TaxTMI 
TaxTMI 
TaxTMI 
2011 (12) TMI 378
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....as prescribed under the Factories Act, 1948 to manufacture copper. As is evident from the Director's report, forming part of the balance sheet and profit and loss account for the assessment year 1999-2000, the petitioner is stated to have commenced its commercial production of copper in the said Unit from 1st April 1998. Thus, for the first time, in the return filed for the assessment year 1999-2000, the petitioner claimed 100% deduction under Section 80 IB of the Income Tax Act, 1961 in respect of the profits arising from the said manufacturing unit's operations. Thus starting from the assessment year 1999-2000, the deduction under Section 80 IB of the Income Tax Act, 1961, available at 100% for the first five assessment years was granted on the assessment made for the assessment years 2001-02, 2002-03 and 2003-04. 3. It is further seen from the averments in the affidavit filed before this Court that in respect of the Rakholi Unit, the assessee got the licence under the Factories Act on 18th March 1998. As the commercial production in respect of the Rakholi unit started only on 22nd February 1999, the assessee claimed deduction under Section 80 IB of the Income Tax Act in the ret....
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.... 2003-04, on 20.7.2006, the Assessing Officer initiated rectification proceedings under Section 154 of the Income Tax Act, proposing to rectify certain errors as apparent on the face of the records, which reads as follows: "Particulars of mistake proposed to be rectified: 115JB: To disallow claim u/s 80 HHC. Provision for bad debts and diminution of value of current investment and income tax debited. 143(3): (i) Share issue expenses and FRN issue expenses written off to be disallowed being capital in nature. (ii) IT & WT debited in P & L A/c. (iii) Mistake in ded. u/s. 80 IB in Chinchpada and ACSR Rakholi Units. 5. The assessee filed its objections to the same. A perusal of the records produced before this Court shows that except for the initiation of the rectification proceedings and the assessee filing its objection, there was no further processing of the proceedings. It is a matter of interest to note that in the order passed on 13th October 2009, on the reply filed by the assessee, the first respondent pointed out that as the issues in question were not such mistakes apparent from the records requiring rectification under Section 154, proceedings under Section 147 was in....
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....st income of Rs. 6,067/- and miscellaneous income of Rs. 67,87,792/-. Since these incomes do not form part of income from manufacturing unit, these are not eligible for deduction u/s.80IB. iv. Provision for Bad debts of Rs. 67,17,311/-, provision for diminishing value of investments of Rs. 1,17,362/- and income tax of Rs. 11,59,66,487/- debited to Profit and Loss account and added to the total income under normal computation was omitted to be added to the net profit u/s.115JB as unascertained liability. v. Wrong claim of 80HHC under section 115JB as no deduction is allowable under section 80HHCas per section 80IA(9). vi. Under normal computation: (a) Share issue expenses written off of Rs. 40,74,600/- and FRN issue expenses written off of Rs. 54,61,569/- debited to Profit and Loss account as per column 17(a) of Form 3CD to be disallowed being capital in nature. (b) Wealth of Rs. 10,89,940/- debited in Profit and Loss account as per clause 17(f) of From 3CD to be disallowed. (c) Mistake in deduction u/s.80IB in Chinchpada and ACSR Rakhali unit i.e., by wrongly allowing deduction u/s.80IB in relation to the interest and miscellaneous income a....
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....Officer is stated to have formed a prima facie view that by reason of any omission or failure on the part of the assessee to disclose fully and truly all material facts, the income of the assessee had escaped assessment, there could be no valid assumption of jurisdiction for the assessment years under consideration. Thus the notice issued after the expiry of four years, hit by the limitation provided therefor under Section 147, there could be no assumption of jurisdiction. Thus, the notices issued are under challenge on the ground of want of jurisdiction, both from the angle of limitation as well as from the absence of materials, disclosing the causal connection on the alleged escapement of tax. 11. As far as the proposal to withdraw 100% deduction in respect of Chinchpada Unit and Rakholi Unit is concerned, the petitioner pointed out that as per Section 80 IB, the five years' period for claiming 100% deduction has to be considered from the date of commencement of production. Given the fact that Chinchpada Unit and Rakholi Unit had their licence granted only on 7th June 1996 and 18th March 1998 respectively, the benefit for five assessment years has to be worked out from the date ....
