Capital Business Systems Ltd, v. ACIT Circle 3 (1),

ITA 4776/DEL/2007 | 2004-2005
Pronouncement Date: 22-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 477620114 RSA 2007
Assessee PAN AAACC0146L
Bench Delhi
Appeal Number ITA 4776/DEL/2007
Duration Of Justice 2 year(s) 1 month(s) 11 day(s)
Appellant Capital Business Systems Ltd,
Respondent ACIT Circle 3 (1),
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 22-01-2010
Date Of Final Hearing 16-12-2009
Next Hearing Date 16-12-2009
Assessment Year 2004-2005
Appeal Filed On 11-12-2007
Judgment Text
THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA HONBLE VICE PRESI DENT AND SHRI C.L. SETHI JUDICIAL MEMBER ITA NOS. 4775 & 4776/DEL/2007 ASSESSMENT YEARS: 1998-99 & 2004-05 CAPITAL BUSINESS SYSTEMS LTD. 54/2 EAST PUNJABI BAGH NEW DELHI. VS. ACIT CIRCLE 3(1) C.R. BUILDING NEW DELHI PAN: AAACC 0146 L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN A ND MS. RANO JAIN CAS RESPONDENT BY : SHRI MANISH JAIN DR O R D E R PER: C.L. SETHI J.M. THESE TWP APPEALS HAVE BEEN FILED BY THE ASSESSEE PERTAINING TO THE ASSESSMENT YEARS 1998-99 AND 2004-05 RESPECTIVELY. 2. WE SHALL FIRST TAKE THE APPEAL (ITA NO. 4775/DEL /2007) FILED BY THE ASSESSEE AGAINST THE ORDER DATED 08.10.2007 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE UNDER 143(3)/147 O F THE INCOME TAX ACT 1961 (THE ACT) FOR THE A.Y. 1998-99. 3. IN GROUND NO. 1 TO 3 THE ASSESSEE HAS CHALLENGE D THE VALIDITY OF ASSUMING JURISDICTION U/S. 147/148 OF THE ACT BY TH E AO WHICH READS AS UNDER:- ITA NOS. 4775 & 4776/DEL/2007 PAGE 2 OF 19 1. THAT THE ORDER PASSED UNDER SECTION 250 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RANGE VI NEW DELHI IS BAD IN LAW AND ON FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED ACIT 3(1) N EW DELHI GROSSLY ERRED IN ASSUMING JURISDICTION 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 T AX ACT 1961 IS BARRED BY LIMITATION AND THEREFORE THE IMPU GNED 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 RS. 25 39 015/-. THIS RETURN WAS INITIALLY PROCESSED U/S. 143(1)(A) OF TH E ACT ON 22.11.2000 DETERMINING TOTAL INCOME AT RS 25 41 015/-. THEREA FTER A REGULAR ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 22.11.2000 DETERMINING TOTAL INCOME AT RS. 25 41 015/-. LATER ON THE AO ISSUED NOTICE U/S. 148 TO THE ASSESSEE COMPANY ON 30.03.20 05 AFTER RECORDING REASONS FOR ISSUING NOTICE BY ENTERTAINING A BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE REAS ONS FOR ISSUING NOTICE U/S. 148 AS DISCUSSED BY THE AO IN THE ASSESSMENT O RDER 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 ASSESSMENT . IT WAS FOUND ON THE PERUSAL OF ASSESSMENT RECORDS THAT DURING THE YEAR UNDER CONSIDERATION NET PROFIT AS P ER THE P&L ACCOUNT HAS BEEN DECLARED AT RS. 89 05 823/- WH ICH INCLUDES FDR INTEREST OF RS. 21 60 187/-. THE REMA INING ITA NOS. 4775 & 4776/DEL/2007 PAGE 3 OF 19 PROFIT WORKS OUT TO RS. 60 45 636/-. THE PROFIT OF PARWANOO UNIT HAS BEEN SHOWN AT RS. 42 46 061/- ON WHICH 100% DEDUCTION HAS BEEN CLAIMED U/S. 80IA AND FOR PEERAGARHI UNIT II THE PROFIT HAS BEEN DECLARED A T RS. 18 96 318/- ON WHICH DEDUCTION @ 30% U/S. 80-I HAS BEEN ALLOWED. THE TOTAL PROFIT OF BOTH THESE UNITS COME S TO RS. 61 38 879/- WHEREAS THE PROFIT WORKS OUT TO RS. 60 45 636/- AFTER EXCLUDING FDR INTEREST ON WHICH NO DEDUCTION U/S. 80-I OR 80-IA HAS BEEN CLAIMED. MOREOVER 2.5% OF SALES HAS BEEN