Ajay Kumar Sharma v. Commissioner Of Income Tax And Anr

THE HIGH COURT OF DELHI AT NEW DELHI %Judgment delivered on: 18.02.2013 +W.P.(C) 1987/2012 & CM No. 4285/2012 AJAY KUMAR SHARMA versus ... Petitioner COMMISSIONER OF INCOME TAX AND ANR ... Respondents AND+W.P.(C) 2732/2012 & CM No. 5883/2012AJAY KUMAR SHARMA... PetitionerversusCOMMISSIONER OF INCOME TAX AND ANR... RespondentsAND+W.P.(C) 2749/2012 & CM No. 5909/2012AJAY KUMAR SHARMA... PetitionerversusCOMMISSIONER OF INCOME TAX AND ANR... RespondentsAND+W.P.(C) 2733/2012AJAY KUMAR SHARMA... PetitionerversusCOMMISSIONER OF INCOME TAX AND ANR... Respondents ... Respondents Advocates who appeared in these cases:For the Petitioner: Mr A. Sharma, Mr Manu K. GiriFor the Respondent: Ms Suruchii Aggarwal CORAM:-HON’BLE MR JUSTICE BADAR DURREZ AHMEDHON’BLE MR JUSTICE R.V.EASWAR JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1.These writ petitions are directed against the notices issued under section148 (all dated 16.12.2011) intending to re-open assessments pertaining to theassessment years 2005-06 to 2008-09. Insofar as the assessment year 2007-08is concerned, a regular assessment had not been completed under section143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the said Act’)and only an intimation under section 143(1) had been sent.As regards theother three years, assessment orders had been framed under section 143(3) ofthe said Act. 2.In assessment year 2005-06, the assessment was framed on 29.03.2007.Similarly, for assessment years 2006-07 and 2008-09 the assessment orderswere passed on 26.12.2008 and 30.12.2010, respectively.It should also bepointed out that insofar as the impugned notices relate to the assessment years2005-06 and 2006-07, they have been issued beyond the period of four years from the end of the respective assessment years and therefore the proviso tosection 147 of the said Act would be attracted. 3.The learned counsel for the petitioner drew our attention to theproceedings pertaining to the assessment year 2005-06 which was the first year in which the petitioner had made a claim of deduction under section 80-IC ofthe said Act inasmuch as there was a substantial expansion in the plant andmachinery during the financial year 2004-2005. The petitioner manufactures ‘PET’ bottles. 4.The learned counsel for the petitioner drew our attention to thepurported reasons for the belief that income had escaped assessment. The saidpurported reasons read as under:- “Name &address of the Assessee :Sh. Ajay Kumar Sharma Reasons for the belief that income has escaped assessment Return of income for the AY 2005-06 in this case wasfiled on 30.10.2005 declaring an income of Rs. Nil afterclaiming deduction of Rs. 26,36,700/- u/s 801C of the I.T. Act, 1961. Assessment for this year was completed u/s 143(3)vide Order dated 29.03.2007 at income of Rs. Nil. Assesee is engaged in the manufacture of petbottles inIndustrialarea,Barotiwalan,districtSolanHimachalPradesh.ln the earlier years i.e; up to the AY 2004-05 ,assessee was claiming deduction u/s 801B in respect ofIndustrial undertakimg. This year assessee claimed deductionu/s 80IC on the ground that he had undertaken substantialexpansion in Plant & Machinery during F.Y.2004-05. Insupport of this claim, Assessee filed audit report u/s 80IC onForm No. IOCCB along with his Return of Income for AY2005-2006 placed on record. Return of income for the AY 2005-06 in this case wasfiled on 30.10.2005 declaring an income of Rs. Nil afterclaiming deduction of Rs. 26,36,700/- u/s 801C of the I.T. Act, 1961. Assessment for this year was completed u/s 143(3)vide Order dated 29.03.2007 at income of Rs. Nil. Assesee is engaged in the manufacture of petbottles inIndustrialarea,Barotiwalan,districtSolanHimachalPradesh.ln the earlier years i.e; up to the AY 2004-05 ,assessee was claiming deduction u/s 801B in respect ofIndustrial undertakimg. This year assessee claimed deductionu/s 80IC on the ground that he had undertaken substantialexpansion in Plant & Machinery during F.Y.2004-05. Insupport of this claim, Assessee filed audit report u/s 80IC onForm No. IOCCB along with his Return of Income for AY2005-2006 placed on record. The claim ofthe assessee being in respect ofmanufacturing of pet bottles in the state of Himachal