE THROUGH ADVANCE LICENCES AND DUTY ENTITLEMENT PASS BOOK ISS UED AGAINST EXPORT OBLIGATIONS IS INCOME IN THE YEAR IN WHICH D UTY FREE IMPORTS ARE MADE. REFERRING TO PAGES 111 TO 128 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTE NTION OF THE 8 BENCH TO THE CLAIM MADE BEFORE THE EXCISE AUTHORITI ES. REFERRING TO PAGES 79 TO 106 OF THE PAPER BOOK THE LD. COUNSE L FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FIN ANCIAL STATEMENTS OF SUBSEQUENT YEAR I.E. A.Y. 2006-07 WH ERE THE ASSESSEE HAS OFFERED TO TAX SUCH REFUND OF EXCISE D UTY. 9.7 SO FAR AS REOPENING ON THE ISSUE OF INTEREST ON TDR IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE HAS ACCEPTED THE SAME AND HAS NOT CHALLENG ED IN THE GROUNDS OF APPEAL. 10. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUBMITTED THAT THE ASSESSEE HAS FAILED TO DISCLOSE THE INCOME CORRECTLY. FURTHER THE VALIDITY OF THE REASSESSME NT WAS NOT CHALLENGED BEFORE THE CIT(A). HE ACCORDINGLY SUBMI TTED THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO ARE VA LID. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY DISPUTE TO BE DECIDED IN THE IMPUGNED APPEAL IS REG ARDING THE VALIDITY OF THE NOTICE ISSUED U/S.148 AFTER A PERIO D OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WHERE ASSES SMENT HAS BEEN COMPLETED U/S.143(3). ADMITTEDLY THE ASSESSEE IN THE INSTANT CASE HAS FILED THE RETURN OF INCOME ON 28-1 0-2005 AND THE AO VIDE ORDER DATED 28-12-2007 PASSED U/S.143(3) DE TERMINING THE TOTAL INCOME AT RS.1 26 20 114/- AS AGAINST THE RETURNED 9 INCOME OF RS.29 68 140/-. THE NOTICE ISSUED U/S.14 8 FOR THE IMPUGNED ASSESSMENT YEAR IS 25-01-2012 WHICH IS ADM ITTEDLY BEYOND A PERIOD OF 4 YEARS FROM THE END OF THE RELE VANT ASSESSMENT YEAR. FROM THE NOTICE ISSUED U/S.148 WH ICH HAS ALREADY BEEN REPRODUCED AT PAGE 2 OF THE IMPUGNED O RDER WE FIND THERE IS NO ALLEGATION BY THE AO REGARDING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT. THEREF ORE UNDER THE FACTS AND CIRCUMSTANCES THE QUESTION THAT ARISES IS AS TO WHETHER THE NOTICE U/S.148 ISSUED AFTER EXPIRY OF 4 YEARS I S VALID WHEN THERE IS NO ALLEGATION BY THE AO THAT THERE IS FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR COMPLETION OF THE ASSESSMENT. 12. AN IDENTICAL ISSUE HAD COME UP BEFORE THE HONB LE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD.(SUPRA). IN THAT CASE THE PETITIONER ASSESSEE FILED THE RETURN OF INCOME FOR A.Y. 97-98 ALONG WITH AUDITED ACCOUNT S TAX AUDIT REPORT IN RESPECT OF ITS INCOME FROM THE MANUFACTUR ING FABRICATION AND SERVICING OF COMPONENTS. THE INCOM E OF THE PETITIONERS FOR THE SAID ASSESSMENT YEAR WAS ASSESS ED BY AN ORDER U/S.143(3). SUBSEQUENTLY THE AO ISSUED NOTICE U/S .148 ON THE GROUND THAT INCOME HAS ESCAPED ASSESSMENT BECAUSE T HE PETITIONER HAS WRONGLY CLAIMED DEDUCTION U/S.80IA I N RESPECT OF INCOME WHICH WAS NOT DERIVED FROM THE INCOME OF THE PETITIONERS UNIT AT KUNDAIM. FURTHER THE LONG TE RM CAPITAL GAINS HAVE BEEN WRONGLY CLAIMED BY THE ASSESSEE WHICH HAV E BEEN 10 WRONGLY CONSIDERED FOR THE SET OFF OF THE UNIT OF K UNDAIM WHICH HAS RESULTED IN ESCAPEMENT OF INCOME. NOWHERE HAS THE AO STATED THAT THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT. UNDER THESE CIRCUMSTANCES THE HONBLE HIGH COURT