TMI Blog2017 (2) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... d in concluding that re- assessment proceedings were not validly initiated. Since the initiation of re- assessment proceedings have been held to be invalid and therefore the reassessment order is liable to annulled, we do not wish to deal with other grounds with regard to the re-assessment proceedings having been initiated on a change of opinion and the arguments that no notice u/s 143(2) of the Act in the re-assessment proceedings were issued and therefore re-assessment proceedings are invalid. We also do not wish to go into the question as to whether the disputed items of income could form part of the composite income of the assessee or not for the purpose of Rule 8(1) of the Rules. - Decided against revenue - I.T.A No. 2754/Kol/2013 - - - Dated:- 3-2-2017 - Sri N. V. Vasudevan, JM And Shri Waseem Ahmed, AM For the Appellant : Shri Rajat Kumar Kureel, JCIT, Sr.DR For the Respondent : Shri D. S. Damle, FCA ORDER Per N. V. Vasudevan, JM This is an appeal by the Revenue against the order dated 09.09.2013 of CIT(A)-XII, Kolkata relating to A.Y.1999-2000. 2. The Assessee is a company engaged in the business of growing and manufacture and sale of tea. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.3.2002. One of the issue that arose for consideration before the AO in the assessment proceedings was the deduction allowable u/s.33AB of the Act. Sec.33AB of the Act reads as follows: Sec.33AB. (1) Where an assessee carrying on business of growing and manufacturing tea or coffee or rubber in India has, before the expiry of six months from the end of the previous year or before the due date of furnishing the return of his income, whichever is earlier,- (a) deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board or the Coffee Board or the Rubber Board; or (b) deposited any amount in an account (hereafter in this section referred to as the Deposit Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea Board or the Coffee Board or the Rubber Board, as the case may be (hereafter in this section referred to as the deposit scheme), with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y no longer required to be written back ₹ 10,68,000/- 2,95,11,034 28,56,64,816 20% of above 5,71,32,963 Amount deposited with NABARD (as per certificate) 5,80,00,000 Admissible deduction: 5,71,32,963 6. It can be seen from the aforesaid discussion of the AO in the order of Assessment dated 27.3.2002 passed u/s 143(3) of the Act, together with its Annexure thereto that the AO had applied his mind to nature of various receipts and incomes which the assessee had credited in its Profit Loss Account and the question whether they could form part of the composite income. After considering the relevant facts and the nature of income, the AO had held that the income credited under the head Misc. income and liabilities no longer required written back did not form part of the composite income derived from growing and manufacture of tea. On that ground he excluded these and some other receipts while working out the qualifying profits from which deduction u/s 33AB was allowed. These facts go to show that the assessee had not only made full disclosure of its income credited under the head Misc. income and liabilities no longer required written back but the AO himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Received from Insurance Company A/c Elephant Damage 8,66,436.00 Received on account of Guest House 34,88,000.00 Sale of Scrap and Old Gunny Bags 9,04,998.34 [A] 97,38,784.34 Details of Liabilities no longer required written back Name of the Tea Estate On account of Rs. Mijcanjan Tea Estate Land Revenue 2,73,853.00 Romai Tea Estate Land Revenue 60,780.00 Dufflaghur Tea Estate Land Revenue 3,32,480.00 Mahanhkali Tea Estate Land Revenue 4,00,329.00 [B] 10,67,442.00 Miscellaneous Income [A + B] 1,08,06,226.00 10. The Assessee explained before the AO in the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above realization of ₹ 34,88,000/-, the assessee incurred an expenditure of ₹ 34, 92, 080/- which are debited in the respectively heads of accounts. It is evident that out of the realization from guest house, the assessee incurred loss and there is no assessable income from realization. Therefore, the composite income determined does not include any profit from maintenance and user of the guest house by the other associated companies. C) As regards the sale scrap and ole gunny bags at ₹ 9,04,998/- we are to submit that in the tea gardens there are regular sale of unusable goods which are procured from time to time for running of the business for growing and manufacturing of tea. Expenses incurred for procurement of such items are included in the purchases account of the gardens and regularly debited in the profit loss account. The sales of such unusable left-outs are also part of the activities of growing and manufacturing of tea. The sale proceeds of such items are credited in the profit loss account and the same is included in the composite income of growing and manufacturing of tea. Essentially, they require to be apportioned in the ratio of 40 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 8,55,01,298/- Add: Profit attributable to sale of tea manufactured out of green leave purchased ₹ 52,13,889/- Add: Income from business (as discussed above) ₹ 1,08,70,000/- Total Business income Rs.10, 15,85, 187/- Add : Income from other source as per computationin the order u/s.143(3) ₹ 5,17,02,569/- Gross Total income Rs.15,32,87,756/- 12. Aggrieved by the order of the AO the assessee preferred an appeal before CIT(A). The assessee objected to the legality and validity of re-assessment proceedings broadly on two counts; (i) against the initiation proceedings under sec. 147 and issue of notice under sec. 148 of the Act and (ii) against the completion of assessment under sec. 143(3) of the Act without issue of statutory notice under sec. 143(2) of the Act. 13. As regards the first point, it was submitted that the original assessment was completed u/s 143(3) on 27.03.2002. Period of 4 years from the end of the AY 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be excluded from the Composite income. It was contended that reopening on such change of opinion was legally unjustified because such reopening did not satisfy the conditions enshrined in the Sec 147 of the I.T. Act viz., reason to believe that income chargeable to tax has escaped assessment. Reliance was placed by the Assessee on the ratio laid down in the following decisions: (i) Rajesh Jhaveri Stock Broking Pvt. Ltd Vs. CIT (291 ITR 500)(SC) (ii) CIT Vs. Foramers France (264 ITR 566) (SC) (iii) Kelvinators of India Ltd (256 ITR 1) (Del) affirmed in (320 ITR 561) (iv) CIT vs Usha International Ltd. (348 ITR 485) (Del) The CIT(A) held that the re-assessment proceedings had been initiated after a period of four years from the end of the relevant assessment year and since the assessment u/s 143(3) of the Act had already been made initiation of re-assessment proceedings u/s 147 of the Act should satisfy the requirements of the proviso to section 147 namely there should be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of that year. The CIT(A) held that the assessee had duly disclosed all material fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, Ld. CIT(A) erred in observing that the recovery of Insurance claim of ₹ 53,45,786/- is part of the income derived from the assessee business of growing and manufacturing of tea for the purpose of computation of composite income for application of Rule 8. (iv) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in observing that the sale of scrap of ₹ 9,04,998/- is part of the income derived from the assessee business of growing and manufacturing of tea for the purpose of computation of composite income for application of Rule 8. (v) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in observing that the Guest House Receipts of ₹ 34,88,000/- is part of the income derived from the assessee business of growing and manufacturing of tea for the purpose of computation of composite income for application of Rule 8. (vi) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in observing that the liabilities written back of ₹ 10,67,442/- is part of the income derived from the assessee business of growing and manufacturing of tea for the purpose of computation of composite income for ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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