Shree Chalthan Vibhag Khand Udyog Mandli Ltd. v. Deputy Commissioner of Income-tax
[Citation -2015-LL-0612-2]

Citation 2015-LL-0612-2
Appellant Name Shree Chalthan Vibhag Khand Udyog Mandli Ltd.
Respondent Name Deputy Commissioner of Income-tax
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 12/06/2015
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags carry forward and set off • unabsorbed business loss • reassessment proceedings • agricultural commodities • additional depreciation • unabsorbed depreciation • depreciation allowance • manufacturing of sugar • co-operative society • system of accounting • business expenditure • method of accounting • regular assessment • cost of production • change of opinion • rural development • sugarcane society • additional price • unabsorbed loss • profit margin • sugar factory • ad hoc basis • full and true disclosure
Bot Summary: Since the unabsorbed depreciation for the period prior to the assessment year 1997-98 was allowed to be carry forward and set off for eight assessment years only, as per the provisions of Income-tax Act, set off of the unabsorbed depreciation pertaining to the period prior to 1997-98 against the income of the assessment year 2007-08 was incorrect and is required to be withdrawn. One group in which the reopening of the assessment for respective assessment years is beyond the period of 4 years and the second group in which the reopening of the assessment is within the period of 4 years. Now, so far as the reopening of the assessment beyond the period of 4 years is concerned, at the outset it is required to be noted that the assessment can be reopened beyond the period of 4 years, if an only if the income chargeable to tax has escaped assessment by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year, even if the Assessing Officer is authorised to make reassessment in the event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. The reasons recorded to reopen the assessment reads as under: Reasons recorded to reopen the assessment The assessee engaged in the manufacturing and selling of sugar and its bye products and absolute alcohol filed its return of income for assessment year 2007-08 on October 23, 2007, declaring nil income after set off of brought forward business loss of Rs. 1,15,65,482 and unabsorbed depreciation of Rs. 2,18,71,543. Since the unabsorbed depreciation for the period prior to the assessment year 1997-98 was allowed to be carry forward and set off for eight assessment years only, as per the provisions of the Incometax Act, set off of the unabsorbed depreciation pertaining to the period prior to 1997-98 against the income of the assessment year 2007-08 was incorrect and is required to be withdrawn. From the ratio that can be culled out from all these decisions, it is amply clear that the Assessing Officer, who is authorized to issue notice under section 148 of the Act for reassessment, on his having a reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped the assessment. No such action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of such assessment.


JUDGMENT judgment of court was delivered by M. R. Shah J.-As common question of law and facts arise in this group of petitions, they are heard, decided and disposed of by this common judgment and order. (1.1) In all these petitions under article 226 of Constitution of India, respective petitioner-sugarcane factory societies have challenged impugned notices under section 148 of Income-tax Act, 1961 (hereinafter referred to as "the Act") issued by concerned Assessing Officer to reopen completed assessments of respective assessment years. That for sake of convenience all these petitions can be bifurcated into two groups. One group in which reopening has taken place beyond period of 4 years from end of concerned/relevant assessment year and another group in which reopening has taken place within period of 4 years from end of concerned/relevant assessment year. statement of particulars with respect to each petitioner falling under first group and second group in tabular form are as under: Reopening beyond period of 4 years from end of relevant assessment year Sl. SCA Assessment Name No. No. year (1) (2) (3) (4) 17773 Shree Khedut Sahkari 1 2007-08 of 2014 Khand Udyog Mandli Ltd. 17870 Shree Chalthan Vibhag 2 2007-08 of 2014 Khand Udyog Mandli Ltd. 18784 Shree Mahuva Pradesh 3 2007-08 of 2014 Sahkari Udyog Mandli Ltd. 18785 Shree Sayan Vibhag 4 2007-08 of 2014 Sahkari Khand Udyog Mandli Ltd. 18787 Shree Kamrej Vibhag 5 2007-08 of 2014 Sahkari Khand Udyog Mandli Ltd. 18795 Shree Madhi Vibhag Sahkari 6 2007-08 of 2014 Khand Udyog Mandli Ltd. 2638 of Shree Maroli Vibhag Khand 7 2007-08 2015 Udyog Sahkari Mandli Ltd. 2639 of Shree Sahkari Khand Udyog 8 2007-08 2015 Mandli Ltd. Shree Vadodara Dist. Co- 4446 of 9 2007-08 op. Sugarcane Growers Union 2015 Ltd. Shree Vadodara Dist. Co- 4447 of 10 2008-09 op. Sugarcane Growers Union 2015 Ltd. 3676 of 2007- Khedut Sahakari Khand Udyog 11 2015 08 Mandli Ltd. 3677 of 2008- Khedut Sahakari Khand Udyog 12 2015 09 Mandli Ltd. 3682 of 2007- Shri Ganesh Khand Udyog 13 2015 08 Sahakari Mandli Ltd. 3683 of 2008- Shri Ganesh Khand Udyog 14 2015 09 Sahakari Mandli Ltd. 5010 of 2008- 15 Shree Narmada Khand Udyog 2015 09 Reopening within period of 4 years from end of relevant assessment year Sl. SCA Assessment Name No. No. year (1) (2) (3) (4) 2362 of Shree Khedut Sahkari Khand 1 2009-10 1 2009-10 2015 Udyog Mandli Ltd. 2364 of Shree Madhi Vibhag Sahkari 2 2009-10 2015 Khand Udyog Mandli Ltd. 2368 of Shree Chalthan Vibhag 3 2009-10 2015 Khand Udyog Mandli Ltd. 2369 of Shree Kamrej Vibhag 4 2009-10 2015 Sahkari Khand Udyog Mandli Ltd. 2370 of Shree Sayan Vibhag Sahkari 5 2009-10 2015 Khand Udyog Mandli Ltd. 2371 of Shree Coper Co-op. Sugar 6 2009-10 2015 Ltd. 2373 of Shree Madhuva Pradesh 7 2009-10 2015 Sahkari Khand Udyog Mandli Ltd. 2375 of Shree Mahuva Pradesh 8 2010-11 2015 Sahkari Khand Udyog Mandli Ltd. 2640 of Shree Maroli Vibhag Khand 9 2009-10 2015 Udyog Sahkari Mandli Ltd. 2641 of Shree Sahkari Khand Udyog 10 2009-10 2015 Mandli Ltd. 4448 of Shree Vadodara Dist. Co-op. 11 2009-10 2015 Sugarcane Growers Union Ltd. 3678 of Khedut Sahakari Khand 12 2009-10 2015 Udyog Mandli Ltd. 3684 of Shri Ganesh Khand Udyog 13 2009-10 2015 Sahakari Mandli Ltd. 5009 of Shree Narmada Khand 14 2007-08 2015 Udyog 5011 of Shree Narmada Khand 15 2009-10 2015 Udyog For sake of convenience Special Civil Application No. 17870 of 2014 is considered and treated as lead matter and, therefore, facts of Special Civil Application No. 17870 of 2014 are narrated more particularly when basic facts in each of petitions are common/similar. (3.1) Facts leading to Special Civil Application No. 17870 of 2014 in nutshell are as under: (3.2) That petitioner-assessee is co-operative society manufacturing sugar out of sugarcane supplied by its members and has been assessed to tax under Act for last several years. That assessee filed its return of income for assessment year 2007-08 on October 23, 2007, declaring nil income after set off of brought forward business loss of Rs. 1,15,65,482 and unabsorbed depreciation of Rs. 2,18,71,543. That return income was accepted and nil income assessed under section 143(3) of Act on December 24, 2009. (3.3) That, thereafter, beyond period of 4 years from end of relevant assessment year, i.e., assessment year 2007-08, Assessing Officer has issued impugned notice dated March 27, 2014, under section 148 of Act to reopen assessment for assessment year 2007-08 alleging, inter alia, that there has been escapement of income at least of Rs. 44,90,71,133 on account of original assessment. (3.4) That immediately on receipt of said notice under section 148 of Act, petitioner-assessee, vide communication/letter dated March 31, 2014, requested to treat original return of income under section 139(1) of Act filed on October 23, 2007, as return of income filed in response to notice under section 148 of Act. Simultaneously, petitioner- assessee