ALFA LAVAL [I] LTD, Pune V. Dy CIT Cir 8 Pune, Pune

ITA 1499/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72413 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 06-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Business income; Depreciation; Wrong claim; Reason to believe
• Section: 143(3); 142(1); 80HHC; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1499/PN/2012 (ASSESSMENT YEAR : 2004-05) ALFA LAVAL (INDIA) LTD., MUMBAI-PUNE ROAD, DAPODI, PUNE 411 012. PAN : AAACA5899A . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE- 8, PUNE. . RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SHRI P. L. PATHADE DATE OF HEARING : 24-10-2013 DATE OF PRONOUNCEMENT : 16-12-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 04.05.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 31.12.2010 PAS SED BY THE ASSESSING OFFICER, U/S 147 R.W.S. 143(3) OF THE INCOME-TAX AC T, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2004-05. 2. IN THIS APPEAL, THE FIRST AND FOREMOST ISSUE RAI SED BY THE ASSESSEE IS THAT THE PROCEEDINGS INITIATED BY THE ASSESSING OFF ICER BY ISSUANCE OF NOTICE U/S 148 OF THE ACT ARE BAD IN LAW AND THEREFORE THE IMPUGNED ASSESSMENT MADE NEEDS TO BE ANNULLED. 3. ON THIS ASPECT, THE POINT MADE BY THE ASSESSEE I S THAT THE ISSUANCE OF NOTICE U/S 148 OF THE ACT HAS TAKEN PLACE AFTER A P ERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ASSESSM ENT WAS ORIGINALLY MADE ITA NO. 1499/PN/2012 A.Y. 2004-05 U/S 143(3) OF THE ACT. ACCORDINGLY, IT IS CANVASSE D THAT THE VALIDITY OF THE NOTICE ISSUED U/S 148 OF THE ACT REOPENING THE ASSESSMENT WOULD DEPEND UPON FULFILLMENT OF THE CONDITIONS PRESCRIBED IN THE FIR ST PROVISO TO SECTION 147 OF THE ACT. THE PROVISO TO SECTION 147 OF THE ACT PRESCRI BES THAT WHERE AN ASSESSMENT U/S 143(3) OF THE ACT HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN TO REOPEN THE ASSESS MENT U/S 147 OF THE ACT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 OF THE ACT OR IN RESPONSE A NOTICE I SSUED U/S 142(1) OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR AN ASSESSMENT. IN THE PRESENT CASE, THE CLAIM MADE BY THE ASSESSEE IS THAT IT MADE A RETURN U/S 139 OF THE ACT AND THERE WAS NO F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS RELATING TO THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. IN SU PPORT OF HIS SUBMISSION, THE LEARNED COUNSEL HAS REFERRED TO THE RELEVANT PA PERS PLACED IN THE PAPER BOOK TO DEMONSTRATE THAT ASSESSEE HAD DISCLOSED FUL LY AND TRULY ALL MATERIAL FACTS RELATING TO THE ASSESSMENT OF THE YEAR IN QUE STION. OSTENSIBLY, THE ISSUE IN DISPUTE IS WITH REGARD TO THE DETERMINATION OF T HE PROFITS OF THE BUSINESS AS DEFINED IN EXPLANATION (BAA) OF SUB-SECTION (4C) OF SECTION 80HHC FOR THE PURPOSES OF COMPUTING