TMI Blog2018 (2) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... essee’s contention that the reassessment proceedings have been initiated when the assessment proceedings are pending is not substantiated. Disallowance of the deduction u/s 80IB(5)(ii), though on a ground different from the reasons mentioned for reopening of the assessment - Held that:- When an assessment is reopened on any one ground which is sustained in the reassessment proceedings, the entire assessment is before the AO and he can consider any other issue which has come to his notice during the re-assessment proceedings as held by the full Bench in the case of CIT vs. Best Wood (2010 (12) TMI 748 - KERALA HIGH COURT). The assessment was reopened to consider the allowability of the deduction u/s 80IB of the Act and the disallowance of deduction u/s 80IB(5)(ii) has been made during the re-assessment proceedings and therefore, we do not agree with the contention of the assessee that the re-assessment proceedings are invalid. Therefore, ground of appeal No.3 is rejected. Deduction u/s 80IA - Held that:- Initial A.Y referred to in section 80IA would only be the year of deduction u/s 80IA claimed for the first time out of the total period, and not the year of commencement of el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings u/s 148 of the Act. We find that the assessee had challenged the re-assessment proceedings before the CIT (A) and therefore, it is a regular ground which can be raised along with Form No.36. Therefore, the rectified revised grounds filed on 21.12.2015 are only considered as regular grounds for adjudication of the assessee s appeal. The grounds raised therein are reproduced hereunder for the purpose of ready reference: 1. The Assessing officer and CTT(A) has contrary to the provisions of section 80AB of the Income Tax Act, 1961 on a fictional basis adjusted the past losses and unabsorbed depreciation of the Midnapore unit from the current years eligible income of the Midnapore unit included all the Gross Total Income of the appellant computed according to the provision of the Income Tax Act, 1961 2. Your Appellant submits that Rule 18BBB had been complied with and the separate profit and loss Accounts and Balance Sheet of the undertaking has accompanied with the form 10CCB and the same should have been accepted by the Assessing Officer as well as the CTT(A) and allowed the deduction under Section 80IB of the Income Tax Act, 1961 3. Your Appellant Submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitial A.Y in which the deduction is being claimed is mentioned as A.Y 2005- 06. The AO observed that as per the details furnished by the assessee, the initial A.Y should be the assessment year commencing with 1.4.2003, but the assessee has claimed deduction for the first time in the A.Y 2005-06. The AO therefore, asked the assessee to file proof of starting production of the Midnapore Unit. The assessee submitted that the production has already commenced during the financial year 2002-03 as mentioned in the annual report of the company for A.Y 2002-03 but that the claim is being made for the first time during the A.Y 2005-06. 4. While considering the assessee s claim of deduction, the AO observed that the assessee has not filed the details as per Rule 18BBB of the I.T. Rules r.w.s. 80IB and 80IA of the I.T. Act, which mandates that the assessee should furnish the audit report in support of its claim of deduction u/s 80I or section 80IA/80IB/80IC for the eligible unit separately and accordingly issued a notice to the assessee to furnish the same. In response to the notice, the assessee filed a separate P L A/c and balance sheet of Midnapore Unit from inception. The AO noticed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on the issues which are not part of the reasons for reopening, and therefore, the reopening of the assessment is not valid. In support of its claim, the learned Counsel placed reliance upon the following decisions: i) Hon'ble Madras High Court in the case of CIT vs. M/s.TTK Pharma Ltd (Tax Case Appeal) No.298 of 2004 dated 23.12.2009 ii) Hon'ble Madras High Court in the case of Carborundum Universal Ltd vs. JCIT (59 Taxmann.com 435)(Mad.) iii) Hon'ble Supreme Court in the case of CIT vs. GK Knitting Industries (P) Ltd (2016) 71 Taxmann.com 35 (SC). 8. Further, the learned Counsel for the assessee also drew our attention to the information called for by the AO vide letter dated 13.06.2008 after passing of the order u/s 143(1) of the Act and assessee s reply dated 7.7.2008 giving the information called for. He submitted that after receipt of the above information only, the notice u/s 148 has been issued to the assessee, which is not sustainable as it is clearly on a change of opinion. Further, he also argued that proceedings u/s 148 cannot be issued without concluding the proceedings pursuant to notice dated 13.06.2008. 