Ita/155/2010 Of The Commissioner Of Income Tax v. M/S Deepak Cables (India) Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 13 DAY OF OCTOBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NO.155 OF 2010 BEI|WEEN 1.THE COMMISSIONER OF INCOME-TAX C.R. BUILDING, QUEENS ROAD BANGALORE. 2).THE DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2(1) C.R. BUILDING, QUEENS ROAD BANGALORE. _.. APPELLANTS (BY SRI. K.V. ARAVIND, ADV.) AND M/S. DEEPAK CABLES (INDIA) LTD.,313 & 314, EMBASSY CENTRENO.11, CRESCENT ROAD.BANGALORE-560001. ~.. RESPONDENT| (RESPONDENT SERVED) THIS IJ§.T.A. IS FILED UNDER SECTION 260-A OI.L.T.ACT, 1961, ARISING OUT OF ORDER DATED 27-11-200 PASSED IN ITA NO.634/BANG/2008, FOR THE ASSESSMENTYEAR 1998-99, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW|STATED THEREIN.» I]. ALLOW THE APPEAL AND SET ASIDE THE ORDERS|PASSED|BYTHE|ITTATBANGALOREIN|ITANO.634/BANG/2008 DATED 27.11.2009, CONFIRMING THE.ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM|THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF|INCOME TAX, CENTRAL CIRCLE-2(1), BANGALORE. THIS I.T.A. COMING ON FOR FINAL HEARING, THISDAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT Mr.K.V.Aravind, learned counsel for the revenue. 2. This appeal under Section 260-A of the Income|Tax Act, 1961 (hereinafter referred to as ‘the Act’, forshort) has been preferred by the revenue. The subjectmatter of the appeal pertains to the Assessment Year1998-99. The appeal was admitted by a Bench of this.Court vide order dated 08.11.2011 on the followingsubstantial questions of law: 1. WhethertheAppellate|Authorities were correct in holding thatthe reopening of assessment U/s.147 ofthe Act was beyond 4 years and barred by limitation as per the proviso, as theAssessing Officer had merely changed hisopinion? 2. WhethertheAppellate|Authorities were correct in not taking intoconsideration the meaterial detected in theCOUTSCofSUFVEY|dated09-03-7004(during AY 2001-02) that the Tumkurunit manufacturing electrical cables hadcommenced 20 years earlier and it wasnot a new unit as per section 80IA of theAct,WHIChWasconfirmed.Dy Mr.Subramanyam, Mr. Venkateshwara Raoin the statement recorded u/s. 131 of theAct and the withdrawal of claim u/s.80IAoftheActDy theadSSCSSCEand|consequentlyrecordedadDerversefinding, which would have shown thatproviso to section 14/7 of the Act was notapplicable? 3. Whether the assessee /s entitled.to claim deduction u/s.80IA of the Act, inrespect of old unit situated at Tumkur,manufacturing electrical cables, whichclaim was not considered by taking into account the entire evidence recorded bythe Assessing Officer? 3. Facts giving rise to the filing of this appeal|briefly stated are that the assessee is a Companycarrying on the business of manufacture and supplyingACSR conductors for transmission / distribution of powerlines. The assessee filed the return of Income for theAssessment Year 1998-99 claiming deduction underSection 80IA of the Act. The Assessing Officer, by anorder dated 16.03.2001, determined the assessee’sincome ats=1,39,66,050/-. The Assessing Officer, while|computing the assessment for the Assessment Year2001-02, conducted a survey under Section 133A of theAct at Tumkur unit of the assessee. It was found during)the course of survey that the aforesaid unit hadcommenced production way back in the year 1996 andthe claim for deduction under Section S8OIA of the Actthat the unit at Tumkur was a new unit during thecurrent Assessment Year, is incorrect. Thereupon, on 09.03.2004, the statement of one Subramanyam wasrecorded under Section 131 of the Act. An additionalstatement of Mr.Venkateshwara Rao was recorded on16.03.2004. Both the aforesaid persons admitted in.their statement that the unit at _Tumkur was an old unitand claim under Section 8OIA of the Act was incorrect.In respect of the Assessment Year 2001-02, theassessee withdrew the claim under Section S8OIA of theAct and paid self assessment tax. Thereupon, a noticeunder Section 148A of the Act was issued by theAssessing Officer on 08.04.2004 which was based on thematerial detected in the survey conducted in the courseof assessment for the Assessment Year 2001-02. The!Tumkur unit manufacturing electrical cables was foundto be more than 20 years old unit and the same was nota new industrial undertaking as claimed by the assessee. —Therefore, the assessee was not held entitled fordeduction under Section S8O0OIJA of the Act. 23.06.2004, the assessee filed the return stating that. the return filed on 27.03.7004 should be treated as asresponse to the notice issued under Section 148 of theAct. The assessee filed revised return while withdrawingthe claim under Section 80IA of the Act in respect of theAssessment Year 1998-99. 