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....tax debited in the Profit and Loss Account, there was never a claim made for deduction. 14. As regards the computation under Section 115 JB of the Act with reference to the claim under Section 80 HHC, the petitioner contended that the provision under Section 115 JB has an overriding effect over the other provision. The amount of profit eligible for deduction under Section 80HHC could not form part of the book profit as per the Section. For the purpose of Explanation (iii) to Section 115JB, it is not the actual deduction under Section 80HHC that is relevant, but what is relevant is the eligible profit for deduction under Section 80HHC of the Act. As regards the provision for bad debts, it was contended that the same was towards ascertained identified liability and a provision was made in the books of accounts. The amount, though added in the regular computation of the total income, was not added while computing book profit under Section 115 JB of the Act. So too the diminution in the value of current investment. The assessee contended that the above claims were considered by the Assessing Officer after making verification with the records of the petitioner. As such, the question of....
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....f the two units and the materials produced at the time of assessment and examined by the Income Tax Officer, learned senior counsel relied on the decision reported in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), followed in a series of decisions, the latest decision being CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC), and pointed out to the consistent view of the Apex Court that in the name of reopening the assessment, there cannot be a review of an assessment made based on the materials. He pointed out that the assumption of jurisdiction under Section 147 presupposes the existence of materials to form the view that by reason of the failure on the part of the assessee from disclosing the full and true facts, there had been an escapement of income, necessitating the reopening of assessment. Thus on a mere point of law as to whether the relief under Section 80 IB has to be granted from the year of operation or the year of commercial production, there could be no assumption of jurisdiction under Section 147 of the Act. When the notice does not disclose the reasons or the materials, the assumption of jurisdiction is bad and it is also hit by the fo....
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....f alternative remedy, the counter affidavit supported the proceedings taken under Section 147 of the Act, particularly with reference to Section 80 IB of the Act, that when the petitioner had been granted excessive relief, the assessment is liable to be reopened under Section 147 of the Act. Learned Senior Standing Counsel appearing for the respondents placed heavy reliance on Explanation (1) to Section 147(1) of the Act and submitted that even though the assessee had placed fully and truly the facts before the Officer, yet, when they had not received due consideration which is required of and the relief had been granted in excess of what is contemplated under the provisions of the Act, the Officer was entitled to assume jurisdiction under Section 147 of the Act. Making particular reference to limitation, he once again referred to Explanation (1) that production of other evidence, by itself, would not amount to disclosure within the meaning of the proviso to Section 147 of the Act. In the circumstances, when there are sufficient remedies available under the Act, the petitioner should have exhausted the same, instead of approaching this Court. He further pointed out that the proceed....
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....o the year in which the licence was granted. To a specific question put to the first respondent as to the first year of granting the relief of 100% under Section 80 IB, the first respondent does not deny, as a matter of fact, that as per the provision under Section 80 IB, the relief of 100% was granted from the year in which the commercial production started. As already pointed out, in respect of Chinchpada Unit, the commercial production started on 1st April 1998 and in respect of Rakholi Unit, the commercial production started on 22nd February 1999. Given the fact that the assessee is entitled to 100% deduction for the first five years starting from the initial assessment year of the date of commercial production, the petitioner had had the benefit of 100% deduction granted for the first time from the assessment year 1999-2000 and 2000-2001 in respect of Chinchpada Unit and Rakholi Unit respectively. 23. The contention of the first respondent herein that there was a wrong relief granted at 100% in respect of the assessment years 2002-03 2003-04 and 2004-05, is not legally correct. 24. Learned Senior Standing Counsel appearing for the Revenue pointed out that the notice to reope....
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.... is not a production of an article as such and that would not be enough to show that the assessee had begun to manufacture or produce articles. This Court pointed out that "The manufacture or production of articles must be in commercial sense." Thus, apart from the issue raised as to the absence of materials available with the Assessing Officer to assume jurisdiction to reopen the assessment, I agree with the contention of the petitioner that going by the purport of Section 80 IB, on the admitted facts as to the date of commercial production, there could be no denial of the relief. 28. As already pointed out, in respect of the assessment year 2003-04, the first respondent herein issued notice under Section 154 on 20.7.2006, wherein, the Officer proposed to disallow the claim under Section 80 HHC, provision for bad debts and diminution of value of current investment and income tax debited in respect of Section 115 JB assessment and on the regular assessment under Section 143(3) in respect of the alleged mistake in granting deduction under Section 80 IB, for income tax and wealth tax debited in the profit and loss account and the share issue expenses and FRN issue expenses written o....
