HINDUSTAN PETROLEUM CORPORATION LTD., MUMBAI v. DY./ASST.C.I.T. RANGE1(1), MUMBAI

ITA 6024/MUM/2008 | 1999-2000
Pronouncement Date: 08-01-2010 | Result: Allowed

Appeal Details

RSA Number 602419914 RSA 2008
Bench Mumbai
Appeal Number ITA 6024/MUM/2008
Duration Of Justice 1 year(s) 3 month(s) 2 day(s)
Appellant HINDUSTAN PETROLEUM CORPORATION LTD., MUMBAI
Respondent DY./ASST.C.I.T. RANGE1(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 08-01-2010
Date Of Final Hearing 05-01-2010
Next Hearing Date 05-01-2010
Assessment Year 1999-2000
Appeal Filed On 06-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI BEFORE SHRI R.S.SYAL AM AND SMT.ASHA VIJAYARAGHAVAN JM ITA NO.6024/MUM/2008 : ASST.YEAR 1999-2000 M/S.HINDUSTAN PETROLEUM CORPORATION LTD 17 JAMSHEDJI TATA ROAD MUMBAI 400 020. PA NO.AAACH1118B VS. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 1(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.J.PARDIWALA RESPONDENT BY : SHRI S.K.PAHWA O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 23.7.2008 IN RELATION TO THE ASSESSMENT YEAR 1999-2000. 2. THE FIRST GROUND IS CHALLENGE TO THE REOPENING O F THE ASSESSMENT U/S.147. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE O RIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) ON 15.3.2002 DETERMINING THE TOTAL INCOM E AT RS.1054.92 CRORES. SUBSEQUENTLY THE ASSESSMENT WAS REOPENED U/S.147. N OTICE U/S.148 WAS ISSUED ON 30.3.2006 AND SERVED ON THE ASSESSEE ON 31.3.2006. THE FOLLOWING REASONS AS HAVE BEEN REPRODUCED IN THE ASSESSMENT ORDER WERE RECO RDED FOR TAKING ACTION UNDER THIS SECTION :- 2. IT IS SEEN THAT THE ASSESSEE HAS CLAIMED ADMINI STRATIVE EXPENSES OF RS.14 85 17 525/- ON THE REASONS AS MENTIONED BE LOW. THE ADMINISTRATIVE EXPENSES AMOUNTING TO RS.14 8 5 17 525/- INCURRED BY THE ENGINEERING & PROJECT DEPARTMENT AT THE HEADQUARTERS OFFICE AND THE REFINERY FOR THE PURPOS E OF MONITORING AND SUPERVISION OF THE EXECUTION OF THE PROJECTS WH ICH IS CHARGED TO ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 2 CAPITAL WORK IN PROGRESS AS ESTABLISHMENT CHARGES I S BEING CLAIMED AS DEDUCTION FROM THE COMPUTATION OF INCOME. THIS EXPE NDITURE IS IN THE NATURE OF ROUTINE ADMINISTRATIVE EXPENSES INCURRED ON DAY TO DAY FUNCTIONING OF THE COMPANY AND NOT IN THE NATURE OF ESTABLISHING NEW LINE OF BUSINESS OF THE COMPANY HENCE THESE EXPENS ES ARE NOT IN THE NATURE OF CAPITAL EXPENDITURE AND SINCE THESE ARE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSIN ESS THEY ARE ALLOWABLE U/S.37(1) OF THE ACT. THE ASSESSEE FURTHER RELIED ON CERTAIN DECISION O F HONBLE HIGH COURT. 