1991-VIL-133-ITAT-DEL

Equivalent Citation: ITD 037, 430, TTJ 041, 124,

Income Tax Appellate Tribunal DELHI

Date: 22.02.1991

JYOTSNA HOLDING PVT. LTD.

Vs

DY. COMMISSIONER.

BENCH

Member(s)  : CH. G. KRISHNAMURTHY., V. P. ELHENCE.

JUDGMENT

The assessee is aggrieved of the consolidated order dt. 12th March, 1990 of the learned CIT, Delhi III, New Delhi for asst. yrs. 1985-86 to 1987-88 under s. 263 of the IT Act, 1961.

2. The assessee M/s Jyotsna Holding Pvt, Ltd., 411, World Trade Centre,Barakhamba Lane,New Delhiis a private limited company which was incorporated on31st Dec., 1983. The first assessment year of the assessee is the asst. yr. 1985-86 for which the accounting year ended on31st Jan., 1985. For the subsequent years the accounting year ended on31st Jan., 1986and31st Jan., 1987. It derives income from the business of aviation by acquiring aircraft and leasing the same to Delhi Flying Club. It also derives income from consultancy from M/s Sumitomo (Sumitomo Sheti Kaissa Ltd.) Corporation, Tokyo (SC), a marketing corporation. The assessee company had entered into two agreements. dt.30th Aug., 1984and5th Nov., 1984with SC agreeing to act as its consultants with respect to tenders floated by Oil and Natural Gas Commission (ONGC) regarding the supply of Saw Line Pipe and Seamless Casing Pipe to the Gas Authority of India Ltd. (GAIL) and the ONGC respectively. The assessee (sic SC) in order to be able to supply certain goods to the ONGC sought the services of the assessee. The schedule of payments of commission under the agreements was as under:

In terms of cl. 2(b) of the Compensation Cl. II of the agreement dt.30th Aug., 1984, all consultancy fees were remitted in Japanese Yen to the account of Eljay consultants INC Panama in the Bank of Credit and Commerce International at 29, Sloane Street London SWIU.K.Similarly as per cl. 2(b) of the Compensation Cl.II of the agreement dt.5th Nov., 1984all consultancy fees were remitted in U.S. Dollars in the aforesaid account. The fee according to the assessee, was to be held in this account and the assessee was entitled to receive it upon certification by SC of the successful completion of the supply of goods and receipt of tenders and the receipt of full consideration for the supplies. Thus between 31st July, 1985 and 24th Oct., 1986 Japanese Yen 906,043,915 were received and between 3rd Dec., 1984 and 18th June, 1985 U.S. Dollars 669,367,84 were received and were repatriated to India on 11th Sept., 1987 after the intimation from SC regarding the successful completion of the supplies under the subject contracts. The assessee had admitted the entire consultancy income originally in its return of income for the asst. yr. 1987-88 filed on31st July, 1987. On18th March, 1988the assessee allegedly wrote to the CIT,DelhiI, that the entire consultancy income be spread over the three years granting appropriate immunity from the levies of penal interest and penalty. The assessee filed petitions dt.18th March, 1988,21st March, 1988and28th March, 1988before the CIT,DelhiI for waiver of interest and penalty for these respective years under s. 273A. The learned Commissioner with the approval of the CBDT, waived the interest charged under s. 139(8) and 217 and ordered dropping of penalty proceedings under s. 273A. This order was passed on24th June, 1988. The revised returns were filed on22nd March, 1988for all these three years thereafter accordingly after alleged discussion with the learned Commissioner. The spread of income was on the basis of the dates of payment by SC to Eljay as accrual. Assessments were completed by the Assessing Officer on23rd March, 1988,28th March,1988and28th March, 1988accordingly. The particulars of the returns filed and assessments made are as follows:

However, the assessee seems to have again changed its stand in so far as it filed appeals the assessments on20th April, 1988. Thereafter on 4th Oct., 1988 it moved applications before the first appellate authority, namely, the Commissioner (A) for leave to raise additional grounds of appeal on the basis that the entire consultancy fee was assessable only in the asst. yr. 1988-89 since that income accrued only in Aug., 1987 (when all the conditions regarding accrual were fulfilled) and was also received by the assessee only on 11 Sept., 1987 and that the earlier voluntary agreement was against law. It was said that the entire consultancy fee had been accordingly offered for taxation on accrual basis in the asst. yr. 1988-89 for which the return was filed and was pending.

