HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved/Chief Justice's Court 1. Case :- WRIT TAX No. - 1402 of 2004 Petitioner :- M/S. Ginni Filaments Ltd. Respondent :- Commissioner, Of Income Tax-I, Agra Petitioner Counsel :- S.K. Garg Respondent Counsel :- Sc.,A.N. Mahajan,B.J. Agarwal,D.Awasthi,G.Krishna,R.K. Upadhyay,S. Chopra 2. Case :- WRIT TAX No. - 1403 of 2004 Petitioner :- M/S. Ginni Filaments Ltd. Respondent :- Commissioner, Of Income Tax-I, Agra Petitioner Counsel :- S.K. Garg Respondent Counsel :- Sc.,A.N. Mahajan,B.J. Agarwal,D. Awasthi,G. Krishna,R.K. Upadhyaya,S Chopra Hon'ble Ferdino Inacio Rebello,Chief Justice Hon'ble Prakash Krishna,J.
1. These two petitions were heard together and are being disposed of by a common judgment. They arise out of proceedings initiated under section 147 of the Income Tax Act against the petitioner for the assessment years 2000-2001 and 2001-2002.
2. The petitioner is a public limited company registered under the Companies Act. It is engaged in the business of manufacturing of yarn and knitted fabrics from its industrial undertaking situate in District Mathura. The petitioner claims that it is a 100% Export Oriented Unit,(the EOU) and its income is exempt under section 10 B of the Act. For the relevant assessment years, the assessments were completed under section 143(1). Along with the Income Tax Return, audited statement of account for the relevant assessment years along with the report of the statutory auditors under the Companies Act, Tax Audit Report under section 44-AB of the Act and statement showing computation of income were filed by the petitioner. Subsequent thereto, notices for reassessment for these two years were issued by the Assessing Officer on the ground that the income has escaped assessment to tax. In response to the notice, returns of income have been filed. A copy of the reasons recorded by the Assessing Officer was served on the petitioner. The present petitions have been filed questioning the legality and validity of the initiation of reassessment proceedings on the ground that there is no sufficient material on the record to form a reason to believe that income of the petitioner has escaped assessment.
3. In the counter affidavit, the Department has sought to justify its stand. The claim of the petitioner that it is 100% EOU and is covered under the provisions of Section 10 B of the Act has been disputed.
4. Heard Shri S.K.Garg along with Shri Ashish Bansal learned counsel for the petitioner and Shri Ashok Kumar, learned counsel for the respondent.
5. Shri Garg raised the following points for determination in the present writ petitions:-
(I) A notice dated 13.5.2003 was issued earlier on the basis of the reasons recorded on 12.5.2003. The said notice was withdrawn and thereafter the impugned notice dated 6.6.2003 was issued. The impugned notice was issued on the basis of the reasons already recorded on 12.5.2003 and thereafter no fresh reasons were recorded and it is thus vitiated. In substance, the argument is that no fresh reasons prior to the issuance of the notice dated 6.6.2003 were recorded and therefore, the said notice is bad.
(ii) The objections raised by the Department with regard to the valuation of closing stock is no reason for initiation of reassessment proceeding. The accounts have been maintained as per the prescribed Accounting Standard. The Accounting Standard does not provide for the inclusion of Central Sales Tax (the CST), and excise duty in the value of the goods/raw material in the closing stock. The element of CST instead of being charged to the related profit and loss account, was being accounted for separately under the heard "CST Receivable" and in this manner the levy of CST did not form part of its "cost" and the profit and loss account. Similarly the excise duty was not payable by the petitioner as it is an EOU(Export Oriented Unit) unless the manufactured goods are sold in the local market. Resultantly, there is no material to form a belief that the income of the petitioner has escaped assessment.
6. In contra, Shri Ashok Kumar learned counsel for the respondent submits that the earlier notice dated 13.5.2003 was withdrawn as there was formal defect therein. The said notice by mistake did not bear the rubber stamp impression below the initials of the assessing officer. On objection being raised by the petitioner, it was thought prudent to withdraw the same and issue a fresh notice.