2.1 FURTHER IT IS ALSO SEEN THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.28 99 26 000/- BEING INTEREST PERTAINING TO CAPI TAL WORK IN PROGRESS AS REVENUE EXPENDITURE AS PER THE STATEMEN T BELOW: AN AMOUNT OF RS.28 99 26 000/- BEING INTEREST ON BORROWINGS WAS CHARGED TO CAPITAL WORK IN PROGRESS RELATING TO EXPANSION OF CERTAIN PROJECTS. THIS AMOUNT IS BEING CLAIMED AS D EDUCTION U/S.36(1)(III) OF THE I.T.ACT. THE ASSESSEE FURTHER RELIED ON CERTAIN DECISION O F HONBLE HIGH COURT. 3. THE ASSESSEE WAS ASKED VIDE NOTICE U/S.142(1) D T. 18.12.2001 AS UNDER: 2. EXPLANATION ABOUT INTEREST OF RS.28.99 CRS ON LOANS DEBITED FOR CAPITAL WORK IN PROGRESS WHICH IS NOT A REVENUE EXPENDITURE BUT CLAIMED AS A REVENUE EXPENDITURE IN THE COMPUTATION OF INCOME IN THE RETURN. 3. EXPLANATION ABOUT ADMINISTRATIVE EXPENDITURE O F RS.14.85 CRS RELATABLE TO CAPITAL WORK IN PROGRESS WHICH IS NOT DEBITED TO P & L BUT CLAIMED DEDUCTION IN THE RETURN. 4. THE ASSESSEE REPLIED VIDE LETTER DT. 14.01.2002 AS UNDER: INTEREST ON LOANS CHARGED TO CWIP WRITE OFF (RS. 28 99 23 000) WE REFER TO OUR CLAIM IN RESPECT OF INTEREST ON L ONG TERM LOANS TAKEN FOR THE PURPOSE OF EXPANSION OF MODERNIZATION OF EXISTING BUSINESS. IN THIS REGARD WE WISH TO SUBMIT THAT WE ARE ENGAGED IN THE ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 3 BUSINESS OF REFINING CRUDE INTO VARIOUS PETROLEUM P RODUCTS AND MARKETING THEREOF THROUGH A NETWORK OF REFINERIES TERMINALS LPG BOTTLING PLANTS DEPOTS ETC. SPREAD THROUGHOUT THE COUNTRY. FOR THE PURPOSE OF IMPROVING THE PRODUCTIVITY AT THE MANUFA CTURING LOCATIONS SUCH AS REFINERIES AS WELL AS EXPANSION OF OUR MARK ETING BASE THROUGHOUT THE COUNTRY WE NEED TO UNDERTAKE CERTAI N PROJECTS FOR WHICH LONG TERM LOANS ARE TAKEN FROM THE FINANCIAL INSTITUTIONS. THESE LONG TERM LOANS HAVE BEEN TAKEN IN RESPECT OF THE PROJECTS FOR IMPROVEMENT IN PRODUCTION SETTING UP NEW DEPOTS /LPG PLANTS FOR MANUFACTURING LUBE LPG FILLING AND MARKETING OF T HE VARIOUS PETROLEUM PRODUCTS. ALL THESE ACTIVITIES CONSTITUTE PROJECTS IN THE NORMAL COURSE OF BUSINESS AND EXPANSION OF THE EXIS TING LINE OF BUSINESS. AS SUCH THE INTEREST ON LONG TERM LOANS IS CLEARLY ALLOWABLE U/S.36(1)(II) OF THE INCOME TAX ACT 1961. WE REFER TO AND RELY UPON THE DECISION OF THE GUJARAT HIGH COURT IN CASE OF A LEMBIC GLASS IND. LTD. REPORTED IN 103 ITR 715. THE GUJARAT HIGH COURT HAD HELD THAT WHERE A BORR OWING IS MADE FOR THE PURPOSE OF BUSINESS INTEREST PAID ON S UCH BORROWINGS BECOME ELIGIBLE FOR DEDUCTION U/S.36(1)(III) IRRESP ECTIVE OF WHETHER THE CAPITAL IS USED IN ORDER TO ACQUIRE A REVENUE ASSET S OR A CAPITAL ASSET BECAUSE THE ACT OF BORROWING OF CAPITAL IS DIFFEREN T FROM THE ACT OF INVESTMENT OF CAPITAL TO ACQUIRE AN ASSET. THE ASSESSEE FURTHER REPLIED ON FOLLOWING CASE LA WS: CIT VS. SHAH THEATERS (169 ITR 499) SHIVAKASMI MILLS LTD. VS. CIT (120 ITR 211) DALAMIA CEMENT (BHARAT) LTD. VS. ACIT (86 TAXMANN 131) ADMINISTRATIVE EXPENSES CHARGED TO CWIP WRITE OF F (RS.14 85 17 525/-) : WE WISH TO SUBMIT THAT THE EXPENDITURE OF RS.14.8 5 CRORES WAS INCURRED BY THE ENGINEERING & PROJECT DEPARTMENT AT THE HQ AND REFINERIES FOR THE PURPOSE OF MONITORING AND SUPERV ISION OF THE EXECUTION OF PROJECTS. THE ADMINISTRATIVE / ESTABLI SHMENT EXPENSES CHARGED TO CWIP ARE ROUTINE ADMINISTRATIVE EXPENSES INCURRED ON DAY TO DAY FUNCTIONING OF THE COMPANY AND NOT IN THE NA TURE OF ESTABLISHING NEW LINE OF BUSINESS OF THE COMPANY. T HESE EXPENSES ARE NOT IN THE NATURE OF CAPITAL BUT REVENUE ONLY INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS ALLOWABLE U/S.37(1) OF THE ACT. ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 4 IN THIS REGARD THE ASSESSEE RELIED UPON THE FOLL OWING DECISIONS: CIT VS. ALEMBIC GLASS INDUSTRIES LTD. (GUJARAT) ( 103 ITR 705) SIVAKAMI MILLS LTD. VS. CIT (MADRAS) (120 ITR 211 ) CIT VS. SHAH THEATERS (RAJASTHAN) (169 ITR 499) 5. AS REGARDS THE ADMINISTRATIVE EXPENSES PERTAINI NG TO ENGINEERING AND PROJECT DEPARTMENT AT THE HEAD QUAR TER OFFICE THESE EXPENSES ARE NOT REVENUE EXPENDITURE AS THE S AME ARE IN RELATION TO CAPITAL WORK IN PROGRESS OF THE ASSESSE E AND SHOULD HAVE BEEN ADDED BACK TO THE CAPITAL WORK IN PROGRESS AND THEREFORE ARE NOT ALLOWABLE AS REVENUE EXPENDITURE AS THESE EXPE NSES HAVE A DIRECT NEXUS WITH THE CAPITAL WORK IN PROGRESS OF THE ASSE SSEE. THE ASSESSEE IS CONSTRUCTING A NEW PROJECT AND THEREFORE ALL TH E EXPENSES IN RELEVANT TO THE SAME WILL FORM PART OF THE WORK IN PROGRESS ACCORDINGLY ESPECIALLY THOSE WHICH HAVE A DIRECT N EXUS AND A DIRECT BEARING IN RELATION TO THE CONSTRUCTION OF THESE PR OJECTS. THE ASSESSEES CONTENTION OF NOT CAPITALIZING THE ABOVE IS NOT ACCEPTABLE AND FURTHER THE ASSESSEE HAS NOT FURNISHED THE DETA ILS OF CAPITAL WORK IN PROGRESS DURING THE COURSE OF ASSESSMENT PROCEED INGS OR IN THE RETURN OF INCOME. IT IS ALSO PERTINENT TO NOTE THAT THE SEC.37(1) CLEARLY PROVIDES FOR A CLAIM ONLY IF THE SAME IS NOT CAPITA L EXPENDITURE. THE ASSESSEE ITSELF HAS CLEARLY IDENTIFIED THE SAME AS CAPITAL EXPENDITURE AND THEREFORE THE CLAIM OF THE ASSESSEE U/S.37(1) IS INCORRECT AND NOT ALLOWED. 5.1 THE ASSESSEE HAS ALSO FAILED TO CAPITALIZE THE HEAD OFFICE EXPENSES IN RELATION TO THE CAPITAL WORK IN PROGRES S OF THE ASSESSEE AS THE HEAD OFFICE DOES MONITORING OF ALL THE JOBS AND OPERATIONS CONDUCTED BY THE ASSESSEE AND THEREFORE THE HEAD OF FICE IS BOUND TO HAVE CONTRIBUTION TOWARDS THE CAPITAL WORK IN PROGR ESS AND THE PROPORTIONATE EXPENSES SHOULD HAVE BEEN ALLOCATED T OWARDS CAPITAL WORK IN PROGRESS AND