TMI Blog2007 (2) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 143(3) was completed on 10.03.2004. For reopening of this assessment, notice under Section 148 was issued by the Assessing Officer to the assessee and notice under Section 263 was issued by the Commissioner of Income Tax for revision of the assessment order passed by the Assessing Officer dated 10.03.2004. 4 While admitting Special Civil Application No.2353 of 2005 relating to the challenge of notice under Section 263, this Court stayed the proceedings under Section 263 for revision of the assessment order. 5 Notice was also issued to the respondents in Special Civil Application No.16306 of 2006 relating to reopening of the assessment in pursuance of notice under Section 148. 6 Heard learned counsels for the parties. 7 The facts are not in dispute. The assessment order for the assessment year 2001-02 was passed on 10.03.2004. The total income assessed was Rs.5,41,22,967/-. 8 Learned counsel for the assessee Shri K.C. Patel submits that when a proceeding under Section 263 for revision of the assessment order dated 10.03.2004 is pending, the Assessing Officer has no jurisdiction to issue notice under Section 148 to reopen the same assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been computed." 11 Prior to 01.04.1989 the provisions of Sections 147 of the Act read as under : "Section 147. If - (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1. - For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the issue 'reason to believe'. At page 840, this Court has observed as under: "8. On a proper interpretation of Section 147 of the Act, it would appear that the power to make assessment or re-assessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance, and whether it is an error of fact or law that has been discovered or found out justifying the belief required to initiate the proceedings. In our view, the words "escaped assessment" where the return is filed, are apt to cover the case of a discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its non-consideration, or, caused by a mistake of law applicable to such transfer or transaction even where there has been a complete disclosure of all relevant facts upon which a correct assessment could have been based. 9. As noted above, the provision of Section 147 requires that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: Management expenses: x Exempted interest income Total Receipts 5,03,64,454 x Rs.1,44,038/- 36,71,43,081 Hence, disallowance of Rs.1,44,038/- should have been made instead of Rs.3,544/-. Therefore, an amount of Rs.1,40,494/- has escaped assessment. 2. The year under consideration the assessee has claimed deduction u/s 80 HHC of the Act amounting to Rs.5986965/-. While passing the order u/s 143(3) of the Act the deduction u/s 80HHC was restricted to Rs.50,37,685/-. While calculating the 'profit of the business', the 90% of the interest receipt of Rs.56,50,605/- has been reduced. The interest income includes the following. (i) Interest on HDFC debenture 1,74,075 (ii) Interest on income-tax refund 4,07,294 (iii) Interest from Bank deposits 50,11,241 The interest on income-tax refund is 'income from other sources' as has been held by Madras High Court in the case of Smt. B. Seshamma v. CIT [1979] 119 ITR 314. The interest on bank deposits and debenture is also 'income from other sources' as has been held by High Court in the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 195 of 11 Act. Under section 195, the TDS is to be made as per rates in force i.e. First Schedule of the Finance Act. As per First Schedule of Finance Act, the TDS on Royalty payment in case of a domestic company, where the Royalty agreement is made before 01.06.1997 is @ 30%. Hence, 30% of Rs.50.18 lacs comes to Rs.15.05 lacs. The assessee should have therefore deducted TDS of Rs.15.05 lacs or in the alternative the Royalty payment corresponding to TDS paid of Rs.7,52,792/- only is allowable u/s.40(a)(i). This point requires verification. 4. Pre-paid excise duty: It is seen that the assessee has pre-paid Excise Duty of Rs.62,59,521/-, which has been claimed as deduction u/s 43B. The said deduction u/s 43B is not allowable in view of the latest decision of ITAT, Delhi Bench 92 ITD 119 (Delhi). In the said ITAT's decision, all the case laws on the subject have been considered and referred to. The said sum of Rs.62,59,521/- is required to be disallowed u/s.43B of the Act. 5. Gratuity It is seen that the assessee has claimed deduction for Gratuity debited to P L Account as under:- Inductotherm (India) Private Limited Assessment year 2001-02 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case is reopened u/s.147 of the Act by issuing notice u/s.148." 16 If we look into the reasons, the Assessing Officer has categorically found from the record that in place of disallowance of Rs.1,44,038/- in the original assessment order, only an amount of Rs.3,544/- has been disallowed and in calculation for allowance under Section 80HHC Rs.50,37,685/- were allowed in the original assessment order. In fact, it should be Rs.49,75,667/-. For the purpose of allowance under Section 80HHC, some type of income has also not been excluded, which is referred in the reasons recorded. Rs.2,59,521/- were also required to be disallowed under Section 43B of the Act and in some matters like unpaid sales commission and provisions for expenses and also where the amount of more than Rs.1.00 cr. debt become really bad, it requires verification, but that has not been done by the Assessing Officer. Therefore, considering the reasons given for reopening of the assessment, it cannot be said that Assessing Officer has no reason to believe that some income has escaped assessment before issuance of notice under Section 148 of the Act. It is further confirmed from the fact that in the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 154, even then Their Lordships held that it would not mean that revisional authority shall be denuded of exercising its revisional power. In the case in hand, no such order under Section 263 of the Act has been passed till the date of issuance of notice under Section 148. 20 When in the case in hand, only notice under Section 263 has been issued, and those proceedings are stayed, but the proceedings initiated after the issuance of notice under Section 148 are not stayed. If the Assessing Officer completes the proceeding and passes a re-assessment order, there is nothing wrong in the order, especially, when the proceedings under Section 148 are not stayed by this Court, both the proceedings can go in parallel. 21 Shri Patel further argued that there are common grounds for issuance of notice under Section 148 and notice under Section 263 so far as escapement of income is concerned, therefore, parallel proceedings should not be allowed. 22 Though Their Lordships in the case of Ralson Industries Ltd. [2007] 288 ITR 322 (SC) held that when there are parallel proceedings under Sections 154 and 263 and if any rectification is made under Section 153, that could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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