Case: Hindustan Lever Limited Vs. R.B. Wadkar &amp; Others

petitioner to file a return of income within thirty days from the date of service of the notice. It is also stated that the notice was issued after obtaining the necessary satisfaction of respondent No.3.8. The petitioner by its letter dated 5th November 2002 requested respondent No.1 to furnish the reasons recorded by him prior to the issuance of the impugned notice so as to enable the petitioner to comply with requirements of the notice. The petitioner did not hear anything from the respondent No.1 and as the time for furnishing a return was coming to an end, the petitioner by its letter dated 14th November, 2002 pointed out that although the proceedings initiated were without jurisdiction, the return was being filed without prejudice to its contentions and legal right to challenge notice and respondent No.1 was again requested to treat the return filed on 1st December, 1997 as a return filed in pursuance of the notice under section 148.9. The petitioner, thereafter, did not hear anything from respondent No.1. However, respondent No.2 vide his notice dated 3rd December, 2002 under sections 142(1) and 143(1) called upon the petitioner to make its submissions as to how the sum of Rs.16.07 crore was allowable as a revenue expenditure. In this connection he had relied upon the judgment of the Gujarat High Court in C.I.T. v. Official Liquidator of Ahmedabad Manufacturing and Calico Printing Company Ltd., 224 ITR 156; wherein it has been held that expenditure incurred in connection with an amalgamation scheme is to be treated as capital expenditure. He has also relied upon a decision of the Supreme Court in Punjab State Industrial Corporation 225 ITR 792 that any expenditure incurred for widening the capital base has to be treated as capital expenditure and as the amalgamation has resulted in the widening of the capital base of the petitioners expenditure incurred ought to be disallowed. He has also referred to a decision of the Calcutta High Court; wherein it was held that stamp duty registration charges etc. incurred in taking over another concern is capital expenditure. The petitioner by their letter dated 9th December, 2002 addressed to respondent No.2 asked for some time to file reply and reiterated its request that the reasons recorded prior to the issuance of the impugned notice be furnished to it.10. In spite of repeated requests, the respondents did not furnish reasons, if any, alleged to have been recorded by respondent No.1 prior to the issuance of the impugned notice. Hence the petitioner filed this petition under Article 226 of the Constitution of India to challenge the impugned notice dated 23rd September, 2002.11. On being noticed, respondents appeared and filed their counter affidavit disclosing the reasons recorded prior to issuance of the notice under section 148. The said reasons recorded read as under:It is seen from the details on record that the assessee company paid stamp duty of Rs.23.29 crores on merger of M/s. Brooke Bond Lipton India Ltd., with it. However, out of the said amount, the assessee company capitalised in its books only an amount of Rs.6.62 crores as being attributable to capital assets. The balance amount of Rs.16.67 crores was claimed/allowed as revenue expenditure relating to current assets such as stocks etc. However, in the case of CIT Vs. Official Liquidator of Ahmedabad Mfg. & Calico Ptg. Co. Ltd. (224 ITR 156) the Honble Gujarat High Court held that any expenditure incurred in connection with an amalgamation scheme is to be treated as capital expenses. Further, Honble Supreme Court of India in the case of Punjab State Industrial Corporation Ltd. (225 ITR 792) has held that any expenditure incurred for widening capital base is to be treated as capital expenditure. In the present case, the above-mentioned merger resulted in widening of capital base of the assessee company. In the case of Gobind Sugar Mills (117 ITR 147) the Honble Calcutta High Court held that Stamp fee, registration chare etc. incurred in taking over another concern was capital expenditure.In the light of the foregoing discussion, it is apparent that treating of the amount of Rs.16.67 crores of stamp duty as revenue expenditure was erroneous and the same resulted in underassessment of income in the assessment-completed u/s. 143(3) on 29.2.2000. In view of these facts and circumstances, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of provisions of Sec.147 of I.T. Act. It may also be mentioned that an order u/s. 263 was passed by the C.I.T.-I on 26.3.2002 in regard to issues like valuation of closing stock and recomputation of deduction u/s. 80 HHC. Thus, remedial action is now proposed u/s. 147 of I.T. Act.12. The Petitioner submits that the disclosure of reasons would make it clear that no failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for that assessment year has been alleged as such the notice is hit by the proviso to section 147 and the same being beyond the period of four years from the end of the assessment year is unsustainable in law much less the same is without jurisdiction. We find that the submission made is well sustainable. It is not in dispute that the proviso to section 147 of the Act is applicable to the facts of this case and the notice is without jurisdiction. The same view is taken by us while deciding connected Writ Petition No.1505/2003. Thus, for the reasons stated in our judgment dated 25th February 2004 delivered in Writ Petition No.1505/2003, we quash and set aside the notice dated 23rd September 2002 issued under section 148 of the Act holding it to be without jurisdiction. Even otherwise, having examined the facts and the proceedings it is clear that the Revenue could not establish any lapse or failure on the part of the assessee petitioner to disclose fully and truly all material necessary for the assessment of the petitioner for the assessment year in question.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. The Petitioner submits that the disclosure of reasons would make it clear that no failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for that assessment year has been alleged as such the notice is hit by the proviso to section 147 and the same being beyond the period of four years from the end of the assessment year is unsustainable in law much less the same is without jurisdiction. We find that the submission made is well sustainable. It is not in dispute that the proviso to section 147 of the Act is applicable to the facts of this case and the notice is without jurisdiction. The same view is taken by us while deciding connected Writ Petition No.1505/2003. Thus, for the reasons stated in our judgment dated 25th February 2004 delivered in Writ Petition No.1505/2003, we quash and set aside the notice dated 23rd September 2002 issued under section 148 of the Act holding it to be without jurisdiction. Even otherwise, having examined the facts and the proceedings it is clear that the Revenue could not establish any lapse or failure on the part of the assesseepetitioner to disclose fully and truly all material necessary for the assessment of the petitioner for the assessment year in question.