DEBITED TO THE P&L ACCOUNT AS ADMINISTRATION & SELLING EXPENSES CHARGED TO HEAD OFFICE TO ARRIVE AT THE NET PROFIT OF A PARTICULAR UNIT. NO BASIS HAS BEEN BROUGHT ON RECO RD FOR DEBITING ADMINISTRATION & SELLING EXPENSES @ 2.5% O F THE SALES. PROPORTIONATE EXPENSES OF THE HEAD OFFICE S HOULD BE DEBITED TO THE P&L ACCOUNT INSTEAD OF 2.5% OF TH E SALES WHICH WILL GIVE THE TRUE AND CORRECT PROFIT OF EACH UNIT FOR ALLOWING DEDUCTION U/S. 80-I AND 80-IA OF THE ACT. EVEN THE ADMINISTRATION AND SELLING EXPENSES CHARGED BY THE HEAD OFFICE ARE NOT APPEARING AS INCOME IN THE CONSOLIDATED P&L A/C. 5. IN REPLY TO NOTICE U/S. 148 AS WELL AS NOTICE U/ S. 143(2) THE ASSESSEE APPEARED BEFORE THE AO AND SUBMITTED VARIOUS DETAIL S AS ASKED FOR. AFTER EXAMINING THE ASSESSEES BOOKS OF ACCOUNTS AND CONS IDERING THE EXPLANATION THE AO DETERMINED THE ASSESSEE S TOTA L INCOME AT RS. 30 90 251/- 6. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 7. BEFORE THE CIT(A) THE ASSESSEE CHALLENGED THE V ALIDITY OF ASSESSMENT ORDER VIDE GROUND NO 1 AND 2 RAISED BEF ORE THE CIT(A). ITA NOS. 4775 & 4776/DEL/2007 PAGE 4 OF 19 8. THE SUBMISSIONS OF THE ASSESSEE BEFORE THE CIT(A ) WITH REGARD TO THE VALIDITY OF THE ASSESSMENT MADE BY THE AO U/S. 147 OF THE ACT ARE REPRODUCED BY THE CIT(A) IN HIS ORDER AS UNDER:- 2. THE ARGUMENT OF LEARNED AR ON THIS ISSUE ARE REPRODUCED BELOW:- A PERUSAL OF THE REASONS RECORDED U/S. 148(2) OF T HE ACT WOULD SHOW THAT THE REASSESSMENT PROCEEDINGS AR E ENTIRELY BASED ON AN AUDIT OBJECTION. THIS WOULD B E CLEAR BY THE FACT THAT IN THE REASONS RECORDED THE REMAINING PROFIT AFTER EXCLUDING INTEREST OF RS. 20 60 187/- FROM TH E DISCLOSED PROFIT OF RS. 89 05 823/- HAS BEEN WRONGLY SHOWN AS RS. 60 45 636/- INSTEAD OF THE CORRECT FIGURE OF RS. 67 45 636/-. THE SAME MISTAKE OCCURS IN THE AUDIT OBJECTION. NO W IT IS TRITE LAW THAT U/S. 147/148 CANNOT BE TAKEN PURELY ON THE BASIS OF AN AUDIT OBJECTION. IF ANY REFERENCE IS N EEDED FOR THIS ELEMENTARY PROPOSITION OF LAW REFERENCE IS IN VOKED TO THE DECISION OF THE APEX COURT IN THE INDIAN AND EA STERN NEWSPAPER SOCIETY VS. CIT 119 ITR 996 (SC). FURTHE R THE REASONS RECORDED BY THE AO SHOW THAT HE HAS NOT AT ALL APPLIED HIS MIND. IT IS ALSO SUBMITTED THAT THE ORI GINAL ASSESSMENT WAS FRAMED U/S. 143(3) ON 28.11.2008. T HERE IS NO ALLEGATION BY THE AO INDEED ON THE FACTS THERE C OULD BE NO ALLEGATIONS THAT ANY INCOME CHARGED TO TAX HAS E SCAPED 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 HA S BEEN ISSUED ON 30.3.2005. THE PROCEEDINGS ARE THEREFORE BARRED BY LIMITATION. IN THIS CONNECTION THE APPELLANT RELIED ON THE FOLLOWING CASE LAWS:- (A) PIECO ELECTRONICS & ELECTRICALS LTD. 210 ITR 991 (CAL) (B) PARVEEN KUMAR VS. CIT 237 ITR 339 (P&H) (C) CIT VS. JAYRAMAN (V) (1994) 207 ITR 1038 (MAD) ITA NOS. 4775 & 4776/DEL/2007 PAGE 5 OF 19 (D) MANAGEMENT REFINERY & PETROCHEMICALS LTD. VS. ACIT 282 ITR 516 (BOM) FURTHER NO REASSESSMENT PROCEEDINGS COULD BE TAKEN ON THE SAME FACTS MERELY BY CHANGE OF OPINION AS HELD BY HONBLE DELHI HIGH COURT THE JURISDICTIONAL HIGH COURT IN THE CASE OF APPELLANT IN JINDAL PHOTOFILMS LTD. VS. DCIT 234 ITR 170. 9. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AN D THE REASONS RECORDED BY THE AO THE CIT(A) DECIDED THIS ISSUE A GAINST THE ASSESSEE BY GIVING FOLLOWING REASONS:- I. THOUGH THE NOTICE U/S. 148 OF THE ACT ISSUED BY TH E AO ON 30.03.2005 WAS ISSUED BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR BUT IT WAS ISSUED WITHIN A PERIOD OF SIX YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR SATISF YING THE PROVISIONS OF SECTION 147 OF THE ACT. II. WITH REGARD TO THE APPLICABILITY OF PROVISO TO SECT ION 147 OF THE ACT THE CIT(A) STATED THAT IT IS NECESS ARY TO ASCERTAIN WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING THE FACTS FULLY AND TRULY AND IN THIS RESPECT HE FOUND THAT FULL DISCLOSURE WAS NOT SUFFICIENT BUT THE DISCLOSURE SHOULD BE TRUE ALSO. IN THE LIGHT OF THE FACTS OF THE CASE HE HELD THAT THE AS SESSEE FAILED TO DISCLOSE THE FULL FACTS TRULY. ITA NOS. 4775 & 4776/DEL/2007 PAGE 6 OF 19 III. WITH REGARD TO THE ASSESSEES OBJECTION THAT THE AO HAS REOPENED THE ASSESSMENT ON CHANGE OF OPINION T HE CIT(A) DID NOT FOUND SUBSTANCE IN IT AS IN HIS OPI NION THERE WAS SUFFICIENT BASIS BEFORE THE AO FOR REOPEN ING THE ASSESSMENT AND IT IS NOT A CASE OF CHANGE OF OPINION. IV. WITH REGARD TO THE ASSESSEES CONTENTION THAT REOPENING OF THE ASSESSMENT WAS BASED ON AUDIT OBJECTION THE CIT(A) HELD THAT THE REOPENING ON FACTUAL INFORMATION PROVIDED BY THE INTERNAL AUDITO R WAS TREATED AS INFORMATION FOR THE PURPOSE OF REOPENING OF ASSESSMENT SO AS OBSERVED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT(A) VS. P.V.S. BEADIES (PVT.) LTD. 237 ITR 13. HE THEREFO RE HELD SINCE THE AUDIT OBJECTION IN THIS CASE WAS BAS ED ON FACTS THE REOPENING ON THE BASIS OF SUCH OBJECT ION WAS JUSTIFIED. 10. IN SUPPORT OF HIS ORDER REJECTING THE ASSESSEE S GROUND ABOUT THE VALIDITY OF REASSESSMENT PROCEEDINGS THE CIT(A) RE LIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BAWA ABH AY SINGH VS. DCIT 253 ITR 83 (DELHI). ITA NOS. 4775 & 4776/DEL/2007 PAGE 7 OF 19 11. THE CIT(A) ALSO HOLD THAT THE CASE LAWS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE HIM ARE DISTINGUISH ABLE ON FACTS AND HENCE THE SAME ARE NOT HELPFUL TO THE ASSESSEE. 12. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFO RE US. 13. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THE PRESENT CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 14 3(3) OF THE ACT BY ASSESSMENT ORDER DATED 30.01.2006 AND DURING THE C OURSE OF ASSESSMENT PROCEEDINGS ALL THE RELEVANT DOCUMENTS AND BOOKS O F ACCOUNTS WERE FURNISHED TO THE AO WHICH WERE EXAMINED AND VERIFI ED AND THE AO THEN COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT. H E FURTHER SUBMITTED THAT THE IMPUGNED NOTICE U/S. 148 ISSUED ON 30.03.2 005 IS ADMITTEDLY BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THEREFORE THE PRESENT CASE IS COVERED B Y 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 CA SE WOULD NOT FALL WITHIN THE NORMAL LIMIT OF LIMITATION FOR ISSUING THE NOTI CE U/S. 148 OF THE ACT AND THEREFORE THE CIT(A)S OBSERVATION THAT THE N OTICE ISSUED WITHIN THE PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT AS SESSMENT YEAR IS TO BE TREATED WITHIN TIME IS NOT CORRECT. IN THIS CONNE CTION THE LD. COUNSEL FOR THE ASSESSEE HAD RELIED UPON THE JURISDICTIONAL HIG H COURT OF DELHI DATED 03.11.2008 IN THE CASE OF HARYANA ACRYLIC MANUFACTU RING CO. VS. CIT ITA NOS. 4775 & 4776/DEL/2007 PAGE 8 OF 19 AND ANR. (2009) 308 ITR 38. HE FURTHER SUBMITTED T HAT THERE IS NO ALLEGATION IN THE REASONS RECORDED BY THE AO THAT A NY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT BY REASONS OF THE ASS ESSEES FAILURE TO MAKE TRUE AND FULL DISCLOSURE OF THE FACTS NECESSAR Y FOR ASSESSMENT AND THEREFORE THE NOTICE U/S. 148 ISSUED BEYOND THE PE RIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS BARRED B Y LIMITATION UNDER THE PROVISO TO SECTION 147 OF THE ACT AND HENCE THE A OS ASSUMING JURISDICTION U/S. 147 IS INVALID AND WITHOUT JURISD ICTION. 