ELIGIBLE DEDUCTION U/S 80HHC OF THE ACT. 4. BEFORE PROCEEDING FURTHER, THE SALIENT FACTS OF THE CASE CAN BE SUMMARIZED AS FOLLOWS. THE ASSESSEE COMPANY FILED A RETURN OF INCOME ORIGINALLY ON 31.10.2004 DECLARING TOTAL INCOME OF RS.84,78,77,408/- WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT BY WAY OF AN O RDER U/S 143(3) OF THE ACT DATED 28.12.2006 WHEREBY THE TOTAL INCOME WAS DETER MINED AT RS.88,11,88,420/-. IN THE RETURN OF INCOME, ASSESS EE HAD INTER-ALIA CLAIMED DEDUCTION WITH RESPECT TO ITS EXPORT PROFITS AT RS. 10,44,40,554/- AND IN THE ASSESSMENT THE ASSESSING OFFICER ALLOWED THE SAME A T RS.9,02,78,002/-. ITA NO. 1499/PN/2012 A.Y. 2004-05 SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED A NOTICE U/S 148 OF THE ACT ON 29.03.2010 ON THE GROUND THAT CERTAIN INCOME CHARGE ABLE TO TAX HAD ESCAPED ASSESSMENT INASMUCH AS THERE WAS AN EXCESS DEDUCTIO N ALLOWED U/S 80HHC OF RS.11,32,850/-. IN THE ENSUING ASSESSMENT FINAL IZED U/S 147 R.W.S. 143(3) OF THE ACT DATED 31.12.2010 THE DEDUCTION ALLOWABLE U/S 80HHC HAS BEEN REWORKED BY EXCLUDING 90% OF RS.98,43,701/- BEING I NCOME CREDITED BY WAY OF IMPACT ON FINANCIAL ACTIVITY FROM THE PROFITS OF THE BUSINESS WHILE DETERMINING THE DEDUCTION U/S 80HHC OF THE ACT. TH E SAID ACTION OF THE ASSESSING OFFICER HAS BEEN AFFIRMED BY THE CIT(A), WHICH IS THE SUBJECT-MATTER OF APPEAL BEFORE US. 5. IN PARA 4 OF THE ASSESSMENT ORDER, THE REASONS R ECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT HAVE BEEN REPRODUCED WHICH READ AS UNDER :- 4. VIDE LETTER DATED 12.05.2010, THE REASONS RECOR DED FOR REOPENING THE ASSESSMENT WERE FURNISHED. THE REASO NS ARE REPRODUCED BELOW : 1. ON VERIFICATION OF CASE RECORDS, IT IS SEEN THAT INCOME ON ACCOUNT OF IMPACT ON FINANCIAL ACTIVITY AMOUNTING T O RS.98,43,701/- FOR A.Y. 2004-05 SHOULD HAVE BEEN EX CLUDED FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE INCOME TAX ACT, 1961. 2. DUE TO THE ABOVE OMISSION THERE HAS BEEN EXCESS DEDUCTION U/S 80HHC FOR A.Y. 2004-05 AMOUNTING TO RS.11,32,850/- AND SHORT LEVY OF TAX OF RS.4,06,410 /- INCLUDING SURCHARGE. 3. THEREFORE, I HAVE REASON TO BELIEVE THAT THERE H AS BEEN AN ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTI ON 147 OF THE INCOME TAX ACT; THEREFORE, IT IS A FIT CASE FOR ISSUE OF NOTICE U/S 148 OF THE ACT. ACCORDINGLY, A NOTICE U/S 148 IS ISSUED. 4. THE NOTICE U/S 148 IS ISSUED WITH APPROVAL OF TH E CIT-V, PUNE VIDE LETTER NO. PN/CIT-V/147/2009-10/3987 DATE D 26.03.2010. 