7. In reply to the second point, the learned counsel for the respondent submits that as per section 145-A of the Act as introduced by the Finance Act No.2 of 1998 with effect from 1.4.1999, the petitioner was statutorily required to value the purchase and sale of goods accordingly. The said section requires the inclusion of the amount of tax/duty/cess or fee actually paid by the assessee in the closing stock of goods. This having been not done by the assessee, it is a clear case that the account books have not been maintained as per requirements of the Act and therefore, it is reasonable to believe that the income of the petitioner has escaped assessment.
8. Considered the respective submissions of the counsel for the parties. So far as the first point is concerned, it will not detain us any further. On a perusal of copy of the notice dated 13.5.2003 it would show that the said notice was perfectly in order except that it did not contain the rubber stamp of the Assessing Officer. In all material respects there was no defect in it. However, an objection was raised by the petitioner vide objection dated 6.6.2003 that in the said notice the designation of issuing authority has not been mentioned and as such the notice is in complete and bad in law.
9. Realising the defect pointed out by the assessee, with a view not to join on this issue, the assessing officer rightly thought it fit to issue a fresh notice by removing the defect which was there in the earlier notice. Every quasi judicial authority has power to rectify a mistake.
10. The objection of the petitioner is not that the assessing officer could not issue the second notice. The objection is that on the reasons recorded on 12.5.2003 the second notice could not be issued. It is nothing but an objection just for the sake of objection. The mandate of law is that there should be recorded reasons at the time of the initiation of reassessment proceedings which is there in the present case. There seems to be no logic in the petitioner's argument that as no fresh reasons were recorded therefore the impugned notice is bad. At least no principle of law or statutory provision or case law was shown by the petitioner before us to substantiate its above stand.
11. Had there been a concluded proceeding on merits on the basis of the reasons recorded on 5.5.2003 an assessee could possibly raise such an objection. Section 147 authorises an Assessing Officer subject to provision of Section 148 to 153 to assess or reassess escaped assessment, if the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment. Admittedly the reasons exists on the record for initiation of reassessment proceeding. The said requirement of law is fulfilled in this case. We therefore, find no substance in the above argument and the same is untenable in law.
12. So far as the second point is concerned, the facts which are not in dispute may be noted. The petitioner along with its income tax return filed copies of the audited statement of account for the relevant assessment year. Its relevant portion for present purposes as has been reproduced in paragraph 6 of the writ petition is reproduced below:
12.(a) ......... ..........
(b) Details of deviation, if any, There are following deviation from
from the method of the method of valuation valuation prescribed under prescribed under section 145 A
section 145 A,and the a) Purchase of goods exclude effect thereof on the Central Sales Tax,
profit or loss. b) Sale of goods exclude tax, wherever applicable.
c) Stock of raw material and stores & spares exclude
Central Sales Tax.
d) Purchase and stock of Fuel exclude Duty Drawback, wherever applicable.
The above deviations have no effect on the profit or loss of the assessee."
13. The return was processed under section 143(1) of the Act. The reasons recorded by the Assessing Officer dated 12.5.2003 giving rise to the initiation of reassessment proceedings has been annexed as annexure-11 to the writ petition, wherein, in substance, it has been mentioned that the assessee has not taken into account the CST paid by it on purchases of raw materials while valuing the closing stock. It has paid a sum of Rs.61,68,000/- as CST. Secondly, the excise duty amount has not been included while valuing the closing stock. A sum of Rs.21,35,000 was paid as excise duty. The assessee has not correctly valued their closing stock and it has under valued it by excluding the CST and the excise duty paid there on, its income has escaped assessment. The English version of reasons as done by the petitioner, in the written arguments for the assessment year 2000-2001 is reproduced below:
"Assessment year 2000-01 Ginni Filaments Ltd. Mathura Road, Chata, Mathura Reasons for initiating proceedings under section 147 Dt.12.5.2003 Assessee has filed the return for the assessment year 2001-2002 on 21.11.2000 showing a loss of Rs.6,53,73,867.
From a perusal of column no.12(a)(b) of the Audit Report as has been referred to in the return form, it is evident that the assessee has made following mistakes in valuation of closing stocks under section 145 of the Act-
a- In the valuation of raw materials, CST which has been paid on purchases, has not been included. In this manner, the assessee has not included in the valuation, the payment of CST which has been made by it on purchases of raw materials, stores and and spares.