Pradesh;pet bottles being an article specified in the ThirteenthSchedule (Sr. No. 20) Assessee was not entitled to deductionof Rs. 26,36,700/- u/s 80 IC despite which Assessee claimeddeduction u/s 801C (Form No. 10 CCB), in col. 14(ii)(e)-"Does the undertaking or enterprise manufacture of produceany article or thing specified in the Thirteenth Schedule".Assessee reported N.A." despite the fact that the claim of theAssessee being in respect of manufacturing of pet bottlesbeing an article specified in the Thirteenth Schedule (Sr. N20) , assessee was not entitled to deduction u/s 801C.Accordingly, I am satisfied that there is a failure on the partof the assessee to disclose fully or truly all material factsnecessary for his assessment for the said assessment year andincome chargeable to tax of Rs. 26,36,700/- has escapedassessment for the assessment year 2005-06 by reason of thefailure on the part of the assessee to disclose fully or truly allmaterial facts necessary for his assessment for his assessmentfor A.Y. 2005-06.I have therefore, reason to believe that thesumofRs.26,36,700/-chargeabletotaxhasescapedassessment for the AY 2005-06 . Thus, the same is to bebrought to tax under section 147/148 of the I.T. Act, 1961. (K.K. MITRA)Income Tax Officer,WardNo.33(1), NewDelhi.” It is apparent that in response to serial No. 14(ii)(e) of form No.10 CCB filedalong with return, the petitioner/assessee had indicated- ‘NA’ meaning therebythat the same did not apply.The question was whether the undertaking orenterprise manufactures or produces any article or thing specified in the 13[th]schedule. 5.It should be pointed out that by virtue of section 80-IC(2) of the saidAct, the deduction thereunder is not to be given to an undertaking whichmanufactures any of the articles specified in the 13[th]schedule to the said Act.6.Serial 20 of the 13[th]schedule to the Income-tax Act reads as under:- It is clear from the above that the plastics and articles which are referred to atserial No. 20 of the 13[th]schedule pertain to the goods falling within the exciseclassification in the range of 39.09 to 39.15.The learned counsel for thepetitioner submitted that the PET bottles manufactured by the petitioner fell within chapter 39 but under heading 39.23 and sub heading 3923.30.90. Theheading 3923.30 relates to ‘Carboys, bottles, flasks and similar articles’. Sub-heading 3923.30.10 refers to ‘insulated ware’ and 3923.30.90 refers to ‘other’.It is under this sub-heading that the PET bottles manufactured by the petitioner falls. It was therefore pointed out by the learned counsel for the petitioner thatthe PET bottles manufactured by the petitioner do not fall within the articlesspecified in the 13[th]schedule to the said Act and therefore do not form part ofthe negative list in respect of which the deduction under section 80-IC cannot be claimed. within chapter 39 but under heading 39.23 and sub heading 3923.30.90. Theheading 3923.30 relates to ‘Carboys, bottles, flasks and similar articles’. Sub-heading 3923.30.10 refers to ‘insulated ware’ and 3923.30.90 refers to ‘other’.It is under this sub-heading that the PET bottles manufactured by the petitioner falls. It was therefore pointed out by the learned counsel for the petitioner thatthe PET bottles manufactured by the petitioner do not fall within the articlesspecified in the 13[th]schedule to the said Act and therefore do not form part ofthe negative list in respect of which the deduction under section 80-IC cannot be claimed. 7.It was pointed out further by the learned counsel for the petitioner thatthe only purported reason indicated for re-opening of the assessment was thatthe PET bottles manufactured by the petitioner were not entitled to deductionunder section 80-IC because they fell within the serial No. 20 of the 13[th]schedule of the said Act. 8.The reasoning adopted in the two years for which the re-opening isbeing sought after four years from the end of the relevant assessment year wasthat since the petitioner had answered ‘Not Applicable’ with regard to serialNo. 