6. NOW, THE FIRST POINT MADE BY THE ASSESSEE IS THA T THE ASSESSMENT HAS BEEN REOPENED AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ORIGINAL ASSESSMENT WAS MAD E U/S 143(3) OF THE ACT AND THEREFORE, THE PRESCRIPTION OF THE FIRST PROVIS O TO SECTION 147 OF THE ACT ITA NO. 1499/PN/2012 A.Y. 2004-05 APPLIES. IT IS SOUGHT TO BE MADE OUT THAT IN TERMS OF THE FIRST PROVISO TO SECTION 147 OF THE ACT, THE ASSESSING OFFICER IS REQUIRED T O MAKE OUT A CASE IN THE REASONS RECORDED AS TO WHETHER THERE IS A FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT. IT IS POINTED OUT THAT THE ASSESSING OFFICER COULD HAVE P ROCEEDED TO REOPEN THE ASSESSMENT ONLY AFTER RECORDING THE AFORESAID AND F OR HIS FAILURE TO DO SO, THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT ARE RE NDERED NUGATORY. IN SUPPORT OF THE AFORESAID PROPOSITION, RELIANCE HAS BEEN PLA CED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR CO MPONENTS LTD. VS. ACIT, (2012) 343 ITR 183 (BOM). 7. IN THE ABOVE CONTEXT, WE HAVE PERUSED THE JUDGM ENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. (SUPRA). IN THE CASE BEFORE THE HONBLE HIGH COURT, NOTICE WAS ISSU ED U/S 148 OF THE ACT FOR REOPENING AN ASSESSMENT BEYOND THE PERIOD OF FOUR Y EARS AND THE INCOME OF THE ASSESSEE WAS ORIGINALLY ASSESSED BY WAY OF AN O RDER U/S 143(3) OF THE ACT. CONSIDERING A SIMILAR ARGUMENT AS IS BEING MADE BEF ORE US, THE HONBLE HIGH COURT HELD AS UNDER :- HAVING REGARD TO THE PURPOSE OF THE SECTION, WE AR E OF THE VIEW THAT THE POWER CONFERRED BY S. 147 DOES NOT PROVIDE A FR ESH OPPORTUNITY TO THE AO TO CORRECT AN INCORRECT ASSESSMENT MADE EARLIER UNL ESS THE MISTAKE IN THE ASSESSMENT SO MADE IS THE RESULT OF A FAILURE OF TH E ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMEN T. INDEED, WHERE THE ASSESSEE HAS FULLY DISCLOSED ALL THE MATERIAL FACTS , IT IS NOT OPEN FOR THE AO TO REOPEN THE ASSESSMENT ON THE GROUND THAT THERE IS A MISTAKE IN ASSESSMENT. MOREOVER, IT IS NECESSARY FOR THE AO TO FIRST OBSER VE WHETHER THERE IS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT AND HAVING OBSERVED THAT THERE IS SUCH A FAILURE TO PRO CEED UNDER S. 147. IT MUST FOLLOW THAT WHERE THE AO DOES NOT RECORD SUCH A FAI LURE HE WOULD NOT BE ENTITLED TO PROCEED UNDER S. 147. AS OBSERVED EARL IER, THE AO HAS NOT RECORDED THE FAILURE ON THE PART OF THE PETITIONER TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASST. YR. 1997-98. WHAT IS RECORDED IS THAT THE PETITIONER HAS WRONGLY CLAIMED CERTAIN DEDUCTIONS W HICH HE WAS NOT ENTITLED TO. THERE IS A WELL KNOWN DIFFERENCE BETWEEN A WRONG CL AIM MADE BY AN ASSESSEE AFTER DISCLOSING ALL THE TRUE AND MATERIAL FACTS AND A WRONG CLAIM MADE BY THE ASSESSEE BY WITHHOLDING THE MATERIAL FA CTS FULLY AND TRULY. IT IS ONLY IN THE LATTER CASE THAT THE AO WOULD BE ENTITL ED TO PROCEED UNDER S. 147. WE ARE SUPPORTED IN THIS VIEW BY A DECISION OF A DI VISION BENCH OF THIS COURT IN HINDUSTAN LEVER LTD. VS. R.B. WADKAR, ASSTT. CIT (2004) 190 CTR (BOM) 166 : (2004) 268 ITR 332 (BOM) WHERE IN A SIMILAR C ASE THE DIVISION BENCH ITA NO. 