From the particulars of closing stocks of the assessee, it is seen that in this year following are the closing stocks -
(figures in thousands) 1 Raw materials 255118 2 Stock and Spare parts 22983 3 Stock in process 30343 3074444 According to the aforesaid, the assessee had paid CST amount to Rs.6167 (000) on the stock of 3074444 (000), which has not been included in the valuation of closing stock, which is a part of the value of closing stock. Thus the assessee is under valued the closing stock by a sum of Rs.6167000. Had the said amount being included in the value of closing stock, there would have been corresponding additional income, which has already been paid by the assessee on the purchases. Value of stock was higher by a sum of Rs.6167000, but by under statement of valuation there is an understatement of income which has escaped assessment.
From the basis of valuation of stock as adopted by the assessee, it is evident that it has not included excise duty on finished goods, in the valuation of the same as per section 145A of the Act, although it is incurred as soon as the goods are manufactured and become ready for sale." The petitioner's contention is that its unit is export-oriented unit (EOU) which is exempt from excise duty but from the records submitted by it, it is seen that it has been selling approximately 30% of goods produced by it in India and it paid excise duty on the same. It was explained that on its goods excise duty is payable up to 7.30% to 13% in different periods. Therefore, by adopting an average of 10%, which will be calculated at the time of assessment keeping in view the period and excise duty payable for the said period. As per section 145(A) of the Act, whatever expenses which include excise duty and other taxes also, are incurred in manufacturing of goods, the same should be included in the valuation of closing stock, which has not been done by the assessee. As the assessee is selling only 30% of its goods in India on which excise duty is payable. Value of closing stock of finished goods has been shown at Rs.7111,86,000, 30% of which comes to Rs.213540 and on sum incurred, excise duty works out to Rs.21350000. The assessee has not included this incurred excise duty in the valuation of closing stock of finished goods. In this manner assessee's income has been assessed at a figure lesser by Rs.21350000".
14. Challenging the initiation of reassessment proceeding that these reasons are not valid reasons objection was filed before the assessing officer which has been rejected by the impugned order dated 28.6.2004. The court was taken through the order dated 28.6.2004. We were also taken through the other documents to show that the petitioner being 100% EOU will get reimbursement of CST by Development Commissioner and NEPZ, Noida. Similarly, the petitioner will get back excise duty paid by it on the finished goods exported outside India.
15. The very fact that the petitioner is 100% EOU as mentioned herein above has been disputed in the counter affidavit. For the purposes of the present case it is not necessary to enter into the controversy whether the petitioner is a 100% EOU or not. The said issue is not the subject matter of the writ petition. For the purposes of the disposal of the writ petition, we assume that the petitioner is a 100% EOU as presently entirely a different controversy I.e the validity of very initiation of reassessment proceeding is under consideration.
16. The scope of interference by High Court at this stage of the proceeding under section 147 is limited one. Time and again it has been laid down that sufficiency of material is not to be examined at this stage of the proceedings. The court is required to test as to whether there is any material on the basis of which a belief that taxable income of an assessee has escaped assessment can be formed or not.
17. It is admitted to the petitioner that it has not included the CST paid by it on the purchases of raw material while valuing the closing stock.
18. Section 145-A of the Act along with the Explanation reads as follows.
" 145A. Notwithstanding anything to the contrary contained in section 145:-
(a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be-
(I) in accordance with the method of accounting regularly employed by the assessee; and (II) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.
Explanation- For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment;"
19. The aforesaid section was introduced by Finance Act No. 2 of 1998 with a view to set at rest a highly debated issue as to whether the amount of tax paid should be included or not in the valuation of closing stock. The issue relating to whether the value of the closing stock of the inputs were in progress and finished goods must necessarily include the elements for which MODVAT credit is available, has been a matter of considerable litigation over the years. The aforesaid section was introduced on the statue book by way of clarification and to set at naught the divergent views. The Department has also issued a circular No. 772 dated 23.12.1998 stating the above. A bare perusal of the aforesaid section would show that it contains two clauses (a) and (b). These two clauses are required to be read conjointly and they provide that in addition to the method of accounting regularly employed by the assessee, the amount of tax, duty etc. actually paid or incurred by the assessee to bring the goods to the place of its location has to be included. The Explanation further clarifies the position that any tax, duty, cess etc. shall be included notwithstanding any right arising as a consequence to such payment.
