The Assessing Officer can only reopen an assessment if he has tangible material to form a reasonable belief that income chargeable to tax has escaped assessment, and his belief cannot be substituted by that of the opinion of the audit party.

AKIL KURESHI, J.

The petitioner has challenged a notice dated 12.03.2015 issued by the respondent Assessing Officer to reopen the petitioner's assessment for the assessment year 2010-11, which was framed after scrutiny.

2. Brief facts are as under.

3. The petitioner is a company registered under the Companies Act and is engaged in manufacturing and sale of pharmaceutical drugs. For the assessment year 2010-11, the petitioner had filed return of income on 15.10.2010 declaring total income of Rs. 25.17 crores (rounded off) and book profit under section 115JB of the Act at Rs. 96.56 crores (rounded off). The case of the company was taken in scrutiny by the Assessing Officer. One of the major claims of the petitioner was of deduction under section 80IC of the Income Tax Act, 1961 (‘the Act’ for short) relating to its unit eligible for exemption situated in Himachal Pradesh. Such claim was examined by the Assessing Officer in the scrutiny assessment. Many other issues came up for consideration. Eventually, the Assessing Officer passed the order of assessment on 28.03.2014, assessing the petitioner's total income at Rs. 65.87 crores (rounded off).

4. In order to reopen such assessment, the Assessing Officer issued impugned notice which, as can be seen, was done within a period of four years from the end of relevant assessment year. In order to do so, he has recorded following reasons:

“The assessee company engaged in the business of production of pharmaceutical and cosmetic products. The assessee filed its return of income for AY 2010-11 on 15/10/2010 declaring total income at Rs. 25,17,45,874/-. The case was selected for scrutiny and assessment u/s 143(3) r.w.s 144 completed on 28/03/2014 determining total income at Rs. 47,62,72,774/-.

The assessee ie M/s. Paras Pharmaceuticals Pvt. Ltd. had claimed deduction u/s 80IC of Rs. 72,67,34,821/- for AY 2010-11. Subsequently, it was noticed from case records that the turnover figures of the assessee were not verified with Central Excise Authority. On verification with Excise Authority it was found that the assessee had furnished a turnover of Rs. 21942.12 lakhs to the Excise Department in respect of the Uttranchal unit of Paras Pharmaceuticals Pvt. Ltd. Income from which is eligible for deduction u/s 80IC. However, assessee had furnished turnover at Rs. 24783.89 lakhs in its P&L Account for claiming deduction u/s 80IC.

Therefore, I have reason to believe that income has escaped assessment for AY 2010-11 equivalent to turnover difference of Rs. 2841.77 lakhs and accordingly assessment is required to be reopened u/s 14 7 of the I.T Act. Necessary approval for reopening of assessment u/s 147 of the Act has been granted by Addl. CIT, Range-3(1), Ahmedabad vide letter No. Addl. CIT/R-3(1)/Audit/2014-15 dated 02/03/2015. Issue notice u/s 148 of the Income Tax Act, 1961.”

5. Upon receipt of the notice and the reasons recorded with the Assessing Officer, the petitioner raised detailed objections to the reopening of the assessment under communication dated 10.07.2015 In such objections, the assesseer inter-alia contended that there was no escapement of income chargeable to tax. In this regard, the assessee contended as under:

“2.3 No escapement of income

2.3.1 It is submitted that in the reasons recorded your goodself has noted that there is difference of Rs. 2,841.77 lakhs in the turnover of Baddi as per Excise records and turnover of Baddi as per Excise records and turnover of Baddi as P&L Account which has led to escapement of income.

2.3.2 It is submitted that the facts of RBHIL are opposite to the usual situation. It is not a case where turnover as per excise is higher than the turnover as per the financial statements. As per reasons recorded, turnover of Baddi unit as per the financial statements is more than the turnover as per excise records by Rs. 2,841.77 lakhs. Since, Baddi unit of RBHIL is eligible to deduction under section 80IC of the Act, it appears that there is an allegation of tra