DISALLOWED AS REVENUE EXPENDIT URE ACCORDINGLY. THEREFORE THE ASSESSEE HAS CLAIMED EXCESS REVENUE E XPENDITURE OF RS.14 85 17 525/- AND ALSO THE PROPORTIONATE HEAD O FFICE EXPENSES WHICH SHOULD HAVE BEEN CAPITALIZED IN RELATION TO T HE CAPITAL WORK IN PROGRESS OF THE ASSESSEE FOR THE RELEVANT YEAR. 5.2 THE ASSESSEE HAS FURTHER CLAIMED AN AMOUNT OF RS.28 99 26 000/- AS INTEREST ON BORROWING WHICH WA S CHARGED TO CAPITAL WORK IN PROGRESS IN RELATION TO EXPANSION O F PROJECTS. THE ABOVE IS NOT REVENUE EXPENDITURE CLAIMED BY THE ASS ESSEE IN THE ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 5 STATEMENT OF INCOME AS PER THE PRINCIPLES OF ACCOUN TING AND THE PRESENT POSITION OF LAW AND IN VIEW OF EXPLANATION 8 TO SEC.43. 6. THE ASSESSEE WAS ASKED VIDE NOTICE U/S.142(1) D T.18.12.2001 AS TO JUSTIFY THE CLAIM OF THE INTEREST ON LOANS CHARG ED TO CAPITAL WORK IN PROGRESS AND ADMINISTRATIVE EXPENSES CHARGED TO CAP ITAL WORK IN PROGRESS .. REPRODUCED ABOVE WHEREIN THE ASSESSEE HAS FAILED TO STATE AND IDENTIFY THE PROJECTS IN WHICH THE AMOUNT S MENTIONED ABOVE WERE ALLOCABLE AND WERE PERTAINING TO AND HAS ALSO FAILED TO JUSTIFY ITS CLAIM REGARDING AS TO WHAT EXPANSION AND MODERNIZA TION OF EXISTING BUSINESS HAD TAKEN PLACE DURING THE YEAR. THE ASSES SEE HAS MERELY MENTIONED THAT THE ABOVE MENTIONED EXPENSES I.E. IN TEREST PAYMENT RELATABLE TO CAPITAL WORK IN PROGRESS AND THE ADMIN ISTRATIVE EXPENSES CHARGED TO CAPITAL WORK IN PROGRESS WERE FOR VARIOU S PROJECTS BUT HAS FAILED TO IDENTIFY AS TO WHAT PROJECT IT WAS PERTAI NING TO AND WHETHER THEY WERE IN RELATION TO MODERNIZATION OR EXPANSION OR NEW PROJECTS AND THUS HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN RESPONSE TO THE ABOVE MENTIONED QUERIES RAISED U/S. 142(1) DT.18.12.2001. 7. THE ASSESSEE HAS FURTHER NOT ALLOCATED THE HEAD OFFICE EXPENSES TOWARDS CAPITAL WORK IN PROGRESS WHICH IS BOUND TO INCUR AS THE HEAD OFFICE IS INVOLVED IN ALL THE ACTIVITIES OF THE ASS ESSEE. THEREFORE THE HEAD OFFICE EXPENSES HAS TO BE ALLOCATED AND APPORT IONED ACCORDINGLY AND HAS TO BE TREATED AS CAPITAL EXPENDITURE AND DI SALLOWED AS REVENUE EXPENDITURE. 8. THEREFORE I HAVE REASON TO BELIEVE THAT THE IN COME OF RS.14 85 17 525/- ON ACCOUNT OF INCORRECT ALLOWANCE OF ADMINISTRATIVE EXPENSE PERTAINING TO ENGINEERING AND PROJECT DEPAR TMENT PERTAINING TO CAPITAL WORK IN PROGRESS AS REVENUE EXPENDITURE AND INCOME OF RS.28 99 26 000/- ON ACCOUNT OF INCORRECT ALLOWANCE OF THE INTEREST EXPENSES PERTAINING TO CAPITAL WORK IN PROGRESS WHI CH HAD TO BE CAPITALIZED AND ALLOWED AS REVENUE EXPENDITURE HAS ESCAPED ASSESSMENT BY ALLOWANCE OF THE ABOVE AMOUNTS AND TH E INCOME HAS ALSO ESCAPED ON NON ALLOCATION OF HEAD OFFICE EXPEN SES TOWARDS CAPITAL EXPENDITURE WHICH HAVE BEEN ALLOWED AS REVE NUE EXPENDITURE. 