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AJAY KUMAR SHARMA Vs. COMMISSIONER OF INCOME TAX AND ANR
February, 26th 2013
        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                                                     ... Petitioner
                                               versus

COMMISSIONER OF INCOME TAX AND ANR                                    ... Respondents

AND

+       W.P.(C) 2732/2012 & CM No. 5883/2012

AJAY KUMAR SHARMA                                                     ... Petitioner
                                               versus

COMMISSIONER OF INCOME TAX AND ANR                                    ... Respondents

AND

+       W.P.(C) 2749/2012 & CM No. 5909/2012

AJAY KUMAR SHARMA                                                     ... Petitioner
                                               versus

COMMISSIONER OF INCOME TAX AND ANR                                    ... Respondents

AND

+       W.P.(C) 2733/2012

AJAY KUMAR SHARMA                                                     ... Petitioner
                                               versus

COMMISSIONER OF INCOME TAX AND ANR                                    ... Respondents




WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                                  Page 1 of 9
Advocates who appeared in these cases:
For the Petitioner                 : Mr A. Sharma, Mr Manu K. Giri
For the Respondent                 : Ms Suruchii Aggarwal


CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR

                                         JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1.      These writ petitions are directed against the notices issued under section

148 (all dated 16.12.2011) intending to re-open assessments pertaining to the

assessment years 2005-06 to 2008-09. Insofar as the assessment year 2007-08

is concerned, a regular assessment had not been completed under section

143(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 the

other three years, assessment orders had been framed under section 143(3) of

the 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 orders

were passed on 26.12.2008 and 30.12.2010, respectively. It should also be

pointed out that insofar as the impugned notices relate to the assessment years

2005-06 and 2006-07, they have been issued beyond the period of four years




WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                            Page 2 of 9
from the end of the respective assessment years and therefore the proviso to

section 147 of the said Act would be attracted.

3.      The learned counsel for the petitioner drew our attention to the

proceedings 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 of

the said Act inasmuch as there was a substantial expansion in the plant and

machinery during the financial year 2004-2005. The petitioner manufactures

`PET' bottles.

4.      The learned counsel for the petitioner drew our attention to the

purported reasons for the belief that income had escaped assessment. The said

purported reasons read as under:-



        "Name &address of the Assessee :Sh. Ajay Kumar Sharma

                                                  Prop. M/s OM Shiva Industries
                                                  181, Azad Mara, Vivekanand
                                                  Puri. Delhi

        PAN                                   :   ARGPS9602P
        Status                                :   Individual
        Assessment Year                       :   2005-2006


        Reasons for the belief that income has escaped assessment


               Return of income for the AY 2005-06 in this case was
        filed on 30.10.2005 declaring an income of Rs. Nil after
        claiming deduction of Rs. 26,36,700/- u/s 801C of the I.T.



WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                              Page 3 of 9
        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 in
        Industrial area, Barotiwalan, district Solan Himachal
        Pradesh.ln the earlier years i.e; up to the AY 2004-05 ,
        assessee was claiming deduction u/s 801B in respect of
        Industrial undertakimg. This year assessee claimed deduction
        u/s 80IC on the ground that he had undertaken substantial
        expansion in Plant & Machinery during F.Y.2004-05. In
        support of this claim, Assessee filed audit report u/s 80IC on
        Form No. IOCCB along with his Return of Income for AY
        2005-2006 placed on record.
                The claim of the assessee being in respect of
        manufacturing of pet bottles in the state of Himachal Pradesh
        ;pet bottles being an article specified in the Thirteenth
        Schedule (Sr. No. 20) Assessee was not entitled to deduction
        of Rs. 26,36,700/- u/s 80 IC despite which Assessee claimed
        deduction u/s 801C (Form No. 10 CCB), in col. 14(ii)(e)-
        "Does the undertaking or enterprise manufacture of produce
        any article or thing specified in the Thirteenth Schedule".
        Assessee reported N.A." despite the fact that the claim of the
        Assessee being in respect of manufacturing of pet bottles
        being an article specified in the Thirteenth Schedule (Sr. N
        20) , assessee was not entitled to deduction u/s 801C.
        Accordingly, I am satisfied that there is a failure on the part
        of the assessee to disclose fully or truly all material facts
        necessary for his assessment for the said assessment year and
        income chargeable to tax of Rs. 26,36,700/- has escaped
        assessment for the assessment year 2005-06 by reason of the
        failure on the part of the assessee to disclose fully or truly all
        material facts necessary for his assessment for his assessment
        for A.Y. 2005-06.I have therefore, reason to believe that the
        sum of Rs.26,36,700/- chargeable to tax has escaped
        assessment for the AY 2005-06 . Thus, the same is to be
        brought to tax under section 147/148 of the I.T. Act, 1961.
                                                (K.K. MITRA)
                                                Income Tax Officer,
                                                WardNo.33(1), New
                                                Delhi."



WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                              Page 4 of 9
It is apparent that in response to serial No. 14(ii)(e) of form No.10 CCB filed

along with return, the petitioner/assessee had indicated- `NA' meaning thereby

that the same did not apply. The question was whether the undertaking or

enterprise manufactures or produces any article or thing specified in the 13th

schedule.

