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JIVRAJ TEA LIMITED Versus ASSISTANT COMMISSIONER OF INCOME TAX - CIRCLE - I (1) (2)

2016 (8) TMI 218 - GUJARAT HIGH COURT

Reopening of assessment - Held that:- We are concerned only with the question of failure on part of the assessee to disclose fully and truly all material facts. - It is not even the case of the Assessing Officer that he noticed the disproportionate allegation/allocation of expenditure in the accounts of non eligible business through any material extraneous to the assessment records. In fact, his entire observations contained in the reasons recorded are borne out from the data available in th .....

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cided in favour of assessee - SPECIAL CIVIL APPLICATION NO. 4005 of 2016 - Dated:- 19-7-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR B S SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR SUDHIR M MEHTA, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged a notice dated 30.03.2015 issued by the respondent Assessing Officer for reopening the assessment of the petitioner for the assessment year 2008-09. 2. Brief facts are as under. 3 .....

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ng the notice. In the present case, assessment u/s. 143(3) of the Act was completed on 22.12.2010 by making following additions / disallowances: (i) Disallowance u/s.40A(2)(b) of the Act. (ii) Disallowance of deduction claimed u/s. 80IA(4) of the Act. (iii) Disallowance u/s.14A of the Act. During the year under consideration, the assessee company has shown turnover of ₹ 79,19,95,350/- & the Gross profit of ₹ 13,24,86,180/- ( GP margin 16.73%) from Tea Division and turnover of  .....

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g expenses. As per law, the expenses which have direct nexus with any line of business should be debited to such respective business, whereas the indirect expenditure (or common expenditure needs to be split between the different lines of business. However, regarding the administrative expense and the other expenses, it is evident that the assessee company has debited a sub of ₹ 1,72,48,250/- and ₹ 58,43,886/- respectively on these account, out of which only ₹ 1,36,829/- ( only .....

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ses to the windmill divisions. Where all the common expenses have been debited to the tea division, thereby artificially pumping its income eligible for deduction u/s.80IA leading to lower returned income and consequently lower taxes. Hence, the common expenses, needs to be allocated between both lines of business in order to arrive at true picture. Since, one line of business is a trading concern (tea division) and other is manufacturing concern (generation of electricity), the ratio of turnove .....

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e Windmill asset value Percentage of windmill block to total block 2,75,86,028 8,02,87,769 74.42% B. Calculation of profit ratio. Total business income Income from windmill Percentage of windmill income to total business income 5,76,55,839 1,81,96,506 31.56% C. Average of A and B above: (74.42 + 31.56)/2 = 52.99% Hence, 52.99% of the administrative expenses and the other expenses amounting to ₹ 2,30,92,136/- should be debited to the windmill divisions thereby reducing their total income an .....

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see company as well as excessive deduction was allowed u/s.80IA(4) of the Act. Hence, there is escaped assessment within the meaning of section 147 of the Act. Thus, it is a fit case for issuing notice u/s. 148 of the Act. 4. The petitioner raised detail objections to the notice for reopening under letter dated 24.12.2015, in which, with respect to the true and full disclosures, the assessee had contended as under: In respect of the aforesaid reason for reopening, we would like to submit that th .....

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e of manufacturing expenses, administrative expenses, financial expenses, financial expenses and depreciation for all the divisions and thus, there is no question of there being any common expenses for both the divisions. • Thirdly , on the basis of maintenance of separate books of accounts, the statutory auditor has also prepared separate audit reports for both the divisions wherein also; all the expenses stands clearly categorised under the head, Manufacturing , administrative , Financial .....

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bonus and boni expenses, donation, advertisement and sales promotion expenses, commission and brokerage expenses, etc., which have duly furnished and are forming part of the original assessment record. Here it is pertinent to note that during the course of original assessment proceedings, the then learned AO had even called for explanations in respect of variation in certain expenses and these explanations also stand furnished by us and accepted by the then learned AO. (f) Lastly but most import .....

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tea division instead of the windmill division, to claim higher deduction u/s. 80IA and therefore, the impugned reopening has been clearly made without proper verification of facts or application of mind. • From the aforesaid facts there remains no doubt that all the expenses for each of the divisions stands verified and accepted by the then learned AO and therefore, it gets established that there is no failure on the part of our company to disclose fully and truly all the material facts nec .....

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