TMI Blog2013 (7) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... reshi J.-The petitioner, a public limited company has challenged a notice dated December 27, 2002, issued by the respondent-Deputy Commissioner of Income-tax under section 148 of the Income-tax Act, 1961 ("the Act" for short). The petitioner has also challenged the subsequent notice under section 142(1) of the Act issued on November 7, 2003. 2. For the assessment year 1996-97, the petitioner filed the return of income on November 30, 1996. Such return was initially accepted without scrutiny under section 143(1) of the Act. Later on, however, a scrutiny assessment was undertaken. During such scrutiny assessment, wide range of issues were examined by the Assessing Officer. A series of queries were raised and replies were filed by the petitioner. Ultimately, the assessment was framed on March 9, 1999, making certain additions and disallowances in the return filed by the petitioner. 3. After such scrutiny assessment was completed, the Assessing Officer issued a letter dated August 19, 1999, and called upon the petitioner to explain the following points : "1. Excise duty relatable to closing stock of finished goods. In para. D of schedule 16 it is written that excise duty o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80-O. A few of such expenses are directors' remuneration, auditors' remuneration and other expenses of head office. You have allocated only Rs. 1,000 towards bank charges which appears to be improbable keeping in view of the huge receipts. 4. Deduction under section 80HHC : Vide your letter dated February 24, 1999, you have allocated Rs. 5,58,640 being indirect expenses, relatable to export trading activity. As in the matter of deduction under section 80-O, it appears that all the head office expenses have not been proportionately allocated being indirect cost as per the provision of section 80HHC(3) Explanation (e) which reads as under : '"Indirect cost" means costs, not being direct costs allocated in the ratio of the export turnover in respect of trading goods to the total turnover.' There is no allocation out of the directors' remuneration, auditors' remuneration, legal and professional fees, bank charges, clearing expenses, etc. Entire head office expense has to be proportionately allocated before allowing deduction under section 80HHC on profit of export trading activity. You are requested to offer your explanation and clarification on the above issues and expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account as they are in the nature of capital expenses. While computing the allowable deduction under section 80-O indirect expenses like director's remuneration, auditors' remuneration and other expenses of the head office should have been proportionately allocated. While computing the deduction under section 80HHC indirect expenses like the director's remuneration, auditor's remuneration, etc., should be proportionately allocated." 7. Having heard learned counsel for the parties, we find that, in the present case, notice for reopening was issued beyond a period of four years from the end of the relevant assessment year. Therefore, for the Assessing Officer to assume jurisdiction for reopening the assessment, both the conditions of his belief that income chargeable to tax has escaped assessment and the same was for the reason of the assessee failing to disclose truly and fully all material facts, must be satisfied. 8. The petitioner has strongly urged that all the four questions were threadbare examined by the Assessing Officer during the course of the original assessment. There was no failure on the part of the assessee to disclose any of the material facts. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income received by the petitioner in respect of consultancy fees in foreign currency. The assessee had claimed on gross receipts of Rs. 1,59,10,426 a deduction of 50 per cent., i.e., Rs. 79,55,213. The respondent in para. 15 of his assessment order took the view that from the gross receipts expenses had to be deducted while calculating the consultancy fees. Accordingly, he reduced the amount claimed by Rs. 3,55,000 resulting into relief given at 50 per cent. on the said amount being Rs. 77,77,712. The details of the expenses were furnished by the petitioner in the course of assessment. IV Reg. Claim under section 80HHC of the Act : The working of the claim under section 80HHC for export benefits was given by the petitioner along with the return accompanied by the report of the chartered accountant. The issue was dealt with by the petitioner in its letter dated January 22, 1999, in para. 2(b). Thereafter, another letter was given on February 24, 1999, whereby in para.1 thereof, the petitioner supplied the revised working for deduction under section 80HHC by annexure BA of the said revised working while passing the assessment order. The petitioner says that the respondent in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee failing to disclose truly and fully all material facts. Additionally in the petition itself the assessee has categorically averred that the Assessing Officer had issued notice dated August 19, 1999, at the behest of the audit party calling upon the explanation of the petitioner. It is further averred that the letter was issued under the audit objection only. It was also contended that the Assessing Officer was fully aware about all four issues and not only in the original assessment proceedings, but also during the first reassessment proceedings. 13. These averments have not been touched by the respondent though two affidavits have been filed before us. This would further led credence to the petitioner's grievance that reopening notice has been issued at the behest of the audit party. Quite apart from the petitioner's averment in this regard we are intrigued by the fact that though precisely on these four issues, the Assessing Officer called upon the petitioner's explanation through a letter dated August 19, 1999, in the subsequent notice for reopening which the Assessing Officer issued on January 23, 2002 (not impugned in this petition), only one ground was taken a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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