Case Law Details
Brief Facts:
The assessee company is a public sector undertaking under the Ministry of Textiles. It is engaged in the business of export and domestic sales of handicrafts, handlooms, readymade garments, carpets, jewellery etc. The assessee had filed its return of income on 31.10.2002 declaring an income of Rs.63,25,117/-. The assessment was taken for scrutiny by issuing of a notice u/s 143(2) of the Act. The scrutiny assessment was completed vide order dated 28.02.2005 by accepting the returned income as declared by the assessee. Subsequently, a notice u/s 148 of the Act was issued and duly served upon the assessee on 31.03.2009 by recording the following reasons :-
“1. In this case scrutiny assessment was completed on 28th February, 2005 for the assessee year 2002-03 at an income of Rs 63,25,120/-. The assessee was allowed deduction u/s 80HHC amounting to Rs 2,38,91,769/- which includes “Income from other sources” amounting to Rs.1,18,06,275/-. As deduction u/s 80HHC was allowable only against business income, the Act of the assessing officer is not correct. The mistake resulted in under assessment of income by Rs.54,81,158/- (as per annexure enclosed) with the consequent short levy of tax of Rs.19,56,773/-.
2. Section 35DDA of the Income-tax Act, 1961, provides that where an assessee increases any expenditure in any previous year by way of payment of any sum to an employee at the time of his voluntary retirement, one fifth of the amount so paid shall be deducted in computing the profit and gains of the business for that previous year and the balance-shall be deducted in equal installment for each of the four immediately succeeding previous year. The assessment of M/s Handicraft & handloom Exports Corporation for the assessment year 2002-03 was completed after scrutiny in February 2005, determining an income of Rs.63,25,120/-. The assessee had debited to profit and loss account a sum of Rs.71,69,000/- on account of payment under voluntary retirement scheme which was fully allowed by the Assessing Officer whereas as per Income Tax Act, one fifth of the total expenditure of Rs.14,33,800/- was to be allowed as deduction and the remaining four fifth expenditure of Rs 57,35,2001- was to be disallowed. The mistake resulted in under assessment of income by Rs.57,35,2001- with consequent short levy of tax Rs.20,47,466/-. Please become a Premium member. If you are already a Premium member, login here to access the full content.