3. THEREAFTER THE ASSESSMENT WAS COMPLETED U/S.143( 3) R.W.S. 147 ON 11.12.2006 MAKING ADDITION OF RS.28.99 CRORES TOWAR DS INTEREST AND RS.14.85 CRORES TOWARDS ADMINISTRATIVE EXPENSES THEREBY DETE RMINING THE TOTAL INCOME AT ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 6 RS.1098.76 CRORES AS AGAINST THE ORIGINAL INCOME CO MPUTED BY THE A.O. U/S.143(3) AT RS.1054.92 CRORES. THE ASSESSEE UNSUCCESSFULLY C HALLENGED THE INITIATION OF REASSESSMENT PROCEEDINGS BEFORE THE LEARNED CIT(A). 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSE E CONTENDED THAT IN THE COMPUTATION OF TOTAL INCOME FOR THE INSTANT YEAR P ROFIT BEFORE TAX WAS TAKEN AT RS.1280.55 CRORES AND CERTAIN AMOUNTS WERE THEREA FTER ADDED AND CERTAIN OTHERS DEDUCTED FOR COMPUTING THE TOTAL INCOME AT RS.944.3 1 CRORES. WHILE INVITING OUR ATTENTION TOWARDS PAGE 102 OF THE PAPER BOOK BEIN G THE CONTINUATION OF COMPUTATION OF INCOME IT WAS POINTED OUT THAT ITEM NO.5 WHICH WAS DEDUCTED FROM THE FIGURE OF PROFIT BEFORE TAX WAS INTEREST ON LON G TERM LOANS CHARGED TO CAPITAL WORK IN PROGRESS AT RS.28.99 CRORES. SIMILARLY ITEM NO.6 WAS ESTABLISHMENT EXPENSES INCURRED DURING THE YEAR WHICH WAS CHARGED TO CAPITAL WORK IN PROGRESS AT RS.14.85 CRORES. IT WAS SHOWN THAT IN THE NOTES AT TACHED TO THE COMPUTATION OF TOTAL INCOME THE ASSESSEE HAD GIVEN NOTE NO.7 WITH REFERENCE TO INTEREST ON LONG TERM LOANS CHARGED TO CAPITAL WORK IN PROGRESS AND NOTE NO.8 TOWARDS ESTABLISHMENT EXPENSES INCURRED DURING THE YEAR CHA RGED TO CAPITAL WORK IN PROGRESS. WHILE REFERRING TO THESE NOTES A COPY OF WHICH IS AVAILABLE ON PAPER BOOK AT PAGE 106 OF THE PAPER BOOK IT WAS SHOWN TH AT THE ASSESSEE HAD SPECIFICALLY MENTIONED THAT A SUM OF RS.28.99 CRORES BEING INT EREST ON BORROWINGS WAS CHARGED TO CAPITAL WORK IN PROGRESS RELATING TO THE EXPANSION OF CERTAIN PROJECTS BUT WAS CLAIMED AS DEDUCTION U/S.36(1)(III). IN SUPPORT OF THE DEDUCTION THE ASSESSEE HAD RELIED ON THE JUDGEMENTS IN 103 ITR 715 (GUJARA T) AND 120 ITR 211 (MADRAS) IN THE SAID NOTE. SIMILARLY IN SUPPORT OF ADMINISTR ATIVE EXPENSES OF RS.14.85 CRORES AS REFERRED TO IN NOTE NO.8 IT WAS MENTIONED THAT THE SAID AMOUNT WAS CHARGED TO CAPITAL WORK IN PROGRESS AS ESTABLISHMENT CHARGES B UT DEDUCTION WAS CLAIMED AS THE SAID EXPENDITURE WAS IN THE NATURE OF REVENUE ADMIN ISTRATIVE EXPENDITURE INCURRED IN DAY-TO-DAY FUNCTIONING OF THE COMPANY AND NOT IN THE NATURE OF ESTABLISHING NEW LINE OF BUSINESS OF THE COMPANY. IN SUPPORT OF THIS CONTENTION THE ASSESSEE AGAIN ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 7 RELIED ON 103 ITR 715 (GUJARAT) 120 ITR 211 (MADRA S) AND 169 ITR 