TMI Blog2006 (3) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... ional ground relates to the assumption of jurisdiction under s. 147, which according to the assessee was void ab initio. The second additional ground relates to the charging of interest under ss. 234A, 234B and 234C. At the time of hearing of appeals, the learned counsel submitted that both the grounds are legal in nature for which relevant facts are already on record. Thus, by relying on the two judgments of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC) and CIT vs. Mahalaxmi Textiles Mills Ltd. (1967) 66 ITR 710 (SC), the learned counsel submitted that additional grounds deserve to be admitted by the Tribunal. 2.1 The learned Departmental Representative submitted that he has no objection to the admission of additional grounds of appeals. 2.2 We have heard both the parties and carefully considered the submissions with reference to the facts, evidence and material on record. The first additional ground relates to legality of the action for initiating reassessment proceedings under s. 147 of the IT Act, 1961. The relevant facts for this ground are already on record. Similarly, the assessee has challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 CTR (Del) 204 [wrongly mentioned by CIT(A) reported in 161 CTR 2041 and the judgment of Hon'ble apex Court in the case of Distributors (Baroda) (P) Ltd. vs. Union of India Ors. (1985) 47 CTR (SC) 349 : (1985) 155 ITR 120 (SC), and held that AO was justified in restricting the deduction under s. 80-O in respect of net income. Accordingly, the appeals of the assessee were dismissed. The assessee is aggrieved with the order of CIT(A). Hence, these appeals before us. 5. The learned counsel for the assessee drew our attention to pp. 1 and 2 of the paper book, which is a copy of the assessment order for the asst. yr. 1993-94 passed under s. 143(3) of the Act. He submitted that in the return of income filed, the assessee had Claimed deduction under s. 80-O for the asst. yr. 1993-94 in respect of income on gross basis and the same was allowed by the AO as it is. He further relied on the decision of Tribunal Calcutta Bench in the case of M.N. Dastur Co. Ltd. vs. Dy. GIT (1991) 42 TTJ (Gal) 231 : (1992) 40 ITD 521 (Gal) where it was held that s. 80AB was not applicable for computing deduction under s. 80-O and therefore, the assessee was entitled to deduction on gross basis and not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of 13th Dec., 1993. He further relied on the judgment of Hon'ble Supreme Court in the case of A.L.A. Firm vs. CIT (1991) 93 CTR (SC) 133 : (1991) 189 ITR 285 (SC) where the AO had not considered High Court decision though available at the time of completing the original assessment and subsequently the AO reopened the assessment by referring to such decision. On these facts, the reopening of the assessment was held to be valid. He submitted that in the present case, there was a judgment of jurisdictional High Court in the case of CIT vs. Marketing Research Corporation dt. 20th Jan., 1987 directly on the issue of deduction under s. 80-O in respect of net income and not in respect of gross income and the same was overlooked by the AO at the time of completing the assessment under s. 143(3) for the asst. yr. 1993-94. Therefore, the reopening of assessments in the case was valid. He further stated that even the subsequent judgment of Hon'ble Calcutta High Court in the case of CIT vs. M.N Dastur Co. (P) Ltd. dt. 14th Jan., 2000, which has been referred to by the AO for initiating proceedings under s. 147 would justify the action of the AO for initiating reassessment proceedings. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1)(a) amounts to completion of assessments or expression of an opinion on the issue. This issue has been considered by the Hon'ble Delhi High Court in the case of MTNL vs. Chairman, CBDT (2000) 162 CTR (Del) 554 : (2000) 246 ITR 173 (Del) where, it was held that intimation under s. 143(1)(a) does not amount to assessment and failure to issue notice under s. 143(2) does not debar the AO from initiating reassessment proceeding under s. 147 in a case where the AO formed 'reason to believe' that assessee was allowed excessive allowance for expenditure. Thus, reopening of the assessment was held to be valid. This issue also came to be considered by the Hon'ble Punjab Haryana High Court in the case of Aditya CO. vs. CIT (2005) 195 CTR (P H) 258 : (2005) 279 ITR 47 (P H). In this case also return was processed under s. 143(1)(a) accepting the returned income. Subsequently, the AO issued a notice under s. 148 on the ground that income was assessable as 'income from other sources' and assessee was not a firm. On these facts, the Hon'ble High Court upheld the action of the AO for initiating proceedings under s. 147 for the reason that the assessee was only sent the intimation under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent assessment completed by the AO under s. 143(3) for the asst. yr. 1997-98 where the deduction under s. 80-O was allowed in respect of net income and not on the basis of gross income. In fact, the order of AO for the asst. yr. 1997-98 was also subsequently upheld by the CIT(A). In the case of A.L.A. Firm vs. CIT, the Hon'ble apex Court had held that in case the AO had not considered the High Court decision, though available at the time of original assessment, subsequent reopening of assessment on consideration of the judgment of High Court would be valid. Now in this case the AO has overlooked the direct judgment of jurisdictional Delhi High Court in the case of CIT vs. Marketing Research Corpn. at the time 6f completing assessment for the asst. yr. 1993-94. Admittedly, the assessee was not entitled to deduction under s. 80-O in respect of gross income in view of the judgment of Delhi High Court where the Hon'ble High Court has also relied on the judgment of Hon'ble Supreme Court in the case of Distributors (Baroda) (P) Ltd. vs. Union of India. Moreover, expression of the opinion by the AO for the asst. yr. 1993-94 does not amount to expression of opinion for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any merit in the submissions of the assessee. 