20. An Explanation is at time appended to explain the meaning of words contained in the section. It becomes a part and parcel of the enactment. Sometime, its purpose and object, is relevant to construe it. An Explanation, normally should be so read as to harmonize with and clear up any ambiguity in the main section and should not be construed so as to widen the ambit of the section. See Bihta Co-operative Development and Cane Marketing Union Ltd. and another versus Bank of Bihar AIR 1967 SC 389. The relevant observation is reproduced below:
" The Explanation must be read so as to harmonize with and clear up any ambiguity in the main section and should not be construed so as to widen the ambit of the section. "
21. In Sundoram Pillai versus Pattabiraman, Fazal Ali J, culled out from earlier cases the following as objects of an Explanation to a statutory provision:
(a) to explain the meaning and intendment of the Act itself,
(b) where there is any obscurity or vagueness in the main enactment, to clarify the same as to make it consistent with the dominant object which it seems to sub serve.
(c ) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful.
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and
(e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.
22. The said Explanation is very widely worded and leaves no room of doubt in the matter. The words "actually paid or incurred" used in clause (b) of section 145-A clearly casts an obligation on an assessee to include in the cost of raw material, the tax, duty, cess etc. paid thereon, for the purposes of the Act. Above interpretation of Section 145-A is further fortifyed by the plain language of the Explanation. The intention of the legislature was to provide and prescribe a clear cut and uniform method for valuation of closing stock, free from any confusion.
23. The argument of the petitioner that the petitioner would be entitled to get the reimbursement of the CST and excise duty, in some form or the other, even if it is accepted even then the Explanation attached to Section 145-A obliges the inclusion of tax, duty, cess or fee on the cost of the raw material paid by the assessee.
24. The petitioner contended that CST has not been considered in the valuation of stock of raw material, as the petitioner being an EOU gets full reimbursement of the same from Development Commissioner, by way of incentive. The CST is not charged as a "cost" to the Profit & Loss Account, instead it is debited to "CST receivable account" wherein reimbursement made by the Development Commissioner are also credited and unrecovered part of the same is carried forward in the Balance Sheet.
As regards Excise Duty, the petition is not required to pay the same by virtue of it being an 100% EOU in view of notification No. 125/84-CE dated 26.5.1984. The liability for excise duty is neither incurred nor required to be paid.
25. The aforesaid objection of the petitioner have been rejected by the impugned order and in our view rightly so in view of Section 145-A of the Act.
26. On a plain reading of Section 145-A, the aforesaid arguments are untenable in law.
27. In view of Section 145-A, there is no justification for not including the excise duty in the closing stock on the ground that the excise duty is refundable by the Central Government under a scheme if the finished goods are exported outside India. Suffice it to say that as per the provisions of the Central Excise Tariff Act, 1995, the duty is on excisable goods which are manufactured or produced in India. In Shinde Brothers v. Deputy Commissioner, AIR 1967 SC 1512, it has been held that the excise duty imposed on goods, and the taxable event for the levy is manufacture or production of goods. A duty of excise is a tax upon the goods and not upon sales or proceeds of sale of goods in terms of Entry 84, List I of Seventh Schedule to the Constitution, taxable event in respect of excise is manufacture or production. Reference can be made to CCE v. Acer India Ltd. , 2004 AIR SCW 5496. The levy is on the manufacture or production of goods. The collection is shifted to stage of removal. In Moriroku UT India (P) Ltd. v. State of Uttar Pradesh and Others, JT 2008 (3) SC 506, it has been observed that the excise duty is a levy on taxable event of 'manufacture'. Liability under excise law is event based on manufacture and irrespective of whether the goods are sold or captively consumed. Excise duty is not concerned with sale. In this case a distinction between tax on sale of goods and excise tax on the production of goods has been pointed out.
28. It is apt at this stage to consider a decision of Apex Court in Commissioner of Income Tax versus British paints India Ltd. (1991) 188 ITR 44. This case has bearing on the issue involved herein. The said decision was rendered by the Apex Court before the insertion of Section 145-A in the Income Tax Act. The issue regarding valuation of closing stock was very much there. The court considered the matter in great depth and while doing so, has taken into account Section 145 (1) of the Act as also its earlier decision and the decision of other courts. It has observed the following:
"It is well-recognized principle of commercial accounting to enter in the profit and loss account the value of the stock in trade at the beginning and at the end of the accounting year at cost or market price, whichever is the lower. As stated by the Lord President in Whimster and Co. versus CIR (1925) 12 TC 813, 823(C.Sess.):"
29. In the later part of the judgment, it has been observed that the object of stock valuation is the correct determination of the profit and loss account resulting from a year's trading activity. It is the true result of the trading activity of that year that must be disclosed by the books. Thereafter, a passage from its earlier judgment in Chainrup Sampatram versus CIT (1953) 24 ITR 481, which reads as followed, has been reproduced below:
" It is wrong to assume that the valuation of the closing stock at market rate has, for its object, the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realised on the year's trading..."