also requested to supply copy of reasons recorded to reopen assessment for assessment year 2007-08. (3.5) That, thereafter, vide communication dated May 1, 2014, petitioner-assessee has been served with copy of reasons recorded for reopening assessment for assessment year 2007-08 (reasons recorded for reopening assessment shall be considered hereinafter). (3.6) That on receipt of copy of reasons recorded for reopening assessment for assessment year 2007-08, petitioner-assessee immediately filed objections with respondent by letter dated June 30, 2014, raising objections against reopening of assessment for assessment year 2007-08 stating, inter alia, that at time of original assessment proceedings, all relevant facts were disclosed to Assessing Officer who passed regular assessment order under section 143(3) of Act; that on identical facts, similar/identical assessments have been made for past decades; that apart from farmers, petitioner-assessee has other two types of members being general members and nominal members and profit is to be distributed on basis of shareholding and not on basis of cane supplied by cane growers; that method of accounting of assessee is same for all years up to assessment year 2006-07 and years thereafter and assessment for all these years have been completed in identical manner as is done under section 143(3) of Act in assessment year 2007-08; that because of ad hoc payments to cane growers, there was outstanding liability on last day of accounting year regarding which entry came to be passed because assessee is following mercantile system of accounting which tallies with subsequent actual payment. It was also submitted that statutory minimum price (hereinafter referred to as "SMP") declared by Government under Sugar (Control) Order, 1966 (hereinafter referred to as "the Control Order") is only minimum price payable by sugar factory and, therefore, any payment made in excess to SMP by no stretch of imagination can be said to be distributing profits. It was further submitted that co-operative sugar factories save individual cane growers from exploitation of private sugar barons. It was further submitted that in matter of assessee's own case for assessment years 1980-81 to 1990-91, learned Commissioner of Income-tax (Appeals) sent matter back to Assessing Officer to find out whether by making payment to crane growers in excess to SMP declared by Government under Control Order whether society had really passed on profits to its members in form of payment of final price and, thereafter, Assessing Officer had held that there was no such passing of profit. It was submitted that, therefore, even rule of constituency would also demand that Department in later year should not somersault. It was also further submitted on behalf of assessee that as such there was no failure on part of petitioner-assessee in not disclosing truly and fully all necessary materials relevant for assessment and, therefore, reopening of assessment beyond period of 4 years is not permissible and justified. (3.7) That, vide letter dated October 14, 2014, Assessing Officer has rejected objections of petitioner to notice under section 148 of Act. Hence, petitioner-assessee has preferred present special civil application under article 226 of Constitution of India. Shri J. P. Shah, learned advocate has appeared on behalf of respective petitioners-assessees in Special Civil Application Nos. 17870 of 2014, 17773 of 2014, 18784 of 2014, 18785 of 2014 18787 of 2014, 18795 of 2014, 2362 of 2015, 2364 of 2015, 2368 of 2015 to 2371 of 2015, 2373 of 2015, 2375 of 2015 and 2638 of 2015 to 2641 of 2015 and Shri B. S. Soparkar, learned advocate has appeared on behalf of petitioners-assessees in Special Civil Application Nos. 3676 of 2015 to 3678 of 2015, 3682 of 2015 to 3684 of 2015 and 5009 of 2015 to 5011 of 2015. (4.1) Shri Sudhir Mehta, learned advocate and Shri K. M. Parikh, learned advocate have appeared on behalf of Revenue concerned Assessing Officers in respective special civil applications. (4.2) At outset it is required to be noted that as such in all these petitions in which reopening of assessment is within 4 years or beyond 4 years from end of relevant assessment year, common ground/reason to reopen assessment is difference between actual price paid to cane growers and SMP declared by Government and Assessing Officer is of opinion that difference between actual price paid to cane growers and statutory minimum price is not price of sugarcane but is distribution of profits and that amount paid to cane growers in excess to SMP declared by Government is passing of profit/distribution of profits and that there has been escapement of income to extent of excess amount paid, i.e., amount paid in excess to SMP declared by Government. In 4 cases, i.e., Special Civil Application Nos. 17870 of 2014, 18785 of 2014, 18787 of 2014 and 2638 of 2015 and some other petitions assessment is reopened on some other grounds/reasons also which shall be considered and dealt with hereinafter. However, common reason/ground to reopen assessment is with respect to price paid to cane growers in excess to SMP declared by Government and treating said difference as distributing profits/passing of profits. Submissions made by learned advocates appearing on behalf of respective petitioner-assessees in cases where reopening is beyond period of 4 years (4.3) Shri J. P. Shah, learned advocate appearing on behalf of some of assessees, has vehemently submitted that impugned notices to reopen concluded assessment beyond period of 4 years is absolutely illegal, invalid and not justifiable. It is further submitted that condition precedent for assumption of jurisdiction to reopen completed assessment beyond period of 4 years as provided under section 147 of Act is not satisfied at all. (4.4) It is submitted that as per proviso to section 147 of Act, only in case where Assessing Officer is of opinion that there was any failure on part of assessee to disclose truly and fully all necessary material for assessment, reopening of assessment beyond 4 years is permissible. It is submitted that in none of cases it is alleged in notice that there was any failure on part of assessee to disclose fully or truly all necessary material for assessment. It is submitted that therefore assumption of jurisdiction to reopen assessment in present case is wholly without jurisdiction. In support of his above submissions, Shri Shah, learned Advocate appearing on behalf of assessees has relied upon following decisions of this court. 1. Austin Engineering Co. Ltd. v. Joint CIT [2009] 312 ITR 70 (Guj); 2. Gujarat State Co-op. Agrl. and Rural Development Bank Ltd. v. Deputy CIT [2011] 337 ITR 447 (Guj); 3. CIT v. Bipin Vadilal [1999] 238 ITR 1022 (Guj); 4. Gujarat Lease Financing Ltd. v. Deputy CIT [2014] 360 ITR 496 (Guj). Shri Soparkar, learned advocate appearing on behalf of some of petitioner-assessees in addition to above has further submitted that in present case Assessing Officer has reopened completed assessment on basis of subsequent judgment of hon'ble Supreme Court in case of Deputy CIT v. Shri Satpuda Tapi Parisar SSK Ltd. reported in [2010] 326 ITR 42 (SC). It is vehemently submitted by Shri Soparkar, learned advocate appearing on behalf of some of assessees that there cannot be any reopening beyond period of 4 years on basis of subsequent Supreme Court decision and that too without whisper of failure on part of assessee to truly and fully disclose all material facts. In support of his above submissions he has relied upon following decisions of this court. 