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