9911796707
TMI Blog2020 (9) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the year 1955, petitioner is mainly engaged in the business of banking activities in India as well as in foreign countries through its branch offices. One of the major sources of income of the petitioner is interest earned from its lending activities. 3.1 Petitioner is assessed to income tax under the Act with respondent No.1 as the assessing officer. 3.2 For the assessment year 1990-91, petitioner filed its return of income declaring total income of Rs. 230,49,30,716.00. It is stated that in the said return of income, petitioner had offered to tax the entire receipt of interest from money advanced as credit in the profit and loss account without claiming any exemption under section 10(15)(iv)(c), (d), (e) and (f) of the Act as the details were not fully collected. A note was made in the return to the effect that particulars of petitioner's claim of interest exempt under section 10(15)(iv) were being collected and would be submitted separately. Further, in the return of income petitioner also claimed exemption under section 10(15)(iv)(h) of the Act for an amount of Rs. 20,58,08,915.00 being interest received on tax free bonds. 3.3 In the course of the assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest exemption under section 10(15)(iv), it furnished those details to respondent No.1 on 06.09.1994 but respondent No.1 refused to consider the further claim of the petitioner. 3.9 At that stage, petitioner preferred appeal before the Commissioner of Income Tax (Appeals). The first appellate authority by his appellate order dated 30.03.1995 directed respondent No.1 to consider the claim of the petitioner in respect of interest exemption under section 10(15)(iv) of the Act on the basis of information furnished by the petitioner and to allow the deduction according to law. 3.10 Respondent No.1 thereafter passed order dated 20.11.1995 giving effect to the order of Commissioner of Income Tax (Appeals) by allowing further deduction of Rs. 119,21,47,306.00 under section 10(15) (iv). 3.11 According to the petitioner, against its claim for exemption under section 10(15)(iv) of Rs. 469,92,61,038.00, it was allowed exemption of Rs. 468,64,17,569.00, the break-up of which has been furnished as under:- 1) Rs. 258,45,37,461.00 vide order dated 23.06.1993 passed under section 154; 2) Rs. 90,97,32,802.00 vide order dated 31.03.1994 passed under section 143(3) read with sections 147 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A. 7. When the petitioner pointed out the above CBDT circular to respondent No.1, it was informed that the said circular was not applicable to the petitioner as the assessment of the petitioner was reopened by issuing notice under section 148 of the Act on 30.03.2001, thus taking the view that the assessment proceeding was pending as on 01.04.2001. 8. After several rounds of communication, respondent No.1 vide letter dated 04.12.2001 furnished the reasons for re-opening of assessment to the petitioner. As per the reasons furnished, respondent No.1 was of the view that by claiming gross receipts as exempt and claiming the cost of borrowing etc. from its business income, petitioner in fact claimed double deduction which is not permissible in law. It is also stated that petitioner had not furnished details of expenses incurred to earn interest on approved foreign exchange loans. However, based on the data from the assessment year 1998-99, the cost for earning interest on such lending comes to more than 80%. Thus, excess exemption was allowed by more than Rs. 280 crores. This resulted in escapement of income by allowing excess exemption under section 10(15)(iv)(c) and (f) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross receipts in place of net receipts after adjustment of the expenditure, the income had escaped assessment. Reliance has been placed on the decision of the Supreme Court in the case of Escorts Limited Vs. Union of India, 199 ITR 43 contending that by claiming exemption on the gross income and getting the deduction of expenses incurred with respect to such income, petitioner had availed double deduction which could never have been the legislative intent. In so far CBDT circular dated 23.07.2001 is concerned, it is contended that the same is not applicable in the case of the petitioner. In the circumstances, respondent No.1 seeks dismissal of the writ petition. 12. Respondent No.1 has also filed additional affidavit in reply enclosing therewith the detailed reasons recorded for re-opening the assessment as well as the satisfaction recorded by Commissioner of Income Tax while granting approval to respondent No.1 for issuance of notice under section 148 of the Act. 13. Mr. Pardiwala, learned senior counsel for the petitioner has meticulously taken us to the materials on record and submits that issuance of the impugned notice is clearly without jurisdiction in as much as responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also drawn our attention to the proviso to subsection (3) of section 14A of the Act which was inserted by the Finance Act, 2002 with retrospective effect from 11.05.2001. He submits that even as per this proviso, the assessing officers are restrained from reopening assessment for any assessment year concluded on or before 01.04.2001. Therefore, this is also a prohibition for respondent No.1 from seeking to re-open the completed assessment of the petitioner for the assessment year 1990-91. 14. Mr. Suresh Kumar, learned standing counsel, Revenue submits that the writ petition filed is not maintainable in as much as the procedure laid down in GKN Driveshafts (India) Limited Vs. Income Tax Officer, 259 ITR 19 has not been followed by the petitioner. In that case, Supreme Court had clarified that when a notice under section 148 of the Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notice. In such an eventuality, assessing officer is bound to furnish reasons within a reasonable time to which noticee would be entitled to file objections. If objections are filed, assessing officer is bound to dispose off t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r must have or form reason to believe that any income of the petitioner chargeable to tax has escaped assessment by reason of the failure on the part of the petitioner to disclose fully and truly all material facts. 