14. THE LD. DR ON THE OTHER HAND SUPPORTED THE CI T(A)S ORDER AND REITERATED THE REASONS GIVEN BY HIM. 15. WE HAVE CONSIDERED RIVAL CONTENTIONS OF BOTH TH E PARTIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. THE RELEVANT PROVISIONS OF LAW CONTAINED IN SECTION 147/148 HAVE BEEN DELIBERATED UPON. WE HAVE GONE THROUGH THE VARIOUS DECISIONS C ITED AT BAR. 16. THE ASSESSMENT YEAR INVOLVED IN THE PRESENT CAS E IS ASSESSMENT YEAR 1998-99. IT IS NOT IN DISPUTE THAT THE ASSESS EE FILED VOLUNTARILY ITS RETURN OF INCOME U/S. 139 ON 30.11.1998 AND THERE AFTER THE REGULAR ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 22.11.2000 DETERMINING THE TOTAL INCOME AT RS. 25 41 015/-. T HE AO THEN ISSUED NOTICE U/S. 148 TO THE ASSESSEE COMPANY ON 30.03.20 05 WHICH IS UNDOUBTEDLY BEYOND THE PERIOD OF FOUR YEARS FROM TH E END OF THE RELEVANT ITA NOS. 4775 & 4776/DEL/2007 PAGE 9 OF 19 ASSESSMENT YEAR I.E. FROM THE 31.03.1999 THEREFORE THIS CASE IS COVERED BY THE PROVISO TO SECTION 147 OF THE ACT WHICH PRO VIDES THAT IN CASE THE ORIGINAL ASSESSMENT HAS ALREADY BEEN COMPLETED U/S. 143(3) OR 147 OF THE ACT NO ACTION U/S. 147 SHALL BE TAKEN AFTER THE EX PIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASONS OF THE FAILUR E ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S. 139 OR IN RESPONSE T O A NOTICE UNDER SUB- SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T 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 S ECTION 148 DOES NOT CAME INTO PLAY IN THE PRESENT CASE IN AS MUCH AS T HE 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 TRUL Y ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT ASSESSMENT YE AR. 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 INTER EST OF RS. 21 60 187/- AND THE REMAINING PROFIT CAME TO RS. 60 45 636/- A GAINST WHICH THE ITA NOS. 4775 & 4776/DEL/2007 PAGE 10 OF 19 ASSESSEE CLAIMED DEDUCTION U/S. 80IA IN RESPECT OF PARWANOO UNIT AND U/S. 80I IN RESPECT OF PEERAGARHI UNIT II AGGREGA TING TO RS. 61 38 379/-. HE FURTHER OBSERVED THAT THE EXPENSES AT 2.5% OF TH E SALES WERE DEBITED TO PROFIT AND LOSS ACCOUNT AS ADMINISTRATION AND SELLI NG EXPENSES TO ARRIVE AT THE NET PROFIT OF A PARTICULAR UNIT AND NO BASIS F OR ALLOCATING ADMINISTRATION AND SELLING EXPENSES AT 2.5% OF THE SALE HAS BEEN GIVEN. FROM THE AFORESAID REASONS IT IS APPARENT THAT THE RE IS NO ALLEGATION BY THE AO THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. ALL THESE FACT S AND FIGURES POINTED OUT BY THE AO HAS BEEN TAKEN FROM DETAILS OF PROFIT AND LOSS ACCOUNT AND OTHER DETAILS SUBMITTED BY THE ASSESSEE. ALL THESE DETAILS WERE FULLY AVAILABLE WITH THE AO AT THE TIME WHEN THE ASSESSME NT WAS ORIGINALLY COMPLETED U/S. 143(3) OF THE ACT. ALL THESE FACTS AND PARTICULARS I.E. THE ASSESSEE HAD RECEIVED INTEREST ON FDRS THE ASSESSE E CLAIMED DEDUCTION U/S. 80IA AND 80I IN RESPECT OF ITS TWO UNITS AND T HAT THE ASSESSEE HAD DEBITED 2.5% OF THE SALE ON ACCOUNT OF ADMINISTRATI VE AND SELLING EXPENSES WERE ALREADY BEFORE THE AO AT THE TIME WH EN THE ASSESSMENT WAS COMPLETED. IT IS NOT THE CASE THAT THE ASSESSE E HAS NOT DISCLOSED