TMI Blog2005 (8) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(1) of the Act on 8-11-2002 on a total income of Rs. 4,56,250. The assessee claimed 100% deduction under section 80-IB of the Act on the profit earned from business of retreading of tyres resulting addition of Rs. 4,56,250. Penalty proceedings under section 271(1)( c ) of the Act were initiated by issuance of notice under section 274, read with section 271(1)( c ) of the Act. In response to the notice, the assessee preferred written submissions by claiming that deduction was claimed under section 80-1A/80-IB in this year and earlier years on the belief that assessee was entitled to 100% deduction on his industrial unit of retreading of tyres by claiming that majority of the High Courts are of the view that retreading of the tyres amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not raised earlier, nor any application has been preferred, no permission has been sought from the Tribunal, so, it was argued that assessee could not be allowed to raise this issue for the first time to which the learned counsel replied upon the decision in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) by contending that it is a legal issue and can be raised at any level. We have considered the rival submissions. 5. On perusal of record and after hearing the rival contentions it is seen that the assessee is dealing in retreading of tyres and claimed 100% deduction under section 80-IB of the Act on the profit earned from business of retreading which was disallowed by the Assessing Officer. The claim of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case ( supra ) pronounced by the Hon ble High Court of Delhi wherein it was held that the assessee employed certain industrial processes to worn out tyres and gave it a new lease of life. It was held that for all practical purposes and in the commercial sense of the term, the retreaded tyres are almost new articles, separately sold in the market in the same way as newly manufactured tyres, therefore, the assessee is entitled was concessional rate of tax as applicable to an industrial company. While coming to this conclusion the Hon ble Delhi High Court followed the decision pronounced in the cases of Om Parkas Gupta v. CCT [1965] 16 STC 935 (Cal.) and Mahabir Prasad Birhiwala v. State of West Bengal [1973] 31 STC 628 (Cal.) and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring proceedings before the first appellate authority. The Hon ble Apex Court in the case of Tamil Nadu State Transport Corpn. (P.) Ltd. ( supra ) on the issue of special deduction held that Tyres retreading does not amount to production and, thus, not entitled to deduction. The Hon ble Apex Court while coming to this decision uphold the decision pronounced by the High Court of Madras in the case of CIT v. Madurai Pandian Engg. Corpn. Ltd. [1999] 239 ITR 375 . Another issue raised by the learned counsel for the assessee was that no satisfaction was recorded during assessment proceedings by the learned Assessing Officer. On perusal of assessment order, it is seen that the Assessing Officer in the last line of the order under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Though it is not essential that the notice to the persons proceeded against should have also been issued during the course of assessment proceedings. Satisfaction, in the very nature of things precedes the issue of notice and it could not be correct to equate the satisfaction of the ITO with the actual issue of notice. 8. A bare reading of the provisions of section 271 and the law laid down by the Hon ble Supreme Court makes it clear that it is the assessing authority who has to form his own opinion and record his satisfaction before initiating the penalty proceedings. Merely because the penalty proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at. For this preposition we are getting support for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 9 (SC) CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP) which was affirmed by the Hon ble Supreme Court in the above-mentioned decision. CIT v. Harshvardhan Chemicals Mineral Ltd. [2003] 259 ITR 212 (Raj.). 11. The word concealment inherently carries with it element of mens rea . Mere omission from the return of an item of receipt amounts neither to concealment nor the deliberate furnishing of inaccurate particulars of income, unless and until there is some evidence to show or circumstances are found from with it can be gathered that the omission was an attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid imposition of tax thereon. For this preposition, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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