8.4 Thus, in the light of these facts and circumstances of the case and the legal position discussed above and also by relying on the ratio of aforesaid judgments, we are of the considered opinion that authorities below were justified for initiating/upholding the action of the AO for initiation of proceedings under s. 147 for these assessment years. We confirm the order of CIT(A) and reject the additional ground of appeal of the assessee for all these assessment years. 9. As regards the merits of original ground taken in these appeals, the learned counsel for the assessee was fair enough to concede that in view of the judgments of Hon'ble Delhi High Court in the case of CIT vs. Marketing Research Corpn., Calcutta High Court in the case of CIT vs. M.N. Dastur Co. (P) Ltd. and the decision of Tribunal Special Bench (Bombay) in the case of Petroleum India International vs. Dy. CIT and the judgment of Hon'ble Supreme Court in the case of Distributors (Baroda) (P) Ltd., the ground of appeal for all the assessment years deserves to be dismissed. Thus, the respective ground of appeals of the assessee for these assessment years are dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) 1 : (2001) 252 ITR 1 (SC) and CIT vs. Hindustan Bulk Carriers (2003) 179 CTR (SC) 362 : (2003) 259 ITR 449 (SC). Thus, he submitted that AO was justified in charging interest under ss. 234A 234B and 234C. 12. We have heard both the parties and carefully considered the rival contentions. We have also examined the facts, evidence and materials on record. Now it is settled position in law that interest under ss. 234A, 234B and 234C is mandatory and the AO has no discretion to waive it overtly or by implication. In this case, the learned counsel has heavily relied on the assessment order for the asst. yr. 1993-94 on the ground that assessee was under a bona fide belief that the assessee was entitled to deduction under s. 80-O in respect of gross income and not net income. But the assessee has overlooked the judgment of the jurisdictional High Court in the case of CIT vs. Marketing Research Corpn. which was delivered on 20th Jan., 1987 as per which the assessee was entitled to deduction under s. 80-O in respect of net income and not in respect of gross income. This judgment is directly on this issue and was much before the date when advance tax was due in this case. Thus, it cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from Australia was small. The assessee had explained that the said visit was undertaken to develop the market in other countries including Australia, as it was quota-free market. However, the AO observed that the justification given by the assessee was too vague to be accepted. The AO further observed that all the three partners of this firm were also partners in another firm namely M/s Vision 3000. He also observed that even the 3rd partner visited Australia at the same time and the expenses of her visit to Australia were debited in the books of account of other firm namely M/s Vision 3000. Thus, the AO observed that all the three family members visited Australia at the same time and the purpose of their visit was personal and not for business. Accordingly, the AO disallowed foreign travel expenses of Rs. 7,95,377. 15. Being aggrieved, the assessee filed an appeal before the CIT(A) challenging the impugned disallowance. It was submitted before the CIT(A) that expenses were incurred wholly and exclusively for the business purposes. It was submitted that during toe course of visit, the assessee carried samples of Indian clothing and accessories to Australia to show that India wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 7,95,377 and accordingly, confirm the disallowance made by the AO in this respect." The assessee is aggrieved with the order of CIT(A). Hence, this appeal before us. 16. The learned counsel for the assessee submitted that the disallowance has been made and sustained by the CIT(A) merely on the basis of surmises and conjectures. He drew our attention to p. 40 of the paper book which is a copy of P L a/c for the assessment year under reference which showed foreign income (commission received) at Rs. 2,81,88,977. He submitted that foreign travelling is integral part of the assessee's business. He relied on th judgment of Hon'ble Delhi High Court in the case of CIT vs. Dr. M.S. Shroff (1971) 80 ITR 687 (Del) and judgment of Calcutta High Court in the case of CIT vs. Woodcrafts Products Ltd. (1993) 111 CTR (Cal) 149 : (1996) 217 ITR 862 (Cal). He submitted that once it was established that assessee had undertaken foreign trip for the purpose of business, no disallowance could be made only for the reason that the assessee had meagre business with the party abroad. He further stated that no addition could be made merely on the basis of surmises and conjectures. It could only be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Products Ltd. Calcutta High Court held that it was immaterial that foreign visits undertaken by the assessee for expansion of business ended in failure. The assessee would be entitled to deduction of such expenses because the same was undertaken for the purpose of business. In the present case, the AO has not brought any material or evidence on record to show that the visit was personal in nature and the assessee did not do any business. Therefore, the basis of disallowance remains in the realm of surmises and conjectures. In the light of these facts and circumstances of the case, we do not find any justification for sustaining the impugned disallowance. Accordingly, we set aside the order of CIT(A) and delete the impugned disallowance. This ground of appeal is allowed. 19. The last effective ground relates to sustaining of disallowance of Rs. 1,27,538 being 1/10th of entire telephone expenses incurred by the assessee. The facts of the case are that the assessee had incurred telephone expenses amounting. to Rs. 12,75,375 in respect of all the telephone lines installed at office and residential premises of the partners. The AO observed that the said expenses were disproportionat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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