TMI Blog2014 (4) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in favour of Assessee. - Writ Petition No. 1497 of 2013 - - - Dated:- 16-4-2014 - S. J. Vazifdar And B. P. Colabawalla,JJ. For the Petitioner : Mr. S. E. Dastur, Senior Counsel with Mr. Nishad Thakkar i/b Mr. Atul K. Jasani For the Respondent : Mr. Vimal Gupta, Senior Counsel with Ms. Padma Divakar JUDGMENT (Per B. P. Colabawalla, J.) 1. Rule. By Consent of Parties made returnable forthwith and heard finally. 2. By this Petition, the Petitioner seeks the quashing of the notice dated 28th March 2012 (impugned notice) issued by the Respondent No. 1 under section 148 of the Income Tax Act, 1961 (the Act) in relation to the A.Y. 2005 -2006. 3. There are two principal grounds of challenge. Firstly, as more than four years had elapsed from the end of the relevant assessment year 2005 -2006 Respondent No. 1, could not have issued the impugned notice without coming to the conclusion that he had reason to believe that income had escaped assessment by virtue of the fact that the Petitioner had failed to disclose fully and truly all material facts necessary for its assessment. In the present case, there was not even an allegation in the reasons recorded fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under this clause) carried to such reserve account: Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paidup share capital and of the general reserves of the corporation or, as the case may be, the company, no allowance under this clause shall be made in respect of such excess. Explanation - In this clause, (a) financial corporation shall include a public company and a Government company; (b) public company shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (c) Government company shall have the meaning assigned to it in section 617 of the Companies Act, 1956 (1 of 1956); (d) infrastructure facility means- (i) an infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80IA, or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfills the conditions as may be prescribed; (ii) an undertaking referred to in clause (ii) or clause (iii) or clause (iv) of sub-section (4) of section 80IA; and (iii) an underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration, the assessee has claimed deduction u/s 36(1)(viii) of the IT Act for Rs.544,63,94,200/- (@ 40% of the profits of income from long term finance). It is observed that the total interest income from long term and short term finance is Rs.1840,14,91,376/-, while the total establishment expenses claimed against the same are Rs.305,53,10,218/- or 16.6% of the total income. During the year under consideration, the gross receipts from long term finance are Rs.1556,73,38,994/. The net receipts from long term finance after deduction of 16.6% of establishment expenses from the gross receipts would be Rs.1298,31,60,721/. Accordingly, the allowable deduction u/s 36(1)(viii) of IT Act on net receipts from long term finance would be Rs.519,32,64,288/. However, the assessee has claimed a deduction of Rs.544,63,94,199/-. Hence, the assessee has claimed excess deduction of Rs.25,31,29,910/. In view of the fact that the assessee has claimed excess deduction of Rs.25,31,29,910/- u/ s 36(1) (viii) of the IT Act, in my view the amount of Rs.25,31,29,910/- has escaped assessment. Based on above I have reason to believe that income of Rs.25,31,29,910/- has escaped assessment in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment 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 subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: (emphasis supplied) 6. The said proviso clearly stipulates that where an assessment under sections 143 (3) or 147 have been carried out for the relevant assessment year, no action can be taken under section 147, after the expiry of 4 years from the end of the relevant assessment year, unless any income chargeable to tax had escaped assessment 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 section 142 (1) or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 7. In the present case, admittedly a scrutiny assessment was done under section 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may hasten to add that it is not enough merely to state that there was a failure on the part of the Petitioner to disclose fully and truly all material facts. It is equally important that Respondent No.1 clearly sets out what fact or other material was not disclosed by the Petitioner that had led to the income escaping assessment as contemplated under section 147 of the Act. In our view, on this ground alone the Petitioner is entitled to succeed in this writ petition. 10. Even otherwise, from the record we find that the Petitioner disclosed fully and truly all material facts for the A.Y. 2005 -2006 and that Respondent No. 1 considered the same before making the assessment order under section 143 (3) of the Act. This is clear from the return of income filed by the Petitioner for the A.Y. 2005 -2006 on 31st October 2005, the queries raised and the material sought for by Respondent No. 1 on 10th February 2006, the Petitioner s response thereto dated 6th March 2006 and the assessment order passed on 30th November 2007. 11. In its return of income filed on 31st October 2005 the Petitioner claimed a deduction of Rs.544,63,94,200/- under section 36 (1) (viii) of the Act. The said de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adjusted expenditure has been apportioned to the interest income received under the respective segments (Refer Sheet C of Annexure I) 5. After all the above steps, we arrive at the net income under each segment. 40% of the net income from RIDF, MT(NS) and LT to State Government (since all the loans in these segments are for more than five years or more) as well as 40% of the net income derived from the loans given for five years or more for the Schematic and MT(C) were considered for deduction u/s 36(i) (viii) of the IT Act, 1961. Thus the total benefit u/s 36(i)(viii) aggregated to Rs. 544.64 cr, which has been claimed in the final computation of income under the head A(d)(ii), deduction under section 36(i)(viii) . 14. The words interest income received in the paragraph 10 (4) can only be the gross interest received. This is clear from the annexure referred to in the said paragraph. Therefore, the attention of Respondent No. 1 was specifically drawn to the fact that the establishment expenses had been apportioned to the gross interest received. After taking into consideration the explanations given by the Petitioner along with supporting documents, Respondent No. 1 di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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