THESE FACTS IN THE ACCOUNTS FILED ALONGWITH THE RETURN OF INCOME OR IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS COMPLETED U/ S. 143(3) OF THE ACT. IN THE LIGHT OF THESE FACTS WE THEREFORE HOLD TH AT THERE WAS NO FAILURE ON ITA NOS. 4775 & 4776/DEL/2007 PAGE 11 OF 19 THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACT NECESSARY FOR ITS ASSESSMENT AND THEREFORE THE N OTICE ISSUED BY THE AO U/S. 148 OF THE ACT BEYOND THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT IS BARRED BY LIMITATION. AT THIS STAGE IT IS PERTINENT TO NOTE THAT ONCE PROVISO TO SECTION 147 IS FOUND APPLICABL E TO A PARTICULAR CASE IT IS IMMATERIAL WHETHER OR NOT THE CASE IS COVERED UN DER THE MAIN PROVISIONS OF SECTION 147 OF THE ACT. IN OTHER WOR DS ONCE EXCEPTION CARVES OUT BY THE PROVISO TO SECTION 147 COME INTO PLAY THE CASE WOULD FALL OUTSIDE THE AMBIT OF SECTION 147 OF THE ACT. IN THIS VIEW OF THE MATTER THEREFORE THE CIT(A)S VIEW THAT THE NOTIC E HAS BEEN ISSUED WITHIN THE NORMAL PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR RENDERING THE NOTICE WITHIN TIME I S MISCONCEIVED. IN SUPPORT OF THE VIEW WE HAVE TAKEN ABOVE A RELIANCE MAY BE PLACED UPON THE DECISION OF HONBLE JURISDICTIONAL DELHI HIGH C OURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. (SUPRA) WHERE IT HAS BEEN OBSERVED AND HELD AS UNDER:- 18. VIEWED IN THIS LIGHT THE PROVISO TO S. 147 OF THE SAID ACT CARVES OUT AN EXCEPTION FROM THE M AIN PROVISIONS OF S. 147. IF A CASE WERE TO FALL WITHI N THE PROVISO WHETHER OR NOT IT WAS COVERED UNDER THE MA IN PROVISIONS OF S. 147 OF THE SAID ACT WOULD NOT BE MATERIAL. ONCE THE EXCEPTION CARVED OUT BY THE PRO VISO CAME INTO PLAY THE CASE WOULD FALL OUTSIDE THE AMB IT OF S. 147. ITA NOS. 4775 & 4776/DEL/2007 PAGE 12 OF 19 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 ASSESSM ENT YEAR; AND (B) UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON 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.1 42 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) O F THE SAID ACT. CONDITION (B) DEALS WITH A SPECIAL K IND OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX. THE ESCAPEMENT MUST ARISE OUT OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER S.139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-S. (1) OF S. 142 OR S. 148. THIS IS CLEARLY NOT THE CASE HERE BECAUSE THE PETITIONER DID FILE THE RETURN. SINCE THERE WAS NO FAILURE TO MAKE THE RETURN THE ESCAPEMENT OF INCOME CANNOT BE ATTRIBUTED TO SUCH FAILURE. THIS LEAVES US WITH ESCAPEMENT OF INCOME CHARGEABLE TO TAX WHICH ARISES OUT OF THE FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR. IT IS ALSO FO UND THAT THE PETITIONER HAD DISCLOSED FULLY AND TRULY A LL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT THEN N O ACTION UNDER S. 147 COULD HAVE BEEN TAKEN AFTER THE FOUR YEAR PERIOD INDICATED ABOVE. SO THE KEY QUESTION IS WHETHER OR NOT THE PETITIONER HAD MADE A FULL AND T RUE DISCLOSURE OF ALL MATERIAL FACTS? 