(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Heard learned counsel for final disposal of the petition.
Petitioner has challenged a notice issued by the respondent under Section 148 of the Income Tax Act, 1961 [ Act for short]. Petition arises in the following factual background.
The petitioner is a company registered under the Companies Act and is regularly assessed to tax. For the AY 2006-07, the petitioner filed its return of income declaring total income of Rs. 9.37 Crores [rounded off]. Such return was accompanied by statement of income; audited accounts and other statutory reports required to be filed under the Act. The Assessing Officer framed scrutiny assessment on 24th December 2008. In the return that the petitioner had filed, deduction under Section 80IB of the Act was claimed. A part of such claim, include a sum of Rs. 13.28 lakhs [rounded off] towards vatav kasar. The Assessing Officer disallowed such claim and excluded the entire amount of Rs. 13.28 lacs for computation of deduction under Section 80IB of the Act.
On 27th March 2012, the respondent issued impugned notice under Section 148 of the Act seeking to re-open the assessment for the said AY 2006-07. At the request of the petitioner, the respondent supplied the reasons recorded for issuing such a notice, which read as under :-
The scrutiny of the case revealed that some other income were not excluded while computing the deduction u/s. 80IB. These incomes are as under :-
Sr. No. Nature of income under Other Income Amount of Income [Rs.] 1 Vatav Kasar 13,28,874/= 2 Rent 62,000/= 3 Bank F.D Interest 74,45,287/= 4 Duty Drawback 55,77,675/= 5 Other Incomes 4,992/= 6 Profit Gokulanand Petrofibre 1,23,03,171/= TOTAL 2,67,21,999/= The entire amount of Rs. 2,67,21,999/= shown was not income derived from the industrial undertaking grouped these income under the head Other Income by assessee. The entire income of Rs. 267.22 lakh was therefore not eligible for computation of deduction under Section 80IB of the Act. But only 30% was disallowed out of vatav kasar income instead of disallowing 30% of the entire other income of Rs. 267.22 lacs. Thus, excess deduction of Rs. 76.18 lakh was allowed u/s. 80IB of the Act. The irregular deduction of Rs. 76.18 lacs resulted in under-assessment of the similar amount.
In view of the above, I have reason to believe that there is escapement of income exceeding Rs. 1 lac in the hands of assessee which is required to be taxed by re-opening the assessment u/s. 147 of the Income-tax Act, 1961 The petitioner raised objections to the notice for reopening of the assessment under its communication dated 3rd November 2012. The Assessing Officer, however, by his order dated 19th November 2012 rejected such objections. Hence, the petition.
At the outset, we may notice that the impugned notice has been issued beyond the period of four years from the end of relevant assessment year and the question whether the petitioner can be stated to have failed to disclose fully and truly all the material facts necessary for assessment, therefore, would assume significance.
In this background, if we peruse the reasons recorded by the Assessing Officer more closely, he had a dispute with respect to the petitioner s claim for deduction under Section 80IB of the Act. In his opinion, several incomes under the head Other Income such as vatav kasar, rent, bank fixed deposit interest, duty drawback, profit from Gokulanand Petrofibre would not be eligible for deduction under Section 80IB of the Act. He, therefore, was of the opinion that the total sum of Rs. 2.67 Crores [rounded off] was wrongly held eligible for such deduction.
In the reasons, the Assessing Officer has recorded that, the scrutiny of the case revealed that .
Further, in such reasons, we notice that during the original assessment, the Assessing Officer had disallowed deduction on vatav kasar. Thus, from the reasons recorded itself, it emerges that the facts were very much part of the return filed by the petitioner. Additionally, we have also perused the return filed, accompanied documents and the original assessment order. In the return that the petitioner had filed, following amounts were shown as other income .
Other Income As at 31.03.2006 [Rs.] L/C Margin Vatav Kasar Rent Bank FD-Interest Duty Drawback Other Incomes Profit Gokulanad Petrofibre 00.00 1328874.12 62000.00 7445286.94 5577675.00 4992.00 12303170.81
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26721998.90 In such return, the petitioner had excluded several of the above items from the claim of deduction under Section 80IB of the Act. Following amounts were not included in such claim :
Gokulanand Petrofibre Rs.12303171 The Assessing Officer had in the order of assessment examined the petitioner s claim for deduction under Section 80IB of the Act on other income and stated as under :-
During the course of assessment proceedings, it is noticed that the assessee has shown vatav kasar income of Rs. 13,28,874/= in the P & L Account under the head of Other Income . The assessee did not exclude the above amount of Rs. 13,28,874/= while working out deduction under Section 80IB of the I.T Act. Deduction u/s. 80IB can be allowed only in respect of the income which is derived from industrial undertaking. The Hon ble Apex Court and various High Courts have already discussed the issue derived from and attributable to in various cases. The issue is decided in cases of Cambay Electric Supply Industrial Company Limited, Sterling Foods 237 ITR 579, Hindustan Lever Limited 239 ITR 297, Pandian Chemicals 262 ITR 278 & K. Ravindranathan Nair 262 ITR
669. In view of the above discussion, income from vatav kasar is not treated as the one which is derived from industrial undertaking and accordingly deduction u/s. 80IB of Rs. 3,98,662/= [being 30% of Rs. 13,28,874/=] claimed on the above income is hereby disallowed. [Addition of Rs. 3,98,662/=] From the above, it could be seen that there was no failure on the part of the assessee to disclose all material facts necessary for the assessment. The Assessing Officer seeking to reopen the assessment gathered such facts from the return filed by the petitioner itself. Further, there is a total non-application of mind on the part of Assessing Officer. It has opined that a total sum of Rs. 2.67 Crores was not eligible for deduction under Section 80IB of the Act, which was wrongly granted to the petitioner-assessee. In fact, the petitioner itself had excluded several of such items from the claim of deduction under Section 80IB of the Act. Such exclusion came to a total of Rs. 1.98 Crores [rounded off]. Additionally, we find that not only there was full disclosure by the petitioner; the entire claim was scrutinized by the Assessing Officer and as above noted, to the extent he was of the opinion that the claim was not valid, disallowances were also made. Learned counsel for the petitioner further pointed out that the sole disputed claim for deduction under Section 80IB of the Act relate to a sum of Rs. 55.77 lakhs of the duty drawback at the relevant time. By virtue of decision of this Court in case of Commissioner of Income-tax v. India Gelatine & Chemicals Limited, reported in 275 ITR 284, deduction was available. It is, of course, true that subsequently, the Apex Court in case of Liberty India v. Commissioner of Income-tax, reported in [(2009) 317 ITR 218 (SC)], reversed such a view of this Court. Therefore, when the Assessing Officer was processing the return, he rightly made no disallowances towards such claim.
In totality of the facts of the case, we are of the opinion that the notice is invalid. The same is, therefore, quashed. Petition is allowed.
(AKIL KURESHI, J.) (Ms.
SONIA GOKANI, J.) Prakash* Page 7 of 7