TMI Blog2017 (1) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... is no loss of revenue and that the petitioner did not carry forward the loss related to the assessment year 2005-06 or set off against the income of the petitioner in the subsequent years. These issues are factual issues, which the assessee has to raise before the first respondent. More particularly, this Court will not go into the aspect as to what is the effect of not carrying forward the loss to the next year or not setting it off against the income in the subsequent years and whether the petitioner would be entitled to file revised returns for the subject year etc. These being factual, it is best left to the assessing authority to decide. This Court is not inclined to interdict the proceedings initiated by the first respondent by issuing a Writ and the prayer sought for by the petitioner to quash the notice under Section 148 of the Act, is held to be not maintainable and as the petitioner had been communicated with the reasons for reopening by communication dated 03.10.2007, liberty is granted to the petitioner to submit their objections within a period of three weeks from the date of receipt of a copy of this order, after which, the first respondent shall take a decision th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent and there being no default on the part of the petitioner, there is no legal basis for the first respondent to initiate re-assessment proceedings. On receipt of the impugned notice, the petitioner by reply dated 29.06.2007, requested the first respondent to furnish the reasons for issuing the notice under Section 148 of the Act. In response to such request, the first respondent by communication dated 03.10.2007, furnished the reasons for reopening stating that the petitioner had declared business loss of ₹ 36,03,553/- and income under other sources of ₹ 3032/- and while computing the business income, the assessee has claimed loss on sale of asset of ₹ 69,243/-, which is a capital gain and the petitioner is not entitled to this amount and hence, it has to be disallowed while computing the business income and therefore, income chargeable to tax to the tune of ₹ 69,243/- has escaped assessment. 4. Mr.M.V.Swaroop, learned counsel appearing for the petitioner submitted that the first respondent having omitted to issue notice under Section 143(2) of the Act within the statutory time limit (31.03.2007), has resorted to reopening the assessment without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which is not allowable as business deduction under the provisions of the Act, being a loss of capital in nature. It is submitted that even if the loss of sale asset amounting to ₹ 69,243/- is ignored for the purpose of computing loss from business, the taxable income of the petitioner would still be NIL after such adjustment, since the loss from business was ₹ 36,03,553/-. Furthermore, the petitioner did not carry forward the said loss related to assessment year 2005-06 and set of against the income of the petitioner in the subsequent years. Therefore, it is the contention of the learned counsel that there is no revenue loss for the department, even if the adjustment is made to the total income of the petitioner by disallowing the loss on sale of assets amounting to ₹ 69,243/- for which the impugned notice has been issued by the first respondent. Therefore, the learned counsel submits that the first respondent lacks jurisdiction to reopen the assessment for the relevant assessment year 2005-06, as there is no income that had escaped assessment to invoke the provisions of Section 147 of the Act and issue the impugned notice under Section 148 of the Act. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re independent proceedings and were rightly initiated by the respondent. It is further submitted that during the assessment year 2005-06, the assessee had international transaction with its associated entreprises viz., Banca Sella SPA Italy; Banca Sella; Maimi Agency; International Capital Gestion, SA Paris; Investment Bank, Luxmburg; Easy Nolo SPA; Gerstnard Fondi S.G.R.Italy; and Fidsel Italy. Therefore, as per provision of Section 92E, the assessee ought to have filed report in Form No.3CEB on or before 31.10.2005. However, the assessee filed the same on 19.07.2006. As the assessee did not comply with the requirements of provisions of Section 92E within due date, penalty notice under Section 271BA was issued to the assessee on 19.02.2007. In response to the penalty notice, the assessee stated that in its case the information was maintained at Italy in Italian language because of which the accountant was not able to certify about the same and had requested for English Version of the information maintained. The assessee attributed the delay in filing the report in Form 3CEB to the delay in getting the transaction which was in Italian language. The assessee had given the same expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent having filed a counter affidavit adverting to the averments made in the affidavit filed in support of the Writ Petition as well as the additional affidavit, the technical glitch is not taken up for consideration and the Court proceeds to consider as to whether the petitioner has made out a case for grant of the relief sought for. 8. The fact that the petitioner is a 100% export oriented unit registered under the STPI for the relevant assessment year namely 2005-06 is not in dispute. In the return of income for the said year, the petitioner admitted a total income of 'NIL' after claiming exemption under Section 10A/10B of the Act on the ground that profits earned from export business is fully exempt. 9. Broadly the impugned action of the first respondent is challenged on four grounds, firstly that the first respondent having not issued any notice under Section 143(2) of the Act in order to complete the regular assessment proceedings could not have resorted to issuing the impugned notice under Section 148 of the Act; secondly, it is submitted that the first respondent had levied penalty under Section 271BA of the Act vide order dated 25.06.2007, even before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether it is a case of no loss of revenue, it would be first essential to take into consideration the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd (supra). In the said case, the Hon'ble Division Bench of the Delhi High Court, dismissed a Writ Petition filed by an assessee challenging the validity of the notices issued under Section 148 and 143(2) of the Act by taking a view that all objections could be taken by the assessee in its reply to the notices and at that stage, the Writ Petition was pre-mature. The Hon'ble Supreme Court while refusing to interfere with the order passed by the Delhi High Court clarified that when a notice under Section 148 of the Act, is issued, the proper course of action for the noticee is to file a return and if he so desires to seek reasons for issuing notices and Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of the reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. Thus, the Hon'ble Supreme Court indicated as to what is the procedure to be adopted by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust claimed that it had received as gift certain shares from a private trust and therefore, the taxes that were deducted at source in respect of the dividends on all the shares, which had been gifted to the public charitable trust, were refunded to the trust of which the petitioner's were the trustees. It came to the knowledge of the Income Tax Officer that gift by the private trust in favour of the public trust was void, as there was no power to make such a gift and therefore, held that refund of taxes deducted at source given to the public charitable trust, were wrongly given and had to be rectified and it was for that purpose, the assessment for the relevant year was sought to be reopened. The learned Single Judge of the Calcutta High Court after analysing the factual position, pointed out that the question would be as to whether there has been any escapement of income of the trust of which, the petitioners or the trustees entitling the revenue authorities to reopen the said assessment. After referring to Section 147, it was pointed out as the trust on which the petitioners therein were trustees is a public charitable trust, its income was not assessable to tax and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect of not carrying forward the loss to the next year or not setting it off against the income in the subsequent years and whether the petitioner would be entitled to file revised returns for the subject year etc. These being factual, it is best left to the assessing authority to decide. 18. Countering the submissions of the learned counsel for the petitioner, the revenue takes a stand that no revenue loss or not carrying forward the loss, is not relevant for reassessment proceedings and submit that penalty under Section 271(1)(c) can be levied and hence a Writ would not be issued, when a procedure has been outlined by a Supreme Court in the case of GKN Driveshafts (India) Ltd vs. ITO, (supra). 19. In Swaraj Engine Ltd., vs. Assistant Commissioner of Income Tax Anr., reported in 2003 (260) ITR 202 (P H), it was held that the Writ court can only consider, whether the notice is valid and it cannot consider the sufficiency of material justifying reassessment. In the said case, it was found that special deduction under Section 80I was wrongly allowed in the original assessment and notice of reassessment was held to be valid. At this stage, it would be useful to refer to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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