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TMI Blog2020 (9) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001; all before the judgment was rendered in GKN Driveshafts (India) Limited [2002 (11) TMI 7 - SUPREME COURT] . Therefore, a view can be taken that since the impugned notice and furnishing of reasons had preceded the judgment in GKN Driveshafts (India) Limited, the later may not have applicability in the present case. As in the first Ajanta Pharma case i.e. [2003 (11) TMI 32 - BOMBAY HIGH COURT] this Court after referring to the Constitution Bench judgment in Calcutta Discount Company Limited Vs. Income Tax Officer, [ 1960 (11) TMI 8 - SUPREME COURT] held that Supreme Court in GKN Driveshafts (India) Limited (supra) nowhere lays down the law to the effect that the noticee is totally debarred from approaching the High Court under Article 226 of the Constitution of India when the exercise of power by the authority under section 148 of the Act ex-facie appears to be without jurisdiction. This writ petition was admitted for hearing by issuing rule way back on 27.06.2002. Having admitted the petition for hearing and such a long period having elapsed, it would neither be fair nor reasonable to relegate the petitioner to file objection to the reasons recorded before respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Mr. Joshi, learned counsel for the petitioner; and Mr. Suresh Kumar, learned counsel for the respondents. 2. By filing this petition under Article 226 of the Constitution of India, petitioner seeks quashing of notice dated 30.03.2001 issued by respondent No.1 under section 148 of the Income Tax Act, 1961 (briefly 'the Act' hereinafter) for the assessment year 1990-91 and subsequent notices issued under sections 143(2) and 142(1) of the said Act. 3. Petitioner is the State Bank of India. It is a corporation established by and under the State Bank of India Act, 1955 having its corporate office at Mumbai. Since its formation in the year 1955, petitioner is mainly engaged in the business of banking activities in India as well as in foreign countries through its branch offices. One of the major sources of income of the petitioner is interest earned from its lending activities. 3.1 Petitioner is assessed to income tax under the Act with respondent No.1 as the assessing officer. 3.2 For the assessment year 1990-91, petitioner filed its return of income declaring total income of ₹ 230,49,30,716.00. It is stated that in the said return of income, petitioner had o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of ₹ 4,69,92,61,038.00, in addition to claiming exemption in respect of interest on tax free bonds amounting to ₹ 20,58,08,915.00. 3.7 Pursuant to the above, respondent No.1 passed order dated 31.03.1994 under section 143(3) read with sections 147 and 154 of the Act determining the revised total income of the petitioner at ₹ 7,46,80,10,649.00. In addition to the exemption granted in the order dated 23.06.1993, respondent No.1 granted further exemption under section 10(15)(iv) of an amount of ₹ 90,97,32,802.00 accepting a part of petitioner's contention in respect of loans granted. 3.8 When petitioner received further details in respect of interest exemption under section 10(15)(iv), it furnished those details to respondent No.1 on 06.09.1994 but respondent No.1 refused to consider the further claim of the petitioner. 3.9 At that stage, petitioner preferred appeal before the Commissioner of Income Tax (Appeals). The first appellate authority by his appellate order dated 30.03.1995 directed respondent No.1 to consider the claim of the petitioner in respect of interest exemption under section 10(15)(iv) of the Act on the basis of informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice was issued. 5.2 In the meanwhile, petitioner was served with notices under section 143(2) as well as under section 142(1) of the Act. 6. Central Board of Direct Taxes (CBDT) issued a circular dated 23.07.2001 regarding insertion of section 14A in the Act with effect from 01.04.1962 and its application. After noting that instances of reopening of old assessments which had caused hardship to a large number of tax payers leading to increase in avoidable litigation had come to its notice, it directed that assessment proceedings which had attained finality before 01.04.2001 should not be re-opened under section 147 of the Act to disallow expenditure incurred to earn such exempt income by applying the newly inserted section 14A. 7. When the petitioner pointed out the above CBDT circular to respondent No.1, it was informed that the said circular was not applicable to the petitioner as the assessment of the petitioner was reopened by issuing notice under section 148 of the Act on 30.03.2001, thus taking the view that the assessment proceeding was pending as on 01.04.2001. 8. After several rounds of communication, respondent No.1 vide letter dated 04.12.2001 furnished the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished and thus, petitioner had failed to disclose fully and truly all material facts necessary for its assessment for that assessment year. That apart, it is stated that petitioner had furnished only the details of gross interest income claimed to be exempted under section 10(15)(iv) without furnishing details of expenses incurred for earning such income. 11.1 In paragraph 12 of the affidavit it is clarified that the impugned notice under section 148 was not issued in view of proposed section 14A in the Finance Bill, 2001. Petitioner's case was examined in the light of facts of the case and various judicial pronouncements whereafter respondent No.1 came to the conclusion that there was reason to believe that by allowing exemption on the gross receipts in place of net receipts after adjustment of the expenditure, the income had escaped assessment. Reliance has been placed on the decision of the Supreme Court in the case of Escorts Limited Vs. Union of India, 199 ITR 43 contending that by claiming exemption on the gross income and getting the deduction of expenses incurred with respect to such income, petitioner had availed double deduction which could never have been the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption under section 10(15)(iv) of the Act. In support of his submissions, Mr. Pardiwala has relied upon the following decisions:- 1. CIT Vs. Industrial Investment Trust Company Limited, 67 ITR 436; 2. CIT Vs. New Great Insurance Company Limited, 90 ITR 348; 3. CIT Vs. Indian Bank Limited, 56 ITR 77 (SC); 4. State Bank of India, Mumbai Vs. Joint Commissioner of Income Tax, ITAT, Mumbai Bench, ITA Nos.1292 and 1293 / Mumbai / 2001 decided on 06.06.2002; 5. Escorts Limited (supra); 6. DIL Limited Vs. Assistant Commissioner of Income Tax, 343 ITR 296; 7. Ajanta Pharma Limited Vs. Assistant Commissioner of Income Tax, 267 ITR 200; and 8. Caprihans India Limited Vs. Tarun Singh, Deputy Commissioner of Income Tax, 266 ITR 566. 