TaxTMI 
TaxTMI 
TaxTMI 
2010 (9) TMI 1065
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....4-2003. The assessing authority had supplied the reasons recorded for the issue of notice under section 148 of the Act, which are as follows : "The assessee had filed a return of income for the assessment year 1996-97 on 1st July, 1996 showing total income at Rs. 1,80,570. The same was assessed under section 143(3) on 26-10-1998 on total income of Rs. 1,80,750. The assessee had sold 75,000 shares of M/s. Kothari Products Ltd. during the financial year 1995-96 and claimed expenses of Rs. 6,92,687 on the same. The net consideration was shown as Rs. 1,43,07,103 (shares sold 75,000 at the rate of 200 per share i.e., Rs. 1,50,00,000 minus expenses claimed Rs. 6,92,897) and an amount of Rs. 1,44,63,525 was invested in residential house at 7/23, Tilak Nagar, Kanpur and claimed exemption from the capital gains under section 54F. Neither particulars of these expenses were filed with the return of income of the assessee for assessment year 1996-97 nor were they submitted during the course of assessment proceedings. The various expenses had been reportedly incurred by Company M/s. Kothari Products Ltd., in which the assessee was a promoter director and whose shares were sold as per the direc....
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....expenditure of Rs. 1,44,33,221.73 had been incurred for the purposes of making public issue/offer for sale of shares held by the assessee and his associates. This was an expenditure, which has been wholly, and exclusively in connection with transfer/sale of shares. The gross amount, therefore, was deductible under section 48(i) for the purposes of computing capital gains. There is however, no provision in the statute for reducing the amount of interest received in the course of such public issue from the expenses incurred for the purposes of transfer. The same was liable to be taxed separately under the head 'income from other sources'. A total of 12,50,000 shares had been offered for sale against which the application money was received on which this interest had been earned, the assessee had offered for sale 75,000 shares and accordingly his proportionate shares in the total interest comes to Rs. 1,73,097. I have, therefore, reason to believe that income for tax as a result of which, the income has escaped assessment. Accordingly, the assessee is required to be reopened under section 147 of the Income-tax Act, 1961. Since the matter pertains to assessment year 1996-97, approval o....
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....terest from bank on temporary deposit of the application money in respect of the aforesaid shares. In the said details of the expenses incurred on the sale of aforesaid shares, the aforesaid interest income at Rs. 28,84,943 was deducted bringing expenses to the figure of Rs. 1,15,48,278.73p. The said expenses relating to the sales of the aforesaid shares were apportioned amongst the shareholders whose shares had been sold. The proportionate expenses in the case of the petitioner was Rs. 6,92,897, which had been duly shown in the computation chart of the income and tax. (v)Complete details relating to the sales of the shares, the sales proceeds and expenses have been furnished before the assessing authority along with the return and on scrutiny of the return various other details as required by the assessing authority have also been furnished during the course of assessment proceeding and on consideration of such details, the assessment order has been passed under section 143(3) of the Act. (vi)The perusal of the assessment order also reveals that under the head "Capital gains", the shares sold by the petitioner has been referred. The sale proceeds, expenses and the ....
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.... how to pass the assessment order. (xii)Since there was no failure on the part of the assessee to disclose fully and truly all material facts, the limitation to take action under section 147 of the Act was four years. In the present case, the notice was issued on 29-3-2003, which was beyond four years and therefore, it was barred by limitation. (xiii)Moreover, interest received at Rs. 28,84,943 was deducted from the expenses incurred relating the amount of expenses which has been further deducted from the total sale proceed. There was no escapement at all." 5. Learned Standing Counsel submitted that no question was asked relating to the sale of shares. Regarding the sale of shares, the petitioner did file the letters on his own motion on 26-10-1998. However, these facts were not gone through and the assessment order was passed on the same date. Thus, it is a case of failure on the part of the assessee to disclose fully and truly all material facts. He submitted that in the present case the escaped income was more than one lakh and, therefore, the limitation to issue the notice under section 148 of the Act was six years under section 149(1)(b) of the Act and since, ....
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....able under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b)where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relied in the return; (c)where an assessment has been made, but- (i)income chargeable to tax has been under-assessed; or (ii)such income has been assessed at too low a rate; or (iii)such income has been made the subject of excessive relief under this Act; or (iv)excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Issue of notice whe....
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....served under this section.] [(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.] 149. Time-limit for notice.-[(1) No notice under section 148 shall be issued for the relevant assessment year- [(a)if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b)if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.] Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pu....