20. IN THE REASONS SUPPLIED TO THE PETITIONER THERE IS NO WHISPER WHAT TO SPEAK OF ANY ALLEGATIO N THAT THE PETITIONER HAD FAILED TO DISCLOSE FULLY AN D TRULY ITA NOS. 4775 & 4776/DEL/2007 PAGE 13 OF 19 ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND THA T BECAUSE OF THIS FAILURE THERE HAS BEEN AN ESCAPEMEN T OF INCOME CHARGEABLE TO TAX. MERELY HAVING A REASON T O BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT IS NOT SUFFICIENT TO REOPEN ASSESSMENTS BEYOND THE FOUR YE AR PERIOD INDICATED ABOVE. THE ESCAPEMENT OF INCOME FROM ASSESSMENT MUST ALSO BE OCCASIONED BY THE FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL F ACTS FULLY AND TRULY. THIS IS A NECESSARY CONDITION FOR OVERCOMING THE BAR SET UP BY THE PROVISO TO S. 147. IF THIS CONDITION IS NOT SATISFIED THE BAR WOULD OPER ATE AND NO ACTION UNDER S. 147 COULD BE TAKEN. WE HAVE ALREADY MENTIONED ABOVE THAT THE REASONS SUPPLIED T O THE PETITIONER DOES NOT CONTAIN ANY SUCH ALLEGATION . CONSEQUENTLY ONE OF THE CONDITIONS PRECEDENT FOR REMOVING THE BAR AGAINST TAKING ACTION AFTER THE SA ID FOUR YEAR PERIOD REMAINS UNFULFILLED. IN OUR RECEN T DECISION IN WEL INTERLADE (P) LTD. (SUPRA) WE HAD AGREED WITH THE VIEW TAKEN BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DULL CHAND SINGHANIA (SUPRA) THAT IN THE ABSENCE OF AN ALLEGATION IN TH E REASONS RECORDED THAT THE ESCAPEMENT OF INCOME HAD OCCURRED BY REASON OF FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT ANY ACTION TAKEN BY THE AO UNDE R 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 PER IOD 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 EST ABLISH THAT THERE WAS A ITA NOS. 4775 & 4776/DEL/2007 PAGE 14 OF 19 FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY 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 ALLEGATIO N IN THE REASONS RECORDED THAT THE ASSESSEE HAD FAILED TO DISCLOSE F ULLY AND TRULY AL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND THAT BECAUSE OF THIS FAILURE THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. WE THERE FORE CANCEL THE ASSESSMENT MADE BY THE AO AS BARRED BY LIMITATION. 18. SINCE THE ASSESSMENT MADE BY THE AO U/S. 147 OF THE ACT HAS BEEN CANCELLED BY US THE OTHER GROUND RELATING TO THE A LLOCATION OF INCOME TO PARWANOO UNIT AND OTHER UNIT FOR THE PURPOSE OF COM PUTING DEDUCTION U/S. 80IA AND 80I HAS BECAME REDUNDANT WHICH THUS NEED NO ADJUDICATION BY US. 19. NOW WE SHALL TAKE THE APPEAL (ITA NO. 4776/DEL /2007) FILED BY THE ASSESSEE AGAINST THE ORDER DATED 07.09.2007 PAS SED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE UNDER 143(3)/14 7 OF THE INCOME TAX ACT FOR THE A.Y. 2004-05. 20. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. THAT THE ORDER PASSED UNDER SECTION 250 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RANGE VI NEW DELHI IS BAD IN LAW AND ON FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ACTION OF THE LEARNED ASSESSING OF FICER IN SUBTRACTING RS. 10 06 669/- AS AGAINST RS. 8 70 219/- ITA NOS. 4775 & 4776/DEL/2007 PAGE 15 OF 19 AS COMMON EXPENSES WHILE GIVING THE RELIEF U/S. 80I A OF THE INCOME TAX ACT IS WITHOUT ANY BASIS THE PAST HISTORY OF THE CASE AND THUS REDUCING DEDUCTION U/S . 80IA IS UNJUST ILLEGAL AND ARBITRARY. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ACTION OF THE LEARNED ASSESSING OF FICER IN ESTIMATING EXPENSES OF RS. 2.50 LACS (REDUCED TO THIS FROM RS. 5 LACS BY CIT APPEAL) ON ACCOUNT OF PRINTI NG AND STATIONERY POSTAGE AND TELEPHONE EXPENSES. TRAVELLING & CONVEYANCE EXPENSES IN UNIT II PURELY ON THE BASIS OF SURMISES AND CONJECTURES WHILE GIVING THE RELIEF U/S. 80IA OF THE INCOME TAX ACT IS WITHOUT A NY BASIS AND THUS REDUCING DEDUCTION U/S. 80IA IS UNJU ST ILLEGAL AND ARBITRARY. 