The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) declared the reopening of the assessment under Section 147 of the Income Tax Act,1961,invalid due to the lack of fresh tangible material.
Cadila Pharmaceuticals Limited,appellant-assessee,was a manufacturer of pharmaceuticals and hospital products. It initially filed a return for the assessment year 2011-12 on 30.11.2011, declaring Nil income, and later revised it on 04.05.2012 to show a loss of Rs. 7,06,58,882. The assessee claimed a deduction of Rs. 53,25,79,553 under section 80IB(4) for its Jammu Unit.
On 16.02.2016, the assessment was completed, and several disallowances were made, including adjustments for transfer pricing and deductions under sections 36(1)(iii), 35(2AB), 14A, and 80IB. A key issue was the failure to allocate Research and Development ( R&D ) expenses to the Jammu Unit. The assessee also claimed Rs. 6,90,83,575 as bad debts but did not provide sufficient evidence for Rs. 1,76,47,978 of the debts.
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The assessment was reopened on 23.03.2018, and a notice under section 148 was issued. The assessee filed a return on 02.05.2018 but disagreed with the reopening. Further disallowances for R&D expenses and bad debts were made by the Assessing Officer ( AO ).
The assessee appealed to the Commissioner of Income Tax ( Appeals ) [CIT(A)], challenging the reopening. The CIT(A) partly allowed the appeal, and the assessee appealed before the tribunal.
The tribunal reviewed the submissions and materials on record. Referring to the case of Shanti Enterprise, the Gujarat High Court held that reopening an assessment within four years, without any fresh material, was invalid. It stated that merely repeating an examination of issues already addressed in the original assessment was impermissible. The Court highlighted that reopening in such cases amounted to a change of opinion, which is not allowed under the law.
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The appellate tribunal also relied on the Bombay High Court’s decision in Lalitha Chem Industries, where it was held that reopening based on a different opinion, without new tangible evidence, was not valid. In that case, all material facts were disclosed during the original assessment, and the allocation of expenses was scrutinized while granting the 80IB deduction.
The two member bench comprising Suchitra Kamble ( Judicial Member ) and Makarand Vasant Mahadeokar ( Accountant Member ) concluded that in the present case, the issues were already examined during the original assessment under Section 143(3), and no new material was brought forward to justify reopening. The assessee had provided separate accounts and evidence during the original proceedings, which were duly verified. Thus, the reopening was declared invalid and void in law.
Ultimately,the appeal filed by the assessee was allowed.
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