3. The learned CIT was, however, of the prima facie view that the assessment orders dt.23rd March, 1988,28th March, 1988and28th March, 1988were erroneous in so far as they were prejudicial to the interests of the Revenue on the following grounds :

(i) The company had claimed and was allowed depreciation on aircraft @ 40 per cent of the written down value though the prescribed rate was only 30 per cent.

(ii) In terms of the agreement dt. 30th Aug., 1984 and 5th Nov., 1984 between the company and M/s Sumitomo Corporation, commission amounting to Japanese Yens 9,06,043,915 were remitted to a specified account in a London Bank on different dates between 3rd Dec., 1984 and 24th Oct., 1986. These amounts were repatriated toIndiaon11th Sept., 1987but no enquiry was made to determine the amounts of interest that had accrued to the assessee company till the date of the repatriation.

(iii) As per the balance-sheet of the assessee company as on31st Jan., 1985(relevant to the asst. yr. 1985-86), share application money of Rs. 1,98,68,081.75 had been shown. this amount was stated to be received form one Eljay Consultant Inc. This amount had been remitted, initially, as advance/deposit with the company. The paid up capital of Eljay was U.S. $ 200 only. The assessee company did not even file a copy of the profit and loss account or the balance sheet of the depositor company. However, no enquiry was made regarding the real identity, creditworthiness and the source of investment made by the said company with the assessee company.

(iv) As per the agreement dt.30th Aug., 1984between the assessee company and M/s Sumitomo Corporation, the commission was to be received in Japanese Yens. Hence, in terms of r. 115 of the IT Rules, the rate of exchange for the calculation of the value in rupees of this income should have been the telegraphic transfer buying rate of Japanese Yens as on the last date(s) of the relevant previous years. However, the assessee company converted the amounts receivable in Japanese Yens first in U.S. Dollars and then from U.S. Dollars to Indian rupees. This indirect mode of conversion resulted into the under assessment of income to the tune of Rs. 60,58,330 and Rs. 20,44,479 in respect of the asst. yrs. 1986-87 and 1987-88 respectively. Similarly, regarding the consultancy fee received from OCP,Morocco, there was an under assessment to the tune of Rs. 2,79,037 in respect of the asst. yr. 1986-87."

Accordingly he gave a show cause notice dt.1st Feb., 1990to the assessee under s. 263. In the replies dt.20th Feb., 1990and28th Feb., 1990, the assessee refuted grounds (ii) to (iv). It was said that the payment of fee was wholly dependent on the successful completion of the contracts because any fee could not have been retained by the assessee in case of total or partial cancellation of the contract and no income could accrue unless the assessee obtained an unambiguous right to a perfected debt. So far as ground No. (i) is concerned, it conceded that the depreciation allowable on aircraft is 30 per cent and not 40 per cent of the written down value. The contention raised was that the assessee missed to notice the amendment of the Rules w.e.f.2nd April, 1983and had moved the Assessing Officer for the rectification of the assessment order for the three years, which applications were pending. The assessee denied that the assessment orders were erroneous or prejudicial to the interests of the Revenue. According to the assessee the assessment orders were in fact prejudicial to its interests in so far as the consultancy fee which was assessable for the asst. yr. 1988-89 was in fact assessed for the asst. yrs. 1985-86, 1986-87 and 1987-88 and had thereby paid more tax. However, the learned Commissioner in a detailed order, held that the assessment orders in question were erroneous in so far as they were prejudicial to the interests of Revenue. Broadly stated he took the view that so far as the allowance of depreciation is concerned, the assessee had itself admitted that it had been wrongly allowed at 40 per cent. So far as the other three points are concerned, he held that there was lack or absence of enquiry on relevant points. He, therefore, set aside the assessments with the direction that they be framed de novo in accordance with law after making proper and appropriate enquiries. We would have occasion to refer to the details hereafter.