4. WITHOUT PREJUDICE TO ABOVE THIS ACTION IN TAKING THE BASIS OF APPORTIONING OF THE EXPENSES ACCORDING TO THE RATIO OF WORK CONTRACT RECEIVED TO THE TOTAL WORK CONTRACT OF THE APPELLANT COMPANY AT 32.74% OF THE TOTAL WORK CONTRACT AS AGAINST THE ME THOD FOLLOWED BY THE APPELLANT COMPANY BEING 2.5% OF THE SALE AS DONE IN THE PAST AND ACCEPTED ALL ALONG BY THE AUTHORITIES IS WITHOUT ANY BASIS UNJUST ILLEGAL A ND ARBITRARY. 21. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 22. WITH REGARD TO THE ISSUE AS TO WHETHER COMMON E XPENSES OF DIFFERENT UNITS ARE TO BE ALLOCATED TO EACH UNIT ON THE BASIS OF THEIR RESPECTIVE TURNOVER OR ON THE BASIS OF CERTAIN PERC ENTAGE OF THE SALE OF RESPECTIVE UNIT THE ISSUE HAS BEEN DECIDED BY US I N ITA NO. 32/DEL/2008 FOR THE A.Y. 2003-04 IN ASSESSEES CASE BY ORDER OF EVEN DATE BY HOLDING AS UNDER:- ITA NOS. 4775 & 4776/DEL/2007 PAGE 16 OF 19 12. AS TO THE METHOD OF ALLOCATION OF COMMON EXPENSES TO DIFFERENT UNITS WE ARE OF THE CONSIDER ED OPINION THAT ALL THE COMMON EXPENSES PERTAINING TO THREE UNITS ARE TO BE ALLOCATED WITH REFERENCE TO THE TUR NOVER OF EACH UNIT. THIS SYSTEM WOULD BE MORE LOGICAL AND ACCURATE AS AGAINST THE SYSTEM ADOPTED BY THE ASSES SEE TO ALLOCATE EXPENSES BY WORKING OUT THE SAME AT 2.5% O F THE TURNOVER OF THE RESPECTIVE UNIT. THIS SYSTEM ADOPTE D BY THE ASSESSEE WITH REFERENCE TO THE TOTAL EXPENSES INCUR RED BY THE ASSESSEE IN ANY UNIT IS IN OUR CONSIDERED OPIN ION NOT JUSTIFIED. WE THEREFORE HOLD THAT THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE A.O.S ORDER IN ALLOCATING THE CO MMON EXPENSES TO EACH UNIT WITH REFERENCE TO THE TURNOVE R 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 SIM ILAR VIEW HAS ALSO BEEN TAKEN BY THE ITAT PUNE BENCH A PUNE IN THE CASE OF KHINVASARA INVESTMENT PVT. LTD. VS. JCIT (2008) 110 ITD 198 (PUNE) WHERE IT HAS BEEN HE LD THAT THE EXPENSES WHICH WERE COMMON TO SEVERAL UNI TS SHOULD BE ALLOCATED ON THE BASIS OF TURNOVER OF RES PECTIVE UNITS. 23. IN THE LIGHT OF THE VIEW WE HAVE TAKEN ABOVE W E HOLD THAT THE CIT(A) WAS JUSTIFIED IN CONFIRMING AOS ACTION IN M AKING ALLOCATION OF COMMON EXPENSES TO VARIOUS UNITS IN THE RATIO OF TH EIR TURNOVER WHICH IS FOUND TO BE MORE SCIENTIFIC AND RATIONAL. 24. IN THIS RESPECT THE AO HAS WORKED OUT THAT THE SALES OF UNIT II IN RESPECT OF WHICH DEDUCTION U/S. 80IA IS ALLOWABLE AT 32.77% OF TOTAL SALES OF ALL THE UNITS. THE AO THEREFORE ALLOCAT ED THE COMMON EXPENSES TO THE UNIT II AT 32.77% OF THE TOTAL EXPENSES. ITA NOS. 4775 & 4776/DEL/2007 PAGE 17 OF 19 25. THE METHOD OF DETERMINING THE TOTAL TURNOVER AN D TOTAL EXPENSES OF ALL THE UNITS HAS ALSO COME FOR OUR CONSIDERATION I N THE ASSESSEES OWN CASE IN THE A.Y. 2003-04 WHERE WE HAVE OBSERVED AN D HELD AS UNDER:- 13. NOW WE SHALL PROCEED TO DETERMINE THE ACTUAL AMOUNT OF COMMON EXPENSES INCURRED BY THE ASSESSEE AS WELL AS THE TOTAL TURNOVER OF ALL THE UNITS AS WELL AS U NIT WISE TURNOVER. IN THIS CASE THE TOTAL EXPENSES OF THE MAIN UNIT HAVE BEEN WORKED OUT BY THE A.O. AT RS. 29 91 591/- WHI CH INCLUDES RS. 4 62 875/- BEING THE INTEREST PAID TO BANK AND OTHERS. HOWEVER THE ASSESSEE HAS ALSO EARNED INTER EST INCOME OF RS. 28 63 107/- WHICH IS MORE THAN THE INTEREST PAID BY THE ASSESSEE. THE INTEREST PAID IS TO BE NETTED OFF AG AINST THE INTEREST RECEIPTS. THEREFORE THE TOTAL EXPENSES O F THE MAIN UNIT WOULD BE ONLY RS. 25 28 716/- I.E. RS. 29 91 5 91/- - RS. 4 62 875/-. THESE EXPENSES SHALL BE CONSIDERED FOR THE PURPOSE OF APPORTIONMENT TO THE ELIGIBLE UNIT. 14. THE