SUN PHARMACEUTICAL INDUSTRIES LTD, SPARC vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - I

The petitioner has challenged a notice dated 31.3.2008 as at Annexure “A” to the petition, by which the Assessing Officer sought to reopen the assessment of the petitioner for the assessment year 2001-02. Brief facts may be noted at the outset.

The petitioner is a company incorporated under the Companies Act, 1956. The petitioner is regularly assessed to tax. For the assessment year 2001-02, the petitioner filed its return of income on 31.10.2001 declaring income of Rs.92.81 crores (rounded off). The petitioner thereafter filed a revised return of income of Rs.92.60 crores (rounded off).

The case of the petitioner was taken in scrutiny. The Assessing Officer framed assessment under section 143(3) of the Income Tax Act, 1961 (“the Act” for short) on 28.3.2003 determining total income at Rs.112.47 crores (rounded off). The assessment was thereafter reopened on two occasions and such fresh assessments were also framed on 31.3.2005 and 29.12.2006. 4. By the impugned notice, the Assessing Officer seeks to reopen such assessment third time. Such notice is issued clearly beyond a period of four years from the end of the relevant assessment year. To reopen such assessment, the Assessing Officer recorded reasons as under: “Giving benefit of MAT credit before calculation of SCA/14219/2008 3/8 JUDGMENT interest u/s 234B. For the A.Y. 2001-02, in the original assessment order passed u/s 143(3), interest u/s 234B was calculated without giving benefit of MAT credit to the assessee. However, the went before CIT (A) who decided in order passed u/s 154, that interest u/s 234B was to be calculated after giving effect of MAT credit. Aggrieved, the department appealed before the Hon'ble ITAT against the order u/s 154, who vide order No.125/AHD/2004 dated 22.3.2007 confirmed the decision of the Ld. CIT(A). Subsequently, the case was reassessed u/s 147, and following the decision of Hon'ble ITAT, benefit of MAT credit was given to the assessee before calculation of interest u/s 234B. This order u/s 147 was audited by the Revenue Audit Party wherein it was objected that this MAT credit benefit should not have been given to the assessee on the ground that the amendment of section 234B in favour of the assessee comes into effect only from 1.4.2007. Giving benefit of Netting of Interest to the assessee while calculation of deduction u/s 80HHC : For the A.Y. 2001-02, in the original assessment order u/s 143(3), the benefit of netting was disallowed to the assessee while calculating deduction u/s 80HHC. However, Ltd. CIT(A) deleted the above addition. Department has filed an appeal before Hon'ble ITAT wherein the decision is pending till date. Meanwhile, the case was reopened u/s 147 for both the years, and following the order of Ld. CIT (A), netting benefit was allowed to the assessee in calculations. These orders u/s 147 were audited by the Revenue Audit Party wherein it was objected that the benefit of netting should not have been allowed to the assessee as Hon'ble Punjab & Haryana High Court in the case of Rani Paliwal v. CIT, [2003] (185) CTR 333) (P&H) had decided in favour of revenue, and that this decision had come after the decision of Ld. CIT (A).

On 10.7.2008, the petitioner raised several objections to the proposal on the part of the Assessing Officer to reopen the assessment. Such objections, however, were rejected by the Assessing Officer vide his order dated 17.11.2008. The petitioner, at that stage, approached this Court challenging the notice for reopening the assessment.

Appearing on behalf of the petitioner, learned counsel Shri Saurabh Soparkar, taking us through the reasons recorded by the Assessing Officer, contended that there was no failure on the part of the assessee to disclose truly and fully all material facts which occasioned escapement of income chargeable to tax. In absence of this requirement being fulfilled, the impugned notice was wholly without jurisdiction.

Counsel pointed out that the first issue with respect to giving benefit of MAT credit before calculation of interest under section 234B of the Act, was not only discussed in the original assessment, the same was concluded in favour of the petitioner for the same assessment year by virtue of a decision of the Tribunal. It was, therefore, not open to the Assessing Officer to reopen the same question, that too, without challenging the decision of the SCA/14219/2008 5/8 JUDGMENT Tribunal.

Counsel further contended that the question of giving benefit of MAT credit for the purpose of calculation of interest under section 234B of the Act has since been decided by the Apex Court in the case of Commissioner of Income Tax v. Tulsyan Nec Ltd., 330 ITR 226. 9. Counsel further submitted that even otherwise, the sole reason for reopening the assessment was an objection raised by the audit party. This by itself would not form sufficient ground for reopening the assessment. 10.With respect to second issue raised by the Assessing Officer in the reasons recorded, counsel submitted that this question also was discussed in the original assessment order. On appeal, the CIT (Appeals) ruled in favour of the assessee. In that view of the matter, reopening on such an issue also was wholly impermissible. Counsel submitted that merely because subsequently a particular view is expressed by the High Court in another case, would not be a ground to reopen the assessment in the case of the petitioner. 11.Counsel pointed out that this issue, namely, while denying deduction under section 80HHC of the Act towards interest income, the question whether the net interest or the gross interest should be disallowed, has now been settled by the Apex Court in the case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax, reported in (2012) 343 ITR 89. SCA/14219/2008 6/8 JUDGMENT 12.On the other hand, learned counsel Shri Manish Bhatt for the Department relied on reasons recorded by the Assessing Officer and opposed the petition. 13.Having thus heard the learned counsel for the parties and having perused the documents on record, we are clearly of the opinion that the notice for reopening the assessment is wholly without jurisdiction. This is so for several reasons. Firstly in the reasons recorded, it is not even an allegation that any income chargeable to tax escaped assessment on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for such assessment. In absence of any such ground, reopening of assessment beyond a period of four years from the end of relevant assessment year would be wholly impermissible. 14.In the present case, in fact, there was not only full disclosure on the part of the petitioner, both the issues which form foundation for the reasons for reopening, were at issue in the original assessment framed in case of the petitioner for the same assessment year. With respect to the first issue, namely, giving benefit of MAT credit to the assessee, the final decision was in favour of the assessee. 15.The CIT (Appeals) in an order under section 154 of the Act, ruled in favour of the assessee. Such decision, though was carried by the revenue before the Tribunal, the view of the CIT (Appeals) was confirmed.