Wp/2668/2010 Of Siements Information Systems Ltd v. Burlop Dealers Ltd

kps HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2668 OF 2010 Siemens Information Systems Ltd....Petitioner-versus-Assistant Commissioner of Income Tax Range 7(2) and others...Respondents ............ Mr.Atul K. Jasani with Mr.P.C.Tripathi, for the Petitioner.Mr.Suresh Kumar, for the Respondents. ............ CORAM : DR. D.Y.CHANDRACHUD & M.S.SANKLECHA, JJ. Date : 10 FEBRUARY 2012 P.C.: 1By a notice dated 24 March 2010, an assessment of the Petitioner for Assessment Year 2005-06 has been reopened. The reopening of the assessment is within a period of four years of the end of the relevant assessment year. The reasons on the basis of which the assessment is sought to be reopened are as follows:- “During the course of the assement proceedings for A.Y. 2006-07, it has been established on the basis of the details filed by the assessee that the assessee is not entitled to deduction u/s. 10A for the following reasons:2006-07, it has been established on the basis of the details filed by the assessee that the assessee is not entitled to deduction u/s. 10A for the following reasons: (1)Units are not independent units and constitute one integrated unit.integrated unit. (2)No independent accounts of units are maintained. (3)There is complete overlapping of work and use of resources amongst units through leased lines.resources amongst units through leased lines. (4)The Tax Audit Report and Audit Report u/s. 10A is not correct or assessee is claiming expenses/ depreciation of correct or assessee is claiming expenses/ depreciation of 10A units in non 10A units. (5)Several non 10A activities are being carried on from 10A units which is evident from service tax returns.units which is evident from service tax returns. (6)The assessee has declined to file a reconciliation of Service Tax/ VAT returns with IT returns. Since both these taxes are location wise, the reconciliation would have shown the overlapping of receipts/ expenses.Tax/ VAT returns with IT returns. Since both these taxes are location wise, the reconciliation would have shown the overlapping of receipts/ expenses. As the assessee has claimed deduction of Rs.87,65,19,003/- u/s. 10A in its return filed for A.Y. 2005-06 and the material facts brought out during the course of assessment proceedings for A.Y. 2006-07, remain the same in the A.Y. 2005-06, I have reason to believe that there is an under assessment of Rs.87,65,19,003/- in A.Y. 2005-06. Further the facts brought out during the course of assessment proceedings of A.Y. 2006-07 have not been truly and fully disclosed by the assessee in A.Y. 2005-06. Therefore it cannot be said that the assessee had disclosed fully and truly all the material facts in respect of the units on which 10A deduction is claimed.” 2The learned counsel appearing for the Petitioner has submitted that during the course of assessment proceedings, the Assessing Officer had carried out an inquiry in regard to the basis of the claim for deduction under Section 10A. In this connection, reliance was placed on several communications addressed by the Assessee to the Assessing Officer during the course of assessment proceedings on the basis of which it was urged that the Assessing Officer had followed a line of inquiry before he allowed a deduction under Section 10A. Consequently, it was urged that the reopening of assessment, though within a period of four years, would be merely on the basis of a change of opinion which is not permissible. The learned counsel relied upon the decision of the Supreme Court in 1Commissioner of Income Tax v/s Burlop Dealers Ltd.. 1[1971] 79 ITR 609 (SC) 1[1971] 79 ITR 609 (SC) 3In the present case, the reopening of the assessment is within a period of four years of the end of the relevant financial year. The Supreme Court has held, in Commissioner of Income Tax v/s Kelvinatorof India Ltd.2, that even when an assessment is sought to be reopened within a period four years a mere change of opinion would not be permissible and there must be tangible material to come to the conclusion that there is escapement of income from assessment. In the present case, the order of assessment for Assessment Year 2005-06 was passed on 30 December 2008. During the course of assessment proceedings for Assessment Year 2006-07, an order of assessment was passed on 30 November 2009. A copy of the order has been annexed to the affidavit in reply. In the course of that assessment order, the Assessing Officer came to the following conclusion:- “26.Therefore assessee is not entitled to deduction u/s 10A for the following reasons.the following reasons. (1)Units are not independent units and constitute one integrated unit.integrated unit. (2)No independent accounts of units are maintained. (3)There is complete overlapping of work and use of resources amongst units through leased lines.resources amongst units through leased lines. (4)The Tax Audit report and audit report u/s 10A is not correct or