AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (4) TMI 1421
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....mputing the deduction under section 80 HHC of the Act excluded 90% of the business centre receipts , interest expenses and motor car expenses disallowed from the income from business under Explanation (baa) to section 80 HHC of the Act. 3. The Assessee had a separate unit at Koramangala, Bangalore, which was carrying on exclusive activity of stitching of garments for which it earned labour charges. Separate books of accounts are maintained for the Koramangala Unit. As per the profit and loss account as on 31.3.2001, the labour charges received by the Koramangala unit was Rs. 2,79,81,165. The unit incurred a loss of Rs. 12,96,655. While working the deduction u/s.80- HHC of the Act, the Assessee had added 90% of the loss of Rs. 12,96,655 to the profits of the business in view of clause(a) of expln. (baa) to Section 80HHC of the Act. This computation was not disturbed by the AO when he completed the Assessment u/s.143(3) of the Act. 4. On 10/1/2005 the AO issued a notice under section 147 of the Act. We will refer to this as the 1st reassessment notice. The reasons for issue of notice under section 148 of the Act for making the assessment under section 147 of the Act was that th....
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....t of the business As per explanation baa (-) 20610638 ---------------------- As the assessee had a negative profit of business as calculated above, the AO held that the assessee is not entitled for deduction u/s. 80 HHC of the I.T. Act, in view of the decision of supreme court in the case of IPCA Laboratory Ltd. and the decision of Bombay High Court in the case of Rohan Dyes Intermediary Ltd. 6. In this regard it has to be mentioned that the AO considered 90% of the labour charges received of Rs. 2,79,81,165 by the Kormangala Unit as falling within clause(a) of expln-(baa) to Section 80HHC of the Act in the reassessment proceedings as against his action in the original order passed u/s.143(3) of the Act, in adding 90% of the loss of Rs. 12,96,655 to the profits of the business in view of clause(a) of expln. (baa) to Section 80HHC of the Act. 7. In fact in assessment year 1999-2000 the assessee was treating the Koramangala unit as part of export unit and was including in the total turnover and profits of the business the turnover and income of the Koramangala units also. The AO while completing the ass....
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....f the I.T. Act, on 23.3.2004. On going through the said return and also from the details filed during the course of assessment proceedings for A.Y 2002-03 and A.Y 2003-04, it is seen that the assessee is engaged in the export business and has claimed deduction u/s. 80 HHC of Rs. 84,72,698/-. It is also seen that the assessee has filed separate P&L Accounts for various units. However, the business of all units are inter-laced. The Koramangala unit of the assessee has been stated to be doing the job work of manufacturing of shirts for its own exports as well as for the other concerns associated with the assessee in terms of section 40A(2)(b). It is seen that the turnover of the Koramangala unit of Rs. 2,79,81,165/- has not been taken into account while calculating the total turnover for the calculation of deduction u/s. 80 HHC. Also the assessee has removed loss of this unit of Rs. 12,69,654/- from the calculation of the profits of the business under clause (baa) of explanation after 80 HHC (4C) . However, it is seen that the net from this Koramangala unit has shown to be a loss as the assessee is charging very nominal rate from its sister concerns and also for its exports, transfer ....
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..../ job work from this party. In the circumstances, I have reasons to believe that income above Rs. 1 lakh chargeable to tax has escaped assessment within the meaning of section 147 of the I.T. Act." 11. On the validity of the initiation of 2nd reassessment proceedings the CIT(A) held that : (1) The first original assessment was reopened u/s. 147 on the ground that the loss sustained by the assessee from export of Trading goods of Rs. 96,00,571/- was omitted. (2) The assessment was reopened again for the second time for altogether different reasons.i.e. (i) For all practical purposes, the Koramangala unit is manufacturing the shirts being exported. This unit can not be said to be engaged in other activities not connected with main business of the assessee of export of shirts. It has been held in several court decisions that if the activity is intimately connected with the main business of export of the assessee, the same can not e treated as other income. Accordingly the assessee's claim of exclusion of 90% of loss of the Koramangala unit from the profits and gains of the business and profession by the assessee was nto correct. (ii) During the course of assessment proc....
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....65 by the Kormangala Unit as falling within clause(a) of expln-(baa) to Section 80HHC of the Act in the reassessment proceedings as against his action in the original order passed u/s.143(3) of the Act, in adding 90% of the loss of Rs. 12,96,655 to the profits of the business in view of clause(a) of expln. (baa) to Section 80HHC of the Act. The fact that the service charges of Rs. 2,79,81,165 received by the Koramangala Unit was not included in the total turnover is a matter which the AO ought to have considered when making the 1st reassessment. Successive reassessments cannot be done to consider different facets of the very same deduction u/s.80-HHC of the Act. In other words, the AO is deemed to have considered this aspect when he passed the original assessment order as well as the 1st reassessment order. The reopening of assessment for the 2nd time on this aspect, if permitted would amount to allowing the AO to review his own orders on a mere change of opinion. In the 1st reassessment the AO was not precluded from going into the question of what should be the total turnover for allowing deduction u/s.80-HHC of the Act. Therefore 2nd reassessment on this aspect should be held to ....