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TMI Blog2002 (8) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... escaping assessment is as under:-- "147. Income escaping assessment.--If the Assessing Officer has reason to believe that any income may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the 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 au material facts necessary for h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case. It has been held by the Hon'ble Apex Court that the taxes forming part of the sale consideration of goods sold in the course of business constitutes trading receipt and is to be included in the total turnover. Thus, for the purpose of computing deduction under section 80HHC, the total turnover was required to be taken at Rs. 13,75,63,456 instead of Rs. 12,67,72,677 taken under section 143(3) and revised to Rs. 12,71,64,041. While giving appeal effect under section 250(6) on 28-2-1995. In this way, the deduction actually allowable to the assessee under section 80HHC works out to Rs, 49,24,200 instead of Rs. 53,26,932, allowed while giving appeal effect. Thus, deduction under section 80HHC of Rs. 4,02,732 (5326932-4924200) has been allowed in excess. Thus, I have reasons to believe that income of Rs. 4,02,732 chargeable to tax has escaped assessment for the year. Hence, sanction as required under section 151(1) of the Act to re-open the case is solicited." Similar reasons were recorded for assessment year 1992-93. 6. The assessee objected to initiation of re-assessment proceedings and submitted returns under protest in response to notices under section 148. In the fresh as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case. 9. The learned Commissioner of Income-tax (Appeals) held that initiation of reassessment proceedings for assessment year 1991-92 was illegal and invalid with the following remarks:-- "2.3 I have carefully considered the facts of the case and the rival submissions. In a sequence of the filing of the return, the assessment under section 143(3) of the Income-tax Act, 1961 was framed in this case vide order dated 22-1-1993 where number of additions were made by the Assessing Officer. The deduction under section 80HHC has been discussed at length in para-9 of the assessment order at page 12. The Assessing Officer after examination of the claim of the appellant and after having sought certain clarification and additional details which the appellant furnished from time to time allowed the deduction under section 80HHC after making certain adjustment. The appellant alongwith the return of income had filed the audited copies of the trading account, profit and loss account, balance sheet etc. alongwith the salient features of the accounting policies. At pages 20 & 21 of the printed balance sheet, the sales/turnover has been declared at Rs. 12,67,62,667 and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to disclose fully and truly all material facts necessary for assessment. The appellant company had disclosed all the particulars which were required to be disclosed in the return of income and other accompanying documents. In particular the report under section 80HHC(4) of the Income-tax Act, 1961 and also provided all information which was subsequently sought by the Assessing Officer at various stages. It cannot, therefore, be said that there has been any violation on the part of the appellant company to disclose fully and truly all material facts necessary for the reassessment. The Assessing Officer no where alleged that the appellant company violated to provide any information that was required during the assessment proceedings. The fact that the disputed amount of excise duty recovered by the appellant company stands disclosed in the audited accounts submitted by the appellant company alongwith the return of income. Pages 20 & 21 of the printed balance sheet needs to be examined. As already stated above, the fact that the excise duty recovered has been separately shown on the debit side of the Profit and Loss Account and the turnover figure has shown in the credit side as hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the reassessment proceedings under section 147 and the issue of notice under section 148 after more than 4 years from the end of the relevant assessment year is illegal, invalid and the consequential reassessment order under section 143(3) of the Income tax Act, 1961 is a void order and is nullity as held by the Gujarat High Court in the case of P.V. Doshi v. CIT [1978] 113 ITR 22 and also by the Calcutta High Court in the case of Rawat Mal Harak Chand v. CIT [1981] 129 ITR 346." 10. The learned Commissioner of Income-tax (Appeals) also decided the appeal in favour of the assessee on merit. He held that Excise Duty was not to be included in the "total turnover" while computing relief under section 80HHC of the Income-tax Act. 11. A similar order was passed for assessment year 1992-93. The proceedings initiated under section 147/148 were held to be illegal and without jurisdiction and relief even on merit was allowed to the assessee. 12. The Revenue is aggrieved and has come up in appeal. We have heard. Smt. Rachna Singh on behalf of the Revenue and Sh. C.S. Aggarwal for the assessee. Smt. Rachna Singh submitted that as per decision of Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disclose material facts, then subject to the other conditions jurisdiction to reopen is attracted. 