PR. COMMISSIONER OF INCOME TAX, RAJKOT - 3 vs. M/S ITALICA FLOOR TILES P. LTD
What did the High Court hold?
The High Court dismissed the appeals filed by the Revenue. The Court distinguished the present case from a previous judgment in Futura Ceramics, where reassessment was quashed because it was based solely on an excise show-cause notice without further verification and before the excise proceedings concluded. In the present case, the Court noted that the AO had elicited the assessee's response to the excise show-cause notice. The Court also rejected the contention that the AO must wait for the finalization of excise proceedings, stating that excise adjudication does not have the same time-barring provisions as the Income Tax Act, and deferring assessment could lead to it becoming time-barred. The Court found that the AO's actions were permissible. The ratio is that an AO can proceed with assessment based on information from other departments, provided the assessee is given an opportunity to respond, and the AO is not obligated to await the final outcome of parallel proceedings if it risks the assessment becoming time-barred.
What were the facts?
The Revenue has filed these appeals challenging the order of the Income Tax Appellate Tribunal (Tribunal) dated January 16, 2018. The assessee, M/s Italica Floor Tiles P. Ltd, had its return for Assessment Year 2005-2006 subjected to reassessment. The Assessing Officer (AO) made additions based on materials collected by the Excise Duty department, which prima facie suggested evasion of excise duty. The Tribunal subsequently deleted these additions, leading to the present appeals by the Revenue. The High Court notes that a similar issue was previously considered in Tax Appeal No. 82 of 2016 and connected appeals, which were dismissed by the Court.
What were the issues?
1. Whether the Assessing Officer could frame an assessment based on a show-cause notice issued by the Excise Department, without further independent verification, when the excise proceedings had not yet culminated into a final order? (Question of law and fact, concerning the basis of assessment under the Income Tax Act). Assessee's Contention: Not explicitly recorded in the provided text, but implied by the Tribunal's deletion of additions, suggesting the assessee likely argued that the AO's reliance on the excise show-cause notice was insufficient for reassessment. Revenue's Contention: The Revenue argued that the AO did not proceed solely on the basis of the show-cause notice but put the assessee to notice regarding its contents and elicited a response. The Revenue also contended that the AO cannot be expected to defer assessment completion awaiting final excise adjudication, as it risks the assessment becoming time-barred. They also noted that material in excise proceedings might differ from income tax assessment proceedings.
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Rajkot Bench
C/TAXAP/1135/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL No. 1135 of 2018 With R/TAX APPEAL No. 1136 of 2018 With R/TAX APPEAL No. 1137 of 2018 With R/TAX APPEAL No. 1138 of 2018 With R/TAX APPEAL No. 1139 of 2018 With R/TAX APPEAL No. 1140 of 2018 ============================================================= PR. COMMISSIONER OF INCOME TAX, RAJKOT - 3 Versus M/S ITALICA FLOOR TILES P. LTD ============================================================= Appearance : Mrs MAUNA M BHATT, Advocate for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ============================================================= CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI and HONOURABLE Mr. JUSTICE B.N. KARIA 17th September 2018
ORAL ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) This group of appeals arise in a similar background. We may record facts from Tax Appeal No. 1135 of 2018. The appeal is filed by the Revenue to challenge judgment of the Income Tax Appellate Tribunal, Rajkot Bench [“Tribunal” for short] dated 16th January 2018. The return of Page 1 of 4
C/TAXAP/1135/2018 ORDER the assessee for AY 2005-2006 was subjected to re-assessment. On the basis of certain materials collected by the Excise Duty prima facie suggesting evasion of excise duty, the Assessing Officer carried out such re-assessment and made additions. Eventually, Tribunal deleted the additions, upon which the appeal has been filed. We have noticed that previously such an issue had come up for consideration before this Court in Tax Appeal No. 82 of 2016 and connected appeals. The Court had dismissed the appeals preferred by the Department, in the following manner :- “8. Having heard learned advocates for the parties at considerable length at the outset, we may straightaway agree with the suggestion of the counsel for the Revenue that the present group of cases do not fall in the same category as the judgment of this Court in case of Futura Ceramics (petitioner) Ltd v. State of Gujarat reported in [2013] 40 taxmann.com 404 (Gujarat). It was the case in which, the petitioner before the High Court was a registered dealer under the Gujarat Value Added Tax Act and was liable to pay tax on the basis of its turnover. The petitioner's return for the financial year 2006-07 was scrutinized by the Assistant Commissioner of Commercial Tax. The assessee was served with the show-cause notice by the said authority indicating that he has reason to believe that taxable turnover was suppressed. This was on the basis of a show-cause notice issued by the Excise department pursuant to the raid indicating that the petitioner had suppressed sales to the tune of Rs. 5.25 crores and thereby evaded tax duty to the extent of 73.55 lacs. The Page 2 of 4
C/TAXAP/1135/2018 ORDER Assistant Commissioner of Commercial Tax therefore, prima facie held a belief that the assessee's sale of Rs. 5.97 crores (i.e. the suppressed sale of 5.25 crores coupled with excise duty element of 73.55 lacs) had escaped assessment. He accordingly, framed the assessment after rejecting the petitioner's objections. Such assessment order was challenged by the petitioner before the High Court on the ground that the Assistant Commissioner of Commercial Tax had proceeded merely on the show-cause notice issued by the Excise Department without any further verification. The Court noticed that the entire order of reassessment proceeded on the show-cause notice issued by the Excise department without any further material being brought on record. The Court held that merely because the Excise department issued such a notice, it cannot be a ground to presume that there was evasion of excise duty further implying evasion of value added tax. It was noticed that the show-cause notice issued by the Excise department had not yet culminated into final order against the petitioner and a piquant situation would arise if ultimately, such show-cause notice were to be dropped in favour of the petitioner. On this ground, the Court quashed the order of reassessment. 7. In the present case, the Assessing Officer has not proceeded on the basis of show-cause notice taking the proposals contained in such show-cause notice as having achieved finality. He has put the assessees to notice with respect to the contents of such show-cause notice issued by the Excise department and also elicited assessee's response to the same. Whether this was sufficient to enable him to frame assessment is a question, which we will answer a while later. 8. Before proceeding further, we may discard the contention of the counsel for the assessees that since the excise proceedings had not yet been finalized, the Assessing Officer could not have passed the final order of assessment. This contention would have multiple objections from us. Firstly, as is well known, the adjudication proceedings under the Central Excise Act do not come with time barring provisions unlike as in the Income Tax Act. In fact, the Adjudicating Page 3 of 4
C/TAXAP/1135/2018 ORDER authorities, under the Central Excise Act, enjoy much wider time period even for issuance of show-cause notice in case of the alleged non payment or short payment of duty is for any reason of fraud or collusion or willful misstatement or suppression of facts or contravention of the provisions of the Act with intent to evade payment of duty. 9. Under the circumstances, the Assessing Officer cannot be expected to defer completion of assessment awaiting final order of adjudication in excise proceedings at the risk of his assessment getting time barred. Even otherwise, in a given case, the material that may be brought on record in excise proceedings may be different from that which may form part of the assessment proceedings though the both may, to some extent, be common.” In the result, these Tax Appeals are also dismissed. [Akil Kureshi, J.] [B.N Karia, J.] Prakash Page 4 of 4
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