499 (RAJASTHAN) IN THE SAID NOTE. IT WAS EXPLAINED THA T PURSUANT TO THE SAID NOTE IN THE COMPUTATION OF TOTAL INCOME THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS INITIATED INQUIRY ON THIS A SPECT VIDE NOTICE DATED 18.12.2001 A COPY OF WHICH IS AVAILABLE AT PAGE NO S.96 TO 100 OF THE PAPER BOOK. THE ASSESSEE FURNISHED REPLY DURING THE ORIGINAL AS SESSMENT PROCEEDINGS VIDE ITS LETTER DATED 14.1.2002 A COPY OF WHICH IS AVAILABL E AT PAGES 84 TO 95 OF THE PAPER BOOK. THEREAFTER THE ASSESSMENT ORDER WAS PASSED ON 15.3.2002 ACCEPTING THE ASSESSEES CLAIM ON THESE TWO POINTS. THE LEARNED C OUNSEL SUBMITTED THAT HAVING ACCEPTED THE CLAIM OF THE ASSESSEE IN ORIGINAL ASSE SSMENT U/S.143(3) IT WAS NOT OPEN TO THE ASSESSING OFFICER TO TAKE ACTION U/S.147 AFT ER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN ACCORDAN CE WITH THE PRESCRIPTION OF PROVISO TO SECTION 147. HE RELIED ON CERTAIN DECISI ONS TO BOLSTER HIS VIEW. IN THE OPPOSITION THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE IMPUGNED ORDER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3) ON 15.3.2002. NOTICE U/S.148 WAS ISSUED ON 30.3.2006 AND THE PRESENT ASSESSMENT WAS FINALIZED ON 11.12.2006. THE FIRST P ROVISO TO SECTION 147 READS AS UNDER:- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLES S ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR TH AT ASSESSMENT YEAR. 6. FROM THE PRESCRIPTION OF THE SAID PROVISION IT C AN BE EASILY NOTICED THAT WHERE AN ASSESSMENT HAS BEEN COMPLETED U/S.143(3) NO ACTION CAN BE TAKEN AFTER ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 8 THE EXPIRY OF FOUR YEARS FROM THE RELEVANT ASSESSME NT YEAR U/S.147 UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN U/S.139 OR IN RESPONSE TO A NOTICE ISSUED U/S.142(1) OR SECTION 1 48 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IT IS NOT A CASE OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S.139 OR IN RESP ONSE TO NOTICE U/S.142(1) OR 148. THUS THE ONLY THING WHICH REQUIRES TO BE EXAMINED IS THE DISCLOSURE ASPECT IN RESPECT OF MATERIAL FACTS NECESSARY FOR ASSESSMENT. FROM THE REASONS REPRODUCED ABOVE AND THE PERUSAL OF THE ORIGINAL ASSESSMENT O RDER IT CAN BE SEEN THAT THE ASSESSEE CLAIMED DEDUCTION TOWARDS ADMINISTRATIVE EXPENSES AND INTEREST WHICH WERE CAPITALIZED IN THE BALANCE SHEET IN THE COMPU TATION OF INCOME. A DETAILED NOTE WAS ANNEXED TO THE COMPUTATION OF INCOME EXPLA INING THE REASONS IN FAVOUR OF THE ELIGIBILITY OF DEDUCTION IN RESPECT OF THESE TW O SUMS. THEREAFTER THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDING S INITIATED FURTHER INQUIRY ON THESE ASPECTS WHICH WAS PROPERLY RESPONDED BY THE ASSESSEE BY WAY OF ITS WRITTEN EXPLANATION AND FURTHER