4. Before us in appeal Shri R.Ganeshan reiterated the submissions made on behalf of the assessee before the learned Commissioner. He submitted that though regarding the grant of depreciation at the rate of 40 per cent the assessee had acquiesced but later on on discovering the mistake due to not noticing the amendment which came about w.e.f.2nd April, 1983. the assessee had itself moved the Assessing Officer for the rectification of the assessment orders. He submitted that the entire assessments need not have been set aside for this reason. He submitted that the assessments were not only erroneous to the interests of the Revenue but also to the interests of the assessee. The point taken by him was that despite of acquiescence by the assessee, if consultancy income accrued only in the asst. yr. 1988-89, it could not in law be taxed in the three assessment years in question as there is no estoppel against law. In this connection by analogy, he referred to the following decisions regarding rectification of errors as also regarding the power to resile from an earlier admission :

1. Shooraji Vallabhdas & Co. vs. CIT (1960) 39 ITR 775 (SC)

2. Pt. Sheo Nath Prasad Sharma vs. CIT (1967) 66 ITR 647 (All).

3. CIT vs. S.Arumugam Pillai (1969) 73 ITR 382 (Mad)

4. CIT vs. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del)

5. Triveni Engineering Works Ltd. vs. CIT (1982) 29 CTR (Del) 234: (1982) 136 ITR 340 (Del)

6. CIT vs. Belapur Sugar & Allied Industries Ltd. (1983) 141 ITR 404 (Bom)

7. The Punjab State Co-operative & Marketing Federation Ltd. vs. CIT (1976) Tax 45(3)-222

8. Madhu Jayanti Ltd. vs. CIT (1985) 154 ITR 277 (Cal)

Shri Ganeshan further submitted that the finding of the learned Commissioner that Eljay acted as its agent was not correct and that Eljay was only a trustee and became an agent of the assessee only on release. He submitted that the entitlement of the assessee remained inchoate and imperfect till the release of payment was made after hearing from SC. In this connection reference was made by him to the decision of the Supreme Court in the case of CIT vs. Hindustan Housing and Land Development Trust Ltd. (1986) 58 CTR (SC) 179 : (1986) 161 ITR 524 (SC). He further submitted that the assessee's method of accounting in regard to consultancy fee was cash although on31st July, 1987the assessee had tendered the same for taxation in the asst. yr. 1987-88 on accrual basis wrongly. He pointed that the commission was accounted for in the account ending31st Jan., 1988. In any case he pointed out that both on accrual as well as receipt basis the fee became taxable only in the asst. yr. 1988-89. So far as the question of enquiry is concerned he pointed out that enquiry could be needed only if there was a provocation for it. In this connection reference was made by him to the following decisions :

(i) Grindlays Bank Ltd. vs. ITO (1978) 115 ITR 799 (Cal) at page 810

(ii) Grindlays Bank Ltd. vs. ITO (1980) 15 CTR (SC) 157 : (1980) 122 ITR 55 (SC). He further submitted that r. 115 had no application whatsoever to the case because the accrual of receipt took place inIndiain the asst. yr. 1988-89. He pointed out that Yens became Dollars when they came to Eljay and became rupees when they came toIndia. He pointed out that artificial conversion could not be made. reliance was also placed by him on the following decisions :

(i) Second ITO vs. M.C.T. Trust & Ors. 1976 CTR (Mad) 169 : (1976) 102 ITR 138 (Mad)

(ii) Hindustan Lever Ltd. vs. CIT (1980) 121 ITR 951 (Bom)

(iii) CIT vs. Minerva Maritime Corpn. (1985) 46 CTR (Bom) 195 : (1985) 155 ITR 258 (Bom)

(iv) CIT vs. Hyderabad Asbestos Cement Products Ltd. (1988) 71 CTR (AP) 22: (1988) 172 ITR 762 (AP)

Regarding the amount of Rs. 1,98,68,081.75 Shri Ganeshan submitted that it was mere share application money and not a deposit and that Shri B.S. Gill was a British national having NRE account No. 25240 with Bank of Baroda, Parliament street, New Delhi. Regarding interest, he pointed out that the entire dollars were premitted toIndiawithout any interest and, therefore, the question of making any enquiry in regard thereto could not arise because on facts there was no provocation made out, therefor. He also referred to Kanga and Palkhivala Vol. I, Eighth Edn. p. 1159 in support of his submissions regarding the applicability of r. 115.

