9911796707
TMI Blog1992 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation at Rs. 7,26,513 and extra shift depreciation at Rs. 4,60,722 aggregating to Rs. 11,87,235. Development rebate was claimed on machinery of Rs. 4,84,132 at the rate of 25 per cent. amounting to Rs. 1,21,033. A list of commission paid on sales at Rs. 8,78,270.77 and on purchase at Rs. 2,08,924.84 was submitted. The list included payment of Rs. 4,77,890.68 plus Rs. 1,24,877.10 to M/s. Metal Distributors Ltd., Bombay. A letter dated March 10, 1976, revising the return for the assessment year 1975-76 was submitted, a sum of Rs. 1,25,589 being the amount of provision for gratuity was included in the earlier return of income. The Income-tax Officer, A-Ward, Kota, was not satisfied with the correctness and completeness of the return and the accompanying statements filed by the petitioner-company. He did not accept the return of income under section 143(1) of the Act. He issued notices under section 143(2) of the Act dated November 2, 1976, for November 17, 1976, dated February 3, 1977, for February 16, 1977, dated June 8, 1977, for June 24, 1977, dated September 8, 1977, for September 20, 1977, etc., requiring the petitioner-company to produce documents, accounts and other eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81/245, dated May 8, 1980, we wish to submit as under : 1. That it is an age old practice of the Department to accept a letter instead of insisting on furnishing of fresh return in compliance with the notice under section 148 of the Act. However, as desired, under protest, without prejudice and without acceding to your jurisdiction, we are submitting herewith a fresh return declaring therein income originally assessed. All the details, statements and information placed on original assessment record may please be treated as part of the return. 2. That in view of the decisions reported in Kerorimull and Co. v. ITO [1971] 79 ITR 270 (Cal), Indra Co. Ltd. v. ITO [1971] 80 ITR 559 (Cal) and 118 ITR 577 (sic), we request you to please supply us a copy of the reasons, if any, recorded. We are prepared to pay the copying fees, if any. Without going through the reasons, it would not be possible for us to judge as to whether jurisdiction has been rightly exercised by you. Before concluding, we again request you : (i) to please furnish us with a copy of the reasons, if any, recorded and sanction, if any, accorded by the Commissioner of Income-tax, Jaipur and (ii) to permit us to inspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given below : -------------------------------------------------------------------------------------------------------------------------------------------------- Assessment years ------------------------------------------------------------------------------------------------------------------ 1970-71 1971-72 1972-73 1973-74 1975-76 1976-77 -------------------------------------------------------------------------------------------------------------------------------------------------- 1. Date of filing of 24-6-1970 28-6-1971 original return 29-7-1972 3-8-1973 30-7-1975 31-7-1976 and income Loss Loss 24,03,458 90,64,547 71,58,105 68,76,810 69,44,859 40,82,012 2. Notice under Yes Yes Yes Yes Yes Yes section 143(2) issued. Appeared, produced books of account and supporting records, replies filed and examined and scrutinised and verified. 3. Date of assessment order 24-4-1971 4-8-1972 24-3-1975 29-11-75 2-1-1978 7/20-2-1978 4. Notice under section 148 24-3-1979 21-3-1980 20/27-1-1981 Undated 21-3-1980 6-1-1981 received on 11-3-1982 --------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was directed to be carried forward. Some addition Development rebate was made in the assessment year 1969-70. The allowed at 25 per cent- development rebate was allowed at Rs. 5,784 at against 15 per cent. on 35 per cent. It remained unabsorbed and was machinery of the value of directed to be allowed to be carried forward. Rs. 2,45,796 for the asses- 2. The petitioner-company continued to be ment year 1972-73. industry and for such industry new machinery was installed each year. Develop- Development rebate ment rebate admissible on priority industry was allowed at 25 per cent. allowed, after verification and satisfaction. The against of 15 per cent. on percentage of production of seamless tubes and machinery of the value of other products during the assessment years Rs. 1,82,12 7 for the assessment year 1969-70 to 1975-76 is as under : 1973-74 ------------------------------------------------------------------------------------------- Assessment Percentage of Percentage of year production of production and seamless tubes sections Development rebate ------------------------------------------------------------------------------------------- allowed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Metal Distributors Ltd. have been acting agency