THE ASST. COMMISSIONER OF INCOME TAX vs. GENO PHARMACEUTICALS LTD, THROUGH ITS MANAGING DIRECTOR

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TXA/76/2012HC BombayHCBM05002817201214 February 2013Author: V. M. KANADE,U. V. BAKRE7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed all four appeals. Regarding Tax Appeals 77 and 78 of 2012, concerning reopened assessments for AY 2005-06 and 2006-07, the Court found no substantial question of law. The ITAT had held that notice under Section 143(2) was mandatory in reopened cases, relying on Supreme Court judgments. The Court noted that the argument regarding Section 292BB was not canvassed before the ITAT. For Tax Appeals 75 and 76 of 2012, concerning AY 2007-08 and 2008-09, the Court held that the CIT(Appeals) and ITAT had reached concurrent findings of fact that the Assessee was eligible for deduction under Section 80IB. As no substantial question of law was raised, these findings were not interfered with. The operative direction was the dismissal of all appeals.

What were the facts?

The Assistant Commissioner of Income Tax (Revenue) challenged orders of the Income Tax Appellate Tribunal (ITAT) concerning Geno Pharmaceuticals Ltd. (Assessee) for Assessment Years (AY) 2005-06, 2006-07, 2007-08, and 2008-09. The Assessee claimed deduction under Section 80IB for a new tablet manufacturing unit. This claim was initially accepted for AY 2004-05 and 2006-07. However, for AY 2007-08 and 2008-09, the Assessing Officer disallowed the deduction, deeming it an expansion, not a new unit. Assessments for AY 2005-06 and 2006-07 were reopened under Section 147, and the 80IB claim was disallowed. The Commissioner of Income Tax (Appeals) allowed the Assessee's appeals in all cases. The ITAT upheld these decisions. The Revenue's appeals to the High Court concerned the ITAT's findings on the mandatory nature of Section 143(2) notice in reopened cases and the eligibility for Section 80IB deduction.

What were the issues?

1. Whether the ITAT erred in holding that the issuance of a notice under Section 143(2) is mandatory for assessments made under Section 143(3) read with Section 147, despite the assessee appearing and cooperating in proceedings (Tax Appeals 77 & 78 of 2012)? - Assessee's contention: The ITAT correctly held that notice under Section 143(2) is mandatory, relying on Supreme Court judgments in R. Dalmia vs. CIT. The ITAT considered relevant provisions and Apex Court judgments. - Revenue's contention: The ITAT's order is contrary to Section 292BB, which deems notices duly served if the assessee appears or cooperates. This aspect was not canvassed before the ITAT. 2. Whether the ITAT and CIT(A) erred in holding that the Assessee was eligible for deduction under Section 80IB for the AYs 2007-08 and 2008-09 (Tax Appeals 75 & 76 of 2012)? - Assessee's contention: Not recorded. - Revenue's contention: Not recorded. The Revenue's appeals were dismissed on the ground that no substantial question of law was raised and there were concurrent findings of fact.

Which sections of the Income-tax Act were involved?

Section 80IB,Section 143(3),Section 147,Section 148,Section 143(2),Section 292BB

AI-generated summary — verify with the full judgment below

1 Txa 75,76,77,78-12 IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEALS NO. 75, 76, 77 & 78 OF 2012

The Asst. Commissioner of Income Tax, Circle 2(1) Panaji, having office at Aayakar Bhavan, Patto-Plaza, Panaji, Goa. ….. Appellant. V/s. Geno Pharmaceuticals Ltd., through its Managing Director, Thivim Industrial Estate, Karaswada, Mapusa, Goa. …... Respondent.

Ms. Asha Dessai, Advocate for the appellant. Mr. Nishant Thakkar and Ms. Gauri Dalvi, Advocates for the respondent. CORAM : V.M. KANADE, U.V. BAKRE, JJ. Date : 14th February, 2013. P.C :-

All these appeals can be disposed of by a common order, since the issue involved in Tax Appeals No. 77 and 78 of 2012 is common and also the issue involved in Tax Appeals No.75 and 76 of 2012 is the same, so also the parties are same.

2 Txa 75,76,77,78-12

2.