1. Austin Engineering Co. Ltd. v. Joint CIT [2009] 312 ITR 70 (Guj); 2. Gujarat State Co-op. Agrl. and Rural Development Bank Ltd. v. Deputy CIT [2011] 337 ITR 447 (Guj); 3. CIT v. Bipin Vadilal [1999] 238 ITR 1022 (Guj); 4. Gujarat Lease Financing Ltd. v. Deputy CIT [2014] 360 ITR 496 (Guj). (5.1) It is further submitted by Shri Soparkar, learned advocate appearing on behalf of some of assessees, that even reasons which have been recorded by Assessing Officer by no stretch of logic lead prudent person to form reason to believe that income has escaped assessment. It is further submitted that it is mandatory that "reason to believe" must necessarily show, indicate and communicate why and for what grounds/cause any income has escaped assessment. It is submitted that reasons recorded must be germane, prudent and disclose prima facie belief that income has escaped assessment. It is submitted that when reasons do not show any nexus or connection with allegation of under assessment, they fall in realm of suspicion, surmises and conjectures. It is submitted that reasons to believe must have rational connection and should be relevant for formation of belief regarding escapement of income and should not be extraneous or irrelevant, otherwise they will be considered as invalid since they do not meet statutory preconditions/pre-requisites. In support of his above submissions he has relied upon following decisions of Delhi High Court. 1. CIT v. Orient Craft Ltd. [2013] 354 ITR 536 (Delhi); 2. G. S. Engineering and Construction Corporation v. Deputy Director of Income-tax (International Taxation) [2013] 357 ITR 335 (Delhi). (5.2) It is further submitted by Shri Soparkar, learned advocate appearing on behalf of some of petitioners, that in present case even formation of opinion by Assessing Officer that he has reason to believe that income has escaped assessment is borrowed satisfaction from another officer. It is submitted that look at provisions of section 147 of Act shows that prerequisite condition, which can be said to be sine qua non is that Assessing Officer "has reason to believe" that income chargeable to tax has escaped assessment. It is submitted that Assessing Officer does not have any jurisdiction to review its own order, and that, opinion formed by Assessing Officer, on opinion of another Assessing Officer, could not be made basis to initiate reassessment proceedings, as it can be described to be "borrowed satisfaction". In support of his above submissions, he has heavily relied upon decision of Rajasthan High Court in case of CIT v. Shree Rajasthan Syntex Ltd. reported in [2009] 313 ITR 231 (Raj). (5.3) It is submitted that in instant group of petitions, in every reason to believe it is stated that learned Commissioner of Income-tax (Appeals) pursuant to order of hon'ble Supreme Court came to conclusion that (in that particular case that was before hon'ble Supreme Court and which was remanded back to him) it was case where profits were appropriated in guise of purchase price. It is submitted that in present case Assessing Officer has solely and simply reiterated "that Commissioner of Income-tax (Appeals)'s findings" in order to held in case of assessee before this court that income has escaped assessment in case of these/present assessees. It is submitted that therefore such borrowed satisfaction in absence of any application of mind and any real finding in case of assessee do not constitute valid reason to believe that income has escaped assessment. It is vehemently submitted that reason to believe cannot be substituted by reason to suspect. In support of his above submissions he has relied upon decision of Delhi High Court in case of Orient Craft Ltd. (supra). (5.4) Shri Soparkar, learned advocate has further submitted that in present cases prices paid to cane growers is in fact business expenditure, hence no income has escaped assessment. In support of his above submissions, he has heavily relied upon following decisions. 1. CIT v. Solapur District Co-op. Milk Producers and Process Union Ltd. [2009] 315 ITR 304 (Bom); 2. CIT v. Mehsana District Co-op. Milk Producers Union Ltd. [2006] 282 ITR 24 (Guj). 3. CIT v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd. [2008] 301 ITR 191 (Bom). (5.5) It is further submitted by Shri J. P. Shah, learned advocate appearing on behalf of some of petitioners, that in fact there was no tangible material available with Assessing Officer to form opinion that income chargeable to tax has escaped assessment. It is submitted that in fact solely on basis that concerned sugarcane growers are paid prices in excess to SMP fixed by State Government under Control Order, amount paid in excess to SMP is considered to be parting of profits and/or distributing profits and chargeable to tax. It is vehemently submitted that as such there was no material whatsoever before Assessing Officer that what was prevailing price paid to cane growers by other co- operative societies at relevant time and/or whether price paid in excess to SMP declared by State under Control Order was so exorbitant and/or too excessive which can be said to be passing of profit and/or distributing profits. It is submitted that any amount paid in excess to SMP declared by State under Control Order ipso facto cannot be said to be passing of profits and/or distributing profits. It is submitted that, therefore, in absence of any tangible material available with Assessing Officer, formation of opinion by Assessing Officer that income has escaped assessment is vitiated. Shri Shah, learned advocate appearing on behalf of some of petitioners has taken us to relevant provisions of Control Order and mechanism while determining SMP by State. He has also vehemently submitted that as such SMP declared by State under Control Order is minimum price to be paid by society to concerned cane growers. It is submitted that, therefore, every payment or price paid to cane growers in excess to SMP cannot be said to be per se passing of profits and/or distributing profits and chargeable to tax as alleged by Assessing Officer. (5.6) It is submitted that in any case without any allegation by Assessing Officer that there was any failure on part of assessee in truly and fully disclosing relevant materials for assessment, reopening of assessment beyond period of 4 years is wholly without jurisdiction, impermissible and invalid. Submissions on behalf of petitioners in cases where reopening is within period of 4 years Shri Shah, learned advocate and Shri Soparkar, learned advocate appearing on behalf of respective assessees have vehemently submitted that as such reopening of assessment within 4 years is also absolutely illegal, impermissible and wholly without jurisdiction, as same is solely on basis of change of opinion by concerned Assessing Officer. It is vehemently submitted that foundation of reasons to believe escapement of income is on mere change of opinion without any tangible material. It is submitted that on mere change of opinion reopening of assessment is not permissible as held by hon'ble Supreme Court in case of CIT v. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC). (6.1) It is further submitted by learned advocates appearing on behalf of respective petitioners that at time of original assessment Assessing Officer considered all issues in detail. It is submitted that on issue having inquired at time of original assessment, on mere change of opinion it is not permissible to reopen concluded assessment. It is submitted that at time of original assessment, inquiry was made and issue was gone into detail and once having taken facts and circumstances into consideration and formed opinion and thereafter assessment was concluded, thereafter it is not open for Assessing Officer to reopen same due to change of opinion. It is submitted that when assessee's claim was processed at length and after calling for detail explanation same was accepted, merely because certain element or angle was not in mind of Assessing Officer while accepting such claim, could not be ground for issuing notice under section 148 of Act for reassessment, where Assessing Officer allowed assessee's claim after making detail inquiry, thereafter he cannot initiate reassessment proceedings on basis of same material, taking view that said claim was wrongly allowed. In support of above submissions, Shri Soparkar, learned advocate appearing on behalf of some of petitioners has relied upon following decisions of this court. 