Lambda Therapeutic Research Limited v. The Assistant Commissioner Of Income Tax ==========================================================Appearance

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 16131 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE A.J.DESAI andHONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1Whether Reporters of Local Papers may be allowedto see the judgment ?2To be referred to the Reporter or not ?3Whether their Lordships wish to see the fair copyof the judgment ?4Whether this case involves a substantial questionof law as to the interpretation of the Constitutionof India or any order made thereunder ? ========================================================== LAMBDA THERAPEUTIC RESEARCH LIMITED Versus THE ASSISTANT COMMISSIONER OF INCOME TAX ==========================================================Appearance: MR TUSHAR HEMANI, SENIOR ADVOCATE WITH MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1MR KARAN SANGHANI FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1========================================================== CORAM:HONOURABLE MR. JUSTICE A.J.DESAIand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 14/06/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE A.J.DESAI) 1.Rule returnable forthwith. Learned advocateMr.Karan Sanghani for learned Senior AdvocateMr. Manish Bhatt waives service of notice ofRule for the respondent.Mr.Karan Sanghani for learned Senior AdvocateMr. Manish Bhatt waives service of notice ofRule for the respondent. 2.With the consent of learned advocates forboth the parties, the petition is taken upfor final hearing.both the parties, the petition is taken upfor final hearing. 3.By way of present petition under Article 226of the Constitution of India, the petitionerhas prayed for the following reliefs :of the Constitution of India, the petitionerhas prayed for the following reliefs : “(a) quash and set aside the impugned notice atANNEXURE-A to this petition. (b)pending the admission, hearing and finaldisposal of this petition, to stay theimplementation and operation of the notice atANNEXURE-A to this petition and stay furtherproceedings for the Asst. Year 2011-12. (c)any other and further relief deemed just andproper be granted in the interest of justice. (d) to provide for the cost of this petition.” 4.Brief facts of the case are as under : incorporated under the provisions of theCompanies Act, 1956, is engaged in thebusiness of providing clinical researchsolutions to the pharmaceutical industries.The petitioner-company filed its original return of income for the Assessment Year2011-2012 on 29.11.2011 declaring totalincome at Rs. 13,87,146/- after claimingdeduction of Rs. 28,56,95,457/- under section80IB(8A) of the Income Tax Act, 1961 (Forshort “the Act, 1961”). The petitionerthereafter filed revised return of income on31.03.2012 declaring total income atRs.8,31,738/- after claiming deduction ofRs.28,62,02,248/- under section 80IB(8A) ofthe Act, 1961. The petitioner also placed onrecord Form No.10CCB in support of the claimof such deduction. 4.2) The case of the petitioner wasselected for scrutiny assessment and variousdetails and information were called for bythe Assessing Officer which were dulyfurnished by the petitioner vide letter dated12.11.2014. 4.3) The Assessing Officer vide orderdated 15.4.2015 framed the assessment undersection 143(3) read with section 144C of theAct, 1961 after examining the claim ofdeduction and did not disturb the claim ofdeduction under section 80IAB(8A) of theAct, 1961. 4.4) The petitioner’s case for theAssessment Year 2010-2011 was reopened byissuance of notice dated 31.03.2017 under section 148 of the Act, 1961 on the groundthat the petitioner was not eligible forclaim of deduction under section 80IB(8A) ofthe Act, 1961. 4.2) The case of the petitioner wasselected for scrutiny assessment and variousdetails and information were called for bythe Assessing Officer which were dulyfurnished by the petitioner vide letter dated12.11.2014. 4.3) The Assessing Officer vide orderdated 15.4.2015 framed the assessment undersection 143(3) read with section 144C of theAct, 1961 after examining the claim ofdeduction and did not disturb the claim ofdeduction under section 80IAB(8A) of theAct, 1961. 4.4) The petitioner’s case for theAssessment Year 2010-2011 was reopened byissuance of notice dated 31.03.2017 under section 148 of the Act, 1961 on the groundthat the petitioner was not eligible forclaim of deduction under section 80IB(8A) ofthe Act, 1961. 4.5) The petitioner challenged suchreopening of assessment before this Court bypreferringSpecialCivilApplicationNo.16338/2017 wherein this Court vide orderdated 29.1.2018 quashed the notice forreopening the assessment. 4.6) The respondent thereafter issued theimpugned notice dated 31.03.2018 undersection 148 of the Act, 1961 to reopen thecase of the petitioner for the assessmentyear 2011-2012 on the same facts as that ofassessment year 2010-2011 for denying thededuction under section 80IB(8A) of the Act,1961 on the ground that the certificateissued by DSIR could not have been acceptedby the Assessing Officer so as to satisfythat the assessee company has carried out anyresearch and development work either for selfor for others which is foundation foravailing deduction under the said section. 