91 ITR 450 (Cal.) (sic) Calcutta High Court has held that profit and loss account should clearly disclose the result of the working and disclose every material feature included credits or receipts....thus reassessment was justified. In the case of Oriental Carpet India Ltd. v. CIT [1987] 168 ITR 296 (Punj. & Har.) The jurisdictional High Court in this case has held that material facts used in clause (a) of section 147 refer only to primary facts which have been disclosed by the assessee showing the sale purchase and profit supported by the Account Books. (is not sufficient). In the case of Malegaon Electricity Co. (P.) Ltd. The Apex Court held that if a material primary facts is suppressed the reassessment is justified. Smt. Rachna Singh further submitted that from all the aforementioned judgments, it is clear that if disclosure of primary facts is suppressed by the assessee, provisions of section 147 would be attracted. Furthermore, in line with Explanation to section 147, it has also been held that the onus cast on the assessee is not that of mere production of account books or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with authority in that behalf, the knowledge or awareness of the law may be in acted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be communicated by any one....that part alone of the note of an Audit Party which mentions the law which escaped the notice of the ITO constitute information.....In every case the ITO must determine what is the effect and consequence of the law mentioned in the audit note....the basis of his belief must be the law of which he has now become aware." In the light of the above it was clear that although the awareness of law as enshrined in Chowringhee Sales Bureau (P.) Ltd's case (supra) was communicated by the Audit Party, the Assessing Officer had arrived at a belief that income had escaped assessment and had determined the effect and consequence of the law mentioned in the Audit note. In the written note, the learned Departmental Representative has further contended:-- "During the course of appellate proceedings before the learned CIT(A), the assessee has relied on the certain judgments which have not been construed in the right perspective. These are discussed as under: In the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ore Co. Ltd. v. ITO [1991] 191 ITR 662 (SC), Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2000] 246 ITR 173 (Delhi), Rakesh Aggarwal v. Asstt. CIT [1997] 225 ITR 496 (Delhi), Dhanraj Singh & Co. v. CIT [1996] 218 ITR 312 (Pat.), Dr. Indra Chand Jain v. Dy. CIT [1997] 59 TTJ (Delhi) 699, Indo Marine Agencies (Kerala) (P.) Ltd. v. Asstt. CIT [1995] 51 TTJ (Coch.) 18, CIT v. Jindal Bros. Riee Mills [1989] 179 ITR 470 (Punj. & Har.), Upcom Cable Ltd. v. Dy. CIT [1997] 63 ITD 404 (All.).She accordingly, submitted that initiation of proceedings under section 147 was valid. 13. On merit, Smt. Rachna Singh submitted that the decision of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. and clause (ba) clearly laid down that Excise Duty was part of total turnover. Only freight or insurance attributable to transport of goods is required to be excluded. Everything else is to be treated as part of turnover. She accordingly, supported the order of the Assessing Officer. 14. Sh. C.S. Aggarwal, learned counsel for the assessee drew our attention to the reasons recorded by the Assessing Officer for initiation of reassessment proceedings. It is stated that "perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and that the assessment should have been made under section 9. While sections 9 and 10 can be described as law, the opinion of the audit party in regard to their application is not law. It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the ITO constitutes 'information' within the meaning of section 147(b); the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the ITO. In every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO." 16. Sh. Aggarwal al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years. On merit, he submitted that only Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. [2000] 245 ITR 769 has held that Excise Duty and other levies are not part of the total turnover for computing relief under section 80HHC of the Income-tax Act. 18. We have given careful thought to the rival submissions of the parties. The controversy involved before us is whether Excise Duty is to be treated as part of "turnovers" for computing relief under section 80HHC (3) of the Income-tax Act. It is the contention of the Revenue that Excise Duty is part of total turnover of business and is to be taken into account. It is further contended that the assessee failed to include Excise Duty in the total turnover while claiming relief under section 80HHC of the Income-tax Act in the returns, and on account of above failure to disclose fully and truly all material facts necessary for the assessment, the income escaped assessment. The assessee, on the other hand, contended that Excise Duty was never included in total turnover for computing deduction under section 80HHC of the Income-tax Act and, therefore, there was no failure on the part of the assessee to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue. 22. Turning to the various decisions of Tribunal, we may refer to decision of Calcutta Bench in the case of Chloride India Ltd. v. Dy. CIT [1995] 53 ITD 180, wherein the Bench held that Excise Duty was not to form part of total turnover, the reason being that excise and sale-tax was not included in the export turnover. In case the above levies were included in the total turnover, the relief permissible under section 80HHC would become negligible and the very purpose of statutory provisions would be defeated. The aforesaid decision has been followed by the other Benches of Tribunal in several cases, some of them being the following:-- 1. Dy. CIT v. Stone India Ltd. [2000] 69 TTJ (Cal.) 569. 