1499/PN/2012 A.Y. 2004-05 HELD THAT REASON THAT THERE WAS A FAILURE TO DISCLO SE FULLY AND TRULY THAT ALL MATERIAL FACTS MUST BE READ AS RECORDED BY THE AO A ND IT WOULD NOT BE PERMISSIBLE TO DELETE OR ADD TO THOSE REASONS AND T HAT THE AO MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL RECORD. THE DIV ISION BENCH OBSERVED AS FOLLOWS : HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT O R MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. 5. WE FIND IN THE CIRCUMSTANCES THAT THE IMPUGNED N OTICE IS NOT SUSTAINABLE AND IS LIABLE TO BE QUASHED AND SET ASI DE. ACCORDINGLY, THE WRIT PETITION IS ALLOWED IN TERMS OF PRAYER CLS. (A) AND (C). 8. OSTENSIBLY, THE HONBLE HIGH COURT OBSERVED THAT THE ASSESSING OFFICER DID NOT RECORD THAT THERE WAS FAILURE ON THE PART O F THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. WHAT WAS RECORDED IN THE CASE BEFORE THE HONBLE HIGH COURT WAS THAT THE PETITIONER HAD WRONGLY CLAIMED CERTAIN DEDUCTION WHICH HE WAS NOT ENTITLED TO. UNDER THESE CIRCUMSTANCES, THE HONBLE HIGH COURT HELD THAT THE NOTICE U/S 148 OF THE ACT WAS NOT SUSTAINABLE BECAUSE IN THE REASONS RECORDED THERE WAS NO RECORDING BY THE ASSESSING OFFICER TO THE EFFECT THAT THERE W AS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE ASSESSMENT. APPLYING THE AFORESAID PARITY OF REASO NING TO THE PRESENT CASE, WE FIND THAT THE REASONS RECORDED, WHICH WE HAVE RE PRODUCED IN THE EARLIER PARAGRAPHS, DO NOT CONTAIN ANY AVERMENT BY THE ASSE SSING OFFICER THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIALS FACTS NECESSARY FOR THE ASSESSMENT, MORE PARTICULAR LY, WITH REGARD TO THE EXCESS DEDUCTION U/S 80HHC AMOUNTING TO RS.11,32,85 0/-. WHAT IS ONLY RECORDED IS THAT ON THE VERIFICATION OF RECORDS IT IS SEEN THAT INCOME BY WAY OF IMPACT ON FINANCIAL ACTIVITY AMOUNTING TO RS.98,4 3,701/- IS LIABLE TO BE EXCLUDED FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT AND FOR THE SAID REASON, THE ASSESSING OFFICER FORMED A BELIEF THAT THERE WAS AN ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 80HHC OF THE ACT QUA EXCESS DEDUCTION U/S 80HHC OF THE ACT OF RS.11,32,8 50/-. IN OUR CONSIDERED OPINION, THE ABSENCE OF ANY AVERMENT IN THE REASONS RECORDED, AS REQUIRED BY THE FIRST PROVISO TO SECTION 147 OF THE ACT TO THE EFFECT THAT THERE IS FAILURE ON ITA NO. 1499/PN/2012 A.Y. 2004-05 THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOS E ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, RENDERS THE INITIATION OF PROCE EDINGS SUSCEPTIBLE TO A LEGAL INFIRMITY, AS EXPLAINED BY THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. (SUPRA). THUS, ON THIS ASP ECT ITSELF, WE ARE INCLINED TO HOLD THAT INITIATION OF PROCEEDINGS U/S 147 OF T HE ACT IN THE PRESENT CASE ARE BAD IN LAW AND CONSEQUENTIAL ASSESSMENT IS LIABLE T O BE ANNULLED. 