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TMI Blog2010 (4) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... is situated in the backward area of Silvasa (Union Territory of Dadra and Nagar Haveli) and is eligible for deduction under section 80-IB(4) of the Act. For the assessment year 2003-04, the petitioner filed return of income on October 29, 2003, declaring an income of Rs. 5,66,114 after claiming deduc-tion under section 80-IB(4) of the Act in respect of the income of unit II at Silvasa. For claiming deduction under section 80-IB(4) of the Act, audit report under section 80-IB read with section 80-IA(7) in Form No. 10CCB is required to be filed. However, the petitioner had not filed the report with the return of income, but had filed the same during scrutiny assessment proceedings. Assessment order under section 143(3) of the Act was passed in the case of the petitioner wherein deduction under section 80-IB(4) of the Act was granted. Subsequently, vide the impugned notice, the respondent, on being satisfied that substantial income had escaped assessment for the year under consideration, seeks to reopen the assessment under section 147 of the Act. The petitioner filed objections dated May 6, 2009, against the said notice, which came to be rejected, vide the impugned order dated Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een granted while framing the assessment order under section 143(3) of the Act. It is submitted that the very same items in respect of which the proceedings are sought to be reopened, were already disclosed in the earlier proceedings.That there is no further information with the respon-dent justifying any escapement of the income and that the respondent is merely expressing a second thought on the same material on record with-out there being any additional information which would justify reopening of the assessment. 7. The learned advocate has invited attention to the computation of total income filed along with the return to point out that all material particulars had been disclosed before the Assessing Officer at the time of assessment. Referring to the computation of total income, it is pointed out that the net profit as per the profit and loss account of unit II have been worked out at Rs. 64,78,664 and the detailed computation is provided at page 58 in the statement of accounts. In so far as the depreciation as per the Companies Act is concerned, which is worked out at Rs. 27,82,842, the details thereof are at page 60. The details of the depreciation as per the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. It is submitted that the assessee having failed to disclose all material facts at the time of assessment proceedings, income chargeable to tax had escaped assessment, hence, the Assessing Officer was justified in reopening the assessment. 9. A perusal of the reasons recorded indicates that the reasons for reopening the assessment are that the petitioner company has not fulfilled all the con-ditions precedent to the allowance of deduction under section 80-IB(4) of the Act and has deliberately included other income in calculating all the deduc-tions, resulting in income escaping assessment in view of non-disclosure of material facts by the assessee relevant for the purpose of making assessment. According to the Assessing Officer, the income that has escaped assessment is to the tune of Rs. 47,05,687. 10. In response to the said notice, the assessee filed its objections pointing out that at the time of scrutiny assessment proceedings, they had furnished the audit report in Form No. 10CCB. The assessee once again furnished a copy of the said audit report in Form No. 10CCB for reference by the Assessing Officer. It was contended that it is well established law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head "Other income" are not forming part of profits and gains" derived from the industrial undertaking and as such, the Assessing Officer had every reason to believe that substantial amount of income has escaped assessment. As regards the contention that the notice issued under section 148 of the Act is time barred, the Assessing Officer has held that the assessment can be reopened under section 147 of the Act up to six years from the end of the relevant assessment year where the assessment has been made under section 143(3) if the income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to : (a)make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or 148 ; or (b) disclose fully and truly all material facts necessary for assessment for that assessment year. The Assessing Officer held that as discussed in the reasons recorded, the asses-see had failed to disclose fully and truly all material facts necessary for assessment year 2003-04 and as such, the six years period would end on March 31, 2010, and as such, the notice was well within the period of limitation. 12. Section 147 of the Act p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us profit on sale of assets Rs. 1,14,327) was not excluded. In the circumstances, what is required to be examined is as to whether the petitioner at the time of filing of the original return and assessment pro-ceedings, had failed to disclose fully and truly all material facts necessary for the assessment. 15. In so far as the audit report in Form No. 10CCB is concerned, it is an admitted position that the same had been furnished during the assessment proceedings though it was not filed along with the return of income. How-ever, apart from a technical breach of the audit report not accompanying the return of income, it has not been shown how such lapse amounts to failure to truly and fully disclose all relevant facts resulting in escapement of taxable income. The settled legal position is that the audit report is required by the Assessing Officer as and when assessment is undertaken to verify the claim made in the return of income. In the facts of the case, the said position obtains and the test stands satisfied. In so far as the other income of Rs. 1,80,379 is concerned, as pointed out by the learned advocate for the petitioner, no deduction had been claimed qua profit on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be sustained.
17. In so far as the order dated September 22, 2009, rejecting the objections raised by the assessee is concerned, it is apparent on the face of record that the same suffers from non-application of mind inasmuch as despite it being the categorical case of the assessee in its reply to the notice that the profit on sale of assets of Rs. 1,14,327 had been excluded while calculating the profit of the industrial undertaking, the respondent, in the impugned order, has noted that it is the submission of the assessee that profit on sale of assets is part of profits and gains derived from the business of the indus-trial undertaking. Thus, it is apparent that the respondent has not properly applied his mind to the objections raised by the assessee and has mechani-cally rejected the objections raised by the assessee.
18.For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated March 27, 2009, under section 148 of the Act and further notice dated September 25, 2009, as well as the order dated September 22, 2009, are hereby quashed and set aside. Rule is made absolute with no order as to costs. X X X X Extracts X X X X X X X X Extracts X X X X
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