TaxTMI 
TaxTMI 
2008 (5) TMI 327
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.... be considered for limiting the deduction under the said section. 5. Without prejudice to the above the CIT(A) erred in rejecting the proposal for enhancement made by the AO in the course of appeal proceedings for withdrawing the entire deduction under s. 80-I of the IT Act as there was loss of business of Rs. 4.12 crores in the relevant year." 2. At the outset the learned counsel for the assessee submitted that the CIT(A) has not gone into the issue of reopening because he has allowed the appeal on merits. He referred to r. 27 of the ITAT Rules and submitted that the assessee has a right to agitate the issue regarding reopening of assessment. He submitted that in this case, original assessment was completed under s. 143(3) on 15th Feb., 1999. Later on a notice under s. 148 was issued on 25th Feb., 2003 which is clearly beyond four years from the end of the assessment year. Since there is no failure on the part of the assessee to disclose any material facts the reopening was not valid. In this regard he relied on the decision of Hon'ble Madras High Court in the case of CIT vs. Elgi Finance Ltd. (2006) 205 CTR (Mad) 241 : (2006) 286 ITR 674 (Mad) and in the case of CIT vs. Pre....
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....year by reason of the failure on the part of the assessee to make a return under s. 139 or in response to a notice issued under sub-s. (1) of s. 142 or s. 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year." The above proviso clearly shows that if original assessment has been completed under s. 143(3) then such assessment cannot be reopened beyond four years unless and until there is a failure on the part of the assessee to disclose any material facts. Now, in the case before us the CIT(A) has reproduced the following computation of income: "4. Relief under s. 80-I: Facts in brief: Following computation statement was filed with the return of income. Income for income-tax 1996-97 assessment (revised) Rs. Net profit as per P&L a/c 80,90,31,779 Add: Depreciation as per books 36,62,93,621 Donation considered separately &n....
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....sp; 1,19,50,38,795 Less: Deduction under s. 35AC in respect of donation to Amar Seva Sangam 1,00,000 Depreciation as per income-tax 99,87,02,250 Premium paid on redemption of debentures 11,66,666 Voluntary retirement payments 4,55,33,698 Expenses on removal of overburden in limestone mines 61,45,831 Front-end fee paid to Bank of America 17,25,855 Interest paid for windmill acquisition 33,26,733 Roller charges paid/loss on cancellation of foreign exchange forward contracts &nb....
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....0,000 2,91,06,490 ----------- -------------- Total income 9,33,59,805 Less: s. 80-I Shankar Nagar (As per working Rs. 11,66,48,272 restricted to) 9,33,59,805 ------------....
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....fore, following the decisions of Hon'ble jurisdictional High Court in the above cases, we hold that assessment was wrongly reopened and, therefore, we annul the assessment proceedings. 6. On merits, after hearing both the parties we find that in original assessment as well as in reassessment total deduction under s. 80-I from Shankar Nagar Unit which was eligible was determined at Rs. 11,38,03,622. In the original assessment the same was allowed to the extent of gross total income amounting to Rs. 9,89,79,212. However, in the reassessment proceeding, the same has been determined as under: "Gross total income as per order dt. 15th Feb., 1999 Rs. 9,89,79,212 Less: (i) UTI dividend Rs. 2,87,82,234 (ii) Interest from TNEB Rs. 21,71,795 3,09,54,029 ....
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....ar Nagar Unit of Rs. 11,38,03,622 restricted to income from business Rs. 6,78,75,183 ---------------- Assessed income Rs. 3,11,04,029" ---------------- From the above it is clear that deduction has been restricted to Rs. 6,78,75,783 and that figure has been derived after reducing UTI dividend and interest from TNEB from the gross total incom....
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....bsp; Rs. 2,87,82,234 (ii) Interest from TNEB Rs. 21,71,795 3,09,54,029 --------------- 6,80,25,185 Less: Short-term capital gains 1,50,000 ....
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....From the above it is clear that AO has excluded the dividend income and interest income from TNEB and reached the figure of Rs. 6,78,75,183. He has though clearly mentioned that the assessee is eligible for deduction under s. 80-I in respect of Shankar Nagar Unit to a sum of Rs. 11,38,03,622, the same was restricted to Rs. 6,78,75,183. It is quite clear that Shankar Nagar Unit was eligible for deduction and in that unit the total profit was Rs. 51,16,81,863 and deduction of Rs. 11,66,48,272 was worked out as under: Profit from Shankar Nagar Unit 51,16,81,863 Add: Certain items such as donations, disal1owab1es, entertainment, etc. 6,51,26,015 &nb....