In case of concealment of income in return deduction under sec 80HHC is allowed appropriately and expenses related to business only allowable

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Briefly stated, the facts of the case are that the assessee filed its return of income on 30.10.2002, inter alia claiming the deduction u/s.80HHC. The return was proceeded u/s.143(1)(a). There was no regular assessment under the provisions of the Act. Thereafter, a notice was issued u/s.148 on the ground that the assessee incurred loss and hence was not entitled to deduction u/s.80HHC. The A.O There was no regular assessment. As is evident from the reasons reproduced above that the learned A.O. has relied inter alia on the judgment of the Hon'ble Supreme Court in the case of IPCA Laboratory VS. CIT (supra) dated 11.03.2004 and that of the Hon'ble Jurisdictional High Court in the case of Rohan Dyes & Intermediate Ltd. (supra), which is dated 04.08.2004, for canvassing the opinion that there was escapement of income. In view of the above two judgments, viz. one of the Hon'ble Supreme Court and the other of the Hon'ble Jurisdictional High Court, it is obvious that the assessee was wrongly allowed deduction u/s.80HHC to a higher level in disregard to these two cases. Explanation 2 to section 147 clearly provides under clause (b) that where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the A.O. that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, it shall be deemed to be a case where income chargeable to tax has escaped assessment. Present is a case in which the deduction claimed by the assessee u/s.80HHC has been allowed at a higher level in contravention to these two judgments. In such circumstances, no fault can be found with the A.O. in forming the view that the income chargeable to tax escaped assessment within the meaning of section 147.

Citation :
Income Tax Officer Ward 18(1)(3), 1st Floor, Parel, Mumbai-400 012 (Appellant) Vs. M/s. Ratan Silk Mills Gala Wood Work Compound, Opp. B. D. D. Chawl No. 115, Worli, Mumbai-400 013 PAN NO: AACFR 7220 D (Respondent) ITA No. : 6035/Mum/2007 Assessment Year: 2004-05 M/s. Ratan Silk Mills Gala Wood Work Compound, Opp. B. D. D. Chawl No. 115, Worli, Mumbai-400 013 PAN NO: AACFR 7220 D (Appellant) Vs. Income Tax Officer Ward 18(1)(3), 1st Floor, Parel, Mumbai-400 012 (Respondent)