TaxTMI 
TaxTMI 
2002 (8) TMI 264
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....to charge the income escaping assessment is as under:-- "147. Income escaping assessment.--If the Assessing Officer has reason to believe that any income may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly au materi....
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....2 is clearly applicable in the instant case. It has been held by the Hon'ble Apex Court that the taxes forming part of the sale consideration of goods sold in the course of business constitutes trading receipt and is to be included in the total turnover. Thus, for the purpose of computing deduction under section 80HHC, the total turnover was required to be taken at Rs. 13,75,63,456 instead of Rs. 12,67,72,677 taken under section 143(3) and revised to Rs. 12,71,64,041. While giving appeal effect under section 250(6) on 28-2-1995. In this way, the deduction actually allowable to the assessee under section 80HHC works out to Rs, 49,24,200 instead of Rs. 53,26,932, allowed while giving appeal effect. Thus, deduction under section 80HHC of Rs. 4,02,732 (5326932-4924200) has been allowed in excess. Thus, I have reasons to believe that income of Rs. 4,02,732 chargeable to tax has escaped assessment for the year. Hence, sanction as required under section 151(1) of the Act to re-open the case is solicited." Similar reasons were recorded for assessment year 1992-93. 6. The assessee objected to initiation of re-assessment proceedings and submitted returns under protest in response to no....
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....d there was no escapement of income on facts and circumstances of the case. 9. The learned Commissioner of Income-tax (Appeals) held that initiation of reassessment proceedings for assessment year 1991-92 was illegal and invalid with the following remarks:-- "2.3 I have carefully considered the facts of the case and the rival submissions. In a sequence of the filing of the return, the assessment under section 143(3) of the Income-tax Act, 1961 was framed in this case vide order dated 22-1-1993 where number of additions were made by the Assessing Officer. The deduction under section 80HHC has been discussed at length in para-9 of the assessment order at page 12. The Assessing Officer after examination of the claim of the appellant and after having sought certain clarification and additional details which the appellant furnished from time to time allowed the deduction under section 80HHC after making certain adjustment. The appellant alongwith the return of income had filed the audited copies of the trading account, profit and loss account, balance sheet etc. alongwith the salient features of the accounting policies. At pages 20 & 21 of the printed balance sheet, the sales/turn....
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.... cannot at a later stage be accuse of any failure to disclose fully and truly all material facts necessary for assessment. The appellant company had disclosed all the particulars which were required to be disclosed in the return of income and other accompanying documents. In particular the report under section 80HHC(4) of the Income-tax Act, 1961 and also provided all information which was subsequently sought by the Assessing Officer at various stages. It cannot, therefore, be said that there has been any violation on the part of the appellant company to disclose fully and truly all material facts necessary for the reassessment. The Assessing Officer no where alleged that the appellant company violated to provide any information that was required during the assessment proceedings. The fact that the disputed amount of excise duty recovered by the appellant company stands disclosed in the audited accounts submitted by the appellant company alongwith the return of income. Pages 20 & 21 of the printed balance sheet needs to be examined. As already stated above, the fact that the excise duty recovered has been separately shown on the debit side of the Profit and Loss Account and the tur....
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.... facts necessary for the assessment, the initiation of the reassessment proceedings under section 147 and the issue of notice under section 148 after more than 4 years from the end of the relevant assessment year is illegal, invalid and the consequential reassessment order under section 143(3) of the Income tax Act, 1961 is a void order and is nullity as held by the Gujarat High Court in the case of P.V. Doshi v. CIT [1978] 113 ITR 22 and also by the Calcutta High Court in the case of Rawat Mal Harak Chand v. CIT [1981] 129 ITR 346." 10. The learned Commissioner of Income-tax (Appeals) also decided the appeal in favour of the assessee on merit. He held that Excise Duty was not to be included in the "total turnover" while computing relief under section 80HHC of the Income-tax Act. 11. A similar order was passed for assessment year 1992-93. The proceedings initiated under section 147/148 were held to be illegal and without jurisdiction and relief even on merit was allowed to the assessee. 12. The Revenue is aggrieved and has come up in appeal. We have heard. Smt. Rachna Singh on behalf of the Revenue and Sh. C.S. Aggarwal for the assessee. Smt. Rachna Singh submitted that as....