In Tax Appeal Nos. 77/2012 and 78/2012, the Assistant Commissioner of Income Tax is challenging the Judgment and Order passed by the Income Tax Appellate Tribunal, (ITAT) Panaji Bench, Panaji. Whereas in Tax Appeals No.75/2012 and 76/2012, the Assistant Commissioner of Income Tax is challenging the order passed by the ITAT, whereby the ITAT was pleased to hold that the respondent was eligible to get deduction under Section 80IB of the Income Tax Act, 1961 (“Act” for short) for the Assessment Year (AY) 2007-08 and for AY 2008-09. 3. Brief facts which are relevant for the purpose of deciding these four appeals are as under : The respondent company, Geno Pharmaceuticals Ltd., is a domestic company, engaged in the business of manufacture and sale of pharmaceutical products in the form of liquid oral, capsules, ointments, tablets, etc. According to the respondent, it set up a new tablet manufacturing unit-II during the previous year, namely relevant AY 2004-05 and claimed deduction under Section 80IB of the Act and it filed the original return of income for the AY 2005-06 on 20.10.2005. The assessee claimed that in the 3 Txa 75,76,77,78-12 AY 2004-05, in view of the setting up of a new tablet unit-II division, it was entitled for the deduction under Section 80IB of the Act. Thus the claim of the assessee was accepted under Section 143(3) of the Act. For the next AY also when the assessee filed original return of income for the AY 2006-07, it claimed benefit under Section 80IB and this claim was also accepted under Section 143(3) of the Act. So for two years, the said claim was accepted. However, for the AY 2007-08, according to the Revenue, on scrutiny, it was noticed by the Assessing Officer that this was only expansion of the existing unit for increasing the production of tablets and not a new unit and accordingly, the claim under Section 80IB was disallowed for the AY 2007-08 and for the AY 2008-09 also it was disallowed under Section 143(3) on the same ground. Thereafter, for the reasons disclosed in AY 2007-08, the assessment for the AY 2005-06 was reopened by issuing notice under Section 148 and reopened proceedings were completed under Section 143(3), read with Section 148 on 20.12.2010, disallowing the assessee's claim under Section 80IB. Similarly, for the AY 2006-07 also the case was reopened by issuing notice under Section 148 and the reopened proceedings were completed under Section 143(3) read with Section 148 of the 4 Txa 75,76,77,78-12 Act on 20.12.2010 and the assessee's claim under Section 80IB was disallowed. In respect of both the reopened cases for the AY 2005-06 and 2006-07, the respondent filed appeal before the Commissioner of Income Tax (Appeals), who was pleased to allow

the appeal and delete the deduction made by the Assessing Officer on the ground that the new unit set up by the assessee is eligible for the claim under Section 80IB. The Revenue went in appeal before the Hon'ble ITAT. However, ITAT dismissed the appeal by order dated 11th May, 2012 and accepted the new ground which was raised by the respondent, namely that the notice under Section 143(2) of the Act is mandatory and it is not a procedural irregularity. Similarly, for the AY 2006-07 also the same orders were passed by the Commissioner of Income Tax (Appeals) and the ITAT. The Assistant Commissioner of Income Tax has filed Tax Appeal No.78/2012 in respect of the orders passed for AY 2005-06, which was reopened. In respect of the reopening of the assessment in respect of AY 2006-07, the Assistant Commissioner challenged the order of ITAT by filing Tax Appeal No.77/2012. In respect of other two appeals, namely Tax Appeal No.75/2012 and Tax Appeal No.76/2012 for the AY2007-08, the claim of the 5 Txa 75,76,77,78-12 assessee was disallowed under Section 143(3) of the Act. However, the CIT (Appeals) allowed the appeal of the respondent and this order was confirmed by the Hon'ble ITAT. Both these orders are challenged by filing Tax Appeal No.75/12. For the AY 2008-09 orders passed by the CIT (Appeals) and the ITAT which were passed in favour of the respondent, Assistant Commissioner of Income Tax has filed Tax Appeal No. 76/2012. 4. So far as Tax Appeals No.77/2012 and 78/2012 are concerned, in both these appeals, the ITAT has held that the issuance of notice after reopening of the case was mandatory and this order is under challenge. It is contended that the said order is contrary to the provisions of Sections 292BB which was introduced by the Finance Act 2008 w.e.f. 01.04.2008, in which it is stated that in a case where an assessee has appeared in any proceedings or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of the said Act which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of the said Act. Perusal of the order of the ITAT reveals that this aspect was not canvassed before the ITAT.

6 Txa 75,76,77,78-12

5.

Apart from that, it is an admitted position that no notice under Section 143(2) had been issued while making assessment under Section 143(3) read with Section 147. The Apex Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income-Tax, report in 229 ITR 383 has held 7 Txa 75,76,77,78-12 filed in compliance with the notice issued under Section 148. 6. Under these circumstances, no case is made out for interfering with the Tax Appeals No.77/2012 and 78/2012 since no substantial question of law is raised in both the appeals.

7.

So far as Tax Appeals No.75/2012 and 76/2012 are concerned, the CIT (Appeals) and the Hon'ble ITAT have recorded concurrent finding of fact that from the material which was on record, the assessee had established that it was entitled to claim the deduction under Section 80IB of the Act and as such, it will not be possible to interfere with the finding of fact recorded by both the Authorities below. No substantial question of law is raised in these appeals as well.

8.

All these four appeals are, accordingly, dismissed. No costs.

V.M. KANADE, J.

U.V. BAKRE, J ssm.

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