9. EVEN OTHERWISE, WE FIND THAT HAVING REGARD TO TH E MATERIAL ON RECORD THERE WAS A FULL AND TRUE DISCLOSURE BY THE ASSESSE E OF ALL THE MATERIAL FACTS IN RELATION TO THE ASSESSMENT; AND, ASSESSEE HAD SPECI FICALLY ELUCIDATED THE MANNER IN WHICH THE DEDUCTION U/S 80HHC OF THE ACT WAS COMPUTED. FURTHER, WE ALSO FIND THAT THERE WAS A DUE APPLICATION OF MI ND BY THE ASSESSING OFFICER WITH RESPECT TO THE ASSESSEES CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. BOTH THE AFOR ESAID POINTS ARE BORNE OUT OF THE MATERIAL ON RECORD WHICH WE WOULD PROCEED TO BRIEFLY REFER TO HEREINAFTER. THE ISSUE IN QUESTION RELATES TO THE DETERMINATION OF THE PROFITS OF THE BUSINESS AS DEFINED IN EXPLANATION (BAA) TO SE CTION 80HHC OF THE ACT. THE ASSESSEE WAS INTER-ALIA ALSO ENGAGED IN ACTIVITY OF LEASING AND HIRE PURCHASE OF CERTAIN ITEMS OF MACHINERY. IN THE BOO KS OF ACCOUNT PREPARED UNDER THE COMPANIES ACT, 1956 INCOME WAS RECOGNIZED ON SUCH TRANSACTIONS IN TERMS OF THE ACCOUNTING STANDARD-19 ISSUED BY TH E INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA. THE LEASE RENTALS ARE APPORTI ONED BETWEEN THE PRINCIPAL AND FINANCE INCOME, CALCULATED ON THE BASIS OF THE IMPLICIT INTERNAL RATE OF RETURN. THE PRINCIPAL AMOUNT RECEIVED REDUCED THE NET INVESTMENT IN THE LEASE/HIRE PURCHASE AND THE COMPONENT OF FINANCE IN COME IS RECOGNIZED A REVENUE INCOME. AS A RESULT, THE INCOME BY WAY OF LEASE RENTALS AND HIRE CHARGES WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT AT RS.31,63,353/- AND NO DEPRECIATION WAS CLAIMED ON THE ASSETS LEASED/HIRED OUT AND THE PORTION OF PRINCIPAL RECEIVED REDUCED THE NET INVESTMENT IN TH E LEASED/HIRED ASSET. IN THE COMPUTATION OF INCOME ANNEXED TO THE RETURN OF INCO ME, ASSESSEE TREATED THE ITA NO. 1499/PN/2012 A.Y. 2004-05 ENTIRE LEASE RENTALS RECEIVED (I.E. COMPRISING OF P RINCIPAL AND FINANCE INCOME) AS AN ITEM OF INCOME AND CLAIMED DEPRECIATION ON TH E VALUE OF ASSETS SO LEASED/HIRED OUT. ACCORDINGLY, THE INCOME WAS ENHA NCED TO RS.1,30,07,054/- AS AGAINST RS.31,63,353/- CREDITED IN THE PROFIT AN D LOSS ACCOUNT AND THUS IN THE RETURN OF INCOME/COMPUTATION OF INCOME, ASSESSE E ENHANCED THE INCOME BY A SUM OF RS.98,43,701/-. SIMULTANEOUSLY, IT CLA IMED DEPRECIATION OF RS.57,07,335/- ON THE VALUE OF THE LEASED/HIRED ASS ETS. THE AFORESAID POSITION WAS DEPICTED BY THE ASSESSEE IN THE COMPUTATION OF INCOME AND ANNEXURE- 1 THEREOF WHICH FORMED PART OF THE RETURN OF INCOME, COPIES OF WHICH HAVE BEEN PLACED AT PAGES 37 TO 38A OF THE PAPER BOOK. FURTH ERMORE, WHILE COMPUTING THE DEDUCTION U/S 80HHC OF THE ACT IN RELATION TO E XPORT PROFITS AMOUNTING TO RS.10,44,40,554/- ASSESSEE FURNISHED A CERTIFICATE FROM A CHARTERED ACCOUNT IN THE PRESCRIBED FORM NO. 10CCAC, WHICH WAS