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....of the Assessing Authority.......If there is omission to disclose material facts, then subject to the other conditions jurisdiction to reopen is attracted. 91 ITR 450 (Cal.) (sic) Calcutta High Court has held that profit and loss account should clearly disclose the result of the working and disclose every material feature included credits or receipts....thus reassessment was justified. In the case of Oriental Carpet India Ltd. v. CIT [1987] 168 ITR 296 (Punj. & Har.) The jurisdictional High Court in this case has held that material facts used in clause (a) of section 147 refer only to primary facts which have been disclosed by the assessee showing the sale purchase and profit supported by the Account Books. (is not sufficient). In the case of Malegaon Electricity Co. (P.) Ltd. The Apex Court held that if a material primary facts is suppressed the reassessment is justified. Smt. Rachna Singh further submitted that from all the aforementioned judgments, it is clear that if disclosure of primary facts is suppressed by the assessee, provisions of section 147 would be attracted. Furthermore, in line with Explanation to section 147, it has also been held that the onus cast on the a....
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....it....while the law may be in acted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be in acted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be communicated by any one....that part alone of the note of an Audit Party which mentions the law which escaped the notice of the ITO constitute information.....In every case the ITO must determine what is the effect and consequence of the law mentioned in the audit note....the basis of his belief must be the law of which he has now become aware." In the light of the above it was clear that although the awareness of law as enshrined in Chowringhee Sales Bureau (P.) Ltd's case (supra) was communicated by the Audit Party, the Assessing Officer had arrived at a belief that income had escaped assessment and had determined the effect and consequence of the law mentioned in the Audit note. In the written note, the learned Departmental Representative has further contended:-- "During the course of appellate proceedings before the learned CIT(A), the assessee has relied on the certain judgments which have not been cons....
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.... The Revenue also draws support from the following:--Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662 (SC), Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173 (Delhi), Rakesh Aggarwal v. Asstt. CIT [1997] 225 ITR 496 (Delhi), Dhanraj Singh & Co. v. CIT [1996] 218 ITR 312 (Pat.), Dr. Indra Chand Jain v. Dy. CIT [1997] 59 TTJ (Delhi) 699, Indo Marine Agencies (Kerala) (P.) Ltd. v. Asstt. CIT [1995] 51 TTJ (Coch.) 18, CIT v. Jindal Bros. Riee Mills [1989] 179 ITR 470 (Punj. & Har.), Upcom Cable Ltd. v. Dy. CIT [1997] 63 ITD 404 (All.).She accordingly, submitted that initiation of proceedings under section 147 was valid. 13. On merit, Smt. Rachna Singh submitted that the decision of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. and clause (ba) clearly laid down that Excise Duty was part of total turnover. Only freight or insurance attributable to transport of goods is required to be excluded. Everything else is to be treated as part of turnover. She accordingly, supported the order of the Assessing Officer. 14. Sh. C.S. Aggarwal, learned counsel for the assessee drew our attention to the reasons recorded by the Assess....
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....as contended that the Assessing Officer was fully conscious of factual position that Excise Duty was not included in "total turnover" and had allowed relief under section 80HHC in accordance with law. Assessing Officer's subsequent belief that income had escaped assessment on account of failure of the assessee to furnish primary and material facts relating to computation of income was merely a change of opinion which was not legally justified. In this connection, Sh. Aggrawal drew our attention of following decision of Hon'ble Supreme Court in the case of Indian & Eastern Newspaper Society. "In the present case, an internal audit party of the income-tax department expressed the view that the receipts from the occupation of the conference hall and rooms did not attract section 10 of the Act and that the assessment should have been made under section 9. While sections 9 and 10 can be described as law, the opinion of the audit party in regard to their application is not law. It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the ITO constitutes 'information' within the mea....
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....cision of SC) is no justification to initiate re-assessment proceedings. In this connection, Sh. Aggarwal relied upon the decision of Hon'ble Supreme Court in the case of Indian Oil Corpn. v. ITO [1986] 159 ITR 956 and also on decision of Delhi High Court in the case of Jindal Photo Films Ltd. v. Dy. CIT [1999] 234 ITR 170. It was further contended that the assessee had been claiming deduction under section 80HHC without including Excise Duty in the past and said deduction was duly allowed till assessment year 1990-91. Thus, there was no misrepresentation on the part of the assessee as far as furnishing of material information was concerned. There was no failure to justify re-assessment proceedings. Sh. Aggarwal supported the order of learned Commissioner of Income-tax (Appeals) in both the assessment years. On merit, he submitted that only Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. [2000] 245 ITR 769 has held that Excise Duty and other levies are not part of the total turnover for computing relief under section 80HHC of the Income-tax Act. 18. We have given careful thought to the rival submissions of the parties. The controversy involved before ....