29. Ultimately it concluded in the following manner:
"Any system of accounting which excludes, for the valuation of the stock-in-trade, all costs other than the cost of raw materials for the goods-in-process and finished products, is likely to result in a distorted picture of the true state of the business for the purpose of computing the chargeable income. Such a system may produce a comparatively lower valuation of the opening stock and the closing stock, thus showing a comparatively low difference between the two. In a period of rising turnover and rising prices, the system adopted by the assessee, as found by the Tribunal, is apt to diminish the assessment of the taxable profit of a year. The profit of one year is likely to be shifted to another year which is an incorrect method of computing profits and gains for the purpose of assessment. Each year being a self-contained unit, and the taxes of a particular year being payable with reference to the income of that year, as computed in terms of the Act, the method adopted by the assessee has been found to be such that income cannot properly be deduced therefrom. It is, therefore, not only the right but the duty of the Assessing Officer to act in exercise of his statutory power, as he has done in the instant case, for determining what, in his opinion, is the correct taxable income. "
30. The ratio laid down therein is that all cost including cost of raw material for the goods in process and finished goods should be included for the purposes of valuation of stock in trade. It reiterated that the closing stock should be valued either at the market price of the material or at the cost price of the raw material inclusive of all the expenditure incurred by the assessee on the said cost of the raw material. Therefore, even before the introduction of Section 145-A , it was laid down that the closing stock should be valued either at cost price or market price whichever is lower. The cost price includes all the taxes etc. paid by the assessee to bring the material at his place. The aforesaid decision has been referred in a subsequent decision in Commissioner of Income Tax, Udaipur versus Hindustan Zinc Ltd. (2007) 4 SCC 705 wherein the Supreme Court has held that an assessee has no right in writing down the value of goods in stock below the cost price by estimating its net revisable value. It has been held that if the fall in the price has the effect of merely reducing the prospective profits, there would be no justification to discard the valuation of cost.
31. It thus follows that even before the insertion of Section 145-A in the Act, the judicial pronouncements were to the effect that the closing stock should be valued at the cost price which evidently include all cost and expenditure including the tax fees etc. paid by the assessee on the purchases of such goods.
32. The learned counsel for the petitioner has also relied upon Indra Prastha Chemicals Pvt. Ltd. Versus CIT (2004) 271 ITR 113, wherein certain judgements of the Apex Court has been relied upon, and submtited that the expression "reason to believe" in Section 147 does not mean purely subjective satisfaction on the part of the Assessing Officer. The belief must be held in good faith; it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Assessing Officer in starting proceedings under section 147 is open to challenge in a court of law as held in S.Narayannappa versus CIT (1967) 63 ITR 219 (SC): Kantamani Venkata Narayana and Sons versus First Additional ITO (1967) 63 ITR 638 (SC); Madhya Pradesh Industries Ltd. Versus ITO(1970) 77 ITR 268 (SC); Sowdagar Ahmed Khan verus ITO (1968) 70 ITR 79 (SC); ITO v.Lakhmani Mewal Das (1976) 103 ITR 437 (SC); ITO versus Nawab Mir Barkat Ali Khan Bahadur (1974) 97 ITR 239 (SC); CST v. Bhagwan Industries (P) Ltd. (1973) 31 STC 293 (SC) and State of Punjab v.Balbir Singh(1994) 3 SCC 299.
33. There is no quarrel to the above proposition that the assumption of jurisdiction under section 147 must be on the existence of materials before the authority. It will not depend on the mere whim or fancy of the Assessing Officer. The existence of the materials therefore, must be real. Secondly, there must be nexus between the materials as well as the belief of the escapement.
