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TMI Blog2020 (2) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... ak Raval, the learned standing counsel waives service of notice of rule for and on behalf of the Revenue. 2 By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs: a. A writ of certiorari or any other writ, order or direction in the nature of certiorari quashing the impugned notice dated 26.03.2018 issued under Section 148 of the Act for the assessment year 2011-12. b. Pending the admission, hearing and final disposal of this petition, restrain the respondent from passing the order of reassessment. c. Pass any other order(s) as this Hon'ble Court may deem fit and more appropriate in order to grant interim relief to the petitioner. d. Any other and further relief deemed just and proper be granted in the interest of justice. e. To provide for the cost of this petition. 3 Thus, it appears that the writ applicant seeks to challenge the impugned notice of reopening dated 26th March 2018 issued under Section 148 of the Income Tax Act, 1961 [for short, 'the Act, 1961'] for the assessment year 2011-12 beyond the four years. 4 The writ applicant filed his return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance amount of administrative expenses shown for all four windmill division is only abut ₹ 40,000/. It was also seen that the assessee company has not debited a single rupee spent on Directors Remuneration the establishment expenses of the head office like electricity, vehicles, rates and taxes, rent Telephone, stationery etc and staff expenses. No expenses had been debited to the windmill divisions at Jodha and Chitradurvga. The assessee company debited only direct expenses to wind mill division, where all the common expenses had been debited to the tea division, thereby artificially pumping its income eligible for deduction u/s 80IA, leading lower returned income and consequently lower taxes. Hence, the common expenses, in nature of administrative expenses need to be allocated between both theline of business ni order to arrive at true picture. Since one line of business is a trading concern (tea division) and other is manufacturing concern (general of electricity), the ratio of turnover cannot be a correct ratio owning in the difference in their basic character. Turnover of a trading concern can be high, without requirement of higher capital and efforts, but the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the writ applicant to the notice of reopening came to be rejected by the Assistant Commissioner of Income Tax vide order dated 24th December 2018. The manner in which the objections have been dealt with by the Assistant Commissioner of Income Tax is quit disturbing. We are saying so because we find that in para 4 of the order passed by the Assistant Commissioner of Income Tax, the judgement of this Court rendered in the Special Civil Application No.4005 of 2016 has been referred to and discussed. It is always open for the Assistant Commissioner to distinguish the judgement of this Court on facts, but, while doing so, it cannot comment on the same as regards the manner in which the petition came to be disposed of. It is too much on the part of the Assistant Commissioner to say that the High Court, without discussing merits of the case, allowed the petition on technical grounds. 9 At this stage, we may refer to the decision of this Court rendered in the Special Civil Application No.4005 of 2016. The same reads thus: 1. The petitioner has challenged a notice dated 30.03.2015 issued by the respondent Assessing Officer for reopening the assessment of the petitioner f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mill division. No such office expenses has been debited to the windmill divisions. Any line of business cannot function on its own. The assessee company seems to have debited only direct expenses to the windmill divisions. Where all the common expenses have been debited to the tea division, thereby artificially pumping its income eligible for deduction u/s.80IA leading to lower returned income and consequently lower taxes. Hence, the common expenses, needs to be allocated between both lines of business in order to arrive at true picture. Since, one line of business is a trading concern (tea division) and other is manufacturing concern (generation of electricity), the ratio of turnover cannot be a correct ratio owing in the difference in their basic character. Turnover of a trading concern can be high, without requirement of higher capital and efforts, but the profit percentage is low, as compared to a manufacturing concern. Hence, for allocation of common costs, owing to difference in character of both lines of business, the average of profit ratio and the gross asset ratio. A. Calculation of gross asset ratio: Gross Block as per schedule5 of audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial expenses, financial expenses and depreciation for all the divisions and thus, there is no question of there being any common expenses for both the divisions. Thirdly , on the basis of maintenance of separate books of accounts, the statutory auditor has also prepared separate audit reports for both the divisions wherein also; all the expenses stands clearly categorised under the head, Manufacturing, administrative, Financial and Other expenses. (d) Fourthly, our company has also prepared separate divisionwise computation of Income for each of the windmills installed by it and the said separate computation of income also stand furnished during the course of the original assessment proceedings and are forming part of the original assessment record. (e) Fifthly, during the course of the original assessment proceedings, the then learned AO had also called for detail of various expenses like staff salary and incentive, bonus and boni expenses, donation, advertisement and sales promotion expenses, commission and brokerage expenses, etc., which have duly furnished and are forming part of the original assessment record. Here it is pertinent to note that dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer, the assessee had not correctly apportioned the expenditure between these two businesses and thereby artificially inflated the income of the eligible businesses to gain larger deduction. 7. We are not on validity of the Assessing Officer's contention. We are concerned only with the question of failure on part of the assessee to disclose fully and truly all material facts. 8. It is not even the case of the Assessing Officer that he noticed the disproportionate allegation/allocation of expenditure in the accounts of non eligible business through any material extraneous to the assessment records. In fact, his entire observations contained in the reasons recorded are borne out from the data available in the assessment records. Further, as pointed out by the assessee in the objections, full separate accounts of both divisions were maintained and also presented before the Assessing Officer during the course of assessment. This is therefore, a clear case where, there was no failure on part of the assessee to disclose truly and fully all material facts necessary for assessment. Notice for reopening which was issued beyond a period of four year must there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of relevant Assessment Year. Referring to the reasons recorded for reopening the assessment, it was pointed out that in the entire reasons, there is not even a whisper as regards any failure on the part of the petitioner to disclose truly and fully all material facts relevant for its assessment. It was submitted that therefore, the first proviso to section 148 of the Act would be attracted and the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act is invalid. Reliance was placed upon the judgment and order dated 19.07.2016 passed by this Court in the petitioner s own case in Special Civil Application No.4005 of 2016 wherein on identical facts, the Court had set aside the identical notice. 2. Having regard to the submissions advanced by the learned advocate for the petitioner, issue Notice returnable on 19.02.2019. By way of adinterim relief, the respondent is permitted to proceed further pursuant to the impugned notice; he, however, shall not pass the final order without the prior permission of this Court. Direct service is permitted today. 14 As we are allowing this writ application, the impugned notice will have to be qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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