1. Cliantha Research Ltd. v. Deputy CIT [2013] 35 taxmann.com 61 (Guj); 2. Sarla Rajkumar Varma v. Asst. CIT [2015] 4 ITR-OL 95 (Guj); [2014] 43 taxmann.com 372 (Guj); 3. Niko Resources Ltd. v. Asst. DIT [2014] 51 Taxmann.com 568 (Guj). (6.2) Shri Shah, learned advocate appearing on behalf of some of petitioners, has further submitted that even in case of most of petitioners co-operative societies for number of decades, assessment came to be made accepting higher price paid to growers to be purchase price and same came to be done in section 143(3) assessment. It is submitted that in other words, in original assessment what was accepted to be price of sugarcane is alleged now as payment made in excess is on change of opinion. It is submitted that in case of some of sugar factories on identical facts, earlier learned Commissioner of Income-tax (Appeals) had remanded matter for assessment years 1980-81 to 199091 to ascertain whether any part of price paid was not price but was part of profit to cane growers and Assessing Officer in consequential orders for these years did not make any addition by disallowing part of price, and, therefore, for all succeeding years also, entire price paid came to be allowed in case of all sugar mills, way it was allowed in all years in past. It is submitted that, therefore, on principle of rule of consistency Assessing Officer is not justified in reopening assessment on aforesaid issue/ground/reasons. (6.3) Shri J. P. Shah, learned advocate appearing on behalf of petitioners of Special Civil Applications Nos. 17870 of 2014 and 2638 of 2015, has submitted that in these cases second reason for reopening assessment for assessment year 2007-08 is with respect to unabsorbed depreciation permitted to be carried forward beyond period of 8 years. It is submitted that in view of decision of Division Bench of this court in case of General Motors India P. Ltd. v. Deputy CIT reported in [2013] 354 ITR 244 (Guj) and another decision in case of Sahkari Khand Udyog Mandal Ltd. v. Asst. CIT reported in [2015] 370 ITR 107 (Guj) on aforesaid ground even within period of 4 years, reopening is not valid. (6.3.1) It is submitted that in present case reopening of assessment is beyond period of 4 years and, therefore, there must be failure on part of assessee to disclose truly and fully all materials necessary for assessment. It is submitted that even in present case reasons itself concede that there was full and true disclosure regarding material fact with respect to unabsorbed depreciation carried forward. It is submitted that in Special Civil Application No. 17870 of 2014 in matter of Shree Chalthan Vibhag Khand Udyog Sahakari Mandli Ltd., reasons itself record "Scrutiny of statement of unabsorbed business loss and depreciation allowance revealed that brought forward unabsorbed depreciation of Rs. 12,32,03,579 (before set off from current year's profit) includes unabsorbed depreciation of Rs. 7,80,40,419 pertaining to period prior to assessment year 1997-98. Since unabsorbed depreciation for period prior to assessment year 1997-98 was allowed to be carry forward and set off for eight assessment years only, as per provisions of Income-tax Act, set off of unabsorbed depreciation pertaining to period prior to 1997-98 against income of assessment year 2007-08 was incorrect and is required to be withdrawn". It is further submitted that in Special Civil Application No. 2638 of 2015 in matter of Shree Maroli Vibhag Khand Udyog Sahakari Mandli Ltd. in reasons recorded it is stated that on verification of record, it is observed that assessee was allowed to carry forward business loss and unabsorbed depreciation pertaining to different preceding assessment years (i.e., from assessment years 1978-79 to 1996- 97 and assessment year 1997-98 to assessment year 2008-09)". It is submitted that, therefore, on second reason also reopening of assessment is not permissible so far as aforesaid two special civil applications are concerned. (6.4) Shri Shah, learned advocate appearing on behalf of petitioners of Special Civil Application Nos. 17875 of 2014 and 18787 of 2014, has submitted that third reason for reopening of assessment in aforesaid two cases is with respect to wrong calculation under section 145A of Act. It is submitted that in both cases as such there was no failure on part of petitioner to disclose fully and truly any material facts necessary for assessment. It is submitted that even in reasons recorded in Special Civil Application No. 19785 of 2014, Assessing Officer has stated that "on verification of computation of income for year under consideration, it is seen that assessee has claimed loss of Rs. 5,22,21,804 after adjustment under section 145A of Act. In this case, assessee-society has wrongly calculated adjustment under section 145A. correct working under section 145A is as under". It is submitted that, therefore, even Assessing Officer concedes that all facts were on record but Assessing Officer who passed under section 143(3) assessment order committed error in accepting calculation of petitioner. It is submitted that on aforesaid reopening of assessment beyond 4 years is not permissible. (6.5) It is submitted that similarly reopening of assessment in Special Civil Application No. 18787 of 2014 on aforesaid ground/reasons that Special Civil Application No. 18787 of 2014 on aforesaid ground/reasons that there has been wrong adjustment under section 145A is not permissible as there is no allegation whatsoever that there was any failure on part of assessee to disclose truly and fully all materials necessary for assessment. (6.6) Shri Shah, learned advocate appearing on behalf of petitioners of Special Civil Application Nos. 2369 of 2015, 2364 of 2015 and 2373 of 2015, has also vehemently submitted that in aforesaid cases reopening of assessment which is beyond period of 4 years is not permissible as reopening is solely on mere change of opinion of Assessing Officer. It is submitted that issues/reasons on which assessment is sought to be opened were as such considered in detail by Assessing Officer while passing 143(3) assessment order in detail. Making above submissions and relying upon above decisions, learned advocates appearing on behalf of respective petitioners have requested to allow present special civil applications and quash and set aside impugned notices under section 148 of Act to reopen completed assessment of respective assessment years. All these petitions are opposed by Shri Sudhir Mehta, learned advocate and Shri K. M. Parikh, learned advocate appearing on behalf of Revenue in respective petitions. Learned advocates appearing on behalf of Revenue have vehemently submitted that in facts and circumstances of case and more particularly when notices under section 148 of Act have been issued and assessments have been reopened on recording reasons and having satisfied that income chargeable to tax has been escaped, it is requested not to entertain present petitions at this stage. (7.1) It is vehemently submitted that when State Government declared final purchase price under Control Order after due procedure as required and after considering element of profit, expenditure etc., it was not open for sugarcane society to pay more than SMP declared and, therefore, any amount paid in excess to SMP is nothing but sharing profits and/or distributing profits and, therefore, same is required to be included in income of assessee-society. (7.2) It is further submitted that Assessing Officer noticed that petitioner society has practice of deciding purchase price of sugarcane after finalising its account profits in financial year subsequent to procurement of sugarcane and till time of finalisation of purchase price, ad hoc payments are distributed amongst sugarcane farmers. It is submitted that sugar purchase price is declared after arriving at profit earned by society during year of procurement of sugarcane. It is submitted that thus ad hoc payments and final payments