34. In the case of Indra Prastha Chemicals Pvt.Ltd. (Supra), the notice under section 147 was quashed by this court on the finding that there was no material to show that income has escaped assessment. The proceedings were initiated on the basis of the report of the Income Tax Inspector therein and it was found that the said report does not set out any reason for coming to the conclusion that this is a fit case to issue a notice under section 147. In other words whether there is relevant material or not depends upon the facts of each case.
35. In the case on hand, the assessee has not included a sum of Rs.61,67,000/-, the CST paid on the closing stock while making its valuation. Similarly, the assessee has not included the 30% of the Excise Duty which comes to Rs.2,13,50,000. The case of the Department is thus the assessee has claimed excess loss of income in its return which is contrary to section 145-A of the Act. At this stage, the Department has placed reliance upon Explanation 2(C) to section 147 of the Act.
36. Explanation 2 to section 147 provides deemed cases where income chargeable to tax has escaped assessment. The relevant Clause (C) for the sake of convenience is reproduced below:
"(c) where an assessment has been made, but-
(i) income chargeable to tax has been underassessed; or
(ii) such income has been assessed at too low a rate; or
(iii) such income has been made the subject of excessive relief under this Act; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.
37. Sub clause (iv) to clause(c) of Explanation 2 to section 147 of the Act supports the Department's point of view that it is a case of deemed escapement of assessment. It is not necessry for us to dwell upon this point any further. At this stage issue is limited as to whether notice for reassessment is liable to be quahsed or not, at its threshold. The sufficiency of the reason is beyond the scope of scrutiny at this stage. The sufficiency of the material cannot be gone into but relevancy certainly can be gone into. The reasons recorded by the concerned authority are relevant reasons to form a belief that the income of the petitioner has escaped assessment.
38. It is not correct to say that by invoking Explanation 2 to Section 147, the Department is in any manner supplementing the reasons.
39. The decision in the case of Vipan Khanna Vs.CIT reported in (2002) 255 ITR page 220 relied upon by the petitioner is misplaced one. It is distinguishable on facts as entirely a different controversy was involved therein. There the issue was when a reassessment notice has been given on the ground that the assessee has claimed excessive depreciation, the jurisdiction of the Assessing Officer is restricted only to the portion of the escaped assessment in respect of depreciation or he could consider other items of income which may have escaped assessment. The issue on hand was not at all involved therein and was not addressed too.
40. The other decisions relied upon by the counsel for the petitioner Sesa Goa Ltd. Versus JCIT reported in (2007) 294 ITR 101; P.R.Prabhakar versus CIT reported in (2006) 284 ITR 548; and CST vesus J.H Gotla reported in (1985) 156 ITR 323 are besides the point involved herein. They do not advance the case of the pettioner any further.
41. The decision in the case of Assistant Commissioner of Income Tax versus D & H Secheron Electrodes Pvt. Ltd. (2008) 173 taxman 188 prima facie supports the contention of the petitioner. But on deeper scrutiny it would appear that the said decision has not got much value. The reason is but obvious. It appears that the attention of the court was not drawn towards the Explanation attached to Section 145-A of the Act. It also missed the point that Excise Duty is payable as soon as the goods are manufactured. There the admitted case was that the Excise Duty was not actually been paid by the assessee on goods in stock as goods did not leave its premises. Interpretation of word 'actually' was in issue there. Here admittedly the petitioner has not added the CST actually paid by it on the purchases of raw material. This itself is sufficient to invoke section 147 of the Act, as per the above relied upon judgment of Madhya Pradesh High Court relied by the petitioner.
42. In view of above, we find no force in the argument of the petitioner that on the basis of the reasons recorded by the Assessing Officer, the re-assessment proceedings could not have been initiated. There is relevant material to form a belief that the income of the petitioner has escaped income.
43. By way of clarification, it may be added that we have only examined the relevancy of the material on record to form an opinion that the income of the assessee has escaped assessment.
44. At this stage, it can be said that there is relevant material on the record to form a reasonable belief that the taxable income of the assessee has escaped assessment, in view of section 145-A of the Act.
45. No other point was pressed. Both the writ petitions are therefore, dismissed. The petitioner is required to appear before the authority concerned along with the certified copy of this order in the 1st week of May 2011. The time from the date of the stay order till the petitioner appears before the authority concerned shall be excluded for the purposes of limitation to complete the reassessment proceedings.
Date:31.3.2011
IB
(Prakash Krishna,J) (F.I.Rebello,C.J)