Decided on August 14,2014

Capital Pharma Appellant


Abraham P.George, Member (A) - (1.) IN this appeal filed by the assessee directed against an order dated 02 -09 -2002 of CIT(A), Mysore, it has raised 10 grounds in toto of which grounds 1 & 10 are general, needing no specific adjudication. Through its grounds 2 to 4, assessee challenges the re -opening done for the impugned assessment year.
(2.) LEARNED counsel for the assessee submitted that no income coming within meaning of Sec. 147 r.w.s. 2(24) of the IT Act, 1961 (in short the Act). According to him, definition of income as given in Sec. 2(24)(i) mentioned profit and gains. Further, as per learned AR Sec. 28 defined what could be the profits and gains of business or profession and addition arising out of disallowance made under sec. 40(a)(ia) for non -deduction of tax at source would not fall under it. In any case, according to him, no speaking order was passed on the objection raised by the assessee to the notice u/s. 148. Counsel for the revenue on the other hand, stated that re -opening was rightly done. We have seen the orders, recorded reasons and carefully given our mind to the contentions raised by the learned AR. In the first place what we find is that return for impugned assessment year filed by the assessee on 19 -10 -2005 was subjected only to a processing u/s. 143(1). We have looked at the reasons for re -opening, considering this aspect. What can be seen is the relevancy of the reason and not sufficiency. Assessing Officer had recorded the reasons for reopening which was done within 4 years of the end of the impugned assessment and this reads as under: "From the return, it is seen that assessee has paid interest to the following persons, but defaulted in deduction of tax. In view of the newly introduced provisions of Sec 40(a)(ia) w.e.f. assessment year 2005 -06, the entire expenditure of Rs. 2,67,150/ - stands to get disallowed. Therefore, I have reason to believe that assessee's failure to deduct tax on the interest payment of Rs. 2,67,150/ - thereby claiming excess expenditure, resulted in escaped assessment within the meaning of Sec. 147 of the IT Act." In our opinion, disallowance made under Sec. 40(a)(ia) also becomes part of income in the final computation. Definition of income in sec. 2(24) being inclusive and not exhaustive, additions made on account of disallowances also would fall under it, not withstanding sub -clause (va) to (ve) thereof which specifically mentions items falling under sec. 28(iiia), (iiib), (iiic), (iv) and (v). We cannot also say that the reason mentioned by AO was irrelevant, especially since originally the return was subjected only to processing under section 143(1) of the Act. As for the ground raised by the assessee the objection raised by it on the notice under section 148, was not dealt with by the AO, it is necessary to have a look at such objection. This is reproduced hereunder: "2.2. On receipt of the reason recorded, the assessee has filed a letter dated 15 -11 -2008 stating that though the above -cited letter you have given us reason for issuance of notice u/s. 148 of the IT Act, 1961 for the assessment year 2006 -07. In this connection, we have to state as follows: Our assessment were completed by the Hon'ble ITO (TDS), Mangalore for the assessment years 2003 -04 to 2005 -06. The Hon'ble ITAT, Bangalore vide its order in MP 30 to 32/Bang/2008 has remanded our case for the assessment year 2003 -04 and orders have already been passed by the Hon'ble IT Office (TDS), Mangalore in our favour for this year. Since orders for assessment years 2004 -05 and 2005 -06 were already passed, by Hon'ble ITO(TDS), Mangalore. We are expecting favouable decision based on assessment year 2003 -04. Hence, assessment u/s. 148 for the assessment year 2005 -06 will not be sustainable." A reading of the above does not show any specific objection raised by the assessee for the AO to deal with, except narrating the course of events in its appeals on orders of tax deduction officer. Hence relevance placed on the decision of the Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO : [2003] 259 ITR 19 : [2002] 125 Taxman 963 would not further its case. We therefore, dismiss grounds 2 to 4 raised by the assessee.
(3.) VIDE its grounds 5 to 9 assessee states that provision of section 40(a)(ia) was not applicable to it. As per the assessee the recipients furnished Form 15G/H and it had no obligation to deduct tax.;

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