TaxTMI 
TaxTMI 
2015 (5) TMI 388
X X X X Extracts X X X X
X X X X Extracts X X X X
....l. The original assessment u/s 143(3) of the Act was completed in the hands of the assessee for the assessment year 2001-02 on 30.1.2004 determining loss of Rs. 996.74 crores under the normal provisions of Act and book profit of Rs. 1580.09 crores under the provisions of section 115JB of the Act. Consequent to the order passed by the ld.CIT(A) on 24.3.2004, the assessment order was revised to give effect to the order of ld.CIT(A) which resulted into total income at NIL under the normal provisions of Act and book profit of Rs. 1214 crores u/s 115JB of the Act. 4. Subsequently, the AO noticed that the income relating to the year under consideration has escaped assessment. Accordingly, he reopened the assessment by issuing notice u/s 148 of the Act on 4.8.2006. The reasons for reopening of the assessment are recorded as under: "Assessee company filed its return of income on 31.10.01 declaring a total of Rs.NIL under the normal provisions and Rs. 12,13,78,86,516 under the provisions of section 115JB of the Income Tax Act, 1961. The assessment was completed under section 143(3) of the Income Tax Act, 1961 on 30.1.2004 at a total loss of Rs. 996,74,68,008 under the normal provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e on the decision of Hon'ble Delhi High Court in the case of Essex Forms (P) Ltd Vs. CIT (1986) 157 ITR 241 Delhi, submitted that the escapement of income should result in escapement of tax in order to hold the reassessment proceedings to be valid. Accordingly, he submitted that the impugned reassessment proceeding is not valid since the same has not resulted in escapement of tax. The Ld. AR further submitted that the AO has stated that he has sought necessary approval from the Commissioner of Income Tax before issuing the notice u/s 148 of the Act. The ld. AR, by placing reliance on the decision of Hon'ble Supreme Court in the case of Chhugamal Rajpal V/s S. P. Chaliha And Others 79 ITR 603(SC) and the decision of Allahabad High Court in the case of Rajkishore Prasad v. ITO (1992) 195 ITR 438 (All), submitted that the ld.CIT(A) should have given an opportunity of being heard to the assessee before granting his approval to the reopening of assessment. Accordingly, the ld.AR submitted that the approval given by the Commissioner of Income Tax without hearing the assessee is not valid and on that count also, the reassessment proceeding gets vitiated. The ld. AR further submitted that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal income in the return of income filed in response to the notice issued u/s 148 of the Act. 10. We have gone through the order passed by Hon'ble Delhi High Court in the case of Essex Farms (P) Ltd (supra) and we notice that the Hon'ble High Court was mainly concerned with the question as to whether there was failure on the part of the assessee to disclose material facts necessary for assessment in terms of sec. 147(a) of the Act, which existed at the relevant point of time. The Court was examining about the validity of arrangement made between the assessee therein and its sister concerns about trading transactions. According to the department, the said arrangement resulted in escapement of income in view of the failure on the part of the assessee to disclose material facts. The Hon'ble High Court noticed that the revenue could not show that the said arrangement resulted in reduction of aggregate tax payable by the assessee therein and its sister concern. Further, the High Court held that there was no failure on the part of the assessee to disclose material facts. Under these set of facts, the Hon'ble High Court held that the reassessment proceeding was not valid. However, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eligible for deduction u/s 80HHC for computing income under section 115JB of the Act. The Ld CIT(A) rejected the said contentions, since he held that the Explanation (baa) to section 80HHC is equally applicable while computing income under section 115JB. 14. Before us the assessee reiterated the same contentions. However, in the absence of any case law to support the view taken by the assessee, we are of the view that the Ld CIT(A) is justified in applying the provisions of Explanation (baa) while computing deduction u/s 80HHC for determining the Book Profit u/s 115JB of the Act. Accordingly, we do not find any reason to hold that the provisions of Explanation (baa) to section 80HHC is not applicable while computing the deduction for the purpose of sec. 115JB of the Act. 15. The assessee has taken alternative ground that the tax authorities are not justified in excluding 90% of the Gross interest for the purpose of computing "Profits of Business". In this regard, the Ld A.R placed reliance on the decision of the Hon'ble Supreme Court rendered in the case of ACG Associated Capsules P Ltd Vs. CIT (343 ITR 89). We notice that the ld CIT(A) has followed the decision of jurisdicti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Profits of Business:- a. Income - Deployment of P&M - Hire charges - 3,79,21,888 b. Income from Time charter - 2,24,18,334 c. Income - commission - 6,02,32,985 d. Rent received - 2,17,62,000 18. In respect of remaining items of receipts, we notice that the following receipts arise out of business activities carried on by the assessee, i.e., they are not independent source of income and hence 90% thereof are not required to be excluded from the net profit in order to compute "Profits of business" in terms of Explanation (baa) to Sec. 80HHC of the Act. (a) Sale of scrap, Excise duty recovered (Scrap Sales), Sales tax recovered (Scrap sales). The scrap sales is held to be part of business activities carried on by the assessee by Hon'ble Kerala High Court in the case of CIT Vs. Kar Mobiles Ltd (Laws (Ker) 2010-1-134). (b) The penalty recovered from Contractors, Insurance claim received, Cash discount received, in our view, cannot be considered as independent sources of income, since they arise out of business operations carried on by the assessee. In respect of insurance claims, we derive support from the decision of jurisdictional Hon'bl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee herein, viz., M/s Reliance Petroleum Ltd figured as one of the beneficiaries in Volcker committee Report. It was stated that 19 million barrels of oil was allotted, of which 15.7 million barrels were lifted by Alcon Petroleum Ltd, a Liechtenstein based energy trading company. Accordingly, the AO took the view that the assessee would have paid commission/surcharge during the year under consideration and estimated the same at Rs. 8,89,36,380/-. Accordingly he added the same to the total income of the assessee. 24. The Ld CIT(A), however, deleted the same with the following observations:- "3.6. I have considered the facts of the case, order of the AO and the submissions made by the appellant and I do not find enough reasons or justification for the addition made by the AO. Whereas the mention as a non-contractual beneficiary in the Volcker Committee Report is the only reason for the addition, following important aspects related to the issue in question supports appellant's case:- (i). The observation in Volcker Committee Report is the only material or evidence for making the addition in the assessment order to the effect that assessee is a non-contractual ben....