1992 (8) TMI 111 - AT - Income Tax

Assessment Proceedings, New Industrial Undertaking, Original Assessment, Profits And Gains, Reason To Believe

Issues Involved:
1. Validity of the reopening of the assessment under section 147(a) of the Income-tax Act, 1961.
2. Inclusion of the cost of incomplete job in the computation of capital employed for section 80J relief.
3. Inclusion of the value of capital goods in transit in the computation of capital employed for section 80J relief.
4. Deduction of a loan from the State Bank of India in the computation of capital employed for section 80J relief.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of the Assessment under Section 147(a):
The assessee challenged the validity of the reopening of the assessment under section 147(a) on grounds such as limitation and lack of jurisdiction. The CIT (Appeals) upheld the reopening as valid, noting that the assessee failed to disclose primary information necessary for the assessment, specifically regarding the terms and period of repayment of a secured loan from the State Bank of India. The Tribunal agreed with the CIT (Appeals), referencing the Supreme Court's decision in Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT, which emphasized the duty of the assessee to disclose all material facts necessary for assessment. The Tribunal concluded that the reopening of the assessment was justified due to the assessee's failure to disclose these primary facts, resulting in the escapement of income.

2. Inclusion of the Cost of Incomplete Job in the Computation of Capital Employed for Section 80J Relief:
The Department objected to the CIT (Appeals) directing the assessing authority to include Rs. 10,76,283, representing the cost of incomplete job, in the computation of capital employed for section 80J relief. Both parties agreed that this issue was settled in favor of the assessee by the Calcutta High Court's decision in CIT v. Indian Oxygen Ltd. The Tribunal followed this precedent and confirmed the order of the CIT (Appeals), rejecting the Department's ground.

3. Inclusion of the Value of Capital Goods in Transit in the Computation of Capital Employed for Section 80J Relief:
The Department objected to the CIT (Appeals) directing the inclusion of Rs. 10,94,158, representing the value of capital goods in transit, in the computation of capital employed for section 80J relief. This issue was also settled in favor of the assessee by the Calcutta High Court in CIT v. Union Carbide India Ltd., which followed the earlier decision in Indian Oxygen Ltd.'s case. The Tribunal followed these precedents and confirmed the CIT (Appeals)'s order, rejecting the Department's ground.

4. Deduction of a Loan from the State Bank of India in the Computation of Capital Employed for Section 80J Relief:
The Department objected to the CIT (Appeals) deleting the deduction of Rs. 1,64,40,000, representing a loan from the State Bank of India, which the Assessing Officer had deducted as borrowed money while computing the capital employed for section 80J relief. The CIT (Appeals) held that the period between the first disbursement of the loan and the last repayment exceeded seven years, qualifying the loan for exclusion under Rule 19A(3)(b). The Tribunal agreed, noting that the repayment schedule was modified by mutual agreement, extending the repayment period beyond seven years. The Tribunal confirmed the CIT (Appeals)'s order, rejecting the Department's ground.

Conclusion:
The Tribunal dismissed both the appeals, upholding the CIT (Appeals)'s decisions on all issues. The reopening of the assessment under section 147(a) was deemed valid, and the inclusions of the cost of incomplete job and value of capital goods in transit in the computation of capital employed for section 80J relief were confirmed. The deduction of the loan from the State Bank of India was also correctly deleted in the computation of capital employed for section 80J relief.

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