contained element of profit of society, which has been distributed amongst sugarcane growers in guise, "cane price" without payment of any income-tax on profit so earned and, therefore, impugned reopened reassessment proceedings are absolutely just and proper. It is submitted that as respective societies failed to fully and truly disclose all material facts during relevant assessment proceedings, cases have been rightly reopened under section 147 of Act after issuing notice under section 148 of Act. (7.3) It is further submitted that as such SMP is finalised by Central Government on recommendation of expert panel which considers cost of production of sugarcane plus adequate profit margin of farmers and profit margin of sugarcane companies. It is submitted that SMP is fair price determined to protect interest of farmers as well as sugarcane factories and applies uniformly to co-operative sugar factories and privately owned sugar factories across India. It is submitted that resolutions passed by assessee-society only endorse said price. It is submitted that in present cases Assessing Officer has proposed to disallow only amount paid over and above SMP as distribution of profit amongst members. It is submitted that even reopening of assessment in case of some of petitioners has been on ground of unabsorbed business loss carried forward. It is submitted that carried forward unabsorbed loss includes unabsorbed loss pertaining prior to assessment year 1997-98 and since unabsorbed depreciation for period prior to assessment year 1997-98 was allowed to be carried forward and set off for 8 assessment years only, as per provisions of Act, set off of unabsorbed depreciation pertaining to period prior to 1997-98 is allowed and set off against income of assessment year 1997-98, was incorrect and required to be withdrawn. It is submitted that failure to do so has resulted in incorrect carry forward of unabsorbed depreciation on which short levy of tax has been worked out and therefore, on aforesaid reason/ground reopening assessment is absolutely just and proper as income chargeable to tax has escaped assessment. Making above submissions, it is requested to dismiss present special civil applications. Heard learned advocates appearing for respective parties at length. In all these petitions under article 226 of Constitution of India, respective petitioners co-operative societies have challenged impugned notices under section 148 of Act reopening assessment for respective assessment years and assumption of jurisdiction under section 147 of Act. (8.1) As observed hereinabove as such this group of petitions can be bifurcated into two groups. One group in which reopening of assessment for respective assessment years is beyond period of 4 years and second group in which reopening of assessment is within period of 4 years. (8.2) Now, so far as reopening of assessment beyond period of 4 years is concerned, at outset it is required to be noted that assessment can be reopened beyond period of 4 years, if only if income chargeable to tax has escaped assessment by reason of failure on part of assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year, even if Assessing Officer is authorised to make reassessment in event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per first proviso to section 147 of Act, assessment can be reopened under section 147 of Act after expiry of 4 years only if assessee had failed to make return under section 139 of Act or in response to notice issued under section 142(1) or section 148 of Act, he failed to disclose truly and fully all material facts necessary for assessment. Once all primary facts were before assessing authority, no further assistance is required by way of disclosure. Once case of assessee is covered by first proviso to section 147 of Act, reassessment proceedings beyond period of 4 years from end of relevant year would be without any jurisdiction and bad in law, if all material facts were furnished and there remained no omission or failure on part of assessee to disclose truly and fully all material facts. (8.3) In present case, perusal of reasons recorded show that there is not even whisper to effect that income has escaped assessment on account of any failure on part of petitioner assessee to disclose fully and truly all material facts necessary for its assessment. reasons recorded to reopen assessment reads as under: "Reasons recorded to reopen assessment assessee engaged in manufacturing and selling of sugar and its bye products and absolute alcohol filed its return of income for assessment year 2007-08 on October 23, 2007, declaring nil income after set off of brought forward business loss of Rs. 1,15,65,482 and unabsorbed depreciation of Rs. 2,18,71,543 (total Rs. 3,34,37,025). returned income was accepted and nil income assessed under section 143(3) of Income-tax Act, 1961, on December 24, 2009. assessee claimed to carry forward of unabsorbed depreciation of Rs. 10,13,32,036. It was noticed from statement of computation of income and statement showing carry forward and set off of business losses and unabsorbed depreciation attached with return of income that assessee had set off business loss of Rs. 1,15,65,482 and unabsorbed depreciation of Rs. 2,18,71,543 (total Rs. 3,34,37,025) against current year income of Rs. 3,34,37,025. Scrutiny of statement of unabsorbed business loss and depreciation allowance revealed that brought forward unabsorbed depreciation of Rs. 12,32,03,579 (before set off from current year's profit) includes unabsorbed depreciation of Rs. 7,80,40,419 pertaining to period prior to assessment year 1997-98. Since unabsorbed depreciation for period prior to assessment year 1997-98 was allowed to be carry forward and set off for eight assessment years only, as per provisions of Incometax Act, set off of unabsorbed depreciation pertaining to period prior to 1997-98 against income of assessment year 2007-08 was incorrect and is required to be withdrawn. Failure to do so has resulted in incorrect carry forward of unabsorbed depreciation to tune of Rs. 7,80,40,419 on which short levy of tax works out to Rs. 2,34,09,125 (potential) as per working provided hereunder: Brought forward as on April 1, 2006 (assessment year 2007-08) Business loss Unabsorbed depreciation Amount AY AY Amount (Rs.) (Rs.) Prior to 1997- 2006-07 1,15,65,482 7,80,40,419 98 1999-2000 31,13,019 2004-05 1,03,99,994 2006-07 3,16,90,147 12,32,03,579 Set off in AY Set off in AY 1,15,65,482 2,18,71,543 2007-08 2007-08 Balance to Balance Nil 10,13,32,036 be C/F 1997-98 Amount (Rs.) 9,97,81,921 Set off in 1998-99 51,17,002 Set off in 2001-02 23,69,122 Set off in 2002-03 8,00,500 Set off in 2003-04 1,19,32,746 Set off in 2005-06 15,22,132 Set off in 1998-99 2,17,41,502 7,80,40,419 Unabsorbed depreciation allowed to be carry forward Assessment year Amount (Rs.) 1999-2000 31,13,019 2004-05 1,03,59,944 2006-07 3,16,90,147 4,15,63,160 Less: Set off in AY 2007-08 2,18,71,543 To be carry forward 2,32,91,617 Actual carry forward allowed in original order 10,13,32,036 Excess/incorrect carry forward 7,80,40,419 correct carry forward of unabsorbed depreciation after set off from balance profit of assessment year 2007-08 worked out to Rs. 2,32,91,617. Further, it was noticed from statement of computation of income filed along with return of income that assessee had disallowed depreciation amounting to Rs. 1,82,00,000 debited to profit and loss account of sugar unit, whereas provisions for depreciation amounting to Rs. 41,22,091 debited to production and trading account of distillery plant was not disallowed and added back. This resulted in underassessment of income to extent of Rs. 41,22,091 on which short levy of tax worked out to Rs. 12,33,627 (potential). assessee is co-operative society engaged in activity of manufacturing sugar from sugar cane purchased from its members, who are shareholders of said co-operative society. It has come to notice during course of assessment proceedings in cases of sugarcane