TaxTMI 
TaxTMI 
2011 (11) TMI 350
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....80-IA of the Act. However, the assessee has failed in its attempt before the CIT (A) as well as ITAT. Before we come to the nature of the challenge led and the question of law raised by the assessee in these appeals, it would be apposite to take stock of the relevant facts. For the sake of brevity we will disclose the facts of the assessment year 1994-95 as on the basis of these facts, the following common question of law pertaining to both the years can conveniently be decided:- "Whether, the Income Tax Appellate Tribunal was correct both in law and on facts in upholding the assumption of jurisdiction of the Assessing Officer to frame an assessment by taking recourse to the provisions contained in Section 147 of the Income Tax Act, 1961?" 2. The appellant Kohinoor Foods Ltd (formally known as Satnam Overseas Limited) is a limited Company incorporated under the Companies Act, 1956 and is engaged in the business of manufacturing of Rice and also trades in pulses, Rice, Sesame Seeds, groundnut etc. It is also engaged in Exports of Rice, pulses etc. For the instant assessment year i.e. 1994-95, the appellant company had furnished a return of total income on 30th No....
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....claimed on this miscellaneous income also, which cannot be said to have been derived from the industrial undertaking, in view of the Delhi High Court‟s decision in the case of CIT Vs. Cement Distributors, 208 ITR 355. I have reasons to believe that income has escaped assessment in as much as excessive deduction u/s 80IA has been claimed by the assessee. Issue notice u/s 148 of I.T. Act, 1961." 3. In response to the notice u/s 148 of the Act the appellant company filed the return of income though under protest on 26th July, 1999 declaring nil income after claiming deduction u/s 80HHC, 80-IA & 80G of the Act at the same figure as was done in the revised return of income. The Assessing Officer, however, by an order dated 18th December, 2000 framed an assessment under Section 143(3) read with Section 148 of the Act at Rs. 34,31,020/-. The Assessing Officer did not allow deduction under Section 80-IA of the Act on Rs. 1,86,39,748/- by holding the same cannot be said to have derived from industrial undertaking. 4. Being aggrieved from the order of assessment under Section 143(3) read with Section 148 of the Act dated 18th December 2000 the appellant filed an appeal bef....
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....egards decision of Hon‟ble Madras High Court in the case of Bapa Lal & Co. Export (supra), it is, seen from the said decision at page 45 of the report, the High Court has noted that the AO has issued the notice without assigning any reason. The mandatory requirement of Section 148 requires the AO to record reasons for the same In absence of reasons recorded, the AO cannot form an opinion that income has escaped assessment. However, the facts of present case are different. The AO has duly recorded the reasons before issue of notice U/S 148. As held by Hon‟ble Supreme Court in the case of Raymond Woollen Mills, 236 ITR 34, the sufficiency of reasons are not required to be looked into. Since there is sufficient material for formation of a belief that income has escaped assessment, the issue of notice U/s 148 and assumption of jurisdiction U/s 147 has to be upheld." 6. On merits, the Tribunal sustained the orders of the Assessing Officer and the CIT (A) in the following words:- "6.We have heard the counsels. We find that amount realized on sale of licence cannot be said as income derived from industrial undertaking for the purpose of computing deduction ....
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....assessment. Relying upon the judgments, it was argued that such a course of action was not permissible. 9. In KLM Royal Dutch Airlines Vs. ADIT, 292 ITR 49 this Court held as under:- "The neat question which arises before us is whether on the commencement of assessment proceedings must they first be brought to their logical conclusion by framing an assessment before embarking on the proceedings as envisaged in Sections 147/148 of the IT Act; or more precisely stated, can resort to Section 147 be made even whilst the normal assessment proceedings are pending conclusion. To find the answer we must keep in perspective that every Return of Income filed under Section 139 may not result in its active and in-depth perusal or consideration by the AO as it may receive an automatic onward passage under Section 143(1). However, once an inquiry has been initiated by the AO, it cannot but result in either the Return being accepted as having been correctly computed by the concerned assessed, or for an Assessment being conducted and concluded thereon by the AO. The provisions of Section 147 would have no role to play at this stage of the proceedings. Once a Return of Income at....
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.... under Section 147. The proceedings under Section 147 are not to be invoked at the mere whim and fancy of an Assessing Officer and it has to be seen in every case as to whether the invocation is arbitrary or reasonable. The decision of the Supreme Court in Chhugamal Rajapal‟s case (supra) is clearly applicable to the facts of the present case. In the case before the Supreme Court, the purported reasons recorded for reopening the assessment were inter alia:- "It appears that these persons are name lenders and the transactions are bogus. Hence, proper investigation regarding these loans is necessary" The Supreme Court did not find that these were sufficient reasons for reopening the assessment. With regard to the sentence „hence, proper investigation regarding these loans is necessary‟, the Supreme Court observed that this conclusion that there is a case for investigation as to the truth of the alleged transactions is not the same thing as saying that there are reasons to issue a notice under Section 148." 11. He further submitted that the Tribunal wrongly relied upon the judgment of Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500. According to him, that ....
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....lability of the provision of Section 143 (2) of the Act, Mr. Sabharwal, submitted that the provisions of Section 143(2) make it clear that notice under Section 143(2) could be issued within 12 months from filing of the return i.e. 30th November, 1996. The reassessment notice was issued on 8th March, 1999. On the said date as stated above no notice under Section 143 (2) could have been issued. For framing of assessment under Section 153(1) clearly provides for 2 years time limit for assessment in view of sub clause (a) from end of years of assessment i.e. upto 31st March, 1995 for assessment year 2004-05 or 1 year under sub clause (b) in case revised Return was filed i.e Revised return filed on 30th November, 1995 and hence time frame was upto 31st March, 1996. Keeping in view the time frame available for reassessment i.e. on the date of issue of notice for reassessment on 8th march, 1999 neither the notice under Section 143(2) could have been sent nor there was time limit available under Section 153 of the Act. In this regard he submitted that the Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra) has clearly laid down that keeping in view Amendment to Sectio....
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....t.... 14. He also refuted the contention of the assessee‟s counsel that the Assessing Officer himself allowed time of lapse for issuance of notice under Section 143 (2) of the Act and, therefore, it was not permissible for him to take advantage of the same for enlarging the time for assessment by issuing notice under Section 147 of the Act. Relying upon the decision of Rajesh Jhaveri (supra) wherein it is held that as long as provisions of Section 147 are satisfied, the Assessing Officer is entitled to initiate reassessment proceedings. He further argued that it was misconceived on the part of the assessee to challenge the reassessment proceedings on the ground that no new material was found by the Assessing Officer. His submission in this behalf was that there was new material and it makes no differences as to whether the material is unearthed from the existing record. It is further submitted that new material should not be extraneous and further that even when the material was existing on record, the important fact is to see as to whether such material is considered by the Assessing Officer or not. 15. We have minutely considered the aforesaid submission....
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....xisting record or outside. What is important is whether such material was considered by the Assessing Officer or not. When the issue was not considered on merits and having regard to the judgment of this Court in Cement Distributor (supra) as per which such a claim under Section 80 IA was not admissible. 16. In A.L.A. Firms Vs. CIT, 189 ITR 285 the Supreme Court has explained the legal position as under:- ".....This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas [1986] 21 S.T.C. 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law:- "The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said ....