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....er of excessive relief under Section 80 IB and the provision for bad debts and provision for diminution in value of current investment, to be considered under Section 115 JB, had not received due consideration at the time of assessment. Consequently, the same warranted assumption of jurisdiction under Section 147. As already seen, as far as the reassessment for the assessment year 2003-04 is concerned, the said issue is also the subject matter of Section 154 proceedings. For the reasons already given in the preceding paragraph, I do not find any justifiable ground to accept the contention of the Revenue to uphold the reassessment proceedings. 32. As regards the writ petitions relating to the assessment years 2002-2003 and 2004-2005, the issue on the grant of relief under Section 80 IB under the reassessment notices are no different from what had been adopted for the assessment year 2002-2003. Learned senior counsel appearing for the petitioner made particular reference that there cannot be a reassessment proceedings on the mere change of opinion, particularly on the scope of Section 80 IB of the Act. He particularly laid stress on the language of Section 147, that in the context o....
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....here is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Legislature has put in the Explanation..." "His omission to bring to the assessing authority's attention those particular items in the account books, or the particular portions of the documents, which are relevant, amount to "omission to disclose fully and truly and truly all material facts necessary for his assessment" "13. It may be pointed out that the Explanation to the sub-section has nothing to do with "inferences" and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose "inferences" - to draw the proper inferences being the duty imposed on the Income-tax Officer. 14. We have therefore come to the conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. 15. The posi....
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....6] 103 ITR 437 (SC), the Apex Court held that the reasons for formation of the belief contemplated under Section 147A of the Act must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of the belief that there has been an escapement of income of the assessee from assessment in the particular year, because of the assessee's failure to disclose fully and truly, all material facts. 39. Dealing with the position of law post-amendment to Section 147 under the Direct Tax Laws Amendment Act, 1987, in the decision reported in Kelvinator of India Ltd. (supra), the Apex Court pointed out that post 1st April 1989, under the amended provision, the power to reopen is much wider. 40. Sounding a note of caution that one has to give a schematic interpretation of the words "reason to believe" under Section 147, the Apex Court pointed out that there can be no reopening of an assessment just on the basis of change of opinion. The Apex Court observed as follows: "We must also keep in mind the conceptual differ....
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....g, I find that as far as the claim under Section 80 IB is concerned, except to the stand taken by the Revenue that the relief under Section 80 IB should be calculated from the date of the licence, a stand which I had already rejected, there is absolutely no material disclosed in the notice for forming a belief that there was escapement of income on account of the failure on the part of the assessee in disclosing fully and truly, material facts relating to the claim. 42. In the light of the above-said enunciation of law on Section 147 of the Act, which is relevant even today after the amendment in 1998, which had already been considered in the decision reported in Kelvinator of India Ltd. (supra), as rightly pointed out by the learned senior counsel appearing for the petitioner, a perusal of the notices issued for all the years under consideration reveals that the notices do not disclose any such material which formed the basis of a reasonable view that there was an escapement of income on account of the failure of the assessee in disclosing fully and truly, the facts. 43. As already pointed out, as far as the assessment for the assessment year 2003-04 is concerned, with Section 1....
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....f decisions of various Courts and that of the Supreme Court and held in the decision reported in Sunil Kumar Jain (supra), that Article 226 of the Constitution of India confers on all the High Courts, a very wide power in the matter of issuing writs. However, the remedy of writ is an absolutely discretionary remedy. If the Court is satisfied that there is total want of jurisdiction, the High Court has always the discretion to refuse to grant any writ and hence, alternative remedy shall not be a bar to consider the claim of an aggrieved party. 48. In a recent decision reported in Union of India v. Tantia Constructions (P.) Ltd. [2011] 5 SCC 697, on the issue of maintainability of a Writ Petition, in the face of the alternative remedy available under the Act, the Apex Court held that the presence of an alternative remedy is not an absolute bar in entertaining a Writ Petition. In so holding, the Apex Court considered the decisions reported in Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [2003] 2 SCC 107; Modern Steel Industries v. State of Uttar Pradesh [2001] 10 SCC 491; Hindustan Petroleum Corpn. Ltd. v. Super Highway Services [2010] 3 SCC 321; National Sample Survey Organization v.....