Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2005 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2005 (11) TMI 186 - AT - Income TaxPowers Of Appellate Tribunal - additional grounds - assumption of jurisdiction - initiation of proceeding u/s 10 of Interest Tax Act for reopening of assessment - whether the assessee falls in the category of 'credit institution' falling within the ambit of sections 2(5A) and 2(5B) of Interest-tax Act, 1974 - HELD THAT:- The assumption of jurisdiction must have legal sanction. Nonobjection to assumption of jurisdiction u/s 10 in the course of assessment proceeding will not validate the issuance of notice u/s 10, an argument advanced by the Ld. Counsel. Even the consent does not confer jurisdiction. It is so because the initiation can validly be made strictly in the circumstances and manner specified. In our considered opinion, in the present case, jurisdiction under section 10 has not been validly assumed, hence issue of notice is bad in law as there is no nexus between formation of belief and material available which is clear from the facts mentioned herein above. Since initiation of proceeding itself is bad in law and invalid, whatever follows thereafter must also necessarily be invalid as it was held in the case of Rawatmal Harakchand v. CIT [1978 (3) TMI 10 - CALCUTTA HIGH COURT]. Consequently, assessment orders passed in this case also are bad in law and invalid. Admittedly, the phrase 'principal business' has not been defined anywhere in the Act. What constitutes 'principal business' will, therefore, depend upon the facts and circumstances of each case. In that situation, past history of the assessee, current business of the assessee, break-up of the income earned during the relevant year will all help in determining the principal business of the assessee-company. As has been stated earlier, reopening of assessment was not made for assessment year 1992-93. It is only from assessment year 1993-94 that the Assessing Officer entertained D the belief that the assessee earned substantial interest out of loans & advances and thus liable to pay interest-tax on such interest income. In assessment year 1993-94, the total sales were amounted to over Rs.4 crores as against gross interest earned of Rs. 1.35 crores. In the subsequent two years, the sales were higher than the interest income earned by the assessee. Therefore, in view of the above facts and discussion we hold that the appellant does not fall under the category of "credit institution". The very charging section 4 is not attracted in the case of the appellant, hence, Interest Tax is not leviable in the case of the appellant and the appellant is not required to file Interest Tax return. Thus, on merit also, we are unable to uphold the orders of the authorities below and the same are quashed. As a result, all the appeals filed by the assessee are allowed as indicated above.
|