HELD THE NOTICE ISSUED U/S.148 AFTER A PERIOD OF 4 YEARS WAS NOT SUSTAINABLE SINCE THERE WAS NO RECORDING BY THE AO THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPLETION O F ASSESSMENT IN THE RELEVANT ASSESSMENT YEAR. THE OBSERVATION OF T HE HONBLE HIGH COURT READS AS UNDER : 4. ACCORDING TO THE LEARNED COUNSEL THE REVENUE IS ENTITLED TO ISSUE SUCH A NOTICE IF THE AO HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE (A) TO MAKE A RETUR N UNDER S. 139 OR (B) IN RESPONSE TO A NOTICE ISSUED UNDER SUB-S. (1 ) OF S. 142 OR S. 148 OR (C) TO DISCLOSE FULLY AND TRULY ALL M ATERIAL FACTS NECESSARY FOR THAT ASSESSMENT YEAR. SINCE THE FIRST TWO CONDITIONS ARE NOT PLEADED BY THE RESPONDENTS IT IS T HE SUBMISSION OF THE PETITIONER THAT THE NOTICE IS WHOLLY UNWARRANTED AND INVALID SINCE THERE IS NO ALLEGATION WHATSOEVER THAT THE PETITIONER HAS FAILED TO DISCLOSE ALL MATERIA L FACTS NECESSARY FOR ASSESSMENT. THIS SUBMISSION CAN BE CONSIDERED ONLY WITH REFERENCE TO THE REASONS PUT FORTH BY THE RESPONDENTS FOR ISSUING THE NOTICE. THE LETTER DT. 27TH JAN. 200 5 INTER ALIA STATES THAT THE AO HAS REASONS TO BELIEVE THAT INCOME HA S ESCAPED ASSESSMENT BECAUSE THE PETITIONER HAS WRONGLY CLAI MED DEDUCTION UNDER S. 80-IA IN RESPECT OF INCOME WHICH W AS NOT DERIVED FROM THE INCOME OF THE PETITIONER'S UNIT OF KUNDAIM. FURTHER THAT LONG-TERM CAPITAL GAINS HAVE BEEN WRON GLY CLAIMED BY THE ASSESSEE WHICH HAVE BEEN WRONGLY CONSIDERED FOR T HE SET OFF OF THE UNIT OF KUNDAIM WHICH HAS RESULTED IN ESCAP EMENT OF INCOME. NOWHERE HAS THE AO STATED THAT THERE IS ANY FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HAVING REGARD TO THE PURPO SE OF THE SECTION WE ARE OF THE VIEW THAT THE POWER CONFE RRED BY S. 147 DOES NOT PROVIDE A FRESH OPPORTUNITY TO THE AO TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNLESS THE MISTAKE IN TH E ASSESSMENT SO MADE IS THE RESULT OF A FAILURE OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY F OR ASSESSMENT. INDEED WHERE THE ASSESSEE HAS FULLY DISCLOSED ALL THE MATERIAL FACTS IT IS NOT OPEN FOR THE AO TO REOP EN THE ASSESSMENT ON THE GROUND THAT THERE IS A MISTAKE IN ASSESSMEN T. 11 MOREOVER IT IS NECESSARY FOR THE AO TO FIRST OBSERVE W HETHER THERE IS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ASSESSMENT AND HAVING OBSERVED THAT THERE IS SUCH A FAILURE TO PROCEED UNDER S. 147. IT MUST FOLLOW THA T WHERE THE AO DOES NOT RECORD SUCH A FAILURE HE WOULD NOT BE ENT ITLED TO PROCEED UNDER S. 147. AS OBSERVED EARLIER THE AO HAS N OT RECORDED THE FAILURE ON THE PART OF THE PETITIONER TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASST. YR. 1997- 98. WHAT IS RECORDED IS THAT THE PETITIONER HAS WRON GLY CLAIMED CERTAIN DEDUCTIONS WHICH HE WAS NOT ENTITLED TO. THER E IS A WELL KNOWN DIFFERENCE BETWEEN A WRONG CLAIM MADE BY AN A SSESSEE AFTER DISCLOSING ALL THE TRUE AND MATERIAL FACTS AND A WRONG CLAIM MADE BY THE ASSESSEE BY WITHHOLDING THE MATERIAL FACTS F ULLY AND TRULY. IT IS ONLY IN THE LATTER CASE THAT THE AO WOUL D BE ENTITLED TO PROCEED UNDER S. 147. WE ARE SUPPORTED IN THIS VIEW BY A DECISION OF A DIVISION BENCH OF THIS COURT IN HINDUSTAN LEVER LTD. VS. R.B. WADKAR ASSTT. CIT (2004) 190 CTR (BOM) 166 : (2004) 268 ITR 332 (BOM) WHERE IN