growers that co-operative sugar factories of South Gujarat are following practice of deciding purchase price of sugarcane after finalisation of its accounts and its profits in financial year subsequent to procurement of sugarcane. Till time of finalisation of purchase price, ad hoc payments are distributed amongst sugarcane farmers. final purchase price is declared after arriving at profits earned by co-operative sugar factories during year of procurement of sugar cane. Thus, ad hoc payments and final payments contain element of profits of co-operative sugar factories, which are distributed amongst sugar cane growers in guise of'cane price', without payment of any income-tax on profits so earned. Payment of sugarcane prices by sugarcane factories to sugarcane growers is governed by'the Sugarcane (Control) Order (SCO), 1966' made by Central Government, by virtue of powers vested with it under'the Essential Commodities Act, 1955'. By this order, fixation of statutory minimum price (SMP) by Central Government every year, for every sugar factory, came into place. This price is fixed as per recommendations of Commission for agricultural costs and prices, after consulting State Governments, associations of sugar industries and sugarcane growers and after considering all factors like cost of production of sugarcane, returns to growers from alternate crops, availability of sugar to consumers at fair price, sale price of sugarcane produced by sugar factory, recovery of sugar from sugarcane and realisation made by sugar factory from byproducts. Thus, exercise of determining SMP/FRP is undertaken in scientific way using all accepted economic, technological and statistical tools by specialists and experts of each of such fields. activity of manufacturing of sugar by co-operative society is not eligible for any kind of deduction under section 80P of Act and entire profits earned from such activity is liable to be taxed. During course of assessment proceedings, made in cases of M/s. Shree Chalthan Vibhag Khand Udyog Sahakari Mandli Ltd. and M/s. Shree Khedut Sahakari Khand Udyog Mandli Ltd., it was seen that those sugar factories had purchased sugarcane over and above minimum support price (MSP)/Fair and remunerative price (FRP) declared by Central Government. It was also seen therein that, during crushing season, co-operative sugar factories of South Gujarat are in practice of making payment to sugarcane suppliers from time to time on ad hoc basis and final amount to be paid for sugarcane (rupees per metric tonne) are fixed after end of crushing season, i.e., after about 5 to 6 months from end of financial year, at time of finalisation of its accounts. cane price so decided is not based on any formula or working. Generally, it is trade practice that purchase price is decided before actual purchase of commodity. In this case, amount to be paid to sugarcane suppliers is neither before crushing season nor during crushing season. This practice of deciding cane price after end of crushing season at time of finalisation of their accounts, was being followed by them so that these sugar factories comes to know of profits earned by it in that crushing season by that time and so that cane purchase price can be so adjusted that there would be no incidence of tax in hands of co-operative society or in hands of their members. This was seen to have been done with motive to substantially suppress profits of co-operative sugar societies by distribution of profit as purchases from its members. entire profits of sugar factories, which otherwise would have been taxed in their hands, are distributed amongst its members, in guise of'cane price'. It is also noted that sugar unit cannot pay purchase price for sugar cane below SMP/FRP decided by Central Government. Thus, it is reasonable to consider that in absence of any purchase price fixed by co-operative sugar factories for sugar cane, it would be reasonable to adopt SMP/FRP as purchase price. case of assessee for year under consideration was also perused from this angle. It was seen that assessee has purchased 1049359.71 metric tonnes of sugarcane during year. average sugarcane purchase price of assessee for year is Rs. 1332.15 per M. T., as against MSP/FRP of Rs. 982.5 per M. T. declared by Central Government. All sugarcane is purchased by assessee from its members. All members of co-operative society are shareholders of society and are interested in co-operative society. In order to avoid incidence of tax, assessee-co-operative society has made excess payment of Rs. 349.65 (1332.15982.5) per metric tons. Since total purchases of assessee for year is 1049359.71 M. T., excess payment made during year to its members works out to Rs. 36,69,08,623 (349.65 x 1049359.71). provisions of section 37(1) strengthened by several judicial pronouncements, like that in cases of Ram Bahadur Thakur Ltd. v. CIT (Ker), Travancore Titanium Product Ltd. v. CIT [1966] 60 ITR 277 (SC) and CIT v. Navsari Cotton and Silk Mills Ltd. [1982] 135 ITR 546 (Guj), in respect of that section finds its applicability upon assessee in respect of said issue of payment of excess purchase price, which actually is distribution of profits amongst its members. Thus, purchases of assessee are inflated to extent of Rs. 36,69,08,623, upon which, assessee ought to have paid taxes and thereafter distributed it to its members as dividend. The'real income' theory states that income that is taxable under Income-tax Act is income computed on ordinary commercial principles but subject to provisions of Act. On these considerations, what is taxable in case of assessee is its commercial profits prior to its distribution to members in guise of'final cane price' and same cannot be allowed as expenditure either under ordinary commercial principles or under Income-tax Act and excess payment of Rs. 36,69,08,623 so made by assessee during year represents the'real income' of assessee, which is taxable. said excess payments in form of inflated purchases of Rs. 36,69,08,623 is liable to be disallowed and added to total income of assessee. Thus, on facts of case, undersigned is also reasonably satisfied and has relevant reasons to believe that there has been escapement of income at least of Rs. 44,90,71,133 on account of original assessment. Therefore, on facts of case, case of your concern for assessment year 2007-08 has been reopened for reassessment of such income to tax, which has escaped assessment." (8.4) In case of Aayojan Developers v. ITO reported in [2011] 335 ITR 234 (Guj), where no foundation was laid in reasons for reopening assessment that there was failure on part of assessee to disclose fully and truly all material facts and nothing was brought on record and by filing of affidavit-in-reply for first time such escapement was indicated, Division Bench of this court has held that notice of reopening beyond 4 years must fail. "5.06. Identical question came to be considered by Division Bench of this court in case of Niko Resources Ltd. (supra) and while considering scope and ambit of powers to be exercised under section 147 of Income-tax Act by Assessing Officer, while reopening assessment beyond period of 4 years, Division Bench of this court while considering its decisions in case of Gujarat Lease Financing Ltd. (supra), has observed and held in paragraphs 16, 17 and 27 as under: '16. Assessing Officer is authorised to make reassessment in event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per 1st proviso to section 147 of Act, assessment can be reopened under section 147 of Act after expiry of 4 years only if (1) assessee failed to make return under section I39 of Act or in response to notice issued under section 142(1) or under section 148 of Act, he failed to disclose truly and fully all material facts necessary for assessment. Once all primary facts are before assessing authority, no further assistance is required by way of disclosure. All inferences of facts and legal inference need to be drawn by Assessing Officer. It is not for any one to guide Assessing Officer in respect of inference "factual or legal", which requires to be drawn by him alone. 