ALSO A NNEXED WITH THE RETURN OF INCOME, A COPY OF WHICH HAS BEEN PLACED AT PAGES 32 TO 35 OF THE PAPER BOOK. IN THE COLUMN 18 SUB-ITEM (A) OF THE CERTIFI CATE, THE CALCULATION OF THE TOTAL TURNOVER OF BUSINESS HAS BEEN WORKED OUT, WHI CH SHOWS THAT THE TURNOVER REFLECTED IN THE PROFIT AND LOSS ACCOUNT H AS BEEN INCREASED BY A SUM OF RS.98,43,701/- WHICH WAS THE IMPACT ON FINANCIA L ACTIVITY. NOTABLY, THE FINANCE INCOME ON ACCOUNT OF LEASE AND HIRE PURCHAS E ALREADY LYING CREDITED IN THE PROFIT AND LOSS ACCOUNT OF RS.31,63,353/- WAS S EPARATELY SHOWN AS AN ITEM OF TURNOVER IN THE SAID COMPUTATION WHICH READ S AS UNDER :- A. THE TURNOVER OF BUSINESS IS WORKED OUT AS UNDE R :- TURNOVER OF GOODS AND JOBS RS.3,990,853,491/- SERVICES RS. 19,344,475/- SCRAP SALE RS. 21,449,552/- FINANCE INCOME FOR LEASE & HIRE PURCHASE RS. 3,163,353/- LEASE RENTALS (INCREMENTAL) RS. 9,843,701/- RS.4,044,654,572/- ITA NO. 1499/PN/2012 A.Y. 2004-05 10. SIMILARLY, IN COLUMN 18 SUB-ITEM (B) OF THE C ERTIFICATE, THE PROFITS OF THE BUSINESS WERE WORKED OUT AS UNDER :- B. THE PROFITS OF BUSINESS ARE WORKED OUT AS FOL LOWS : BUSINESS INCOME RS.853,793,778/- AS PER RETURN LESS : 90% OF THE COMMISSION RS. 373,259/- INTEREST RECEIVED RS.19,690,458/- SALE OF SCRAPPED ASSETS RS. 90,374/- EXPORT INCENTIVES RS. 3,208,597/- INCENTIVE FORM BROKERS RS. 5,221/- RS.23,367,909/- 90% THEREOF RS.21,031,118/- RS.832,762,660/- 11. OSTENSIBLY, THE PROFITS OF THE BUSINESS HAVE BEEN COMPUTED BY APPLYING EXPLANATION (BAA) TO SECTION 80HHC(4C) OF THE ACT BY CONSIDERING THE BUSINESS INCOME AT RS.85,37,93,778/- AS PER THE COM PUTATION OF INCOME, WHICH IS INCLUSIVE OF THE ENHANCED INCOME SHOWN BY WAY OF IMPACT ON FINANCIAL ACTIVITY AMOUNTING TO RS.98,43,701/-. 12. NOW, AT THE TIME OF INITIATION OF PROCEEDINGS U /S 147 OF THE ACT, THE POINT MADE BY THE ASSESSING OFFICER IS THAT WHILE DETERMI NING THE AFORESAID PROFITS OF THE BUSINESS, 90% OF INCOME BY WAY OF IMPACT O N FINANCIAL ACTIVITY AMOUNTING TO RS.98,43,701/- HAS NOT BEEN EXCLUDED B Y APPLYING EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT. 13. IN THIS BACKGROUND, ONE HAS TO EXAMINE AS TO WH ETHER THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IS JUSTIFIED, WHICH WOULD DEPEND ON WHETHER THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATING TO THE ASSESSMENT FOR THE Y EAR UNDER CONSIDERATION. NOW, THE MATERIAL ON RECORD DISCLOSES THAT ASSESSEE HAD FURNISHED WITH ITS RETURN OF INCOME, THE DETAILS OF COMPUTATION OF INC OME, THE ADJUSTMENT MADE TO THE RETURNED INCOME ON ACCOUNT OF IMPACT ON FINANC IAL ACTIVITY, THE CLAIM FOR DEDUCTION U/S 80HHC, DETAILS OF THE TOTAL TURNOVER COMPUTED FOR THE PURPOSES ITA NO. 1499/PN/2012 A.Y. 2004-05 OF SECTION 80HHC, DETAILS OF THE PROFITS OF THE BU SINESS COMPUTED FOR