A SIMILAR CASE THE DIVISION BENCH HELD THAT REASON THAT THERE WAS A FAILURE TO DISCLOSE F ULLY AND TRULY THAT ALL MATERIAL FACTS MUST BE READ AS RECORDED BY THE AO AND IT WOULD NOT BE PERMISSIBLE TO DELETE OR ADD TO T HOSE REASONS AND THAT THE AO MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL RECORD. THE DIVISION BENCH OBSERVED AS FOLLOW S : 'HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATE RIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR SO AS TO ESTABLISH THE VITA L LINK BETWEEN THE REASONS AND EVIDENCE.' 5. WE FIND IN THE CIRCUMSTANCES THAT THE IMPUGNED NOT ICE IS NOT SUSTAINABLE AND IS LIABLE TO BE QUASHED AND SET ASIDE. ACCORDINGLY THE WRIT PETITION IS ALLOWED IN TERMS OF PRAYER CLS. (A) AND (C). 13. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . FORAMER FRANCE REPORTED IN 264 ITR 566 (SC) HAS HEL D THAT WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT PROVISO TO SECTION 147 WAS APPLICABLE. THE NOTICE BEING ISSUED AFTER 01-04-1989 AFTER EXPIRY OF 4 YE ARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS BARRED BY L IMITATION. ACCORDINGLY THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT WAS UPHELD AND THE APPEAL FILED BY THE REVENUE WAS DISMISSED. 12 13.1 IN THE CASE OF DYNACRAFT AIR CONTROLS (SUPRA) THE HONBLE BOMBAY HIGH COURT HAS HELD THAT REASSESSMENT PROCEE DINGS CANNOT BE UNDERTAKEN AFTER THE EXPIRY OF 4 YEARS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY F OR COMPLETION OF THE ASSESSMENT AND THIS EXISTENCE OF JURISDICTIONAL CONDITION HAS BEEN INDICATED IN THE REASONS WHICH ARE FURNISHED T O THE ASSESSEE. SIMILAR VIEW HAS BEEN TAKEN BY THE PUNE BENCH OF TH E TRIBUNAL IN THE CASE OF ALFA LAVAL (INDIA) LTD. (SUPRA). 14. SINCE THERE IS NO ALLEGATION IN THE REASONS REC ORDED BY THE AO THAT THERE WAS ANY FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR COMPLETION OF THE ASSESSMENT THEREFORE IN VIEW OF THE DECISIONS CITED (SUPRA) WE HOLD THAT THE REASSESSMENT PROCEED INGS INITIATED BY THE AO ARE VOID AB-INITIO. ACCORDINGLY THE NOT ICE ISSUED U/S.148 IS QUASHED IN RESPECT OF THE 1 ST ISSUE AND THE GROUND RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS IS ALLOWED TO THE EXTENT O F ADDITION ON ACCOUNT OF REFUNDABLE EXCISE DUTY OF EXPORTS AMOUNT ING TO RS.25 03 772/-. HOWEVER SINCE THE ASSESSEE BY NOT TAKING ANY GROUND ON THE ISSUE OF INTEREST ON TDR AND HAS ACCE PTED THE SUPPRESSION OF INTEREST INCOME ON TERM DEPOSIT RECE IPTS THEREFORE THE SAME IS NOT DISTURBED AND ISSUE OF N OTICE U/S.148 OF THE ACT ON THIS GROUND IS UPHELD. 13 15. SINCE THE ASSESSEE SUCCEEDS ON THIS PRELIMINARY ISSUE OF VALIDITY OF REASSESSMENT PROCEEDINGS IN RESPECT OF EXCISE DUTY REFUND THEREFORE THE GROUND OF APPEAL NO.2 CHALLE NGING THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION OF RS.2 5 03 772/- ON ACCOUNT OF REFUNDABLE EXCISE DUTY ON EXPORTS BECOME INFRUCTUOUS AND ACADEMIC IN NATURE. THEREFORE THE SAME IS NOT BEING ADJUDICATED. 16. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30-04-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 30 TH APRIL 2015 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I NASHIK 4. THE CIT-I NASHIK 5. THE D.R B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT PUNE BENCHES PUNE