ASSESSEE HAS FURTHER POINTED OUT THAT THE TOTAL CONSOLIDATED TURNOVER OF ALL UNITS HAS BEEN T AKEN BY THE A.O. AT RS. 5 99 09 596/- WITHOUT INCLUDING THE OTH ER INCOME OF RS. 44 07 913/-. WE ARE OF THE VIEW THAT IT IS C OMMON THAT THE ASSESSEE MIGHT HAVE ALSO INCURRED CERTAIN EXPEN SES IN EARNING THE OTHER INCOME OF RS. 44 07 913/-. THEREF ORE FOR THE PURPOSE OF ALLOCATING THE TOTAL EXPENSES INCURRED B Y THE ASSESSEE THE AMOUNT OF OTHER INCOME IS TO BE TAKEN INTO ACCOUNT AND IN THAT WAY THE CONSOLIDATED TURNOVER WOULD BE RS. 6 43 17 509/- OUT OF WHICH THE TURNOVER OF ELI GIBLE UNIT IS RS. 1 25 20 976/-. THE PERCENTAGE OF THE TURNOVER OF ELIGIBLE UNIT TO THE CONSOLIDATED TURNOVER OF ALL UNITS WOUL D 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 RS. 25 28 716/- AS WORKED OUT ABOVE SHALL BE ALLOCATED TO THE ELIGIBLE UNIT AND IF IT IS SO ALLOCATED IN THE MAN NER ABOVE THE CORRECT ALLOCATION WOULD BE RS. 4 92 900/- AS AGAIN ST RS. 6 25 252/- WORKED OUT BY THE A.O. WE THEREFORE H OLD THAT THE EXPENSES AMOUNT TO RS. 4 92 900/- SHALL BE ALLO CATED TO THE ELIGIBLE UNIT I.E. UNIT NO. 2 FOR THE PURPOSE OF DE TERMINING THE AMOUNT OF DEDUCTION AVAILABLE U/S 80IA OF THE ACT. THE A.O. IS THEREFORE DIRECTED TO COMPUTE THE DEDUCTION U/ S 80IA ITA NOS. 4775 & 4776/DEL/2007 PAGE 18 OF 19 ACCORDINGLY. THUS THIS ISSUE RAISED BY THE ASSESSE E IS PARTLY ALLOWED IN ASSESSEES FAVOUR. 26. IN THE LIGHT OF OUR ABOVE ORDER PERTAINING TO T HE A.Y. 2003-04 WE RESTORE THIS ISSUE ABOUT THE DETERMINATION OF TURNO VER AND EXPENSES TO THE FILE OF THE AO WITH A DIRECTION TO DETERMINE THE SA ME IN THE SAME MANNER AS HELD SO IN THE A.Y. 2003-04. 27. NOW WE SHALL COME TO THE ISSUE ABOUT THE APPOR TIONMENT OF EXPENSES ON ACCOUNT OF TRAVELING AND CONVEYANCE ETC . TO THE UNIT II WHICH HAS BEEN REDUCED TO RS. 2 50 000/- BY THE CIT (A) FROM RS.5 LACS ALLOCATED BY THE AO. ON PERUSAL OF AOS ORDER AS W ELL AS CIT(A)S ORDER WE FIND THAT NO DETAILS OR RATIONAL BASIS HA S BEEN GIVEN EITHER BY THE AO OR BY THE CIT(A) IN ALLOCATING EXPENSES ON ACCOU NT OF TRAVELING EXPENSES CONVEYANCE ETC. TO UNIT II. THE ASSESS EE HAS ALREADY DEBITED THE EXPENSES ON ACCOUNT OF TRAVELING AND CONVEYANCE TO UNIT II WHICH IN THE OPINION OF THE AO IS MEAGER. BUT THE AO H AS NOT BROUGHT ANY MATERIAL ON RECORD FOR COMING TO A CONCLUSION THAT THE EXPENSES ON ACCOUNT OF TRAVELING AND CONVEYANCE TO UNIT II AR E MEAGER AND TO SHOW THAT THE EXPENSES ON ACCOUNT OF TRAVELING AND CONVE YANCE RELATABLE TO UNIT II HAS BEEN DEBITED TO OTHER UNITS. NO MATE RIAL TO THAT EFFECT HAS BEEN POINTED OUT BY THE AO. WE THEREFORE HOLD TH AT THE ALLOCATION OF EXPENSES AMOUNTING TO RS. 2 50 000/- AS REDUCED BY THE CIT(A) FROM RS. 5 LACS MADE BY THE AO IS ALSO UNJUSTIFIED. WE T HEREFORE HOLD THAT NO ITA NOS. 4775 & 4776/DEL/2007 PAGE 19 OF 19 SUCH ALLOCATION TO THE EXTENT OF RS. 2 50 000/- AS DONE BY THE CIT(A) SHALL BE MADE. 28. IN THE LIGHT OF THE ABOVE DISCUSSIONS THE ISSU ES RAISED BY THE ASSESSEE IN THIS APPEAL ARE PARTLY DECIDED IN THE F AVOUR OF THE ASSESSEE. 29. IN THE RESULT THE APPEAL FOR THE A.Y. 1998-99 IS ALLOWED AND THE APPEAL FOR THE A.Y. 2004-05 IS PARTLY ALLOWED. 30. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 22 ND JANUARY 2010. SD/- (G.E. VEERABHADRAPPA) VICE-PRESIDENT SD/- (C.L. SETHI) JUDICIAL MEMBER DATED: 22 ND JANUARY 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. BY ORDER DEPUTY REGISTRAR