3CD, B/s, P/L, Notes on accounts and computation of income revealed that assessee has debited 12,02,50,000 (PY 9,13,11,000) in raw material consumed account being net losses relating to transactions concluded on net settlement basis. As per notes on account, net settlement Contracts means the company does trading of crude and refined edible oil on a net settlement basis. The income/loss from these transactions which is difference between the purchase price and sale price is accrued at the time of nomination of the contract in favour of the buyer and seller, as applicable, at which time the risk and rewards are transferred and contract becomes legally binding. It is quite clear from above that assessee is doing speculative business in crude and refined oil and transferring the loss in regular basis to its material consumed account. As these transactions are not meant for purchase of raw material for its manufacturing utilization, it is not covered under provision of the Act. As such speculation loss was not adjustable from business income of assesseeu/s 73 of the Act.Faliure to do so resulted in escapement of taxable income of Rs.12,02,50,000.

Section 5 of the Act provides that the total income of a person for any previous year shall include all incomes from whatever sources derived, actually received or accrued or deemed to be received or accrued. Scrutiny of 3CD, B/s,P/L, Notes on accounts and computation of income revealed that assessee has received additional sales tax exemption of Rs.29,70,00,000 from Karnataka Government. The assessee credited the amount as sales tax/VAT incentives and reversed Rs.13,99,95,001 which was accrued on provisional basis in earlier year. The net amount of Rs.15,70,04,999 was disclosed as operating income. The company has already paid sales tax/VAT in excess of above eligibility of Rs.29,70,00,000 from 2006-07

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till date and would be eligible for refund of the same. It is quite clear from this note of account that assessee has already taken deduction on account of payment of sales tax/VAT in earlier years and has not shown as income of incentive of Rs.13,99,95,001 which accrued on provisional basis in earlier years. Further, as the refund of sales tax/VAT has been crystallized during this year, entire amount of eligible refund of sales tax/VAT was required to be added as income of assessee under the provision of the Act. Further, as per provisions of the Act, neither the assessee can file revised return of earlier years nor the department can revise the assessed income due to cases being time barred. Failure to do so resulted in escapement of income of Rs.13,99,95,001 (Rs.29,70,00,000 - Rs.15,70,04,999)."

4. Upon being supplied the reasons, the petitioner raised objections to the notice of reopening under communication dated 28.03.2017. Such objections were rejected by the Assessing Officer by an order dated 28.04.2017. Hence this petition.

5. From the materials on record, it can be seen that the notice for reopening of assessment came to be issued beyond a period of four years from the end of relevant assessment year. Under the circumstances, the question of failure on part of the assessee to disclose truly and fully all material facts necessary for assessment, would assume significance. In this

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context, one may peruse the reasons recorded. The Assessing Officer has cited two reasons for reopening the assessment. First is that, in the return, the assessee had claimed a sum of Rs.12.02 crores by way of expenditure which was, in fact, suffered by the assessee in course of trading of crude and refined edible oil on settlement basis. According to the Assessing Officer, this was not an allowable business expenditure but was a speculative loss and therefore not allowable under section 73 of the Act. The reason itself records that scrutiny of the declarations made by the assessee revealed that the said sum of Rs.12.02 crores was debited as a net loss relating to the transactions concluded on settlement basis. The Assessing Officer has not referred to any material which did not form part of the assessee's return to form this belief that the assessee's claim of loss was not allowable claim. In other words, from the face of the reasons recorded by the Assessing Officer, it can be gathered that the material which he seeks to rely upon, formed part of the return and accompanying documents filed by the assessee. There was thus no failure on the part of the assessee to disclose

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material facts. Counsel for the Revenue however argued that there was no indication in the accounts of the assessee that the transactions were completed without taking actual delivery, which made the transaction speculative. This contention also cannot be accepted since the reasons themselves mentioned that from the material on record the Assessing Officer had noted that the transactions were concluded on net settlement basis. He further elaborated that such transactions were not for purchase of raw material but were in the nature of speculative business.