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.... Court have held that in the case of business of work contract total turnover should include cost of construction of flats received by the assessee from flat owners for computing deduction under section 80HHC of the Act. The aforesaid decision is based on definition of "total turnover" given in KGST Act. It is clear from the authority that decision is based on peculiar facts of that case where KGST Act was applicable and had a definition of total "turnover" which was held to be applicable to the facts of the case decided by the Hon'ble High Court. From the above decisions, no inference can be drawn that Excise Duty should form part of total turnover for purposes of section 80HHC of the Income-tax Act. We are, therefore, inclined to follow and apply the only decision of a High Court available on the issue. 22. Turning to the various decisions of Tribunal, we may refer to decision of Calcutta Bench in the case of Chloride India Ltd. v. Dy. CIT [1995] 53 ITD 180, wherein the Bench held that Excise Duty was not to form part of total turnover, the reason being that excise and sale-tax was not included in the export turnover. In case the above levies were included in the total turnove....
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....ispute that provisions of section 80HHC were introduced and are being retained in the Income-tax Act, to encourage export of goods and mercantile out of India to earn foreign exchange needed for the country. These are beneficial provisions and are required to be construed in a liberal manner. Having regard to the text and context, we are to interpret the expression 'turnover' as would achieve the purpose of the Legislature. In fact, there is ample evidence in the statute itself to show that the quantum of deduction provided by sub-section (3) for several years was not considered sufficient and through amendment made by Finance Act, 1992, it has been thought proper by Legislature to increase the amount of deduction by 90% of sums referred to in clauses (iiia), (iiib) & (iiic) of section 28 of the Income-tax Act. Therefore, any interpretation of the provision which seeks to reduce the deduction has to be rejected. Now referring to the text, it is clear that the amount of deduction is the "profit" derived from export forming part of the total income. So the purpose of section 80HHC is to find out portion of the profit out of the total profit (income) of the assessee. The "total turnov....
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....see. But on similar facts where recovered Excise Duty is not paid, it cannot be added while computing the total income. But on account of above, the expression "turnover" cannot have different meaning in two situations. 25. Accordingly, besides relying upon decision of the Bombay High Court and various Benches of the Tribunal, we decide the issue in favour of the assessee for the reasons stated above. We hold that Excise Duty is not to be taken into account for determining total turnover of the assessee under section 80HHC(3) of the Act. We uphold orders of the Commissioner of Income-tax (Appeals) impugned before us in both the assessment years. 26. Both the parties addressed us long arguments on the validity of the reassessment proceedings initiated under section 147/148 of the Income-tax Act. There is no dispute that notices under section 148 of Income-tax Act were issued in both the assessment years after the expiry of four years from the end of the relevant assessment year. There is further no dispute that the original assessments in both the assessment years were made under sub-section (3) of section 143 and, therefore, conditions as per proviso to section 147 are also t....
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....to hold that action of the audit party in asking the Assessing Officer to initiate the re-assessment proceedings involved misapplication of the decision of the Supreme Court in the case of Indian & Eastern Newspaper Society. The learned Commissioner of Income-tax (Appeals) had the advantage of the relevant record while considering question of validity of the initiation of the assessment proceedings. In the circumstances of the case, we are unable to interfere with the impugned orders of the learned Commissioner of Income-tax (Appeals) on this aspect of the issue. 28. Reverting again to the question of failure on the part of the assessee to disclose material facts, we are unable to agree with the Revenue that in the present case the assessee should have disclosed and highlighted in the return that in the "total turnover" taken for purposes of section 80HHC(3) of the Act, the Excise Duty recovered has not been included. There is no statutory obligation on the part of the assessee to highlight above fact. Neither in the Form prescribed, nor in the statutory provisions there is any specific obligation to treat Excise Duty as part of turnover under section 80HHC(3) of the Act. In thi....
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....sum of Rs. 32,986 realised as sales tax by the appellant in its character as an auctioneer formed part of its trading or business receipts; (ii) that the fact that the appellant credited the amount received as sales tax under the head "sales tax collection account" did not make any material difference." The Court further observed:-- "The appellant would, of course, be entitled to claim deduction of the amount as and when it pays it to the State Government." When reasons recorded by the Assessing Officer under section 148 of the Income-tax Act are read in the light of above decision, it is evident that legal inference drawn by Assessing Officer from the decision of the Hon'ble Supreme Court is slightly twisted as he has observed in the reasons "it has been held by the Hon'ble Apex Court that the taxes forming part of the sale consideration of goods sold in the course of business constitutes trading receipt and is to be included in the total turnover." It is evident from above that the Supreme Court treated sale tax collected from buyers and not paid either to sale tax department or to the actual owner of goods, as trading receipt in the hands of an auctioneer. Accordi....