assessee is claiming expenses/ depreciation of 10A units in non 10A units.correct or assessee is claiming expenses/ depreciation of 10A units in non 10A units. (5)Several non 10A activities are being carried on from 10A units which is evident from service tax returns.units which is evident from service tax returns. (6)The assessee has declined to file a reconciliation of Service Tax/ VAT returns with IT return. It claims in letter dated 04/09/09 that Revenue recognition is different and reconciliation can not be made. Again it says in letter dated 12/11/09 that any attempt to reconcile will lead to misleading results and says that it will take time of eight weeks i.e. Beyond the limitation date. Interestingly more than 8 weeks had passed by that time since the submission letter dated 04/09/09. Since both these taxes are location wise, the reconciliation would have shown Tax/ VAT returns with IT return. It claims in letter dated 04/09/09 that Revenue recognition is different and reconciliation can not be made. Again it says in letter dated 12/11/09 that any attempt to reconcile will lead to misleading results and says that it will take time of eight weeks i.e. Beyond the limitation date. Interestingly more than 8 weeks had passed by that time since the submission letter dated 04/09/09. Since both these taxes are location wise, the reconciliation would have shown the overlapping of receipts/ expenses. 26.1For Delhi Unit III (Gurgaon) it is the first year of claim of deduction and it is held that it is only an expansion of existing units. Further the facts discussed in this order were also not disclosed by the assessee in earlier years. Therefore it can not be said that the assessee had disclosed fully and truly all material facts in those years in respect of units which started in earlier years. Therefore those units are also not eligible for 10A deduction.”deduction and it is held that it is only an expansion of existing units. Further the facts discussed in this order were also not disclosed by the assessee in earlier years. Therefore it can not be said that the assessee had disclosed fully and truly all material facts in those years in respect of units which started in earlier years. Therefore those units are also not eligible for 10A deduction.” The assessment proceedings for Assessment Year 2005-06 are sought to be reopened on the basis of tangible material. The assessment proceedings for Assessment Year 2005-06 are sought to be reopened on the basis of tangible material. 4The decision of the Supreme Court in Burlop Dealers(supra) will not advance the case of the Petitioner. InBurlop Dealers(supra), the Supreme Court considered the provisions of Section 34(1) of the Income Tax Act, 1922. Under Section 34(1)(a), the Assessing Officer had authority to serve a notice when he had reason to believe that by reason of the omission or failure on the part of an Assessee to disclose fully and truly all material facts for assessment for that year the income chargeable of tax had escaped assessment. The Supreme Court held that the Assessee is under an obligation to disclose primary facts relevant for assessment, but he is under no obligation to instruct the Assessing Officer about the inference which the Assessing Officer may raise from those facts. Under the present Act the test of whether there has been an omission to disclose fully and truly all material facts necessary for assessment applies where an assessment is reopened beyond a period of four years of the relevant assessment year. Consequently, the decision in Burlop Dealers(supra) would, with respect, not advance the case of the Petitioner. 5Moreover, if the order of assessment for Assessment Year 2006-2007 is considered, it would emerge that there was no full disclosure of material facts by the Assessee during the Assessment Year 2005-06. Therefore, at this stage, the jurisdictional requirement has been satisfied. There is tangible material on the basis of which the assessment has been reopened. At this stage, the Court cannot decide upon the merits or correctness of what has been stated therein. It would suffice to note that the order of assessment which was passed for Assessment Year 2006-07 would constitute tangible material on the basis of which the Assessing Officer would be justified in reopening the assessment. The order of assessment dated 30 December 2008 for Assessment Year 2005-06 clearly does not reveal that the Assessing Officer dealt with the issues which were considered in the order of assessment for Assessment Year 2006-07. The order of assessment for Assessment Year 2006-07 is based on fresh material. The reopening of assessment for Assessment Year 2005-06 is not based on a mere change of opinion. There is tangible material. In view of the fact that there was tangible material before the Assessing Officer to reopen the assessment, we find no merit in the petition. The Petition is, accordingly, dismissed. No order as to costs. (Dr.D.Y.Chandrachud, J.) (M.S.Sanklecha, J.)