Asstt. CIT vs Geno Pharmaceuticals Ltd.

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. 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 u/s 80IB of the Income Tax Act, 1961 (''Act'' for short) for the Assessment Year (AY) 2007-08 and for A.Y. 2008-09.

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 A.Y. 2004-05 and claimed deduction u/s 80IB of the Act and it filed the original return of income for the A.Y. 2005-06 on 20-10-2005. The assessee claimed that in the A.Y. 2004-05, in view of the setting up of a new tablet unit-II division, it was entitled for the deduction u/s 80IB of the Act. Thus the claim of the assessee was accepted u/s 143(3) of the Act. For the next AY also when the assessee filed original return of income for the A.Y. 2006-07, it claimed benefit u/s 80IB and this claim was also accepted u/s 143 of the Act. So for two years, the said claim was accepted. However, for the A.Y. 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 u/s 80IB was disallowed for the A.Y. 2007-08 and for the A.Y. 2008-09 also it was disallowed u/s 143(3) on the same ground. Thereafter, for the reasons disclosed in A.Y. 2007-08, the assessment for the A.Y. 2005-06 was reopened by issuing notice u/s 148 and reopened proceedings were completed u/s 143(3), read with section 148 on 20-12-2010, disallowing the assessees claim u/s 80IB. Similarly, for the A.Y. 2006-07 also the case was reopened by issuing notice u/s 148 and the reopened proceedings were completed u/s 143(3) read with section 148 of the Act on 20-12-2010 and the assessees claim u/s 80IB was disallowed. In respect of both the reopened cases for the A.Y. 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 u/s 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 u/s 143(2) of the Act is mandatory and it is not a procedural irregularity. Similarly, for the A.Y. 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 A.Y. 2005-06, which was reopened. In respect of the reopening of the assessment in respect of A.Y. 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 A.Y. 2007-08, the claim of the assessee was disallowed u/s 143 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 A.Y. 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.

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. 1-4-2008, 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.

Apart from that, it is an admitted position that no notice u/s 143(2) had been issued while making assessment u/s 143(3) read with section 147. The Apex Court in the case of National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, has held that the Tribunal has discretion to allow or not to allow a new ground to be raised. But in a case where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The ITAT, after relying on the judgment of the Apex Court in R. Dalmia and Another Vs. Commissioner of Income Tax, , came to the conclusion that issuance of notice u/s 143(2) was mandatory. The ITAT has taken into consideration the relevant provisions and has also taken into consideration the judgment of the Apex Court and relying on the said judgments, the ITAT has held that notice u/s 143(2) is mandatory and in the absence of such service, the Assessing Officer cannot proceed to make an inquiry on the return filed in compliance with the notice issued u/s 148.

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.

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 u/s 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. All these four appeals are, accordingly, dismissed. No costs.