commission of as sole selling agent of the petitioner-company Rs. 2,93,226 for the assessment since it came into production. They continued year 1972-73 ; to act as sole selling agent of the company up Rs. 3,40,084 for the assessment to March 31, 1976. The Central Government year 1973-74 ; has accorded approval of the sole selling agency Rs. 4,77,891 for the commission agreement dated September 21, assessment year 1975-76 1971, vide its letter No. 1/301/75, dated July 31, to M/s. Metal Distributors 1975. The payment to M/s. Metal Distributors Ltd. at Bombay at 1 per cent. Ltd. in each assessment year is in accordance not admissible with the agreement approved by the Central Government and on account of the services rendered by them. The final approval for the period from April 1, 1976, to October 31, 1976, was given by the Central Government, vide letter No. 12/315/75-Cl. XI, dated March 31, 1976. 2. The sole selling agency commission to M/s. Metal Distributors Ltd. had been allowed in the past and had been allowed in the assessment years 1976-77, 1977-78 and 1978-79. The Commissioner of Income-tax, Jaipur, vide notice under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mind and satisfaction that the payments made were the legitimate need of the petitioner-company. Service charges to M/s. 1. The petitioner-company agreed to pay service Oriental Management charges to M/s. Oriental Management (P.) Services (P.) Ltd., Calcutta, Ltd., Calcutta, for the services rendered by Rs. 1,20,000 and to M/s. them. Such payment is being made from the Metal Distributors Ltd., assessment year 1971-72. An agreement dated Bombay, Rs. 44,548 for February 1, 1972, was entered into between the assessment year assessee-company and M/s. Oriental Management 1975-76 (P.) Ltd., Calcutta, for payment of service charges at Rs. 10,000 per month. Such payment was allowed in the assessment year 1973-74 and onwards after verification and complete satisfaction. 2. The petitioner-company was originally incorporated in the State of West Bengal with its registered office at Calcutta. It continued to have its registered office in Calcutta during the year. However, the plant of the petitioner-company is located in Kota in the State of Rajasthan. During this year, it had all its banking arrangements at Calcutta. Shares of the petitioner-company were listed with the Calcutta Stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handling imports for a very long time were retained to look after the imports of the petitioner-company on payment of service charges. 4. The service charges of Rs. 44,548 were paid to them in consideration of their having attended to the import work, e.g., establishing L/Cs. amending L/Cs, appointing clearing agents, supervising rebooking of goods to Kota and doing everything else in the process. As R sons Material facts on record in the original assessment proceedings these service charges were incurred for the business of the petitioner-company the same were allowed in full. 5. All the abovementioned facts were fully explained to the assessing authority at the time of the original assessment. The relevant files were duly produced before him. After verification from the record produced before him, he allowed the service charges paid to M/s. Oriental Management Services (P) Ltd., Calcutta, and M/s. Metal Distributors Ltd., Bombay, by the petitioner-company. We may reiterate that nothing has gone unnoticed and there was no lapse on the part of the petitioner-company to fully and truly disclose all material facts in connection with the above service charges incurred by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, it has been shown by the petitioner's counsel that, for many things, i.e., for development rebate, depreciation, overriding sales agency commission, commission to M/s. Metal Distributors, Bombay, and M/s. G. K. Damani Sons had been paid in the past and the proceedings taken under section 263 of the Act had also been decided in favour of the assessee, it would have been appropriate if the Income-tax Officer had taken reassessment proceedings after hearing the assessee and providing him with an opportunity. Normally, this is not required but, in the peculiar facts of the case, I consider it to be in the ends of justice to do so. Counsel for the Department contended that section 147 of the Act is discretionary. Assuming that to be so, it can be justified only when the conditions precedent existed. If the Income-tax Officer, after providing the opportunity, is satisfied that the issuance of the notice was justified, he would be entitled to proceed to determine the amount due. In that event, initiation of the proceedings under section 147(a) of the Act would be justified but if grounds are not found for initiating proceedings under section 147(a) of the Act, then the procee ..... 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