5. In reply Shri B. Gupta, the learned counsel for Department strongly relied upon the order of the learned Commissioner. So far as the allowance of depreciation is concerned he argued that the assessment orders were prima facie erroneous because under Item 1 of App. I Pt. I. cl. II (D)(1) of the depreciation schedule in the IT Rules, the rate of depreciation was 30 per cent and not 40 per cent after the amendment w.e.f. 2nd April, 1983. So far as the second point regarding interest is concerned, he submitted that there was lack of enquiry in regard to the accrual of interest or amount of interest between the dates of accrual and remittance and the dates of remittance and repatriation. He pointed out that the dates of receipt of firm contract, letter of credit and shipment were not enquired into and so the dates of accrual of the consultancy fee was also not enquired into. He pointed out that both the accrual and the receipt were in the earlier years. He also stated that the audited accounts of the assessee were maintained on a mercantile basis and it is only in regard to the consultancy fee account that the assessee wanted to employe cash basis although its case all along had been of accrual. In this connection he referred to the query dt.11th March, 1988made by the IAC in reply to which the assessee did not say anything. He pointed out that even under the cash system the entire consultancy fee could not be included in the asst. yr. 1988-89 and that the mere factum of repatriation on11th Sept., 1987was not enough. According to him there were constructive receipts in the three years of which the assessee became the owner. Reference was also made to the case of R.R. Holdings P. Ltd. which was also controlled by the same family as the directors of the assessee company. Reference was also made to the certificate dt.20th Feb., 1985of Eljay whereby two remittances were made under instructions from the assessee to its Bankers. He pointed out that the identity and connection of Shri B.S. Gill with the assessee company and Eljay was also not ascertained. He pointed out that a firm contract was awarded and the amounts were remitted and credited to a designated account and, therefore, the question of paying back could arise only after receiving the money. He submitted that the letters dt.4th June, 1984and23rd July, 1984being of dates prior to the subject agreements, lost their identity as the agreements themselves recited that they were complete in themselves. He also pointed out that assessee had resiled again and again thrice and had also received the advantage of waiver of interest and penalty under s. 273A and, therefore, the principle of promissory estoppel applied against the assessee. He also pointed out that Eljay was none other than the assessee. So far as the letters dt.4th Aug., 1988and7th Sept., 1988are concerned, Shri Gupta argued that they amounted to procured and self serving evidence which were hit by the ratio in the following decisions :

(i) CIT vs. Chunilal vs. Mehta & Cons P. Ltd. 1973 CTR (SC) 470 : (1971) 82 ITR 54 (SC)

(ii) CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC)

(iii) Morvi Industries Ltd. vs. CIT (1971) 82 ITR 835 (SC)

(iv) M. Velayutham vs. CIT (1981) 21 CTR (Mad) 329 : (1981) 130 ITR 145 (Mad)

He pointed out that Eljay and the assessee were the same and in that connection referred to para 15 of the impugned order of the learned Commissioner. He pointed out that the consultancy fee had been rightly declared for the assessment years in question and the postponement of receipt did not affect accrual. He also pointed out that the assessee changed its stand and filed additional grounds of appeal on4th Oct., 1988after notices dt.10th Aug., 1988had been issued under s. 8 of the Companies (Profits) Surtax Act and s. 104 of the IT Act so as to avoid the liability in respect of surtax and additional tax since by Finance Act, 1987 the levy of surtax was discontinued and the provisions of ss. 104 to 109 were deleted w.e.f.1st April, 1988. Next he submitted that the IT Department never suggested any revision of returns and so the mention of "to come in line with the thinking of the IT Department" in the reply dt.28th Feb., 1990of the assessee was not borne out from the records. He also referred to that part of the learned Commissioner's order where it was mentioned that for the asst. yr. 1986-87 remittance at the rate of U.S. $ 25,000 per month were received by the assessee from OCP, Morocco and declaration of Rs. 33,97,443 was made as against Rs. 36,76,470 under r.115. He submitted that r. 115 was very clear and had an application and the order was erroneous in so far as there was failure on the part of the Assessing Officer to apply the correct rate of exchange from Japanese Yens to Indian rupees directly. So far as the amount of Rs. 1,98,68,018.75 is concerned, Shri Gupta pointed out that no enquiry had been made by the assessing Officer regarding the real identity, creditworthiness and source of investment made by Eljay Consultants, who had been registered on 27th Dec., 1983 and whose paid up capital was only 200 $ on 4th Dec., 1984. He pointed out that the amounts were received mutually as advance/deposit/investment, which was subsequently shown as share application money. He also stated that there were many unusual features suggesting close connection, Eljay being the front company of the assessee and, therefore, s. 68 of the IT Act, 1961 was attracted. Reference was made by him to the well-known decision of the Delhi High Court in the case of Gee Vee Enterprises vs. Addl. CIT 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del) where the nature of the jurisdiction under s. 263 was examined and principles laid down as to when an assessment order could be said to be erroneous in so far as it is prejudicial to the interests of the Revenue. With reference to this decision Shri Gupta submitted that the Assessing Officer simply accepted the submissions of the assessee; that the documents filed were looked into perfunctorily and that the assessments were made in undue hurry. He also submitted that no prejudice whatsoever could be said to have been caused to the assessee by the assessment orders in question. Lastly, he submitted that the learned Commissioner by setting aside the assessment orders completely and by directing the Assessing Officer to frame the assessments afresh, had left the Assessing Officer free to come to his own view, which was quite in order.