5.      It should be pointed out that by virtue of section 80-IC(2) of the said

Act, the deduction thereunder is not to be given to an undertaking which

manufactures any of the articles specified in the 13th schedule to the said Act.

6.      Serial 20 of the 13th schedule to the Income-tax Act reads as under:-



         Activity or article Excise                  Sub-class under
                                                     National
         or thing                 classification     Industrial
                                                     Classification
                                                     (NIC), 1998
         xxx                      xxx                xxx

         20.                      Plastics and       39.09 to 39.15
                                  articles thereof


It is clear from the above that the plastics and articles which are referred to at

serial No. 20 of the 13th schedule pertain to the goods falling within the excise

classification in the range of 39.09 to 39.15. The learned counsel for the

petitioner submitted that the PET bottles manufactured by the petitioner fell




WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                            Page 5 of 9
within chapter 39 but under heading 39.23 and sub heading 3923.30.90. The

heading 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 that

the PET bottles manufactured by the petitioner do not fall within the articles

specified in the 13th schedule to the said Act and therefore do not form part of

the 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 that

the only purported reason indicated for re-opening of the assessment was that

the PET bottles manufactured by the petitioner were not entitled to deduction

under section 80-IC because they fell within the serial No. 20 of the 13th

schedule of the said Act.

8.      The reasoning adopted in the two years for which the re-opening is

being sought after four years from the end of the relevant assessment year was

that since the petitioner had answered `Not Applicable' with regard to serial

No. 14(ii)(e) of form 10 CCB, the petitioner had failed to disclose full and true

material facts necessary for his assessment. Apart from this, the learned

counsel for the petitioner also drew our attention to the assessment order dated

29.3.2007 pertaining to the assessment year 2005-06 wherein the assessing







WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                            Page 6 of 9
officer had allowed the deduction claimed by the petitioner and had specifically

noted as under:-

                 "the assessee has filed necessary evidences"

It was also pointed out by the learned counsel that prior to the completion of

the assessment, several letters including the letters dated 27.12.2006,

13.03.2007 and 23.03.2007 had been written by the petitioner to the assessing

officer explaining, inter alia, the claim for deduction under section 80-IC. The

learned counsel for the petitioner also drew our attention to the objections

which were taken by the petitioner to the purported reasons for re-opening of

the assessment. In the objections the petitioner had specifically taken the plea

that the 13th schedule of the said Act and, particularly, serial No. 20 thereof has

been misrepresented by the revenue inasmuch as it has not realized that the

product manufactured by the petitioner fell within the heading no. 39.23 and

was therefore not in the negative list which dealt with articles falling within

headings 39.09 to 39.15 of the Central Excise Classification. Unfortunately

this aspect of the matter has not been dealt with appropriately, if at all, by the

assessing officer in the order dated 17.02.2012 rejecting the objections raised

by the petitioner.

9.      We have also heard the learned counsel for the respondent who has

supported the issuance of the notices as also the purported reasons and the

order rejecting the objections. However, we are inclined to agree with the




WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                            Page 7 of 9
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 the

petitioner's product namely PET bottles fall within the negative list stipulated

in serial No. 20 of the 13th schedule of the said Act. We have noted the

arguments of the learned counsel for the petitioner that the product

manufactured by them falls under 3923.30.90 of the Central Excise

Classification which is not within the range of products specified in serial

No.20 of the 13th schedule of the said Act, that is, within headings 39.09 to

39.15.     Therefore clearly, the submission of the learned counsel for the

petitioner is correct. The petitioner's product does not fall within the negative

list stipulated in the 13th schedule of the said Act. If that be the case, then, the

answer given by the petitioner in serial No. 14(ii)(e) of form 10 CCB filed

along with the return is not wrong, false or inaccurate. Therefore, the petitioner

cannot be held to have failed to fully and truly disclose all material facts

necessary for its assessment.

10.      Insofar as the other assessment years are concerned where the issue of

limitation 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 of

section 80-IC(2) read with serial No. 20 of the 13th schedule of the said Act

read with the first schedule to the Central Excise Tariff Act, 1985, it would be

clear that the petitioner's product does not fall within the negative list and




WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                             Page 8 of 9
therefore the petitioner had rightly claimed deduction under section 80-IC of

the said Act which the assessing officer in the years in which the assessment

had been completed under section 143(3) had allowed after examining the

necessary evidence. Even in respect of the year in which there was no

assessment order under section 143(3), that is, the assessment year 2007-08, we

feel that the same cannot be re-opened because no reasonable person can be

attributed with any reason to believe that income had escaped assessment when

the petitioner's product clearly does not fall within the negative list. Thus, in

view of the established facts in this case, the assessing officer could not even

have taken the prima facie view that there were reasons to believe that income

had escaped assessment.               Consequently, we feel that, in the facts and

circumstances of this case, the issuance of notices under section 148 of the said

Act was not warranted. The said notices are quashed and all proceedings

pursuant thereto are also quashed.

11.     The writ petitions are allowed. All pending applications also stand

disposed of. There shall be no orders as to costs.



                                                BADAR DURREZ AHMED, J



                                                            R.V.EASWAR, J

FEBRUARY 18, 2013
kb



WP(C) 1987/12, 2732/12, 2749/12 & 2733/2012                             Page 9 of 9
 
 
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