17. Once case of assessee is covered by first proviso to section 147 of Act, reassessment proceedings beyond period of 4 years from end of relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on part of assessee to disclose truly and fully all material facts. This court, after extensively discussing law on issue in case of Gujarat Lease Financing Ltd. (supra), has held thus (page 522 of 360 ITR): "10. It can be clearly noted from reasons recorded that there is no mention at all of assessee having not disclosed fully or truly material facts which were necessary for purpose of computing income of assessee. Assuming that in notice for reopening, such wordings are not specifically mentioned and they can be supplemented either while rejecting objections or by way of affidavit of Assessing Officer, then also, Revenue has failed to point out as to in what manner there has been non- disclosure on part of assessee."... 27. From ratio that can be culled out from all these decisions, it is amply clear that Assessing Officer, who is authorized to issue notice under section 148 of Act for reassessment, on his having reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped assessment. However, no such action is permissible after lapse of 4 years from end of relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on part of assessee to disclose fully and truly all material facts necessary for purpose of such assessment. onus is on assessee to reveal primary facts and to draw inferential facts would be responsibility of Assessing Officer. Once having revealed from record that assessee disclosed full and complete facts and on scrutiny, at time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error earlier on part of Assessing Officer himself or because he choose not to opine on issue or even when he changes his mind and interprets material or law otherwise than what was done by him.' 5.07. Applying decision of Division Bench of this court in case of Niko Resources Ltd. (supra) as well as Gujarat Lease Financing Ltd. (supra), to facts of case on hand and as observed hereinabove, there does not appear to be failure on part of assessee to disclose truly and fully all material facts necessary for assessment with respect to additional depreciation claimed, initiation of impugned reassessment proceedings which are initiated beyond period of four years, are not permissible and same cannot sustain and on that ground alone, impugned reassessment proceedings deserve to be quashed and set aside." (8.5) Under circumstances and in absence of any allegation in notice under section 148 of Act that there was any failure on part of assessee to disclose truly and fully all material facts necessary for assessment, considering first proviso to section 147 of Act, assumption of jurisdiction is absolutely wholly without jurisdiction and illegal. Under circumstances, impugned notices under section 148 of Act beyond period of 4 years cannot be sustained on aforesaid ground alone and same deserve to be quashed and set aside. Now, so far as initiation of impugned reassessment proceedings and impugned notices under section 148 of Act within 4 years is concerned, it appears that reopening has taken place only on one ground that assessee has paid price of sugarcane more than SMP. It is required to be noted that in all these cases assessments were completed under section 143(3) of Act after holding necessary inquiry by Assessing Officer. It also appears that inquiry was made and issue was gone into detail. It is also required to be noted that in some of cases practice of paying more prices to cane growers than SMP declared by Government has been consistently followed since many years and same has been accepted and no objection has been raised at any point of time earlier. It appears that reason to believe and/ or formation of opinion by Assessing Officer that income chargeable to tax has escaped assessment is on ground that assessee has paid more price than price determined/declared by Government and, therefore, same is nothing but distribution of profits and/or passing of profits on basis of decision of hon'ble Supreme Court in case of Shri Satpuda Tapi Parisar SSK Ltd. (supra). However it is required to be noted that once at time of original assessment under section 143(3) of Act Assessing Officer after applying mind accepted return, thereafter reopening of assessment can be said to be on mere change of opinion of Assessing Officer and as per opinion of Assessing Officer and as per catena of decisions of hon'ble Supreme Court as well as this court mere on change of opinion of Assessing Officer, reassessment proceedings are not permissible. (9.1) If any decisions are required to be referred to on point, they are decision of hon'ble Supreme Court in case of Kelvinator of India Ltd. (supra), decisions of this court in case of Cliantha Research Ltd. (supra), Sarla Raj Varma (supra) and Niko Resources Ltd. (supra). In case of Kelvinator of India Ltd. (supra), hon'ble Supreme Court in paragraph 6 has held as under (page 564 of 320 ITR): "On going through changes, quoted above, made to section 147 of Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfilment of said conditions alone conferred jurisdiction on Assessing Officer to make back assessment, but in section 147 of Act (with effect from April 1, 1989), they are given goby and only one condition has remained, viz., that where Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen assessment. Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give schematic interpretation to words'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to Assessing Officer to reopen assessments on basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind conceptual difference between power to review and power to reassess. Assessing Officer has no power to review; he has power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if concept of 'change of opinion' is removed, as contended on behalf of Department, then, in garb of reopening assessment, review would take place. One must treat concept of'change of opinion' as in-built test to check abuse of power by Assessing Officer. Hence, after April 1, 1989, Assessing Officer has power to reopen, provided there is'tangible material' to come to conclusion that there is escapement of income from assessment. Reasons must have live link with formation of belief. Our view gets support from changes made to section 147 of Act, as quoted hereinabove. Under Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted words'reason to believe' but also inserted word 'opinion' in section 147 of Act. However, on receipt of representations from companies against omission of words'reason to believe', Parliament reintroduced said expression and deleted word'opinion' on ground that it would vest arbitrary powers in Assessing Officer. We quote hereinbelow relevant portion of Circular No. 549, dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows: '7.2 Amendment made by Amending Act, 1989, to reintroduce expression "reason to believe" in section 147.