6. In reply Shri Ganeshan submitted that there was no estopping against law and that Eljay was a different corporate entity in so far as Eljay was registered on27th Dec., 1983whereas the assessee was registered on31st Dec., 1983. He also pointed out that before the receipt of commission Eljay had become a shareholder in the assessee company and that the share application money came earlier than the commission.

7. We have carefully considered the detailed submissions. the decisions referred to above and the entire record including the papers on the paper book. The first point common for all the three years under consideration relates to the grant of depreciation on aircraft. Admittedly depreciation had been erroneously granted by the Assessing Officer at the rate of 40 per cent instead of 30 per cent the relevant item of the depreciation schedule (after the amendment w.e.f. 2nd April, 1983) of the IT Rules, 1962) being (sic Item II (D)(1) of Depreciation schedule) as pointed out by the learned counsel for the Department. Therefore, the jurisdiction under s. 263 was rightly assumed by the learned Commissioner.

7.1. The learned Commissioner has observed in para 15 of the impugned order that Eljay and the assessee were the same. However prima facie Eljay is a separate entity having been registered inPanamaon27th Dec., 1983before the assessee was registered on31st Dec., 1983. The subject contracts, whose genuineness has not been doubted by the learned Commissioner, refer separately to the assessee and to Eljay. Therefore, notwithstanding peculiar factors like the shareholding, the size of the paid up capital of Eljay and the location of its administrative office and bank account, the question to be considered relates to the capacity, function or the status of Eljay qua the contracts between SC and the assessee.

