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The Assistant Commissioner of Income Tax Versus M/s. M.K. Exim (India) Ltd.

2015 (9) TMI 604 - ITAT JAIPUR

Reopning of assessment - basis of reopening of the assessment order was lesser figure of total turnover - Held that:- It is undisputed fact that AO had not borrowed the satisfaction from the audit party as nowhere in the satisfaction he has mentioned the audit objection. As per his working in reasons recorded excess deduction had been calculated at ₹ 27,66,386/- on the basis of total turnover of ₹ 16,82,67,037/- whereas the assessee has taken total turnover in computation made by the .....

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had not made any addition on the basis of reopening or satisfaction recorded.

AO has not made any addition on the basis of formation of believe under section 147 of the IT Act. The AO has power as per Explanation 3 to include the items of income which came to his notice subsequently in the course of proceedings under this section for which no separate reopening is required, but in final out come both the additions have to be made by the AO in assessment order which has not been the c .....

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against quashing the assessment order passed by the AO u/s 148 of the I.T. Act. 2. The brief facts of the case are that the assessee is an exporter of textile goods, filed its return declaring income of ₹ 4,96,128/- on 31.10.2002. The assessment was completed in this case under section 143(3) read with section 148 of the IT Act after recording the reasons as under :- "REASONS FOR ISSUING NOTICE U/S 148 M/s. M.K. Exim (India) Ltd. 1, Anand Chambers, B.H.C. Marg, Jaipur PAN No. AABCM 49 .....

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he business carried on by the undertaking. A scrutiny of the assessment records of above company has revealed that an exemption of ₹ 3,24,81,050/- u/s 10B was claimed by the assessee and also allowed by the AO. The allowable amount of exemption works out to ₹ 29714664/- as per details given below. Export turnover of EOU unit ₹ 15,39,35,866/- Total turnover (153935866+14331171 other income) ₹ 16,82,67,037/- Business Income ₹ 3,24,81,050/- Export turnover Total turnov .....

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etails in respect of other income of ₹ 1,43,31,171/- that assessee also included Interest income amounting to ₹ 12,14,227/-, Dividend income amounting to ₹ 32,550/- and Brokerage and Commission amounting to ₹ 12,736/- totalling ₹ 12,59,513/- apart from Excise Duty refund, Closing Stock of finished goods and Work-in-progress. The AO observed that deduction under section 10B as claimed by the assessee company in respect of interest income, dividend income and income f .....

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8 (SC) In response to show cause notice the assessee submitted before the AO that assessee also incurred interest expenditure amounting to ₹ 44,65,350/-. Thus the interest income earned should be reduced from interest expenditure. Dividend income of ₹ 32,550/- is received from shares of SBBJ who are the bankers of the company. Brokerage and commission of ₹ 12,736/- is received from M/s. Maersk India Ltd. which is a shipping company. Since the assessee company has direct dealing .....

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only as against deduction under section 10B claimed in the return of income at ₹ 3,24,81,050/-. Thus, the difference of ₹ 12,59,513/- is liable to be assessed as income from other sources and not income from business and profession. 3. Being aggrieved by the order of AO, assessee challenged reopening under section 148 and also on merit before ld. CIT (A). The ld. CIT (A) vide order dated 18.01.2010 had quashed the assessment order by considering the assessee's reply. The ld. A/R .....

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AO was satisfied about the wrong issue being taken as the basis for reopening, he dropped the issue of total turnover but proceeded to hold certain incomes to be not eligible for 10B exemption. It was submitted that AO hade not passed a speaking order while disposing off the objection against reassessment proceedings. It was further submitted that reassessment was done on issue other than the issue on which the reopening was done. In this regard the AO placed reliance on several judicial decisi .....

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basis of audit objection. There is no independent material available with the AO to justify the reopening. Accordingly he quashed the reassessment and has not decided the case on merit. 4. This issue was challenged by the revenue before the Tribunal. This Bench has decided Revenue's appeal in ITA No. 410/JP/2010 for A.Y. 2002-03 vide order dated 10.03.2011 and Revenue's appeal was dismissed. 5. The Revenue filed Miscellaneous Application against this order which has been decided by this .....

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d that the AO recorded the reasons under section 147 on the ground that assessee's total turnover has been considered for claiming deduction under section 10B and had not included other income in total turnover. During the course of assessment proceedings, the AO further came to know that assessee has not excluded other income i.e. interest income, dividend income and brokerage income which is not related to export business. Therefore, he rightly reduced the other income from the business in .....

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sons to believe then the basis of reasons to believe had not been made part of addition in the final order. It means the AO has recorded the reasons on which no addition has been made by him. As evident from the deduction claimed by the assessee, it has not been disturbed i.e. ₹ 3,24,81,050/-. The ld. AO had simply reduced the other income which has not been treated by him as derived income from the 100 export oriented unit as per section 10B of the IT Act for which he has relied upon the .....

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sumed jurisdiction. For inclusion of such items the AO would be required to issue a fresh notice under section 148. 7.1. In case of Jet Airways (I) Ltd. (supra), the Hon'ble Bombay High Court had expressed similar view and held that the AO accepted the objection of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assessee income under some other issue independently. It means the Assessing Officer had to make addition on .....

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n. The basis of reopening of the assessment order was lesser figure of total turnover. As per his working in reasons recorded excess deduction had been calculated at ₹ 27,66,386/- on the basis of total turnover of ₹ 16,82,67,037/- whereas the assessee has taken total turnover in computation made by the CA in prescribed form at ₹ 15,39,35,866/- but this issue has not been considered by the AO at the time of completing the assessment. He simply reduced the other income from total .....

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d Hon'ble Bombay High Court in the case of Jew Airways (I) Ltd. (supra) are squarely applicable on the case of assessee. The Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd has held as under:- "Under Explanation 3 if during the course of the proceedings the Assessing Officer comes to the conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings a .....

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he assessment proceedings, he found the deduction under sections 80HH and 80-I as claimed by the assessee to be not admissible. He consequently proceeded to make deductions under sections 80HH and 80-I and accordingly reduced the claim on these accounts. The very basis of initiation of proceedings for which reasons to believe were recorded was income escaping assessment in respect of items of club fees, gifts and presents, etc., but while these items were not disturbed, the Assessing Officer pro .....

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not override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or rea .....

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