EXPLANATIONS. ON THE PERUSA L OF SUCH MATERIAL PLACED BEFORE THE HIM DURING THE ASSESSMENT PROCEEDINGS AS WELL A S THE RETURN OF INCOME THE AO GOT CONVINCED AND DID NOT OPT TO MAKE THESE TWO ADD ITIONS. IT IS ONLY AFTER THE COMPLETION OF THE ASSESSMENT THAT THE NOTICE U/S.14 8 WAS ISSUED ON THESE TWO COUNTS IN WHICH IT WAS OPINED THAT THESE TWO AMOU NTS WERE NOT DEDUCTIBLE AND WERE REQUIRED TO BE CAPITALIZED. FROM THE FACTS NAR RATED ABOVE IT IS MORE THAN CLEAR THAT THE ASSESSEE DISCLOSED FULLY AND TRULY ALL MAT ERIAL FACTS IN RESPECT OF THESE TWO AMOUNTS. NOW IN ORDER TO INITIATE REASSESSMENT ON A NY OF THE POINTS WITHIN THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR IT WAS SINE QUA NON THAT THERE OUGHT TO HAVE BEEN FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR. IN THE ABSENCE OF SUCH FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NO ACTION WAS PERMISS IBLE U/S.147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THERE IS ABSOLUTELY ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 9 NOTHING TO INDICATE EVEN REMOTELY THAT THE ASSESSE E FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN RESPECT OF ASSESSMENT. IN TH E INSTANT CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) THE SAID PERI OD OF FOUR YEARS AS PER PROVISO TO SECTION 147 EXPIRED ON 31.3.2003. AS NOTICE U/S .148 WAS ISSUED ON 30.3.2006 I.E. A PERIOD BEYOND THE PRESCRIBED PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THE REASSESSMENT CANNOT STAND ON I TS LEGS SINCE ASSESSEE HAD FURNISHED COMPLETE DETAILS AND EXPLANATION TO THE A SSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THERE WAS NO FA ILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. WE T HEREFORE SET ASIDE THE INITIATION OF REASSESSMENT PROCEEDINGS IN THIS CASE. AS A CONSEQU ENCE OF THAT THE CONSEQUENTIAL ASSESSMENT ORDER AND THE IMPUGNED ORDER ALSO STAND SET ASIDE. THIS GROUND IS THEREFORE ALLOWED. 7. IN VIEW OF OUR DECISION ON GROUND NO.1 QUASHING THE INITIATION OF REASSESSMENT PROCEEDINGS THERE IS NO NEED TO ADJUD ICATE UPON THE OTHER GROUNDS RAISED BY THE ASSESSEE ON MERITS. 8. IN THE RESULT THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 08 TH DAY OF JANUARY 2010. SD/- SD/- (ASHA VIJAYARAGHAVAN) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI : 08 TH JANUARY 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A)-I MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 10 TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI. ITA NO.6024/MUM/2008 M/S.HINDUSTAN PETROLEUM CORPORATION LIMITED. 11 DATE INITIAL 1. DRAFT DICTATED ON 05.01.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 07.01.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER. *