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2016 (5) TMI 1126 - ITAT CHENNAI

2016 (5) TMI 1126 - ITAT CHENNAI - TMI - Reopening of assessment - disallow the expenditure in terms of Section 14A - Held that:- In the present case, it is not the case of assessee that the AO was not made any addition by invoking the provisions of the section 14A of the Act. Being so, the contention of the assessee was that there is no addition for which the assessment was reopened, is not correct. There is an addition by the AO on the reasons recorded that is by invoking the provisions of the .....

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a rubber fitting. Accordingly, we hold that the CIT(A) has rightly upheld the rejection of assessee’s claim of deduction/s 80IB of the Act.- Decided against assessee - I.T.A. No. 2046/Mds. /2015 - Dated:- 10-2-2016 - Shri Chandra Poojari, Accountant Member And Shri G. Pavan Kumar, Judicial Member For the Appellant : Mr. Sarojkumar Parida, Advocate For the Respondent : Mr. R. Duraipandian, JCIT, D.R ORDER Per Chandra Poojari, Accountant Member This appeal is filed by the Assessee is directed agai .....

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g work was entrusted to Mr.N.Gopalan, who had left the services vide his resignation letter dated 29.04.2015 and thereafter in his absence, there was no competent person to care of the taxation matter. Being so, it has taken time to identify the counsel for filing the appeal and later this case was given to M/s.Subbaraya Aiyar Padmanabhan and Ramamani, Advocates and thus there was a delay of 124 days in filing the appeal before this Tribunal and delay has to be condoned. 3. We have carefully gon .....

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sessee company is engaged in the business of manufacture and sale of rubber contraceptives and filed its return of income on 29.10.2004 admitting a total income of ₹ 40,75,83,117/-. Subsequently, the return was selected for scrutiny under CASS and the assessment was completed u/s.143(3) of the Act on 21.12.2006. Thereafter, the assessment was reopened by issue of notice u/s.148 dated 30.03.2011 on the ground the disallowance of expenditure u/s.14A of the Act in relation to investments in m .....

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) of the Act was completed on 21.12.2006 and the assessment was reopened vide notice u/s.148 of the Act dated 30.03.2011, which is after four years from the end of the assessment year (A.Y 2004-05) without any failure on the part of the assessee to disclose all material fact fully and truly for the purpose of assessment. According to him, the assessment is bad in law. Further, he submitted that the assessment was reopened to disallow the expenditure incurred in relation to exempt income which do .....

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inal assessment was completed in this case on 21.12.2006 and re-opening of assessment notice was issued to the assessee u/s.148 of the Act on 30.03.2011 with the reasons that in the case of the assessee M/s. TTK LIG limited, during the last Year 2004-05, the investments as on 31.03.2004 stands at 51,46,64,200/- being investments in mutual funds and subsidiaries and joint venture partner, the income from which is not includible in the total income. The assessee company M/s. TTK LIG Limited while .....

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sessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment within the meaning of section 147 of the Income Tax Act, 1961. Later the AO completed the assessment u/s.143(3) r.w.s.147 on 01.12.2011 wherein he made an addition not only with regard to Sec.14A disallowance, but also disallowed deduction u/s.80-IB of the Act of ₹ 3,75,58,838/-. During the course of reassessment, it was found that the claim of assessee is no s .....

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e formed. The word reason in the phrase reason to believe would mean cause or justification. In case the Assessing Officer has a cause or justification to know or suppose that income has escaped assessment , action u/s 148 can be taken. But obviously, there should be relevant material on which a reasonable man could have formed a requisite belief. Whether this material(s) would conclusively prove the escapement of income is not the concern at that particular stage. So what is required is the sub .....

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ll material facts necessary for the assessment for that assessment year, inter alia. As seen from the reasons recorded which gives a clear picture that the Assessing Officer has got material evidence to form his opinion for taking recourse to section 147 r.w.s 148 of the Act. There cannot be two opinions. The point of time when the reasons are recorded after forming opinion of escapement of income is only relevant. Hence, this plea of the ld.AR is not tenable in the eyes of law. It is true that .....

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n question. The Assessing Officer is required to see if the conditions laid in Explanation 2(c) because in this case the assessment was completed u/s 143(3) are satisfied or not. In case, (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low rate; or(iii) such income has been made the subjective of excess relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed, the Assessing O .....

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power to re-assess post 1st April, 1989 are much wider than these used to be before. But still the schematic interpretation of the words reason to believe failing which section 147 would give arbitrarily powers to the Assessing Officer to reopen the assessment on the basis of mere change of opinion, which cannot be, per se a reason to reopen the case. The Act has not given power to the Assessing Officer to review but has only given power to re-assess. There is a conceptual difference between th .....

