1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.10.2017 CORAM HONOURABLE Mr.JUSTICE T.S.SIVAGNANAM Writ Petition No.35087 of 2007 Esquire Translam Industries, Represented by its Managing Partner, Mr.Ketan Bagadia, Plot No.B125, PIPDIC, Industrial Estate, Mettupalayam, Puducherry 605 009. ...Petitioner Vs 1.Chief Commissioner of Income Tax VI, Aayakar Bhavan , III Floor, 121, Nungambakkam High Road, Chennai 600 034. 2.Commissioner of Income Tax, D.P.Thottam M.G.Road, Puducherry. 3.Income Tax Officer, Ward I(1) Puducherry. ...Respondents Prayer: Writ Petition filed under Article 226 of Constitution of India seeking to issue Writ of Certiorari calling for records of second respondent in C.No.9127A(25)/CIT/PDY/2007-08 dated 17.10.2007 and quash impugned notice. For Petitioner : Mr.R.Sivaraman For Respondents : Mr.A.P.Srinivas, SPC http://www.judis.nic.in 2 ORDER Heard Mr.R.Sivaraman, learned counsel for petitioner and Mr.A.P.Srinivas, learned senior panel counsel for respondents. 2. petitioner is aggrieved by notice issued by second respondent under Section 154 of Income Tax Act, 1961. notice states that order dated 20.01.2006 passed by his predecessor under Section 263 of Act for assessment year 2002 2003 requires to be amended, as there is mistake apparent from record within meaning of Section 154 of Act. notice further states that rectification of mistake as per particulars given will have effect of enhancing assessment/reducing refund/increasing petitioner's liability. petitioner was given opportunity of being heard in person on 30.11.2007. This notice dated 12.10.2007 issued under Section 154 of Act (Impugned notice) itself suffered from mistake in sense that assessment order was wrongly mentioned as 2002 2003 instead of 2001 2002. Therefore, erratum was issued vide notice dated 29.10.2007. 3. Two questions would arise for consideration in this writ petition. Firstly, whether activity done by petitioner amounts to manufacture, secondly, whether second respondent would justified to issue notice under Section 154 of Act, after detailed order was passed by his predecessor under Section 263 of Act, dropping proceedings which he http://www.judis.nic.in 3 had initiated. With regard to first issue, matter has now been settled in various decisions and one of decisions being that of High Court of Gujarat in Commissioner of Income Tax -vs- Alfa Lamination reported in [(2009)225 CTR 212 (Gujarat)], wherein, Court, while affirming view taken by Tribunal held as follows: 11.Whether particular activity amounts to manufacture or not would always be question dependent upon facts and evidence on record and would be based on facts of each case. only issue which would call for inquiry is as to whether correct tests have been applied after finding facts on record. tests to ascertain whether activity amounts to manufacture or production of article or thing have been laid down and reiterated by various decisions of apex Court and this High Court. Broadly, requirement is that raw material must be, in first instance, subjected to process of such nature that it cannot be termed to be same as end-product after raw material undergoes process of manufacture. In other words, goods purchased as raw material should go in as inputs in process of manufacture and result must be manufacture of other goods. article produced must be regarded by trade as new and distinct article having identity of its own, independent market after commodity is subjected to process of manufacture. nature and extent of process would vary from case to case, and in given case, there may be only one stage of processing, while in another case, there may be several stages of processing, and perhaps, different kind of process at every stage. That with every process, commodity would experience change, but ultimately, it is only when change, or series of changes, bring about result so as to produce new and distinct article, that it can be said that differently, final product does not retain identity of raw material after it has undergone process or processes of manufacture. [CIT v. Prabhudas Kishordas Tobacco Products (P.) Ltd., [2006] 201 CTR (Guj.) 312: [2006] 282 ITR 568 (Guj.)]. http://www.judis.nic.in 4 above referred decision of Division Bench of High Court of Gujarat has been affirmed by Hon'ble Supreme Court as appeal filed by Revenue in S.L.P.No.6625 of 2010 was dismissed by order dated 04.10.2010. 4. Therefore, first issue framed for consideration has to be answered in favour of assessee and it has to be held that proposal to rectify so called error in order dated 20.01.2006 is not tenable. second question would be as to whether power under Section 154 of Act could be exercised, after Commissioner has considered matter by passing order under Section 263 of Act. 5. learned counsel for petitioner would place reliance on decision of this Court in case of Festo Elgi Private Limited -vs- Commissioner of Income Tax reported in [(2000) 246 ITR 705 (Madras)], Court observed that successor who consider himself abler cannot on that score undo what his predecessor had done. facts of said case are also more or less identical to that of case on hand. 6. As pointed out earlier, petitioner's predecessor in office had done thorough exercise and passed order under Section 263 of Act dated 20.01.2006, after conducting inspection of petitioner's factory and being satisfied that activity done by petitioner amounts to manufacture. Unfortunately, successor in Office namely second http://www.judis.nic.in 5 respondent while issuing impugned notice did not even state as to what is mistake which is apparent from record. Thus, it can be safely concluded that present attempt of second respondent was to undo what his predecessor has done, which has been clearly held to be impermissible in case of Festo Elgi Private Limited. Thus, following said decision Issue No.2 is also answered favourable of assessee. 7. For above reasons, writ petition is allowed and impugned notice is quashed. No costs. 26.10.2017 Speaking (or) Non speaking Order : Index : Yes / No Internet : Yes / No rna To 1.Chief Commissioner of Income Tax VI, Aayakar Bhavan , III Floor, 121, Nungambakkam High Road, Chennai 600 034. 2.Commissioner of Income Tax, D.P.Thottam M.G.Road, Puducherry. 3.Income Tax Officer,Ward I(1), Puducherry. http://www.judis.nic.in 6 T.S.SIVAGNANAM,J rna W.P.No.35087 of 2007 26.10.2017 http://www.judis.nic.in Esquire Translam Industries v. Chief Commissioner of Income-tax VI, Chennai/ Commissioner of Income-tax, Puducherry/ Income-tax Officer, Ward I(1), Puducherry