TMI Blog2010 (1) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... n under section 147/148 of the Income Tax Act, 1961. 3. That on the facts and in the circumstances of the case and without prejudice to the generality of ground of appeal no. 2 above. In the issuance of the notice u/s. 147/148 of the Income Tax Act 1961 is barred by limitation and therefore the impugned assessment order deserves to be quashed. 4. In this assessment year, the assessee filed its original return of income on 30.11.1998 declaring total income at ₹ 25,39,015/-. This return was initially processed u/s. 143(1)(a) of the Act on 22.11.2000 determining total income at ₹ 25,41,015/-. Thereafter, a regular assessment u/s. 143(3) of the Act was completed on 22.11.2000 determining total income at ₹ 25,41,015/-. Later on, the AO issued notice u/s. 148 to the assessee company on 30.03.2005, after recording reasons for issuing notice by entertaining a belief that the income chargeable to tax had escaped assessment. The reasons for issuing notice u/s. 148 as discussed by the AO in the assessment order are as under:- A notice U/s. 148 was issued to the assessee company on 30.03.2005 after recording reasons for issuing notice as the income has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 20,60,187/- from the disclosed profit of ₹ 89,05,823/- has been wrongly shown as ₹ 60,45,636/- instead of the correct figure of ₹ 67,45,636/-. The same mistake occurs in the audit objection. Now it is trite law that u/s. 147/148 cannot be taken purely on the basis of an audit objection. If any reference is needed for this elementary proposition of law, reference is invoked to the decision of the Apex Court in the Indian and Eastern Newspaper Society vs. CIT 119 ITR 996 (SC). Further the reasons recorded by the AO show that he has not at all applied his mind. It is also submitted that the original assessment was framed u/s. 143(3) on 28.11.2008. There is no allegation by the AO indeed on the facts there could be no allegations that any income charged to tax has escaped assessment by reason of the failure on the part of the appellant to disclose fully and truly all material facts necessary for his assessment. Therefore in view of the proviso to section 147 of the Act, notice u/s. 147/148 of the Act could be issued only by 30.3.2003 whereas it has been issued on 30.3.2005. The proceedings are therefore barred by limitation. In this connection the appellant r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon ble Delhi High Court in the case of Bawa Abhay Singh vs. DCIT 253 ITR 83 (Delhi). 11. The CIT(A) also hold that the case laws relied upon by the ld. counsel for the assessee before him are distinguishable on facts, and hence the same are not helpful to the assessee. 12. Still aggrieved, the assessee is in appeal before us. 13. The ld. counsel for the assessee has submitted that in the present case, the original assessment was completed u/s. 143(3) of the Act by assessment order dated 30.01.2006, and during the course of assessment proceedings, all the relevant documents and books of accounts were furnished to the AO, which were examined and verified, and the AO then completed the assessment u/s. 143(3) of the Act. He further submitted that the impugned notice u/s. 148 issued on 30.03.2005 is admittedly beyond the period of four years from the end of the relevant assessment year, and, therefore, the present case is covered by the proviso to section 147 of the Act. He, therefore, submitted that when the case is covered under the proviso to section 147 of the Act, the case would not fall within the normal limit of limitation for issuing the notice u/s. 148 of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary for his assessment for that assessment year. It is an admitted position that failure to make a return u/s. 139 or in response to notice under sub-section (1) of section 142 or section 148 does not came into play in the present case in as much as, the assessee had filed a return originally u/s. 139 of the Act on 30.11.1998. Now, what is necessary for taking action u/s. 147 in the present case is to see as to whether any income had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year. On plain reading of the reasons recorded for issuing notice u/s. 148 of the Act, it is seen that the AO has issued the notice u/s. 148 of the Act as he found that the net profit declared by the assessee included FDRs interest of ₹ 21,60,187/-, and the remaining profit came to ₹ 60,45,636/-, against which the assessee claimed deduction u/s. 80IA in respect of Parwanoo Unit, and u/s. 80I in respect of Peeragarhi Unit II aggregating to ₹ 61,38,379/-. He further observed that the expenses at 2.5% of the sales were debited to profit and loss account as administrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the said Act, carves out an exception from the main provisions of s. 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of s. 147 of the said Act would not be material. Once the exception carved out by the proviso came into play, the case would fall outside the ambit of s. 147. 19. Examining the proviso [set out above], we find that no action can be taken under s. 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied:- (a) an assessment under sub-s. (3) of s. 143 or this section has been made for the relevant assessment year; and (b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee: (i) to make a return under s. 139 or in response to a notice issued under sub-s. (1) of s.142 or s.148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment. Condition (a) is admittedly satisfied in as much as the original assessment was completed under s. 143(3) of the said Act. Condition (b) deals with a special kin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, any action taken by the AO under s. 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dt. 29 th March, 2004 under s.148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dt. 2 nd March, 2005 are without jurisdiction as no action under s.147 could be taken beyond the four year period in the circumstances narrated above. 17. In the light of the discussions made above, we, therefore, hold that the notice issued by the AO u/s. 148 on 30.03.2005 is barred by limitation in as much as it is hit by the proviso contained in the provisions of section 147, and the department has failed to prove and establish that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, and that too in the light of the fact that there is no whisper, what to speak of any allegation, in the reasons recorded that the assessee had failed to disclose fully and truly al material facts necessary for assessment, and that because of this failure the income chargeable to tax had escaped assessment. We, therefore, cancel the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntage of the sale of respective unit, the issue has been decided by us in ITA No. 32/Del/2008 for the A.Y. 2003-04 in assessee s case by order of even date by holding as under:- 12. As to the method of allocation of common expenses to different units, we are of the considered opinion that all the common expenses pertaining to three units are to be allocated with reference to the turnover of each unit. This system would be more logical and accurate as against the system adopted by the assessee to allocate expenses by working out the same at 2.5% of the turnover of the respective unit. This system adopted by the assessee with reference to the total expenses incurred by the assessee in any unit is, in our considered opinion, not justified. We, therefore, hold that the ld. CIT(A) is justified in confirming the A.O. s order in allocating the common expenses to each unit with reference to the turnover of respective units. We, therefore, uphold the order of ld. CIT(A) and confirming the A.O. s action in making apportionment expenditure on turnover basis. A similar view has also been taken by the ITAT, Pune Bench A , Pune in the case of Khinvasara Investment Pvt. Ltd. Vs. JCIT (2008) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated turnover of all units would, thus, be 19.5% as against 20.9% worked out by the A.O. We, therefore, hold that 19.5% of the total expense of ₹ 25,28,716/- as worked out above shall be allocated to the eligible unit, and if it is so allocated in the manner above, the correct allocation would be ₹ 4,92,900/- as against ₹ 6,25,252/- worked out by the A.O. We, therefore, hold that the expenses amount to ₹ 4,92,900/- shall be allocated to the eligible unit i.e. Unit No. 2 for the purpose of determining the amount of deduction available u/s 80IA of the Act. The A.O. is, therefore, directed to compute the deduction u/s 80IA accordingly. Thus, this issue raised by the assessee is partly allowed in assessee s favour. 26. In the light of our above order pertaining to the A.Y. 2003-04, we restore this issue about the determination of turnover and expenses, to the file of the AO with a direction to determine the same in the same manner as held so in the A.Y. 2003-04. 27. Now, we shall come to the issue about the apportionment of expenses on account of traveling and conveyance etc. to the Unit II, which has been reduced to ₹ 2,50,000/- by the CIT(A) fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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