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only when the Assessing Officer has a tangible material to base his conclusion that there is an escapement of income from assessment and the reasons recorded have a link with the formation of his belief, he has the power u/s 147 of the Act. 9. Now the most material part which was argued by the ld.AR is regarding the time lag which is provided in first proviso to section 147 which states that where an assessment u/s sub-section(3) of section 143 has been made for the relevant assessment year, whi .....

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what failure of the assessee to disclose fully and truly all material facts signify. The expression failure to disclose material facts has been explained in the Taxman s Direct Taxes Manual Volume 3. It is true that every disclosure is not and cannot be treated to be a true and full disclosure. A disclosure can be even false or true. It may be a full disclosure or it may not be a full one. A part disclosure many a times may be misleading one. What is required under the law is a full and true dis .....

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r from case to case. The material should not only be full but also be true. If some material found in the evidence produced before the Assessing Officer which the Assessing Officer could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. This omission or failure may be either deliberate, or even inadvertent, that is immaterial, but in case there is omission to disclose the material facts then subject to the other conditions juris .....

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he Act. Further, Explanation 1 to Section 147 of the Income Tax Act which reads as under: Production before the Assessing Officer of accounts books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso . It is possible that with due diligence the Assessing Officer would have ascertained this fact at the time of original assessment also, but in view .....

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or the assessment, this proviso will not come to its rescue. Same is applicable to other reasons records for reopening of assessment. Consequently, we hold that the entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. The assessee fails on this legal issue. Being so, there was no information regarding exempt income that itself is sufficient to hold that the assessee has disclosed all the material fact necessary for the purpose of asse .....

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Vs. Jet Airways (I) Ltd., cited supra, the AO cannot travel beyond the reasons recorded. In our opinion, this argument holds no water. In that case Hon ble Bombay High Court held that AO may assess or reassess the income in respect of any issue which comes to his notice. Subsequently, in the course of the proceedings, though the reasons for such issue were not included in the notice, however even if issuing of notice u/s.148, the AO accepted the contention of the assessee and holds that the inco .....

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he AO on the reasons recorded that is by invoking the provisions of the section 14A of the Act and being so; the AO can travel beyond he reasons recorded for making the addition as disallowance in re-opening the assessment also. Accordingly, this ground of the assessee is rejected. 11. The next ground in this appeal is with regard to disallowance u/s.80IB of the Act in respect of Palavaram Unit. 12. After hearing both the parties, this issue is squarely covered by the order of the Tribunal in as .....

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IT(A) have declined the claim on the ground the product falls under entries 27 & 28 of the Eleventh Schedule of the Act and the unit is located in a cantonment area. The CIT(A) has not specifically decided the latter objection and upheld the A.O. s first conclusion regarding Eleventh Schedule post of years applicability of the facts of the case. Coming to the statutory provision itself, it is clear that Sec.80-IB of the Act provides deduction in respect of profits and gains from certain indu .....

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in sub- sections (3) to (11) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :- (i) .....

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r plant previously used for any purpose; (iii) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section (4) shall apply as if the words "not being any article or thing specified in the lis .....

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y country outside India; and (c) No deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2 : Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the tot .....

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twenty or more workers in a manufacturing process carried on without the aid of power. Since there is further stipulation in the above provision that the article or thing as manufactured or produced by the concerned assessee should not be covered by the Eleventh Schedule of the Act, we also deem it appropriate to reproduce herein below the necessary items as follows: Eleventh Schedule Item No.27: Crown corks or other fittings of cork, rubber, polyethylene or any other material. Pilfer proof cap .....

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No.27 pertains to crown corks or other fittings of cork, rubber, polyethylene or any other material. In other words, the same covers the case of rubber fittings whereas entry-28 covers cases of pilfer proof caps for packaging or other fittings of rubber. The two entries above cited i.e. item Nos. 27 & 28 envisage different contextual references i.e. Crown Corks and other fittings of cork and rubber and pilfer proof caps. If we analyze the usage of a condom, we are constrained to hold that it .....

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hing covered by Eleventh Schedule depends on the nature and characteristic of the product manufactured and not on the case laws settling legal principles as there cannot be any straight jacket formula defining its purview. So far as to the case laws cited by the A.R is concerned, in our opinion, the products involved in the same were altogether different i.e. rubber stoppers, Cigarette filters, rubber compounds for utilization in rubber industries. Therefore, the same are not relevant qua adjudi .....

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nth Schedule of the Act. Item 27 of Eleventh Schedules appended to the Income - Tax Act, 1961 reads as under: Crown corks or other fittings of cork, rubber, polyethylene or any other material. 23. A bare reading of this schedule makes it amply clear that manufacture of tyres of rubber which falls under Item 27 which exclude the item from the benefit of section 80IA. In this schedule, crown corks, or other fittings of cork, rubber, polyethylene or any other material has been mentioned clearly. Th .....

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