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....etails of public issue expenses filed along with the return on 1-7-1996 and which was duly considered along with all the relevant records by the Assessing Officer for the purposes of framing an assessment under section 143(3) of the Act. 7. That during the course of assessment proceedings for the assessment year 1996-97 detailed queries were made by the Assessing Officer with regard to the income from sale of shares declared by the petitioner in the computation of income and the details thereof appended along with the return. One such query was dated 7-8-1998. 8. That after considering in details the income and expenses declared by the petitioner in the said return of income, the Assessing Officer was satisfied that the declaration made by the petitioner was justified and correct. He was also satisfied that the interest income received by the petitioner in the transaction of sale of aforesaid shares had been correctly and legitimately been shown as reducing the total expenses incurred for the sale of the aforesaid shares, the entire transaction being part and parcel of one and the same transaction of sale of shares. The assessment order was passed by the Assessing Officer on 26-1....
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....7,103 Less : Invested in residential house at 7/23, Tilak Nagar, Kanpur (Self occupd.) Rs. 1,44,63,525 Excess invested Rs. 1,56,422 NIL Income from other sources (i ) Interest from saving Bank Rs. 19,466 (ii ) Interest from FDR Rs. 1,72,175 (iii ) Interest on NSC maturity Rs. 1,930 Rs. 1,93,572 Gross total income Rs. 1,93,572 Less : Deduction u/s 80L Rs. 13,000 Total income Rs. 1,80,572 OR Rs. 1,80,570 Assessed on income of Rs. 1,80,570. Issue notice of Demand and challan. Charge interest as per rule. Dated : 26-10-1998 Sd/- (Budh Sen) Asstt. Commissioner of Income-tax, Central Circle-IV, Kanpur Copy to the assessee : Sd/- (Budh Sen) Asstt. Commissioner of Income-tax, Central Circle-IV, Kanpur The petitioner filed return of income on 1st July, 1996 disclosing therein the following particulars as under : A. Capital Gain 75000 Shares of Kothari Products Ltd. Sold @ 200 Rs. 1,50,00,000 Less : Expenses Rs. 6,92,897 Net received Rs. 1,43,07,103 Less : I....
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....,220. The petitioner is entitled to deduction of these expenses in view of the provisions laid down in section 48(1) of the Act. (v) The Answering Respondent further submits that however, petitioner presented the figure of expenses incurred in a round about manner to confuse the entire issue relating to the sale of shares and reduced it by a sum of Rs. 28,84,943 being interest received from the Bank. This interest was received by the petitioner as has been gathered from the details filed in other case of this Group on account of monies deposited in Bank Account and was therefore separately taxable and could not have been deducted from the total expenses incurred for the transfer of shares. (vi) The expenses of Rs. 1,15,48,278 after the deduction of abovementioned interest were allocated among the petitioner and other shareholders namely M.M. Kothari, HUF, Vikram Kothari, Indl. Vikram Kothari HUF, Deepak Kothari, Indl. Deepak Kothari, HUF on pro rata basis and claimed in the return of income. On this basis, the share of petitioner comes to Rs. 6,92,897. (vii) The income arisen from the sale of shares taxable under Chapter IVF of the Act, which deals with Capital....
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....earned against the expenses incurred by the petitioner at any stage of the Assessing proceedings. 8. That the contents of paragraph No. 6 of the writ petition need no reply at this stage, as the same has already been replied in reply to the contents of paragraph No. 3 of the writ petition, as the same are reiterated and re-affirmed. 9. That the contents of paragraph No. 7 of the writ petition are not admitted, incorrect as such denied. It is wrongly stated by the petitioner that the Assessing Officer had examined the issue of adjustment of interest income against the expenses incurred and had come to the conclusion that the petitioner is entitled to do so. However, it is submitted that in this regard the proper and correct reply had already been given in reply to the contents of paragraph No. 4 of the writ petition, which are re-iterated and re-affirmed. 10. That the contents of paragraph Nos. 8, 9, 10 and 11 of the writ petition need no comment at this stage, being matter of record." 10. From the perusal of the return, the details furnished, the assessment order and averments made in the counter-affidavit referred hereinabove, it is apparent that the petitioner had disclosed a....
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....ly all material facts necessary for assessment for the assessment year, the proceeding can be initiated beyond the period of four years. The proviso to section 147 completely prohibits to take action beyond four years unless the case is covered under the exception mentioned in the proviso itself. Section 149 provides limitation for the issue of notice under section 148. Section 149(1)(a) provides general limitation for issue of notice four years. Section 149(1)(b) is an exception to sub-section (a) of section 149(1) of the Act provides six years limitation for issue of notice in case escaped income exceeds one lakh. Section 149(1)(a) and (b) read with proviso to section 147 of the Act clearly provides that where the case falls under the exception mentioned in the proviso to section 147 of the Act the proceeding can be taken beyond the period of four years, but within six years if the escaped income exceeds rupees one lakh and in for all other cases, the limitation for issue of notice remains four years meaning thereby that if the income is chargeable to tax which has escaped assessment is less than rupees one lakh, the limitation to issue notice under section 148 of the Act is only....