4. The Assessing Officer passed an order on)27.02.2007 in whicn tne claim of tne assessee underSection 80IA of the Act was disallowed. Beingaggrieved,theaSS@e@SSCfiledan)appeal.The|Commissioner of Income Tax (Appeals), by an orderdated 25.03.2008,inter alia, held that the notice under|Section 148 of the Act was issued on 08.04.2004 that isbeyond a period of 4 years after 31.03.2003 which is incontravention of Section 14/7 of the Act as in the originalreturn the aforesaid item of deduction was disclosed andthe same only amounted to change of opinion which isimpermissible in law. The Commissioner of Income Tax|(Appeals), therefore, set aside the order by which the assessment was reopened. Being aggrieved, therevenue filed an appeal. However, the Tribunal upheldthe order passed by the Commissioner of Income Tax(Appeals) by an order dated 27.11.2009|inter alia,ON)the ground that the order of reopening of assessment isvalid in law as the same is barred by limitation and the.same is based on mere change of opinion and therefore,the deduction under Section 80OIA of the Act cannot bedisallowed. In the result, the appeal preferred by therevenue was dismissed. In the aforesaid factual|background, the revenue has filed this appeal. 5. Learned counsel for the revenue submitted that|tne substantial question of law Nos.2 and 3 are.answered in favour of the revenue by a Bench of this.Court by order dated 03.06.2014 passed in ITA.No.205/2008. With regard to substantial question of lawNo.1, it is submitted by the learned counsel for the|revenue that in the original order of assessment, the. eligibility of the assessee for a claim under Section 801Aof the Act was not examined. It is also argued thatthough the assessment was completed under Section143(3) of the Act, in the course of survey under Section133A of the Act, material was found that the assessee is.not eligible for deduction under Section 80IJA of the Act.The assessee also accepted the same and filed revisedreturn by withdrawing the claim under Section 80IA ofthe Act and therefore, reopening was based on freshmaterial and due to failure on the part of the assesseeto disclose fully and truly the material facts necessaryfor assessment. It is alSo argued that the assesseewhile filing the return in compliance to the notice underSection 148 of the Act, has accepted its ineligibility toclaim deduction under Section S8OIA of the Act whichShows that the original return was not true and correct. |It is also contended that the condition for invocation ofreopening of the assessment was complete in the facts.of the case and the finding recorded by the Tribunal that no material was found during the course of survey under.Section 133A of the Act is factually incorrect and isperverse. In support of his submissions, he has placedreliance on the decision of the Supreme Court in thecase of.“COMMISSIONER OF INCOME-TAX, DELHIVs. KELVINATOR OF INDIA LTD.’ (2010) 320 ITR56] 6. We have considered the submissions made by|the learned counsel for the parties and have perused therecord. From perusal of the record, it is evident that theAssessing Officer has recorded the satisfaction whilereopening the assessment in the following terms: “During the course of survey U/sS 133A ofthe Income-tax Act on 09.03.2004 the factory|premisesOF|M/s.DeepakCables(India)Limited, No.N-1, Industrial Estate, Tumkur. It|was found that the assessee was wrongly|claiming deduction u/s 80-IA to the tune of|Rs.30,13,535/-. The same was put forth before theassessee. The assessee accepted the same|and has filed the revised return on 277.3.7004withdrawing the claim of Sec.80-IA. In view of the above, I have reason tobelieve that by virtue of omission on the part of|the assessee to disclose fully and truly all the|material facts necessary for computation of|income in as much as claim of deduction u/s|80-IA of the Income-tax act, 1961. Hence, I have reason to believe that theassessee’s income assessable to tax hes!escaped assessment within the meaning ofsec. 147”. 7. However, the aforesaid aspect of the matter Nas|not been taken into account by the Tribunal and theTribunal, in a cryptic and cavalier manner, has foundthat during the course of survey under Section 133A ofthe Act, no material was found and the reopening of the.assessment is not valid in law. It is pertinent to mention here that it was admitted on behalf of the assessee in the statements recorded under Section 131 of the Act, that the unit at ,Tumkur was an old unit and the claim ofdeduction under Section S8OIA of the Act was not correctand the assessee itself had withdrawn the claim underSection 80OIA of the Act for the Assessment Year 2001O02. In the proceedings under Section 148 of the Actalso, the assessee had filed the return stating that thereturn filed on 23.02.7004 should be treated asresponse to the notice under Section 148 of the Act andthe assessee had filed revised return withdrawing theclaim under Section 80IA of the Act in respect of theAssessment Year 1998-99. 8. For the aforementioned reasons, the Tribunal|erred in holding that the reopening of the assessmentunder Section 14/7 of the Act was beyond 4 years andwas barred by limitation. 9. In view of the preceding analysis, the 1[9;]substantial question of law No.1 is answered in theaffirmative and in favour of the revenue. For the reasons assigned in the order dated|03.06.2014 passed in ITA No.205/2008, the substantialquestion of law Nos.2 and 3 framed in this appeal areanswered in favour of the revenue. In the result, the order passed by the Tribunal is)hereby quashed. | Accordingly, the appeal is allowed. RY| Sd/-—JUDGE Sd/-JUDGE