THE PURPOSES OF SECTION 80HHC BY APPLYING EXPLANATION ( BAA) THEREOF, AND THE ENTIRE FACTUAL ASPECT WAS FURNISHED IN THE MANNER P RESCRIBED IN LAW I.E. BY WAY OF A REPORT OF A CHARTERED ACCOUNTANT CONTAINED IN FORM NO. 10CCAC. THE AFORESAID MATERIAL, IN OUR OPINION, CLEARLY DEPICTE D THE MANNER IN WHICH THE PROFITS OF THE BUSINESS WERE COMPUTED FOR THE PURP OSES OF SECTION 80HHC OF THE ACT BY APPLYING EXPLANATION (BAA) THEREOF. IN- FACT, WITH RESPECT TO THE INCOME ON ACCOUNT OF IMPACT ON FINANCIAL ACTIVITY , THE ASSESSING OFFICER DULY APPLIED HIS MIND TO THE ISSUE WHEN HE PASSED THE OR DER OF ASSESSMENT U/S 143(3) OF THE ACT ON 28.12.2006. WE SAY SO FOR THE REASON THAT IN THE LAST PART OF PARA 17(B) OF THE ASSESSMENT ORDER HE HAS SPECIF ICALLY NOTED THE INCOME CREDITED TO THE PROFIT AND LOSS A/C ON ACCOUNT OF F INANCE INCOME FOR LEASE AND HIRE PURCHASE OF RS.31,63,353/- AND EXCLUDED THE SA ME FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSES OF COMPUTING DEDUCTION U /S 80HHC OF THE ACT. THUS, THE ASSESSING OFFICER CHOSE TO EXCLUDE ONLY A SUM OF RS.31,63,353/- IN ORDER TO COMPUTE THE PROFITS OF THE BUSINESS AS P ER EXPLANATION (BAA), ALTHOUGH THE INCREMENTAL INCOME DECLARED ON THIS CO UNT AMOUNTING TO RS.98,43,701/- WAS VERY MUCH BEFORE HIM BY WAY OF C OMPUTATION OF INCOME AND ANNEXURE-1 THEREOF AND ALSO IN COLUMNS 18 (A) & (B) OF THE CERTIFICATE ISSUED BY A CHARTERED ACCOUNTANT FOR DEDUCTION U/S 80HHC OF THE ACT. THEREFORE, IT IS A CASE WHERE NOT ONLY FULL AND TRU E DISCLOSURE HAS BEEN MADE BY THE ASSESSEE OF ALL THE MATERIAL FACTS IN RELATI ON TO THE COMPUTATION OF THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDUCTI ON U/S 80HHC OF THE ACT BUT THERE WAS ALSO A DUE APPLICATION OF MIND BY THE ASS ESSING OFFICER. AT THIS POINT, WE MAY ALSO REFER TO AN ARGUMENT SET-UP BY T HE REVENUE THAT 90% OF RS.98,43,701/- IS EXCLUDIBLE FROM THE PROFITS OF T HE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC OF THE ACT AND THU S EXCESSIVE DEDUCTION STOOD ALLOWED AND THEREFORE, INVOKING OF SECTION 14 7 OF THE ACT IS SOUGHT TO BE JUSTIFIED. A SIMILAR ARGUMENT HAS BEEN ANSWERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. (SUPRA ) BY STATING THAT THERE IS A ITA NO. 1499/PN/2012 A.Y. 2004-05 DIFFERENCE BETWEEN A WRONG CLAIM MADE BY THE ASSESS EE AFTER DISCLOSING THE FULL AND TRUE MATERIAL FACTS AND A WRONG CLAIM MADE BY THE ASSESSEE BY WITHHOLDING THE MATERIAL FACTS FULLY AND TRULY. AC CORDING TO THE HONBLE HIGH COURT, IT IS ONLY IN THE LATTER CASES THAT AN ASSES SING OFFICER IS ENTITLED TO PROCEED U/S 147 OF THE ACT. IN THE PRESENT CASE, A S WE HAVE CONCLUDED EARLIER, ASSESSEE HAS DISCLOSED FULL AND TRUE MATERIAL FACTS AND EVEN IF THE ORIGINAL ASSESSMENT HAS RESULTED IN ALLOWING OF A WRONG CLAI M, IT CANNOT BE PROCEEDED WITH BY THE ASSESSING OFFICER U/S 147 OF THE ACT BE CAUSE IT IS NOT A CASE WHERE THE CLAIM HAS BEEN MADE BY THE ASSESSEE BY WITHHOLD ING THE MATERIAL FACTS FULLY AND TRULY. 