13.1. Mr. Pardiwala has also drawn our attention to the proviso to subsection (3) of section 14A of the Act which was inserted by the Finance Act, 2002 with retrospective effect from 11.05.2001. He submits that even as per this proviso, the assessing officers are restrained from reopening assessment for any assessment year concluded on or before 01.04.2001. Therefore, this is also a prohibition for respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no action shall be taken under section 147 after expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to 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 fully and truly all material facts necessary for its assessment for that assessment year. 17. The present case is one were the impugned notice issued under section 148 of the Act is clearly beyond four years from the end of the assessment year in question. Therefore, what is relevant to note is that the assessing officer must have or form reason to believe that any income of the petitioner chargeable to tax has escaped assessment by reason of the failure on the part of the petitioner to disclose fully and truly all material facts. 18. The expressions 'reason to believe' and 'failure on the part of the assessee to disclose fully and truly all material facts' have been subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, if filed, by passing a speaking order before proceeding with the assessment. This decision was rendered by the Supreme Court on 25.11.2002. It was applied by this Court in the second Ajanta Pharma case i.e., 295 ITR 218 wherein the matter was remanded to the assessing officer to grant opportunity to the petitioner to file additional objections and thereafter to dispose off the same in terms of judgment of the Supreme Court in GKN Driveshafts (India) Limited (supra). 20. In the instant case, the impugned notice was issued on 30.03.2001 and the reasons were furnished by respondent No.1 to the petitioner on 04.12.2001; all before the judgment was rendered in GKN Driveshafts (India) Limited (supra). Therefore, a view can be taken that since the impugned notice and furnishing of reasons had preceded the judgment in GKN Driveshafts (India) Limited, the later may not have applicability in the present case. That apart, in the first Ajanta Pharma case i.e., 267 ITR 200 , this Court after referring to the Constitution Bench judgment in Calcutta Discount Company Limited Vs. Income Tax Officer, 41 ITR 191 held that Supreme Court in GKN Driveshafts (India) Limited (supra) nowhere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction cannot be allowed to be availed as a matter of course. In order to decide an issue of jurisdiction, findings of the authority on the factual aspect may be necessary. In that case, certainly primarily the assessee will have to approach the Assessing Officer. That does not. mean that the assessee is invariably bound to approach the Assessing Officer in each and every case. There can be the cases, like the one in hand, where he may be entitled to approach the Court directly under Article 226 of the Constitution of India. 20.1. Thereafter this Court referred to the decision in Caprihans India Limited (supra) in support of the above view. That was also a case where notice issued under section 148 of the Act was put to challenge in writ proceeding and the revenue had relied upon GKN Driveshafts (India) Limited (supra). After discussing GKN Driveshafts (India) Limited, this Court observed that the assessee should have filed its return pursuant to the impugned notice and should have sought for the reasons for issuing such notice. This Court further observed that it would have rejected the writ petition on this ground but the reasons having been disclosed by the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details in respect of the borrowers, clause under which exemption for interest income was sought and the amount of interest earned from each of the parties were pointed out. It is the petitioner's case that exemption in respect of eligible interest was claimed on the gross amount. As interest received from each of the parties was disclosed separately, exemption was claimed on the basis of the total amount without reducing any expenditure. It was thereafter that assessment order was passed on 26.03.1993 under section 143(3) of the Act. While determining the total income of the petitioner at ₹ 10,51,38,85,506.00, claim of the petitioner to exemption under section 10(15)(iv) was overlooked on the ground that though petitioner had stated in the return of income that it would be filing relevant details and information in support of such claim, no such details and information were filed. 25. When the petitioner brought to the notice of respondent No.1 the details and information furnished by it vide letter dated 22.08.1992, respondent No.1 rectified the assessment order by an order dated 23.06.1993 passed under section 154 wherein it was held that relevant details were file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner to disclose fully and truly all material facts necessary for its assessment? We are afraid answer to the above has to be in the negative. As rightly held by this Court in DIL Limited (supra), beyond the period of four years when an assessment is sought to be re-opened, there must be failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. 29. Even otherwise also, in Indian Bank Limited (supra), Supreme Court had held that no general principle is deducible for the proposition that if a part of the income of a business is tax free, expenditure incurred for the purpose of earning its income is outside the purview of section 10. 30. In Industrial Investment Trust Company Limited (supra), this Court held that if expenses are allowable as business expenses, those would be allowed to be deducted from the income of the business which is liable to tax; the circumstance that the business activity has produced income, a part of which is liable to tax and a part of which is free from tax, will not permit the allocation of the expenses between these two parts of income and allow only that part which is attributable to earning of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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