HAPPY FORGINS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) HAVE the respondents acted illegally in reopening the assessment of the petitioner assessee for the asst. year 1998 99 ? This is the short question that arises for consideration in this writ petition. The relevant facts may be briefly noticed.

(2.) THE petitioner is a limited company. It filed its return of income for the asst. year 1998 99 on 30th Nov., 1998. It showed a gross income of Rs. 1,90,07,901. The petitioner claimed deductions including an amount of Rs. 50,07,669 on account of excise duty paid in advance allowable under s. 43B. This return was considered under S. 143(1)(a). An intimation was sent to the assessee vide letter dt. 24th Aug., 1999. On 11th Aug., 2000 the Dy. CIT respondent No. 2 gave a notice under S. 148 of the IT Act, 1961, to the petitioner. The assessee was required to file its return of income for the asst. year 1998 99 within a period of 31 days. The petitioner filed the return on 22nd Aug., 2000. A copy has been produced as Annexure P 4 with the writ petition. In response to this return filed under S. 148 of the Act, the petitioner was served with notice under ss. 142(1) and 143(2) along with a questionnaire. The copies have been collectively produced as Annexure P 5 with the writ petition. The reasons for reopening the assessment proceedings were also communicated. A copy has been produced as Annexure P 6 with the writ petition. On receipt of the aforesaid notices, the petitioner filed his explanation on 10th Oct., 2000. It claimed that no income had escaped assessment. Thus, the proceedings under S. 147 of the Act deserve to be dropped.

(3.) A written statement has been filed on behalf of the respondents by Mr. K.K. Kapila, CIT, Ludhiana. The claim made by the petitioner has been controverted. It has been averred that the notices under ss. 143(2) and 142(1) were served on the petitioner on 11th Sept., 2000, and not on 11th Aug., 2000. The allegation that the AO has rejected the petitioner's submissions is not correct. The objections raised by the assessee will be considered at the time of finalisation of the reassessment under S. 147 of the IT Act, 1961". It has been further stated that a perusal "of the assessment record for the asst. year 1998 99 revealed that while computing its taxable income, the assessee had deducted a sum of Rs. 50,07,669 from the profit determined by it as per P&L a/c. This sum represented the advance excise duty paid and appeared as an asset in the balance sheet as on 31st March, 1998. The amount was claimed to be a deductible expenditure under s.43B of the IT Act, 1961. This expenditure "was not routed by it through the P&L a/c". On this basis, it is claimed that the AO "had reason to believe that the income of the assessee chargeable to tax had escaped assessment". It was "on the basis of facts and figures available in the balance sheet and P&L a/c, etc. that the AO formed the belief that the assessee has wrongly claimed deduction under S. 43B.............. and, therefore, the income to the extent of Rs. 50,07,669 had escaped assessment". It is maintained that the assessee "was charging to its P&L a/c, fiscal duties paid during the year........... However, while valuing its closing stock, the elements of fiscal duty and the other direct manufacturing costs were not included. This resulted in under valuation of inventories and understatement of profits". Various other averments made by the petitioner have been controverted. The respondents pray that the writ petition be dismissed.