18. The expressions 'reason to believe' and 'failure on the part of the assessee to disclose fully and truly all material facts' have been subjected to numerous judicial pronouncements, and it is not necessary to burden this judgment by making reference to the long line of judicial precedents. Suffice it say that there must be a live link between the reasons recorded and formation of the belief that income chargeable to tax has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment which must not be fanciful or based on suspicion. Both the conditions must co-exist in order to confer jurisdiction on the assessing officer. Of course, the assessee is required to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the assessing officer books of accounts or other materials from which the required evidence with due dili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in GKN Driveshafts (India) Limited, the later may not have applicability in the present case. That apart, in the first Ajanta Pharma case i.e., 267 ITR 200, this Court after referring to the Constitution Bench judgment in Calcutta Discount Company Limited Vs. Income Tax Officer, 41 ITR 191 held that Supreme Court in GKN Driveshafts (India) Limited (supra) nowhere lays down the law to the effect that the noticee is totally debarred from approaching the High Court under Article 226 of the Constitution of India when the exercise of power by the authority under section 148 of the Act ex-facie appears to be without jurisdiction. It was reiterated that mere availability of an alternative remedy can be no bar for exercise of writ jurisdiction when the authority seeks to assume jurisdiction which it does not possess or act in totally arbitrary manner. It was held thus, "15. If one reads the decision of the apex Court in GKN's case (supra), as rightly submitted by the learned advocate for the petitioners, it nowhere lays down the law to the effect that the party is totally debarred from approaching this Court under Article 226 of the Constitution of India when an exercise of powers by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra). After discussing GKN Driveshafts (India) Limited, this Court observed that the assessee should have filed its return pursuant to the impugned notice and should have sought for the reasons for issuing such notice. This Court further observed that it would have rejected the writ petition on this ground but the reasons having been disclosed by the assessing officer prima facie showed that there was nothing in the reasons to indicate failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. On that ground this Court declined to dismiss the writ petition in limine. 21. There is one more reason for us to adopt a similar view. As already noted above, this writ petition was admitted for hearing by issuing rule way back on 27.06.2002. Having admitted the petition for hearing and such a long period having elapsed, it would neither be fair nor reasonable to relegate the petitioner to file objection to the reasons recorded before respondent No.1. This is more so because respondent No.1 has filed affidavits justifying the reasons recorded and issuance of the impugned notice. In other words, to direct the petitioner to file objection befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim, no such details and information were filed. 25. When the petitioner brought to the notice of respondent No.1 the details and information furnished by it vide letter dated 22.08.1992, respondent No.1 rectified the assessment order by an order dated 23.06.1993 passed under section 154 wherein it was held that relevant details were filed by the petitioner and after going through the documents, allowed exemption under section 10(15)(iv) of the Act to the extent of Rs. 2,58,45,37,461.00. It may be mentioned that along with the said letter, a list was annexed which furnished branch-wise information of borrowers, the clause under which interest income was treated as exempt and borrower-wise amount of interest. From this list it was evident that interest was allowed as exempt under section 10(15)(iv) of the Act on gross basis. 26. Thereafter notice under section 148 of the Act was issued to the petitioner on 23.12.1993 for re-opening the assessment for the assessment year 1990-91. Pursuant thereto petitioner filed its return of income wherein it claimed exemption of interest under section 10(15) (iv)(c), (d), (e) and (f) of the Act to the extent of Rs. 4,69,92,61,038.00; besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which is liable to tax; the circumstance that the business activity has produced income, a part of which is liable to tax and a part of which is free from tax, will not permit the allocation of the expenses between these two parts of income and allow only that part which is attributable to earning of the taxable income. This view was followed by this Court in New Great Insurance Company Limited (supra). The question which arose in that case was whether dividends received by the assessee company which otherwise satisfied the requirements of section 99 of the Act were upon the terms of that section gross dividends in the hands of the assessee or net dividends after deducting proportionate management expenses? After careful analysis, this Court held that the assessee company was entitled to a rebate on the gross dividends and not on the net dividends i.e., not after deducting proportionate management expenses. 31. Though section 14A was inserted in the Act by Finance Act, 2001 with retrospective effect from 01.04.1962, the same may not be of any assistance to the revenue in as much as the retrospective amendment of law would only negate the inference sought to be drawn of the failu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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