14. THEREFORE, IN THE PRESENT CASE, THE CONDITION P RECEDENT TO EXERCISE THE JURISDICTION TO REOPEN THE ASSESSMENT BEYOND FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR HAS NOT BEEN FULFILLED AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS. THUS, AS RIGHTLY POINTED OUT BY THE ASSESSEE, IN TERMS OF TH E JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PRASHANT PROJECTS LTD. VS. ACIT, (2011) 333 ITR 368 (BOM) AS ALSO THE JUDGMENT IN THE CASE OF T ITANOR COMPONENTS (SUPRA), THE INITIATION OF PROCEEDINGS U/S 147 OF T HE ACT IS LIABLE TO BE SET-ASIDE. WE HOLD SO. 15. BEFORE PARTING, WE MAY REFER TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INDIAN HUME PIPE CO. LTD. VS. ACIT, (2012) 348 ITR 439 (BOM) WHICH HAS BEEN RELIED UPON BY THE CIT(A) AND THE REVENUE BEFORE US TO SUPPORT THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT. IN THE CASE BEFORE THE HONBLE HIGH COURT, ISSUE RELATED TO REO PENING OF ASSESSMENT AFTER THE END OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR AND THE ORIGINAL ASSESSMENT WAS MADE U/S 143(3) OF THE ACT. THE CLA IM MADE BY THE ASSESSEE WAS THAT INITIATION WAS BAD IN LAW BECAUSE IT HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT A ND THEREFORE, THE INITIATION OF PROCEEDINGS WAS BAD IN VIEW OF THE SAME BEING NON-C OMPLIANT WITH THE FIRST ITA NO. 1499/PN/2012 A.Y. 2004-05 PROVISO TO SECTION 147 OF THE ACT. THE HONBLE HIG H COURT DID NOT ACCEPT THE AFORESAID PLEA OF THE ASSESSEE. HOWEVER, THE SAID JUDGMENT OF THE HONBLE HIGH COURT DOES NOT HELP THE REVENUE IN THE PRESENT CASE BECAUSE BEFORE THE HONBLE HIGH COURT IT WAS FACTUALLY DEMONSTRATED TH AT THERE WAS NO FULL AND TRUE DISCLOSURE OF THE RELEVANT FACTS BY THE ASSESS EE. FACTUALLY SPEAKING, THE POSITION IN THE PRESENT CASE STANDS ON A DIFFERENT FOOTING AND THEREFORE THE RATIO OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF INDIAN HUME PIPE CO. LTD. (SUPRA) DOES NOT APPLY IN THE PR ESENT CASE. CONSIDERING THE FACTUAL POSITION IN THE PRESENT CASE, THE ISSUE IN THE PRESENT CASE IS LIABLE TO BE DECIDED HAVING REGARD TO THE JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. (SUPRA ) AND PRASHANT PROJECTS LTD. (SUPRA) IN FAVOUR OF THE ASSESSEE. 16. IN THE RESULT, WE HOLD THAT THE INITIATION OF P ROCEEDINGS BY THE ISSUANCE OF NOTICE U/S 147/148 OF THE ACT IN THE PRESENT CAS E IS BAD IN LAW AND THEREFORE, THE CONSEQUENTIAL ASSESSMENT MADE IS HEREBY CANCELL ED. THUS, ASSESSEE SUCCEEDS ON THIS ASPECT. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 16 TH DECEMBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE