Cliantha Research Ltd. v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 2028 (Guj-HC) : (2013) 053 (I) ITCL 0131 Income Tax Act, 1961 --Reassessment--Change of opinion Assessment under section 143(3) vis-a-vis disallowance of claim under section 80-IB(8A)--During original assessment made under section 143(3), assessing officer allowed assessee's claim under section 80-IB(8A) partly on the ground that it was doing scientific research activities on behalf of various companies. However, after completion of assessment the same was reopened on the ground that assessee was providing professional services, being analysis of clinical samples and thus, it was not entitled to deduction under section 80-IB(8A) and notice under section 148 was issued accordingly to disallow deduction under section 80-IA(8A). *Held:* Not justified. Where during original assessment under section 143(3) assessee's claim under section 80-IA(8A) was partly allowed after raising various queries for allowability of deduction under section 80-IA(8A) partly, the reopening of assessment on the ground that assessee-company was rendering professional services (analysis of clinical samples) and not during scientific research work as such, assessee was not fulfilling condition precedent to allow deduction under section 80-IA(8A), reopening of assessment was merely on change of opinion and notice issued under section 148 was to be quashed. During the original assessment, the assessing officer under his notice dated 21-10-2009 raised several queries in connection with the petitioner's return of income. [Para 11] In response to such queries and further queries which were raised by the assessing officer during the assessment proceedings, the petitioner filed several replies on 2-1-2009. [Para 12] Under yet another communication dated 11-11-2009 the petitioner, in the context of its claim of deduction under section 80-IB(8A) stated that: The assessee is engaged in providing services in the field of analysis of clinical samples for bio-equivalence, bio availability and clinical trial studies for the pharmaceutical industry. The assessee carries research work on behal of its clients which are pharmaceuticals formulation manufacturers so as to carry out detailed for bio-equivalence, bio-availability and clinical trial and analytical studies for them on the formulations provided by them. [Para 13] Under communication dated 27-11-2009, the petitioner wrote to the assessing officer and further clarified its claim. [Para 14] 'Under yet another communication dated 22-12-2009 the petitioner wrote to the assessing officer and conveyed that disallowance is not warranted in the case of the assessee as the above facts make it amply clear that the course of business between assessee-company and Ltd. Is at market rate and is not so arranged that the business transacted between them produced the assessee-company more than the ordinary profit which might be expected to arise for the purposes of claiming deduction under section 80-IB(8A). [Para 15] It was after such detailed examination of the petitioner's claim for deduction that the assessing officer framed scrutiny assessment in which he disallowed part of the petitioner's claim of such deduction. The assessing officer was of the opinion that sample storage income of Rs.13.45 lakhs generated by the petitioner would not be eligible for deduction under section 80-IB(8A). He gave detailed reasons for coming to such a conclusion. [Para 16] From the above it can be seen that the petitioner's claim for deduction under section 80-IB(8A) came for detailed scrutiny by the assessing officer in the original scrutiny assessment. Series of queries were raised by the assessing officer. All such questions were answered at length by the assessee. He filed several replies before the assessing officer. Only after considering such replies and documents accompanying such replies, assessing officer framed the assessment in such assessment order. He disallowed only a small portion of the petitioner's claim for deduction. To the extent the petitioner had claimed deduction for sample storage income, the same was disallowed, rest of the claim was accepted. By no stretch of imagination, can it be stated that the claim under section 80-IB(8A) was not examined by the assessing officer in the original assessment. Entire claim was thoroughly and painstakingly scrutinized. His queries were not restricted to sample storage income alone. For example, in his communication dated 21-10-2009 he called upon the petitioner to furnish details of transactions with various companies, such as M/s. C Ltd., L Ltd. etc. These are the companies with whom the petitioner had entered into detailed agreements for carrying out scientific research. In paragraph 4 of such notice, he called upon the petitioner to furnish note on claim of deduction under section 80-IB(8A) to produce necessary evidence in support of such claim. He also directed the petitioner to furnish note on how all the conditions laid down under Rule 18DA were fulfilled. [Para 17] In addition to such queries with respect to the entire claim, he also raised pointed queries with respect to sample storage income and miscellaneous income for which the petitioner had claimed deduction. [Para 18] In response to such queries, the petitioners had given detailed replies and produced voluminous material to support the claim of deduction. It cannot be stated by any stretch of imagination that such claim of deduction under section 80-IB(8A) was not examined by the assessing officer in the original assessment. It may be that he did not raise specific query to allowability of the claim on the premise that the petitioner was doing scientific research for and on behalf of the companies. However, merely for the failure of the assessing officer to raise such a question, would not authorize him to reopen the assessment even within the period of 4 years from the end of the relevant assessment year. Any such attempt on his part would be based on mere change of opinion. To reiterate when a claim was processed at length and after calling for detailed explanation from the assessee, the same was accepted, merely because a certain element or angle was not in the mind of the assessing officer while accepting such a claim, cannot be a ground for issuing notice for reassessment. [Para 19] In the result the petition is allowed impugned notice dated 21-3-2012 is quashed [Para 23] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2028 (Guj-HC) : (2013) 053 (I) ITCL 0131

Income Tax Act, 1961

--Reassessment--Change of opinion Assessment under section 143(3) vis-a-vis disallowance of claim under section 80-IB(8A)--During original assessment made under section 143(3), assessing officer allowed assessee's claim under section 80-IB(8A) partly on the ground that it was doing scientific research activities on behalf of various companies. However, after completion of assessment the same was reopened on the ground that assessee was providing professional services, being analysis of clinical samples and thus, it was not entitled to deduction under section 80-IB(8A) and notice under section 148 was issued accordingly to disallow deduction under section 80-IA(8A). Held: Not justified. Where during original assessment under section 143(3) assessee's claim under section 80-IA(8A) was partly allowed after raising various queries for allowability of deduction under section 80-IA(8A) partly, the reopening of assessment on the ground that assessee-company was rendering professional services (analysis of clinical samples) and not during scientific research work as such, assessee was not fulfilling condition precedent to allow deduction under section 80-IA(8A), reopening of assessment was merely on change of opinion and notice issued under section 148 was to be quashed.

During the original assessment, the assessing officer under his notice dated 21-10-2009 raised several queries in connection with the petitioner's return of income. [Para 11] In response to such queries and further queries which were raised by the assessing officer during the assessment proceedings, the petitioner filed several replies on 2-1-2009. [Para 12] Under yet another communication dated 11-11-2009 the petitioner, in the context of its claim of deduction under section 80-IB(8A) stated that: The assessee is engaged in providing services in the field of analysis of clinical samples for bio-equivalence, bio availability and clinical trial studies for the pharmaceutical industry. The assessee carries research work on behal of its clients which are pharmaceuticals formulation manufacturers so as to carry out detailed for bio-equivalence, bio-availability and clinical trial and analytical studies for them on the formulations provided by them. [Para 13] Under communication dated 27-11-2009, the petitioner wrote to the assessing officer and further clarified its claim. [Para 14] 'Under yet another communication dated 22-12-2009 the petitioner wrote to the assessing officer and conveyed that disallowance is not warranted in the case of the assessee as the above facts make it amply clear that the course of business between assessee-company and Ltd. Is at market rate and is not so arranged that the business transacted between them produced the assessee-company more than the ordinary profit which might be expected to arise for the purposes of claiming deduction under section 80-IB(8A). [Para 15] It was after such detailed examination of the petitioner's claim for deduction that the assessing officer framed scrutiny assessment in which he disallowed part of the petitioner's claim of such deduction. The assessing officer was of the opinion that sample storage income of Rs.13.45 lakhs generated by the petitioner would not be eligible for deduction under section 80-IB(8A). He gave detailed reasons for coming to such a conclusion. [Para 16] From the above it can be seen that the petitioner's claim for deduction under section 80-IB(8A) came for detailed scrutiny by the assessing officer in the original scrutiny assessment. Series of queries were raised by the assessing officer. All such questions were answered at length by the assessee. He filed several replies before the assessing officer. Only after considering such replies and documents accompanying such replies, assessing officer framed the assessment in such assessment order. He disallowed only a small portion of the petitioner's claim for deduction. To the extent the petitioner had claimed deduction for sample storage income, the same was disallowed, rest of the claim was accepted. By no stretch of imagination, can it be stated that the claim under section 80-IB(8A) was not examined by the assessing officer in the original assessment. Entire claim was thoroughly and painstakingly scrutinized. His queries were not restricted to sample storage income alone. For example, in his communication dated 21-10-2009 he called upon the petitioner to furnish details of transactions with various companies, such as M/s. C Ltd., L Ltd. etc. These are the companies with whom the petitioner had entered into detailed agreements for carrying out scientific research. In paragraph 4 of such notice, he called upon the petitioner to furnish note on claim of deduction under section 80-IB(8A) to produce necessary evidence in support of such claim. He also directed the petitioner to furnish note on how all the conditions laid down under Rule 18DA were fulfilled. [Para 17] In addition to such queries with respect to the entire claim, he also raised pointed queries with respect to sample storage income and miscellaneous income for which the petitioner had claimed deduction. [Para 18] In response to such queries, the petitioners had given detailed replies and produced voluminous material to support the claim of deduction. It cannot be stated by any stretch of imagination that such claim of deduction under section 80-IB(8A) was not examined by the assessing officer in the original assessment. It may be that he did not raise specific query to allowability of the claim on the premise that the petitioner was doing scientific research for and on behalf of the companies. However, merely for the failure of the assessing officer to raise such a question, would not authorize him to reopen the assessment even within the period of 4 years from the end of the relevant assessment year. Any such attempt on his part would be based on mere change of opinion. To reiterate when a claim was processed at length and after calling for detailed explanation from the assessee, the same was accepted, merely because a certain element or angle was not in the mind of the assessing officer while accepting such a claim, cannot be a ground for issuing notice for reassessment. [Para 19] In the result the petition is allowed impugned notice dated 21-3-2012 is quashed [Para 23]