9. The learned DR, on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs which attracts the provisions of sec.1 95 r. w.s.40(a)(i) for non-deduction of tax at source. The 3CD report is, silent regarding deduction of TDS on the payments made in Foreign currency towards Interest . In the absence of details, the expenditure of ₹ 50.51 lakhs needs to be disallowed. (3) The assessee company claimed deduction u/s.80G to the tune of ₹ 25,92,785 (50% of ₹ 42,68,285) towards donation. However, as per the assessment record donations to the tune of ₹ 37,91,OOO were allowed, which should actually be restricted to ₹ 25,92,785. Thus an amount of ₹ 5,50,000 short worked which needs to be brought to tax. In this connection you are requested to offer your explanation on the above observation immediately. Yours faithfully, Sd/- (M.Narmada) Asst. Commissioner of lncome tax Circle-3(3), Hyderabad(I/c) . 11. The assessee vide letter dated 7.07.2008 submitted the following reply: Visaka Industries Ltd, Secunderabad Date: 07/07/2008 To Asstt. Commissioner of Income Tax Circle 3(3), Hyderabad Sir, Sub: M/s. Visakha Industries Ltd A.Y 2005-06 Ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I furnish the following information: 1. The Assessee company claimed deduction of ₹ 2,96,87,778 u/s 80IB(5) in respect of unit at Midnapure , West Bengal, being the 1st year of deduction as stated in the Form No.10CCB . However, as noticed from the assessment record for the A.Y 2004- 05, that the said unit was in existence w.e.f. A.Y 2003- 04 and onwards. The assessee company had claimed deduction u/s 80HHC in respect of Midnapure Unit for the A.Y 2003-04 2004-05. The assessee company has 4(four) Units (1) Patancheru (2) Pasamathi (3) Midnapure (4) Textile Division (Nabpur) and in the previous year relevant to A.Y 2004-06 a new unit at Tumkur Karnataka came into existence. The assessee company had claimed deduction u/s 80IB(5)(ii) in respect of Midnapure unit at ₹ 2,96,87,778/- (100%) which was considered for deduction u/s 80HHC upto A.Y 2004-05. In view of the above stated position, the deduction u/s 80IB(5)(ii) in respect of Midnapure unit needs to be disallowed and brought to tax, as the said unit already claimed deduction u/s 80HHC and hence not a new industrial undertaking as per sub-section (2) of section 80IB. Thus, income chargeable to tax has esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 was issued to the assessee. As is evident from the letter dated 13.06.2008, the return was already processed u/s 143(1) of the Act on 30.03.2007. The reason for reopening the assessment were recorded only after the assessee, vide letter dated 7.7.2008, has furnished the information called for by the AO. According to the learned DR, the AO had called for information to satisfy herself about the reasons for reopening of the assessment. We find that there is no such provision in the Act to initiate re-assessment proceedings after requiring the assessee to furnish the information. However, we also cannot consider the letter dated 13.06.2008 as a notice u/s 143(2) as 143(2) notice should have been issued before the expiry of 12 months from the end of the month in which the return is furnished and the AO could not have issued the notice u/s 142(1) once time period for issuance of notice u/s 143(2) has expired. Therefore, the letter dated 13.06.2008 cannot be considered as a notice either u/s 143(2) or u/s 142(1) of the Act and assessee s contention that the reassessment proceedings have been initiated when the assessment proceedings are pending is not substantiated. 14. Coming to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other business income of the assessee, cannot be notionally brought forward and set off against the income of the assessee during relevant A.Y in which the claim was first made u/s 80IB of the Act. The Hon'ble Supreme Court also considered the CBDT Circular No.1/2016 dated 15/12/2016 before dismissing the SLPs filed by the Revenue against the decision in the case of Velayudhaswamy Spinning Mills (P) Ltd as reported in (2016) 76 Taxmann.com 176 (S.C). Respectfully following the above decision of the Hon'ble Apex Court, we hold that the assessee is eligible to claim deduction u/s 80IB of the Act for the first time during the A.Y 2005-06 without setting off the unabsorbed loss depreciation of earlier A.Ys which has already been set off against profit of other business. 17. We find that the AO has disallowed the claim u/s 80IB also for the following other reason: i) That the assessee has not filed the copies of the P L A/c and balance sheet for the Midnapore Unit as certified by the C.A. 18. As regards this objection of the AO, we find that the assessee has not filed a separate P L A/c and the balance sheet of the Midnapore Unit certified by the CA for making the cl ..... 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