7.2 The next point is as to when did the consultancy fee accrue to the assessee. The agreements dt.30th Aug., 1984and5th Nov., 1984provided that the consultancy fee was to be remitted by SC to the designated account of Eljay in the Bank of Credit and Commerce International inLondon(vide cl. 2(b)). The ld. Dep. Representative is indeed right in saying that since cl. III(ii) of these agreements stated that they set forth an entire agreement of parties and that they superseded any prior agreement and understanding, the letters dt.4th June, 1984and23rd July, 1984relied upon by the assessee stood superseded by the agreements which were of a later date. Since the subject matter contained in these letters did not get incorporated in the agreements themselves, these letters would not have the effect of amending or supplementing the agreements. There was an addendum dt.24th June, 1985to these agreements but it did not refer to the subject matter contained in the aforesaid letters. However, the subsequent letters are important namely those dt.9th Feb., 1987,25th Aug., 1987,1st Sept., 1987,4th Aug., 1988and7th Oct., 1988. There was no material before the learned Commissioner nor before us to discard them as procured or self serving evidence. The letter dt.9th Feb., 1987was written by Eljay to the assessee regarding its inability to remit the consultancy fee to the assessee, which had been received by it from SC. By means of this letter the assessee was told that under the arrangement, it was agreed that until a full and final satisfaction letter was given to it by SC, Eljay would have to hold the said fee with it and that till date it had not received any such letter and was awaiting the same. Lastly it was said that as soon as it received such a letter, the total consultancy fee would be immediately remitted to the assessee. The letter hinted at some agreement. Then there were two letters dt.25th Aug., 1987from SC to Eljay regarding remittances made in U.S. dollars and Japanese Yens with reference to the subject contracts. In the second letter it was said by SC that there was no further commission payable under the agreement dt.30th Aug., 1984and addendum dt.24th June, 1985which then stood terminated. Later there was a letter dt. 1st Sept., 1987 from Eljay to the assessee to the effect that it had recently been informed by SC that full and final payment had been made under the subject contracts and that since there were not claims and there were no further payments receivable from SC, it was asking its bankers to remit the money to the assessee's bank in New Delhi in full and final settlement of the accounts under the subject contracts. On4th Aug., 1988the assessee sought confirmation from SC of the fact that the assessee was to be entitled to receive consultancy fee only after the successful completion of the supply of the goods under the tenders and that till then, the fee was to be held inLondonaccount of Eljay. The same was confirmed by SC vide letter dt.7th Oct., 1988. The learned Commissioner, in his impugned order, has referred only to the communication dt.7th Oct., 1988from SC to the assessee and not to any other communications. He did not examine or discuss them. The letter referred to above show that though the consultancy fee was deposited in the designated account of Eljay in London, Eljay was to hold the same (i.e., to the account of SC) till it received from the SC a full and final letter of satisfaction. Thus the position of Eljay was that of a confidant of both (SC as well as the assessee) and that the right of the assessee to the amount was inchoate and imperfect till 25th Aug., 1987 or 1st Sept., 1987 when SC informed Eljay that full and final payment had been made under the subject contracts. It is then since there were no claims and non further payments receivable form SC that Eljay asked its bankers to remit the money to the assessee's bank inNew Delhi. Thus these letters show that they operated as supplements or amendments to the subject contracts and that it is only after 1st Sept., 1987 that the assessee's right in respect of the consultancy fee got perfected under the contract and resulted in the accrual of income. Eljay, therefore became an agent of the assessee as well after and w.e.f.1st Sept., 1987. The SC itself confirmed this position in its letter dt.7th Oct., 1988in response to the assessee's letter dt.4th Aug., 1988. The learned Commissioner, therefore erred in so far as without examining the nature, content and effect of the aforesaid letters on the subject contracts as well as on the accrual of consultancy fee income to the assessee, he held that the same accrued in the three assessment years in question. The learned Commissioner was not right in taking the dates of remittances of the consultancy fee by SC to Eljay's London Bank account as the dates of the accrual of the said income. The accrual took place when remittances were repatriated toIndiaon11th Sept., 1987which is relevant for the asst. yr. 1988-89. There was accordingly no postponement of the receipts involved in the remittances received on11th Sept., 1987. The question whether the assessee could change the system of accounting qua consultancy fee from mercantile to cash system will, therefore, become academic. In view of the foregoing discussion, the certificate dt.20th Feb., 1985of Eljay to the effect that two remittances were made by SC to Eljay's bankers under instructions from the assessee, would also not change the position in this regard. Since the consultancy income did not accrue under the agreement dt. 30th Aug., 1984 when Japanese Yen were remitted between 31st July, 1985 and 24th Oct., 1986 nor did it accrue under agreement dt.5th Nov., 1984when U.S. dollars were remitted between3rd Dec., 1984and18th June, 1985by SC to the account of Eljay inLondon, the question of these being any constructive receipt of income by the assessee in the three assessment years in question also could not arise.

7.3 The contracts dt.30th Aug., 1984and5th Nov., 1984r/w the letters dt.9th Feb., 1987,25th Aug., 1987,1st Sept., 19874th Aug., 1988and7th Oct., 1988were clear and did not refer to the payment of any interest. As a fact also no interest in shown to have been demanded, earned or received by the assessee. the learned Commissioner was, therefore, not right in holding that the facts provoked any enquiry on the point of accrual of interest to the assessee company till the date of the repatriation. This would also follow from our finding in para 7.2.

7.4 There is no doubt that there was a voluntary declaration by the assessee originally of the consultancy fee income in the asst. yr. 1987-88 and later it sought its spread over in the three asst. yrs. 1985-86 to 1987-88 on the basis that that income accrued on the dates when U.S. dollars and Japanese Yen were remitted to the designated account of Eljay in the London Bank. This was an admission. But the question as to when income could be said in law, to have accrued, is a question of law and there can be no estoppel against law. If the ITO assesses an assessee upon an amount which is not the assessee's receipt at any given time, and is, therefore, not taxable in law in that period, the assessee can say so and explain the admission. The assessee did secure an order dt. 24th June, 1988 from the learned Commissioner under s. 273A but no promissory estoppel could be said to have arisen from it, in as much as, the assessee took action which was "in line with the thinking of the Department". If the assessee is able to satisfy that the earlier admission or declaration was the result of a mistake of law or fact or had been made due to ignorance or other factors, it may not come in its way. The assessee's applications for raising additional grounds in the appeals filed on20th April, 1988are in this direction, which are pending before the learned Commissioner (A), to the effect that the consultancy fee was taxable only in the asst. yr. 1988-89. It is not a question of the assessee resiling again and again from the admissions made from time to time since an admission or consent does not confer jurisdiction on the assessing authority to tax a receipt in an year in which it is not taxable in law. That is why admissions though relevant, are not conclusive and as we have seen, the accrual of income depended upon the interpretation of the Contracts.