2. Sudarshan Chemical Industries Ltd. v. Dy. CIT [1997] 60 ITD 629 (Pune) 3. Wolkem India Ltd. v. Dy. CIT [1999] 65 TTJ (Jp.) 59 4. Avon Cycles Ltd. v. Asstt. CIT [1997] 59 TTJ (Chd.) 75 5. Shri Dinesh Mills Ltd. v. Asstt. CIT [2000] 72 ITD 110. All these decisions of various Benches are in favour of the assessee and in some decisions, the case of Chowringhee Sales Bureau (P.) Ltd. has been taken into account. 23. The learned Departmental Representative, however, relied upon two dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, any interpretation of the provision which seeks to reduce the deduction has to be rejected. Now referring to the text, it is clear that the amount of deduction is the "profit" derived from export forming part of the total income. So the purpose of section 80HHC is to find out portion of the profit out of the total profit (income) of the assessee. The "total turnover", therefore, should include such receipts only which have something to do with the "profit" of the business. It is difficult to argue that statutory levies imposed on a businessman has any element of profit. The assessee cannot recover more than what is authorised by the statute. There is no question of earning any profit out of statutory levies like sale-tax or excise and, therefore, these levies cannot form part of "total turnover" if purpose stated above namely to find out position of the total profit is kept in mind. Further it is seen that the relevant provision uses expression "total turnover of the business". The word "business" is important and is to be given its natural meaning. The expression, therefore, cannot be considered in a technical sense. When natural meaning is given as would be done by a busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat notices under section 148 of Income-tax Act were issued in both the assessment years after the expiry of four years from the end of the relevant assessment year. There is further no dispute that the original assessments in both the assessment years were made under sub-section (3) of section 143 and, therefore, conditions as per proviso to section 147 are also to be satisfied. As per the Revenue, there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment in the two assessment years under consideration. To be specific, the Revenue has contended that assessee failed to include Excise Duty recovered in the total turnover, while claiming relief under section 80HHC of the Income-tax Act in the returns. It is further claimed by the Revenue that assessee failed to highlight in the return that Excise Duty was not included in the "total turnover". The deduction was allowed on the basis of claim in both the assessment years and thus, income escaped assessment. 27. After considering submissions of both the parties in the light of material available on record, we are unable to agree with the contention advanced on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken for purposes of section 80HHC(3) of the Act, the Excise Duty recovered has not been included. There is no statutory obligation on the part of the assessee to highlight above fact. Neither in the Form prescribed, nor in the statutory provisions there is any specific obligation to treat Excise Duty as part of turnover under section 80HHC(3) of the Act. In this connection, reference is invited to the decision of Hon'ble Allahabad High Court in the case of Modi Spg. & Wvg. Mills wherein it has been laid down that duty of the assessee to disclose fully and truly primary and relevant facts would depend on the nature of information that the assessee is enjoined upon by the statute to furnish at the time of filing of return or when is asked by the Assessing Officer. The assessee has no obligation to disclose or provide information on the points neither required by statute nor prescribed by the Form of return, nor required by the Assessing Officer in the course of assessment proceedings. 29. The present case of failure on the part of the assessee to furnish material information relating to assessment is being made out by the Revenue on the basis of its interpretation of expression "tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of goods sold in the course of business constitutes trading receipt and is to be included in the total turnover." It is evident from above that the Supreme Court treated sale tax collected from buyers and not paid either to sale tax department or to the actual owner of goods, as trading receipt in the hands of an auctioneer. According to the Assessing Officer, the Apex Court held that the taxes forming part of sale consideration--constitutes trading receipt and is to be included in the total turnover. The Supreme Court was dealing with sale tax and not with the Excise Duty. The question as to what should be turnover or total turnover was never considered and decided by the Hon'ble Supreme Court. The unpaid sales-tax could be added as business receipt for it was not paid by the assessee in that case. The Assessing Officer twisted the judgment to suit his purpose. It has already been discussed that having regard to purpose of levy, text and context of the provision levies may or may not be trading receipts subject to taxation under the income-tax and other statutes. The legal inference drawn by the Assessing Officer of a statutory provision which is open to doubt and deb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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