6. The second ground cited in the reasons recorded pertains to additional sales tax exemption of Rs.29.70 crores received by the assessee from the Karnataka Government during the period relevant to the assessment year 2010-11. Against this sum, the assessee had reversed a sum of Rs.13.99 crores (rounded off) which the assessee had credited in the earlier years on provisional basis and the net amount of Rs.15.70 crores (rounded off) was disclosed as an operating income during the year under consideration. The Assessing Officer had twofold objections. One was, the assessee could have already taken deduction in the

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earlier years on such sum of Rs.13.99 crores and second that, in any case, since the income actually accrued during the present year, the entire amount should have been taken during such period.

7. We are not on the validity of the Assessing Officer's objections. We however cannot ignore the fact that all these observations and formation of belief by the Assessing Officer are based on documents on record produced by the petitioner along with the return of income. In fact, this issue was examined by the Assessing Officer during the original assessment. As can be seen from a detailed reply submitted by the petitioner to the Assessing Officer under a letter dated 19.03.2014, relevant portion of which reads as under:

"3. Your goodself has asked details regarding reversal of incentive accrued in the earlier year of Rs.139,995,001/- shown in Schedule-13 of the Audited Financial Statements. In this regard we submit that the assessee company is eligible to avail sales tax exemption benefits on sales tax/VAT collected on sales of finished goods and by- products to the extent of its accepted fixed capital investment of Rs.297,000,000 which works out to Rs.594,000,000 for a period of 10 years from the date of commencement of commercial production, i.e. from December 31, 2001 as per the terms and condition stipulated in the Agro Food Processing

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Industrial Policy 1999 and specific FAVC Bangalore. The company has already availed sales tax exemption equivalent to 100% fixed capital investment amounting to Rs.297,000,000/- till the year 2006-07. Pursuant to the issuance of an amended certificate by the Joint Director-Department of Industries and Commerce, Bangalore, Government of Karnataka dated December 31,2009 and a Government order dated December 22,2009 the Joint Commissioner of Commercial Taxes, VAT Division, Mangalore has granted an amended certificate of entitlement for additional amount of Rs.297,000,000 (Total Exemption amount of Rs.594,000,000/-) Please find attached herewith copy of original certificate and revised certificate of entitlement issued by the Joint Director- Department of industries and Commerce and Government of Karnataka vide Annexure-3. During the year the assessee company accrued sales tax/VAT incentive of Rs.297,000,000/- based on amended certificate as written above and reversed an amount of Rs.139,995,001/- which was accrued on provisional basis in the A.Y.2007-08 and A.Y.2008-09. Please find attached herewith copy of relevant page of Audited Financial Statements of A.Y.2008-09 and A.Y.2007-08 vide Annexure-4 On perusal of which your goodself will find that the assessee company has already offered for tax incentive claim receivable of Rs.139,995,001 during the A.Y.2007-08 and A.Y.2008-09. The net amount of Rs.157,004,999/- has been disclosed as operating income in Schedule 13 and Sales Tax Incentive Receivable of Rs.297,000,000/- is shown under the head of current assets in Audited Financial Statements. Further find attached herewith copy of ledger accounts of VAT Incentive and Reversal of Incentive accrued in the earlier year for the year under consideration vide Annexure-5."

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8. This very issue thus, was scrutinized by the Assessing Officer. The question of failure on the part of the assessee therefore simply does not arise.

9. Under the circumstances, impugned notice dated 02.12.2016 is set aside. We have not examined the petitioner's additional grounds of challenge viz. that the notice was issued under the insistence of the audit party and further that the assessee company M/s.Rajshri Packagers Limited having amalgamated in Adani Wilmar Limited, impugned notice was issued to a non existing entity.

10. Petition is disposed of.

(AKIL KURESHI, J.)

(BIREN VAISHNAV, J.)

ANKIT

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