4.7) The petitioner vide letter dated16.04.2018 requested the respondent to treatthe original return of income as return inresponse to the notice issued under section148 of the Act, 1961. However, the respondent C/SCA/16131/2018 JUDGMENT DATED: 14/06/2022 vide notice dated 9.7.2018 informed thepetitioner that it was mandatory to filefresh return of income electronically andtherefore, the petitioner filed return ofincome electronically on 18.7.2018. 4.8) The respondent vide letter dated3.8.2018 supplied the copy of reasonsrecorded for reopening to the petitionerwhich was received by the petitioner on7.8.2018. 4.9) The petitioner vide letter dated13.8.2018 raised the objections against thereopening of the assessment. 4.10) The respondent vide order dated24.9.2018 disposed of the objections raisedby the petitioner holding that reopening isvalid. Hence, this petition. 5.Learned Senior Advocate Mr.Tushar Hemaniassisted by learned advocate Ms. VaibhaviParikh for the petitioner submitted thatreopening of the assessment for theassessment year 2011-2012 is based on theprevious assessment year 2010-2011 and thisCourt has already quashed the reopeningnotice for the assessment year 2010-2011 byjudgment and order dated 29.01.2018 inSpecial Civil Application No. 16338/2017against which SLP preferred by the respondent is also dismissed by the Hon’ble SupremeCourt on October 29, 2018. It was therefore,submitted that the facts of both theassessment years 2010-2011 and 2011-2012 areidentical and in the reasons recorded in theassessment year 2011-2012, the basis forreopening the case is the same and therefore,the impugned notice deserves to be quashedand set aside. is also dismissed by the Hon’ble SupremeCourt on October 29, 2018. It was therefore,submitted that the facts of both theassessment years 2010-2011 and 2011-2012 areidentical and in the reasons recorded in theassessment year 2011-2012, the basis forreopening the case is the same and therefore,the impugned notice deserves to be quashedand set aside. 5.1) Learned Senior Advocate Mr. TusharHemani further submitted that the impugnednotice under section 148 is issued beyond aperiod of four years and as per the provisoto section 147 of the Act, 1961 as it existedat the relevant point of time, such action ofreopening can be beyond a period of fouryears only if there is a failure on part ofthe petitioner to disclose truly and fullyall material facts necessary for theassessment year 2011-2012. It was submittedthat for the purpose of claiming deductionunder section 80IB(8A) of the Act, 1961, thepetitioner has disclosed all the materialfacts in the return of income as well as inthe audit report in Form 10CCB along with theletter dated 12.11.2014 filed during theoriginal assessment proceedings under section143(3) of the Act, 1961. It was therefore,submitted that reopening of the assessmentfor the assessment year 2011-2012 would be nothing but change of opinion and in view ofsettled legal position, the Assessing Officerhad no jurisdiction to reopen the assessmentby issuing the impugned notice. 5.2) It was submitted that vide noticedated 27.10.2014 the petitioner was calledupon to furnish all the details with regardto calculation of deduction under section80IB(8A) and the explanation why suchdeduction should not be disallowed andthereafter, examining the claim of deductionunder section 80IB(8A) of the Act, 1961, theAssessing Officer passed the assessment orderunder section 143(3) on 15.4.2015. It wastherefore, submitted that the respondent hasno jurisdiction to issue the impugned noticeunder section 148 to reopen the assessmentunder section 147 of the Act, 1961 merelybecause he has a different opinion than thatof his predecessor on the same set of factsas there is nothing on record to indicatethat the respondent has any other informationin his possession which came subsequent toframing of the original assessment and onbasis of such information he has reason tobelieve that income has escaped assessment. 5.3) Learned Senior Advocate Mr. Hemanisubmitted that on merits also the petitioneris eligible for claim of deduction under section 80IB(8A). 5.4) It was submitted that the respondenthas no jurisdiction to issue the noticebeyond a period of four years as per theproviso to section 147 in absence of anyfailure on part of the petitioner to trulyand fully disclose all material facts necessary during the course of assessmentunder section 143(3) of the Act, 1961. 6.On the other hand learned advocate Mr. KaranSanghani appearing for M.R. Bhatt and Co.for the respondent submitted that therespondent has issued the impugned noticeunder section 148 of the Act, 1961 forreopening the assessment of the assessmentyear 2011-2012 as new facts came to theknowledge of the Assessing Officer as it wasnoticed that the work done by the petitionerwas merely that of testing laboratory and wasnot doing any research and development workand there was no development of technology.It was submitted that on the basis ofmaterial available on record with therespondent it was found that the petitionercompany was engaged in providing professionalservices to their client which was not anyresearch and development work and therefore,the petitioner was not eligible for deductionunder section 80IB(8A) of the Act, 1961 as it did not satisfy the very first criteria ofavailing such deduction. did not satisfy the very first criteria ofavailing such deduction. 