2012 (12) TMI 1190 - AT - Income Tax

Summary

Issues Involved:
1. Violation of Principles of Natural Justice
2. Legality of Reopening of Assessment u/s 147
3. Classification of Income from Business as Capital Gains
4. Disallowance of Miscellaneous Expenses
5. Disallowance of Administrative and General Expenses

Summary:

Issue 1: Violation of Principles of Natural Justice
The appellant did not press Ground No.1 regarding the alleged violation of principles of natural justice, and it was treated as dismissed.

Issue 2: Legality of Reopening of Assessment u/s 147
The appellant challenged the reopening of the assessment u/s 147 of the Income Tax Act, 1961. The Tribunal held that the Assessing Officer (AO) had not formed any opinion about the transaction in question during the original assessment. The reopening was based on the AO's belief that income amounting to Rs. 44,90,600/- had escaped assessment. The Tribunal upheld the reopening, citing the Supreme Court's decision in the case of Kelvinator of India Ltd., which allows reassessment based on new tangible material and not merely a change of opinion.

Issue 3: Classification of Income from Business as Capital Gains
The appellant argued that the income/loss from buying and selling of shares should be treated as 'business income' rather than 'capital gains.' The Tribunal noted that the appellant had shown certain investments as 'investment' in its Balance Sheets and had not provided sufficient reasons to classify the loss as 'business loss.' The Tribunal upheld the AO's decision to treat the loss as 'capital loss' and allowed it to be carried forward. The Tribunal found no merit in the appellant's claim and decided against the appellant.

Issue 4: Disallowance of Miscellaneous Expenses
The AO disallowed Rs. 3.01 lakhs claimed as 'Miscellaneous Expenses Written Off' u/s 35D, stating that the appellant, being a Non-Banking Financial Company (NBFC), was not entitled to such deduction. The Tribunal upheld the disallowance, agreeing with the AO and the First Appellate Authority (FAA) that the appellant was not an industrial undertaking and thus not eligible for the deduction u/s 35D. The Tribunal also noted that the reopening of assessment allowed the AO to assess any income that had escaped assessment, even if not originally mentioned.

Issue 5: Disallowance of Administrative and General Expenses
The AO disallowed 50% of the Administrative Expenses (Rs. 1.5 lakhs) and General Expenses (Rs. 93,750/-) claimed by the appellant due to lack of supporting evidence. The FAA upheld the disallowance, noting that the appellant failed to provide bills, vouchers, or any basis for the allocation of expenses with its parent company. The Tribunal agreed with the FAA, emphasizing that the burden of proof for claiming deductions lies with the appellant, which was not met in this case. The Tribunal found no reason to interfere with the FAA's order.

Conclusion:
The appeal filed by the assessee was dismissed, with all grounds decided against the appellant.