TMI Blog2010 (9) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... rial facts relating to sales of shares, expenses incurred, interest received and computation of capital gains. A notice was issued on 29-3-2003 beyond the period of four years. The AY involved is 1996-97. The four years expired on 31-3-2001. We have already held that it is not the case of the failure on the part of the assessee in disclosing fully and truly all material facts necessary for assessment. we are of the view that the impugned notice issued u/s 148 is barred by limitation being issued beyond the period of limitation inasmuch as no case of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the assessment year is made out. The writ petition is accordingly allowed and notice dated 28-3-2003 issued u/s 148 for the AY 1996-97 is hereby quashed. - YATINDRA SINGH RAJES KUMAR, JJ. V.K. Upadhyaya and Ritvik Upadhyaya : for the Petitioner. Ashok Kumar : for the Respondent. JUDGMENT Rajes Kumar, J. In the present writ petition, the petitioner prays for a writ of certiorari for quashing the notice dated 28-3-2003 issued by the respondent No. 2 under section 148 of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of shares. Since no particulars of expenses incurred for sale of shares were furnished by the assessee, the income by way of interest could not be put to tax under section 56 of the Income-tax Act, 1961, the escapement has been on account of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment. This amount being in the nature of a revenue receipt should have been offered for tax by the assessee under the head income from other sources in respect of his shares. But the assessee had failed to do. The Hon ble Supreme Court in 227 ITR 172 has held that interest income is always of a revenue nature unless it is received by way of damage of compensation. On this reasoning it held that the interest derived by the assessee from the borrowed fund which were invested in short terms deposit with bank would be chargeable to tax under the head income from other sources . Same would not go to reduce the interest payable by the assessee on the loans secured by it (which may be capitalized after the commencement of commercial production). Similarly, in 248 ITR 449 the Supreme Court has reaffirmed its view in the CIT v. V.P. Gopinath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me amount on the ground that the sale proceeds ₹ 1,43,07,103 have been invested in the residential house, 7/23, Tilak Nagar, Kanpur and excess amount of ₹ 1,56,422 invested under section 54F of the Act and accordingly, NIL capital gain has been shown. (ii)A sum of ₹ 1,93,572 has also been shown under the head Income from other sources as interest income chargeable to tax. (iii)Along with the return a chart of computation of income and tax has been filed, which was clearly mentioned in Part 4 of the return which provides, list of the documents attached along with the return. In chart of computation of income and tax a complete details of the shares sold by the petitioner was shown, under the head Capital Gain , wherein sales of 75,000 shares of M/s. Kothari Products Limited at the rate of ₹ 200 for ₹ 1.50 crores, the deduction of amount of expenses at ₹ 6,92,897; and the net amount received at ₹ 1,43,07,103, which has been claimed to have been invested in the residential house of 7/23, Tilak Nagar, Kanpur have been shown. The interest income at ₹ 1,93,572 has also been shown as income from other sources. (iv)The petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of shares. Since no particulars of expenses incurred for the sales of shares were furnished by the assessee, the income by way of interest could not be put to tax under section 56 of the Act, 1961, the escapement has been on account of the failure on the part of the assessee fully and truly all material fact necessary for the assessment, is absolutely wrong. (viii)Along with the return, details of the expenses made for the sale of the shares have been duly given. These expenses were relating to the sales of 12,50,000 shares including the sales of the 75,000 shares of the petitioner. The interest from the bank was received at ₹ 28,84,943 on the temporary deposit of the application money in respect of the entire shares of 12,50,000 and, therefore, from the expenses incurred at ₹ 1,44,33,721.23p. on the sale of 12,50,000 shares including the share of 75,000 of the petitioner, the interest received at ₹ 28,84,943 was deducted. (ix)During the course of assessment proceedings, the queries were made in respect of the sale of shares vide notice dated 7-8-1998 and in pursuance thereof, the complete details have been furnished, which were duly examined before pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings, under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment years) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment 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 sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year : Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 : Provided that in a case- (a)where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b)subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time-limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice : Provided further that in a case- (a)where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the counter-affidavit. 4. Paras 4, 5, 6, 7 and 8 of the writ petition.-That the petitioner had disclosed in the aforesaid return the income derived from sale of 75,000 shares of Kothari Products Limited and had claimed expenses to the tune of ₹ 6,92,897 relating to the sale of said shares. The net receipt after deducting the aforesaid expenses relating to the sale of said shares was shown at ₹ 14,37,103 and ₹ 1,44,63,525 was declared to have been invested in the construction of residential house at 7/23, Tilak Nagar, Kanpur. 