6.1) Learned advocate Mr. Sanghani wouldsubmit that as per explanation (1) to section147, the Assessing Officer has reason tobelieve that the income has escapedassessment and therefore, mere production ofbalance-sheet, profit and loss account oraccount books will not necessarily amount todisclosure as required by the provision ofsection 147 of the Act 1961. It was submittedthat during the course of inquiry, theAssessing Officer discovered that thepetitioner is not engaged in technologydevelopment and the petitioner has failed todisclose the fact that it is engaged inproviding professional services for researchto their clients and did not carry out anyresearch and development activities so as toqualify for deduction under section 80IB(8A)of the Act, 1961. 6.2) Learned advocate Mr. Sanghanisubmitted that there is no dispute that thepetitioner after receiving the approval ofDSIR was ready to do research and developmentwork however as per the details submitted bythe petitioner, the petitioner did not deriveany income from research and developmentactivity including during the year underconsideration and therefore, the petitioner is not entitled to get deduction undersection 80IB(8A) of the Act, 1961. It wastherefore, submitted that the respondent hadseen tangible material to show that incomehad escaped assessment. It was submitted thatmere certificate issued by DISR cannot be aconclusive proof for granting deduction forresearch and development under section80IB(8A) of the Act, 1961. It was therefore,submitted that petition may be dismissed asthe respondent authority has rightly issuedthe notice under section 148 of the Act, 1961by rejecting the objections raised by thepetitioner. 7.We have heard learned advocates appearing forthe respective parties and on perusal of thematerial on record, it is not in dispute thatthe respondent authority has issued thenotice under section 148 of the Act, 1961beyond a period of four years from the end ofrelevant assessment year on the basis ofreopening notice issued for the assessmentyear 2010-2011 with regard to the claim ofdeduction under section 80IB(8A) of the Act,1961 which is meant for scientific andindustrial research and development. Therespondent Assessing Officer has recordedreasons for issuing notice disputing theresearch activities of the petitioner so asto disallow such deduction. 8.The Assessing Officer has merely reproducedthe material which forms part of thethe material which forms part of the reopening notice for the assessment year2010-2011 for issuance of notice forreopening the assessment for assessment year2011-2012. 2010-2011 for issuance of notice forreopening the assessment for assessment year2011-2012. 9.It is pertinent to note that the coordinateBench of this Court vide judgment and orderdated 29.11.2018 quashed and set aside the notice under section 148 issued by the respondent Assessing Officer for theassessment year 2010-2011 applying the ratioof the decision in case of Cliantha ResearchLtd. v. Deputy Commissioner of Income-Tax,Ahmedabad reported in (2013) 35 taxmann.com61 (Gujarat). 10.It is also brought on record thatSpecial Leave Petition (Civil) Diary No.34524/2018 preferred by the respondentauthority against the said judgment and orderwas also dismissed on October 29, 2018. 11.On perusal of the material on record, itappears that the Assessing Officer inoriginal scrutiny assessment has examined theclaim for deduction under section 80IB(8A) ofthe Act, 1961 in detail by raising series ofqueries which were answered at length by theassessee by filing several replies before theAssessing Officer. It is only after considering such documents and replies, theAssessing Officer framed the assessment foryear under consideration. 10.It is also brought on record thatSpecial Leave Petition (Civil) Diary No.34524/2018 preferred by the respondentauthority against the said judgment and orderwas also dismissed on October 29, 2018. 11.On perusal of the material on record, itappears that the Assessing Officer inoriginal scrutiny assessment has examined theclaim for deduction under section 80IB(8A) ofthe Act, 1961 in detail by raising series ofqueries which were answered at length by theassessee by filing several replies before theAssessing Officer. It is only after considering such documents and replies, theAssessing Officer framed the assessment foryear under consideration. 12.In such circumstances, issuance ofnotice under section 148 of the Act, 1961 toreopen the assessment for the assessment year2011-2012 is nothing but would amount tochange of opinion on the part of theAssessing Officer as admittedly such noticeis issued after a period of four years fromthe end of the relevant assessment year underconsideration and there is nothing on recordto show that there is any failure on part ofthe assessee to disclose fully and truly allmaterial facts relevant for such assessment. 13.In view of the foregoing reasons, thepetition requires consideration and same isaccordingly allowed. Impugned notice dated31.03.2018 issued by the respondent-AssessingOfficer under section 148 of the Act, 1961 ishereby quashed and set aside.petition requires consideration and same isaccordingly allowed. Impugned notice dated31.03.2018 issued by the respondent-AssessingOfficer under section 148 of the Act, 1961 ishereby quashed and set aside. Rule is made absolute to the above extent. Noorder as to costs. (A.J.DESAI, J) RAGHUNATH R NAIR (BHARGAV D. KARIA, J)