Commissioner Of Income Tax v. M/S. Colour Graphics....opponent(S

O/TAXAP/1853/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1853 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ COMMISSIONER OF INCOME TAX....Appellant(s) Versus M/S. COLOUR GRAPHICS....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1MR MANISH J SHAH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 24/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.This appeal u/s.160A of the Income Tax Act, 1961 is filed against the judgment and order dated 12.05.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘A’ in C.O. No.85/AHD/2006 in ITA No.263/AHD/2006 whereby, the Cross Objection filed by the assessee is allowed. 2.Briefly stated, the facts are that the assessee is a partnership firm engaged in printing works. The assessee filed its Return of Income declaring total income at Rs.65,754/- after claiming deduction of Rs.11,62,483/- u/s.80IA of the Income Tax Act, 1961 for the A.Y. 2000-01. Assessment scrutiny was undertaken and thereafter, the Assessing Officer passed the order u/s.143(3) on 04.03.2005 holding that the assessee is not entitled to deduction u/s.80IA of the Act. 3.Aggrieved by the aforesaid order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal vide order dated 11.11.2005 holding that the assessee is engaged in manufacturing activity as per Section 80IA(2) O/TAXAP/1853/2006 JUDGMENT (iii) of the Act. Against the order of CIT(A), appeals were filed before the Appellate Tribunal. Vide common impugned judgment and order dated 12.05.2006 passed in ITA No.262 to 265/AHD/2006 with C.O. No.85/AHD/2006 and ITA No.223/AHD/2006, the Tribunal dismissed all the six appeals but, allowed the cross objection filed by the assessee. Being aggrieved by the common impugned judgment and order, the present appeals have been preferred. 4.The appeal was admitted on 23.07.2007 in terms of the following substantial question of law; “Whether on the facts and circumstances of the case and in law was the Appellate Tribunal right in holding that the reopening of the assessment was invalid on the basis of the outcome of the assessment?” 5.We have heard learned counsel for both the sides and perused the material on record. It appears that the Assessing Officer had reopened the assessment on the ground that the activity of the assessee was not manufacturing activity and that the industrial undertaking was formed by splitting up the business which was already in existence. However, we find that there was 4.The appeal was admitted on 23.07.2007 in terms of the following substantial question of law; “Whether on the facts and circumstances of the case and in law was the Appellate Tribunal right in holding that the reopening of the assessment was invalid on the basis of the outcome of the assessment?” 5.We have heard learned counsel for both the sides and perused the material on record. It appears that the Assessing Officer had reopened the assessment on the ground that the activity of the assessee was not manufacturing activity and that the industrial undertaking was formed by splitting up the business which was already in existence. However, we find that there was nothing on record from which the Assessing Officer could have come to the conclusion that the assessee-firm was formed by splitting up of an industrial undertaking already in existence. There should have been something on record with the A.O for reopening the assessment alleging that the firm was formed by splitting up of an industrial undertaking already in existence. 6.In the absence of any material on record, in our opinion, the Assessing Officer could not be justified in stating that the assessee was formed by splitting up of an industrial undertaking. In any case, having not disallowed the claim of the assessee on this ground, the ground for reopening should also have failed. The relevant observations made by the Tribunal regarding reopening of assessment could be found in Para-23 of the impugned judgment, which is reproduced hereunder; “23. Looking to the facts and circumstances of the case, we condone the delay. On merits, we find that the reopening was on the ground that the activity of the assessee was not manufacturing activity and the industrial activity and the industrial undertaking was formed by splitting up the business which is already in existence. The assessee’s contention to that was that it was a new industrial undertaking and the claim has not been disputed after reopening the case on the ground and, therefore, the ground for O/TAXAP/1853/2006 JUDGMENT reopening fails. There is no fresh material on record than that was available in the original assessment. The reopening was justified by the CIT(A) on the ground that the assessee has not come forward to prove that the details regarding claim u/s.80IA were produced at the time of original assessment or that the A.O had verififed these details before completion of the said assessment and that the reopening has also not been challenged by the assessee before A.O. According to the CIT(A), it is very clear that at the time of assessment proceedings, the assessee had accepted the reasons for reopening and it has furnished the details called for by the Assessing Officer which were not furnished in the original assessment and, therefore, the Assessing Officer was justified in reopening the assessment. This, in our opinion, is not a correct approach. If the details are not available on record how could the Assessing Officer be satisfied about the fact that the assessee firm was formed by splitting up of an industrial undertaking already in existence. There must be something on record with the Assessing Officer for reopening the assessment alleging that the firm was formed by splitting up of an industrial undertaking already in existence. In the absence of any material on record, in our opinion, the Assessing Officer could not be justified in stating that it was formed by splitting up an industrial undertaking. In any case, having not disallowed the claim of the assessee on this ground, the ground for reopening also fails on the same ground...” 7.In view of the above, the question of law as to whether the Tribunal was right in holding that the reopening of the assessment was invalid on already in existence. In the absence of any material on record, in our opinion, the Assessing Officer could not be justified in stating that it was formed by splitting up an industrial undertaking. In any case, having not disallowed the claim of the assessee on this ground, the ground for reopening also fails on the same ground...” 7.In view of the above, the question of law as to whether the Tribunal was right in holding that the reopening of the assessment was invalid on O/TAXAP/1853/2006 JUDGMENT the basis of the outcome of the assessment or not is answered in the affirmative in favour of the assessee and against the Revenue. 8.Consequently, the appeal is dismissed. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/*