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SCA/8176/2000 8/ 8 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 8176 of 2000
For
Approval and Signature:
HONOURABLE
MR.JUSTICE D.A.MEHTA Sd/-
HONOURABLE
MR.JUSTICE H.B.ANTANI
Sd/-
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ? NO
2
To be
referred to the Reporter or not ? NO
3
Whether
their Lordships wish to see the fair copy of the judgment ? NO
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ? NO
5
Whether
it is to be circulated to the civil judge ? NO
=========================================================
GUJARAT
CARBON & INDUSTRTIAL LTD. - Petitioner(s)
Versus
JT.COMMISSIONER
OF INCOME TAX - Respondent(s)
===============================================================
Appearance :
MR
MJ SHAH WITH MR JP SHAH for Petitioner(s) : 1,
MR MANISH R BHATT
for Respondent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MR.JUSTICE H.B.ANTANI
Date
: 19/06/2008
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
1 This
petition challenges notice issued under section 148 of the Income Tax
Act,1961 (the Act) dated 19.03.1999 for Assessment year 1988-89.
2 The
petitioner, a Public Limited Company is engaged in the business of
manufacturing Carbon-black. On 17.03.1998 search proceedings took
place under section 132 of the Act. After detailed inquiry calling
for various details and evidence on the basis of discrepancies found
during the course of search operation the assessing officer recorded
as under :
?SSince the assessee has
already taken into account all the expense relating to purchase,
mfg. And sales, as such whole of the amount of Rs.3,26,69,000/- is
considered to be its sales of C.B.made outside its regular books of
accounts.
Further, during search
operation as per physical verification of stock inventory prepared it
was found that excess stock of finished goods (C.B.) was found to
the extent of 136.234 M.T.which is valued at ? Rs.21,36,131.00.
This excess stock of C.B. Is considered to be part of suppression of
yield of C.B. As described in previous paras of this order, hence a
sum of Rs.21,36,131.00 is set off against the total unaccounted sale
consideration of yield of C.B. worked out above. Thus in nutshell a
net addition of Rs. 3,05,42,869.00 (3,26,69,000 ? 21,36,131) is
made in this account??.
3 The
assessee carried the matter in Appeal before Commissioner (Appeals)
who gave partial relief. Against the order of Commissioner
(Appeals) both the assessee and the department preferred appeals
before the Tribunal. To complete the chain of events it may be noted
that during pendency of the said appeals the petitioner assessee took
benefit of Karvivad Samadhan Scheme.
3 The
learned Advocate for the petitioner-assessee submitted that the
impugned notice has been issued beyond the period of four years from
the end of the Assessment Year in question viz. Assessment Year
1988-89; that there is no violation on the part of the assessee as
required by the Proviso to Section 147 of the Act, and the
department has not even stated that there is any failure as
stipulated by the Proviso to Section 147 of the Act as can be seen
from the reasons recorded which form part of the Affidavit-in-Reply
tendered by the respondent authority. That in fact, in relation to
the so called excess stock of carbon-black valued at Rs.21,36,131/-
the authorities had after application of mind and scrutiny given
the set-off as can be seen from the discussion in the assessment
order and hence the impugned notice was bad in law. In support of the
submissions made reliance has been placed on the following two
decisions of this Court :
Mohamed Nasim Abdul Razak
Mistry V/s. Wealth Tax Officer – (1995) 216 ITR 104.
Swastik Engineering And
Manufacturing Co. Pvt. Ltd. V/s. Income Tax Officer ? (1991) 189
ITR 667.
4. On
behalf of the respondent authority Mr. M.R.Bhatt, learned Senior
Standing Counsel submitted that as could be seen from the reasons
recorded, during course of search and seizure proceedings under
section 132 of the Act the value of excess stock of carbon-black
amounting to Rs.21,36,131/- was found but the assessee had neither
shown the sale of such stock of finished goods nor was the value of
the same shown as part of closing stock as on 31.03.1988. Hence,
there was failure on the part of the petitioner-assessee to disclose
fully and truly all material facts relevant for the purpose of
assessment and respondent authority had rightly exercised
jurisdiction under section 147 of the Act.
5. The
reasons recorded by the assessing officer read as under :
?SReasons for the belief
that the income has escaped assessment.
The assessee is a limited
company dealing in the manufacturing of carbon black. The assessment
u/s.143(3) was finalised on 30.12.96 at a total income of
Rs.4,98,26,170/- as against returned income of Rs.2,35,67,582/-.
A search action u/s. 132 was
carried out in this case on 17.03.1988. During the search, a
detailed inventory of stock lying in the factory premises of the
assessee was prepared. Accordingly, a difference was found in the
stock found as per physical verification and stock as per books of
account. The physical stock of raw material and finished goods was
found to be excess than the stock as per books of account on the
date of search by Rs.26,59,600/-. Out of total excess stock found,
excess stock of finished goods (carbon black) weighing 136.234 MT
valued at Rs.21,36,131/- was found.
As per order dated 30.12.96,
addition of Rs.3,26,69,900/- was made on account of low yield of
carbon black. However, the value of excess stock of carbon black of
Rs.21,36,131/- found at the time of search was reduced from the
addition on account of low yield considering that the excess stock
of carbon black found was part of the low yield determined. No
separate addition on account of excess stock found of carbon black
was made.
A perusal of the case records
reveals that the assessee has neither shown the sale of this stock of
finished goods during the period from 17.03.1988 nor it has shown
the value of the same as part of the closing stock as on 31.03.1988.
In view of the above, I have
reason to believe that the income of Rs.21,36,131/- has escaped
assessment. In my opinion, this is a fit case for reassessment u/s.
147 of the I.T.Act, 1961. Therefore, notice u/s. 148 is being issued
for making reassessment u/s.147 of the I.T.Act, 1961 in this case??.
6. On
going through the aforesaid reasons it is apparent that the assessing
officer is conscious while recording reasons for proposed reopening
that as per assessment order dated 30.12.1996 addition to the tune of
Rs.3,26,69,900/- was made on account of low yield of carbon-black and
from the said amount the value of excess stock of carbon-black to
the tune of Rs.21,36,131/- was reduced. This indicates that
assessing officer, while framing assessment order had applied his
mind to the aforesaid item relatable to value of excess stock of
carbon-black.
7. In
fact, as can be seen from the extract reproduced hereinbefore, there
is a categorical finding that the whole of the amount of
Rs.3,26,69,000/- has been considered to be sales made by the assessee
outside Regular Books of Accounts. The excess stock of finished
goods of carbon-black to the extent of Rs.21,36,131/- is considered
to be a part of the aforesaid suppressed sales of carbon-black and
has been given set-off by making a net addition of
Rs.3,05,42,869/-.
8. In
the aforesaid set of facts and circumstances of the case it is not
possible to state that there is any failure on part of the assessee
to fully and truly disclose all material facts relevant for the
assessment of the assessment year in question. At the most, it can be
termed to be a case wherein the assessing officer has formed an
incorrect opinion as per opinion of the successor assessing officer.
In the circumstances, the successor assessing officer cannot treat
the assessee to be in default of non-disclosure. Considering the fact
that admittedly the impugned notice under section 148 of the Act is
issued beyond a period of four years from the end of the relevant
Assessment Year the said notice is required to be quashed.
9. For
the reasons stated hereinbefore, notice under section 148 of the Act
dated 19.03.1999 for Assessment Year 1988-89 is hereby quashed. The
petition is allowed accordingly. Rule made absolute. There shall be
no order as to costs.
Sd/- Sd/-
(D.A.
Mehta, J.) (H.B. Antani, J.)
M.M.BHATT
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