-A number of representations were received against omission of words "reason to believe" from section 147 and their substitution by "opinion" of Assessing Officer. It was pointed out meaning of expression, "reason to believe" had been explained in number of court rulings in past and was well settled and its omission from section 147 would give arbitrary powers to Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, Amending Act, 1989, has again amended section 147 to reintroduce expression "has reason to believe" in place of words "for reasons to be recorded by him in writing, is of opinion". Other provisions of new section 147, however remain same.'" (9.2) Even otherwise it is required to be noted that reasons to believe must necessarily show, indicate and communicate why and on what grounds/cause any income has escaped assessment. Reasons recorded must be germane, prudent and disclose prima facie belief that income has escaped assessment. Even for formation of opinion and/or reason to believe that any income has escaped assessment, there must be some tangible new material available with Assessing Officer on basis of which reassessment proceedings are permissible. In present case, as such except allegation that cane price/price has been paid to cane growers more than purchase price determined/ declared by Government under Control Order and, therefore, difference between same is distributing profits and, therefore, income liable to tax has escaped assessment. However, mere payment of cane price paid in excess to SMP cannot by ipso facto and/or per se can be said to be distributing profits. There must be tangible material available with Assessing Officer, such as amount or cane price paid to cane growers in excess to SMP either is exorbitant or too excessive and is not justifiable at all and on basis of material available with Assessing Officer with respect to cane price paid by other societies it is found that amount of cane price paid by particular assessee- cooperative society is not justifiable at all, as either it is exorbitant and/or unreasonable, then and then only it can be said that such excess payment of cane price is nothing but distributing profits and/or passing of profits. However, for that and for reopening of assessment on aforesaid ground, there must be some tangible material available with Assessing Officer to have reasonable belief and/or form such opinion and in that case only reassessment is permissible. At this stage it is required to be noted that as such SMP declared by Government, declared under Control Order is as such in larger interest of cane growers and so as to see that cane growers are not exploited and, therefore, it is mandated that sugar co-operative societies to pay purchase price of cane not less than SMP declared by Government. Under Control Order as such there is no restriction and/or ban not to pay more amount than SMP declared. Even in case of Satpuda Tapi Parisar SSK Ltd. (supra), hon'ble Supreme Court has observed that in deciding questions whether differential payment made by assessee to cane growers after close of financial year or after balance- sheet date would constitute expenditure under section 37 of Act and whether such differential payment would, applying real income theory, constitute expenditure or distribution of profits, Assessing Officer is required to take into account manner in which business works, resolutions of State Government, modalities and manner in which SAP and SMP are decided, timing difference which will arise on account of difference in accounting years, etc. Therefore, while considering aforesaid question, number of questions are required to be examined by aforesaid question, number of questions are required to be examined by Assessing Officer, before even forming opinion and/or reason to believe that income chargeable to tax has escaped assessment. Mere payment of any amount of cane price/purchase price in excess to SAP/ SMP per se cannot be said to be distribution of profits. For which detailed inquiry is required to be conducted by Assessing Officer. In present case, no such inquiry has been done and/or conducted by Assessing Officer before having reasonable belief and/or forming opinion that income chargeable to tax has escaped assessment on aforesaid ground. (9.3) At this stage it is required to be noted that in some of cases Assessing Officer has formed opinion on basis of order passed by learned Commissioner of Income-tax (Appeals) which were pursuant to order of hon'ble Supreme Court in case of Satpuda Tapi Parisar SSK Ltd. (supra). However, it is required to be noted that on basis of order passed by learned Commissioner of Income-tax (Appeals) in case of some other assessees satisfaction of Assessing Officer and formation of opinion in case of present assessee cannot be sustained and same can be said to be borrowed satisfaction from another officer. Such borrowed satisfaction in absence of any application of mind and any real finding in case of assessee do not constitute valid reason to believe that income has escaped assessment. Under circumstances on aforesaid ground also impugned reassessment proceedings within 4 years and beyond 4 years deserves to be quashed and set aside. (9.4) At this stage even provisions of Sugarcane Control Order, 1966, are also required to be referred to. Clause 3 provides for minimum price of sugarcane payable by producer of sugar and it provides that Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in Official Gazette, from time to time, fix minimum price of sugarcane to be paid by producers of sugar or their agents for sugarcane purchased by them, having regard to (a) cost of production of sugarcane; (b) return to grower from alternative crops and general trend of prices of agricultural commodities; (c) availability of sugar to consumer at fair price; (d) price at which sugar produced from sugarcane is sold by producers of sugar; and (e) recovery of sugar from sugarcane. It is also required to be noted that even Control Order provides for additional price for sugarcane purchased and it also further provides that no additional price determined under sub-clause (2) or sub-clause (3) of clause 5A shall become payable by producer of sugar who pays price higher than minimum sugarcane price fixed under clause (3) to sugarcane growers, provided that price so paid shall in no case be less than total price comprising minimum sugarcane price fixed under clause (3) and additional price determined under sub-clause (2) or subclause (3), as case may be of clause 5A. Therefore, even in Control Order itself there is reference to additional purchase price which can be more than purchase price fixed under clause (3). However, as observed hereinabove, in given case after holding inquiry if it is found that purchase price paid in excess to SMP is so exorbitant and/or unreasonable it can be said to be distributing profits and/or passing of profits. However, for that purpose there must be some further inquiry and/or tangible material with Assessing Officer. (9.5) Under circumstances, impugned notices under section 148 of Act to reopen proceedings beyond 4 years and within 4 years on aforesaid ground, i.e., on ground that payment of purchase price in excess to SMP has escaped assessment cannot be sustained and same deserves to be quashed and set aside. Now, so far as reopening of assessment on other grounds, viz., (1) unabsorbed depreciation permitted to be carried forward beyond period of 8 years raised in Special Civil Application Nos. 17870 of 2014 and 2638 of 2015; (2) wrong adjustment under section 145A of Act raised in Special Civil Application Nos. 17875 of 2014, 18787 of 2014 and 2369 of 2015; and (3) with regard to section 43B of Act raised in Special Civil Applications Nos. 2364 of 2015 and 2373 of 2015 are concerned, considering respective assessment orders it appears that at relevant time after due inquiry same was allowed by Assessing Officer and, therefore, reopening on aforesaid reasons/grounds can be said to be change of opinion which is not permissible. reasons/grounds can be said to be change of opinion which is not permissible. In view of above and for reasons stated above, on aforesaid ground alone and without expressing any opinion on merits/ on issue whether any amount of purchase price paid in excess to SMP declared by Government can be said to be distributing profits and/ or passing of profits or not, impugned notices under section 148 of Act to reopen completed assessment for respective assessment years are hereby quashed and set aside. Rule is made absolute to aforesaid extent in each of petitions. In facts and circumstances of case, there shall be no order as to costs. *** Shree Chalthan Vibhag Khand Udyog Mandli Ltd. v. Deputy Commissioner of Income-tax
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