14(ii)(e) of form 10 CCB, the petitioner had failed to disclose full and truematerial facts necessary for his assessment. Apart from this, the learnedcounsel for the petitioner also drew our attention to the assessment order dated29.3.2007 pertaining to the assessment year 2005-06 wherein the assessing officer had allowed the deduction claimed by the petitioner and had specificallynoted as under:- “the assessee has filed necessary evidences” It was also pointed out by the learned counsel that prior to the completion oftheassessment,severallettersincludingthelettersdated27.12.2006,13.03.2007 and 23.03.2007 had been written by the petitioner to the assessingofficer explaining, inter alia, the claim for deduction under section 80-IC. Thelearned counsel for the petitioner also drew our attention to the objectionswhich were taken by the petitioner to the purported reasons for re-opening ofthe assessment. In the objections the petitioner had specifically taken the pleathat the 13[th]schedule of the said Act and, particularly, serial No. 20 thereof hasbeen misrepresented by the revenue inasmuch as it has not realized that theproduct manufactured by the petitioner fell within the heading no. 39.23 andwas therefore not in the negative list which dealt with articles falling withinheadings 39.09 to 39.15 of the Central Excise Classification.Unfortunatelythis aspect of the matter has not been dealt with appropriately, if at all, by theassessing officer in the order dated 17.02.2012 rejecting the objections raisedby the petitioner. 9.We have also heard the learned counsel for the respondent who hassupported the issuance of the notices as also the purported reasons and theorder rejecting the objections.However, we are inclined to agree with the submissions made by the learned counsel for the petitioner. The entire sub-stratum of the notices issued under section 148 of the said Act is that thepetitioner’s product namely PET bottles fall within the negative list stipulatedin serial No. 20 of the 13[th]schedule of the said Act.We have noted thearguments of the learned counsel for the petitioner that the productmanufacturedby themfallsunder3923.30.90oftheCentralExciseClassification which is not within the range of products specified in serialNo.20 of the 13[th]schedule of the said Act, that is, within headings 39.09 to39.15.Therefore clearly, the submission of the learned counsel for thepetitioner is correct. The petitioner’s product does not fall within the negativelist stipulated in the 13[th]schedule of the said Act. If that be the case, then, theanswer given by the petitioner in serial No. 14(ii)(e) of form 10 CCB filedalong with the return is not wrong, false or inaccurate. Therefore, the petitionercannot be held to have failed to fully and truly disclose all material factsnecessary for its assessment. 10.Insofar as the other assessment years are concerned where the issue oflimitation of four years does not arise, the position would not be any different.This would be so because on a reasonable interpretation of the provisions ofsection 80-IC(2) read with serial No. 20 of the 13[th]schedule of the said Actread with the first schedule to the Central Excise Tariff Act, 1985, it would beclear that the petitioner’s product does not fall within the negative list and therefore the petitioner had rightly claimed deduction under section 80-IC ofthe said Act which the assessing officer in the years in which the assessmenthad been completed under section 143(3) had allowed after examining thenecessary evidence. Even in respect of the year in which there was noassessment order under section 143(3), that is, the assessment year 2007-08, wefeel that the same cannot be re-opened because no reasonable person can beattributed with any reason to believe that income had escaped assessment whenthe petitioner’s product clearly does not fall within the negative list. Thus, inview of the established facts in this case, the assessing officer could not evenhave taken the prima facie view that there were reasons to believe that incomehad escaped assessment.Consequently, we feel that, in the facts andcircumstances of this case, the issuance of notices under section 148 of the saidAct was not warranted.The said notices are quashed and all proceedingspursuant thereto are also quashed. 11.The writ petitions are allowed.All pending applications also standdisposed of. There shall be no orders as to costs. BADAR DURREZ AHMED, J R.V.EASWAR, J FEBRUARY 18, 2013kb