5. That along with the said return the petitioner had filed the details of expenses made for the sale of the aforesaid shares. In the aforesaid details the petitioner had disclosed the receipt of ₹ 28,84,943 as interest from the bank on the temporary deposit of the application money in respect of the aforesaid shares. In the said details of expenses incurred for the sale of the aforesaid shares the total expenses incurred in the sale of the aforesaid shares was shown at ₹ 1,44,33,221.73p. from which the aforesaid interest income was reduced bringing the expenses to the figure of ₹ 1,15,48,278.73p. The said figure of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made after detailed scrutiny and discussion. This is evident from the Notice dated 7-8-1998 issued to the petitioner bearing No. VNK/CC-IV/KNP/98 which is reproduced below : To, Sri Vikram Kothari (HUF) 24/19, The Mall, Kanpur Sub. : Asst. Proceedings for the assessment year 1996-97 In connection with the asst. proceedings for the assessment year 1996-97 you are hereby required to furnish/explain and produce the following : 1.The details of household expenses keeping in view the size of family and standard of living may be furnished. 2.To produce the bank pass book from which the interest income has shown in the computation of income. 3.To furnish the details of new investment made either in immovable or in movable property during the year. 4.To furnish the details of share income as shown in the computation of income. Notices under sections 143(2) and 142(1) are enclosed herewith fixing the date of hearing on 20-8-1998 at 11.00 A.M. Encl. : As above. Sd/- (Budh Sen) Asstt. Commissioner of Income-tax, Central Circle-IV, Kanpur No question was asked regarding sale of shares. Regarding sale of shares the petitioner did file letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income on 1st July, 1996 disclosing therein the following particulars as under : A. Capital Gain 75000 Shares of Kothari Products Ltd. Sold @ 200 ₹ 1,50,00,000 Less : Expenses ₹ 6,92,897 Net received ₹ 1,43,07,103 Less : Invested in residential house at 7/27, Tilak Nagar, Kanpur (Self occupd.) ₹ 1,44,63,525 Excess invested ₹ 1,56,422 NIL B. Income from other sources (i) Interest from saving Bank ₹ 19,466 (ii) Interest from FDR ₹ 1,72,175 (iii) Interest on NSC matur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (g) Management consultancy charge 26,00,000 (h) Bank charges 1,90,115 (i) Misc. expenses 1,37,275 1,44,33,221 Less : Intt. received from Bank 28,84,943 1,15,48,278 The total expenses, therefore, for transferring the shares is ₹ 1,44,33,220. The petitioner is entitled to deduction of these expenses in view of the provisions laid down in section 48(1) of the Act. (v) The Answering Respondent further submits that however, petitioner presented the figure of expenses incurred in a round about manner to confuse the entire issue relating to the sale of shares and reduced it by a sum of ₹ 28,84,943 being interest received from the Bank. This interest was received by the petitioner as has been gathered from the details filed in other case of this Group on account of monies deposited in Bank Account and was therefore separately taxable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute regarding the allowance/disallowance of expenses incurred by the petitioner and others. The dispute is only with regard to the fact whether the petitioner is entitled to adjust the interest income earned on account of deposit on sale of shares to the extent of ₹ 28,84,943 against expenses. Therefore, nothing hinges on the averment made in para under reply. The Answering Respondent further submits that the petitioner did file the details of expenses on 26-10-1998 and on the same date the assessment order was passed. No query worth the name was made regarding the adjustment of interest earned against the expenses incurred by the petitioner at any stage of the Assessing proceedings. 8. That the contents of paragraph No. 6 of the writ petition need no reply at this stage, as the same has already been replied in reply to the contents of paragraph No. 3 of the writ petition, as the same are reiterated and re-affirmed. 9. That the contents of paragraph No. 7 of the writ petition are not admitted, incorrect as such denied. It is wrongly stated by the petitioner that the Assessing Officer had examined the issue of adjustment of interest income against the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not find any substance in the argument of learned Standing Counsel that where the escaped income exceeds rupees one lakh, the limitation to issue notice is six years under section 149 of the Act, whether the case falls under the exception of the proviso to section 147, or not. 13. In our view both sections 147 and 149 of the Act are to be read together. The proviso to section 147 of the Act specifically provides the limitation for taking action under the said section within four years and only in the exceptional case mentioned therein, namely, where there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the assessment year, the proceeding can be initiated beyond the period of four years. The proviso to section 147 completely prohibits to take action beyond four years unless the case is covered under the exception mentioned in the proviso itself. Section 149 provides limitation for the issue of notice under section 148. Section 149(1)(a) provides general limitation for issue of notice four years. Section 149(1)(b) is an exception to sub-section (a) of section 149(1) of the Act provides six years limitation for issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt etc., then action can be taken beyond four years subject to the issue of notice under section 148 of the Act within the limitation provided under section 149 of the Act. (iii)Where case falls under the exception to proviso to section 147 and escaped income exceed rupees one lakh the notice under section 148 can be issued beyond the period of 4 years but within 6 years under section 149(1)(b). (iv)In case when the escaped income is less than rupees one lakh the limitation to issue the notice under section 148 is only four years, even if the case falls under the exception of proviso to section 147. 15. It may be mentioned here that our above view is supported by the decision of the Bombay High Court in the case of Anil Radhakrishna Wani v. ITO [2010] 323 ITR 564 , in the case of Multiscreen Media (P.) Ltd. v. Union of India [2010] 324 ITR 48 (Bom.), in the case of IPCA Laboratories Ltd. v. Gajanand Meena, Deputy CIT (No. 2) [2001] 251 ITR 416 1, and in the case of Supreme Treves (P.) Ltd. v. Deputy CIT [2010] 323 ITR 3232 (Bom.) and the decision of the Gujarat High Court in the case of Arvind Mills Ltd. v. Deputy CIT [2000] 242 ITR 173 3, in the case of Gujarat Fluoroc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
