2013 (7) TMI 999 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening proceedings u/s 147 of the Act.
2. Restriction of allowable expenditure u/s 14A to 10% of professional fee.
3. Correctness of the calculation of interest u/s 234B of the Act.

Summary:

Issue 1: Validity of Reopening Proceedings u/s 147 of the Act

The assessee challenged the reopening of assessments for AYs 2003-04 and 2004-05, arguing that the Assessing Officer (AO) lacked "tangible material" to justify the reopening. The Tribunal referred to the reasons recorded by the AO, which were based solely on the statements of income filed by the assessee. The Tribunal cited the Supreme Court judgments in Rajesh Jhaveri Stock Brokers (P) Ltd. and Kelvinator of India Ltd., emphasizing the necessity of tangible material for reopening assessments. The Tribunal concluded that the AO did not possess such material, rendering the reopening invalid. Consequently, the reassessments were quashed.

Issue 2: Restriction of Allowable Expenditure u/s 14A to 10% of Professional Fee

For AYs 2005-06, 2006-07, and 2007-08, the assessee contested the CIT (A)'s decision to restrict allowable expenses to 10% of professional fees. The Tribunal noted that the assessee failed to provide sufficient evidence to substantiate the claimed expenses. The CIT (A) had relied on a remand report that lacked detailed investigation. The Tribunal found the 10% restriction arbitrary and unsustainable, directing the AO to conduct a de novo assessment, allowing the assessee to present evidence to support the claimed expenses.

Issue 3: Correctness of the Calculation of Interest u/s 234B of the Act

For AY 2003-04, the assessee disputed the calculation of interest u/s 234B, arguing that it should be charged from the date of determination of total income u/s 143(1) / 143(3) until the completion of reassessment u/s 143(3) r.w.s. 147. However, since the reassessment was quashed, this issue became academic and was not adjudicated.

Conclusion:

The appeals for AYs 2003-04 and 2004-05 were allowed, quashing the reassessments. The appeals for AYs 2005-06, 2006-07, and 2007-08 were allowed for statistical purposes, with the AO directed to reassess the allowable expenses based on detailed examination and evidence.

Order pronounced in the open court on 3.7.2013.