7.5 Share application money of Rs. 1,98,68,081.75 had been shown by the assessee in its balance sheet as on31st Jan., 1985, as having been received from Eljay. This amount had been remitted initially as advance/deposit. We have already seen that Eljay was registered on 27th Dec., 1983, i.e., as a legal entity, it was already in existence when the assessee M/s Jyotsna Holding Pvt. Ltd. was incorporated and registered on 31st Dec., 1983. However, Eljay had applied for shares in the assessee company. Since it is a non-resident company, the necessary particulars were furnished to the Reserve Bank ofIndia, who granted approval to hold the money initially and to allot shares equivalent thereof to Eljay. Necessary intimation had also been given to the Registrar of Companies. Eljay then became a shareholder of the assessee company and share scrips were sent to it. Thus the separate identity of Eljay being established and the assessee having furnished before the Assessing Officer the entire evidence culminating in the Reserve Bank ofIndiapermission, the learned Commissioner was not right in holding that due enquiry was not made on this point by the Assessing Officer. The source of the source can also not be expected to be enquired into from the assessee. Thus on this point the order of the learned Commissioner cannot be supported.

7.6 So far as the applicability of r. 115 is concerned, it is relevant for asst. yrs. 1986-87 and 1987-88. Since the consultancy fee accrued in India on 11th Sept., 1987 and not on the various dates in London when the remittances were made by SC to Eljay in the designated account, the finding of the learned Commissioner that r. 115 applied or that the conversion by the assessee of Yens to dollars and dollars to Indian rupees in under assessment of income, does not appear to be correct. Artificial conversion could not be made.

7.7 Regarding the consultancy fee received from OCP, Morrocco the findings of the learned Commissioner was that there was an under assessment to the tune of Rs. 2,79,037. This relevant for asst. yr. 1986-87. Remittance @ U.S. $ 25,000 per month was received but the assessee from OCP Morocco. According to the learned Commissioner a declaration of Rs. 33,97,443 was made as against Rs. 36,76,470 under r. 115. Here the complete facts are not there and it does not appear if due enquiries were made by the Assessing Officer to see if r. 115 was applicable. Therefore, no fault can be found with the order of the learned Commissioner so far as this aspect is concerned.

7.8 Sec. 263 enables the Commissioner to call for and examine the record of any proceeding under the IT Act, 1961. Expln. (b) to s. 263(1) as amended by the Finance Act, 1988 w.e.f. 8th June, 1988 provides that "record" shall include and shall be deemed always to have included all records relating to any proceeding under the IT Act., 1961 available at the time of examination by the Commissioner. Thus though the assessments for the assessment years in question had been completed on23rd March, 1988,28th March, 1988and28th March, 1988the learned Commissioner could examine the record as at the time of giving the show cause notice. i.e.,1st Feb., 1990. That is how the communications dt.4th Aug., 1988and7th Oct., 1988referred to by us in para 7.2 of this order have significance even though the latter of these communications was after the issue of notices dt.10th Aug., 1988under Companies (Profits) Surtax Act and. 104 of the IT Act., 1961. As already observed by us, the learned Commissioner did not consider the nature and effect of these communications or the communications dt.9th Feb., 1981,25th Aug., 1987and1st Sept., 1987. Thus though we agree with the learned Commissioner that the jurisdiction under s. 263 could be validly assumed by him and the assessment set aside to be made afresh, it needs to be made clear that the prima facie view expressed by the learned Commissioner is to be taken by the Assessing Officer as modified by our above observations regarding the accrual of income, interest, share application money and r. 115. It is to be mentioned here that is became necessary for us to express our considered opinion on these aspects as they were gone into by the CIT and were hotly contested by the parties before us although we are upholding his action under s.263 on other points.

8. In the result, and subject to the foregoing findings, the appeals filed by the assessee are to be treated as having been partly allowed.

 

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