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2016 (8) TMI 1511 - HC - Income TaxReopening of assessment u/s 147 - exercise of reopening is being undertaken at the behest of the audit party - Capital gain not showed by the assessee on transfer of a land to Shri Ashwinbhai B. Patel - HELD THAT - If the view of the Assessing Officer was that once the land was sold through a exchange deed, the assessee was liable to pay capital gain, irrespective of the subsequent cancellation of the deed, he ought to have taxed such income in the order of assessment. The fact that the assessee had executed such documents and not offered any income of capital gain to tax was thus within the knowledge of the Assessing Officer. Without there being anything additional, such issue cannot be reexamined in exercise of powers of reassessment. As noted, the letter dated 24.10.2003 of the Assessing Officer of Shri Ashwin B. Patel may prima facie, give an impression that such facts were being brought to the notice of the present Assessing Officer for the first time, but as noted, the queries raised by the Assessing Officer during the original assessment and the replies of the petitioner would show that all these details were very much part of the record. Reduction on account of withdrawal of interest and the additional depreciation claimed - As question of additional depreciation in ground (2b), the Assessing Officer had not inquired into the nature of reduction of interest - It may be that such interest though paid during the assessment year 2009-2010 was later on withdrawn. Withdrawal of the interest happened during the assessment year 2010-2011. The Assessing Officer therefore, would be prima facie, correct in questioning the assessee in reducing such interest for the assessment year in question namely, 2009-2010. Computation of income being specific to the period pertaining to the previous year relevant to the assessment year under consideration, a legal question would arise whether for a later withdrawal of interest, the assessee could have claimed effect thereof during the earlier year. Being at a stage where the assessment is yet to be framed, we would not give our conclusive opinion on this aspect. Suffice it to say, this issue was not examined by the Assessing Officer in the original assessment. Higher depreciation - additional depreciation which was on account of increase in opening WDV did not match the figures contained in the report of the Chartered Accountant - Entire claim of depreciation in whatever form presented by the assessee was under examination. The assessee had replied to such a question in detail giving sufficient materials. If the Assessing Officer was not satisfied he could have either raised further query or disallowed the claim in toto. Not having done that same cannot be reexamined in exercise of powers of reassessment. Disallowance of interest - assessee had received total interest of ₹ 2.00 crores against which it had paid interest to the department to the tune of ₹ 31.39 lacs which could not have been adjusted against the interest income - As petitioner pointed out that though such adjustment was claimed in the return, the Assessing Officer disallowed the same. He took us through the order of assessment and pointed out that such amount of ₹ 31.39 lacs was not allowed to be reduced from the interest income. Learned counsel for the Revenue was unable to controvert this aspect. This ground thus was based on inaccurate factual premise. Depreciation of windmill - AO was of the opinion that four wind turbine generators were not commissioned on 30.9.2008 thus depreciation relatable to such investment was not allowable - assessee had pointed out the factum of installation and commission of wind power turbines and the details regarding why the depreciation and additional depreciation was available on such investment. This issue was also therefore, thoroughly scrutinised. Depreciation at a higher rate on the energy saving device - Energy saving device is covered under the item (3)(8)(ix) under the heading of machinery and plant. As provided in section 32(1)(iia) additional deprecation is allowed in case of machinery and plant. It is submitted that it is fulfilling all the conditions narrated in section 32(1)(iia) and therefore it is eligible for additional deprecation. Thus it was after a minute scrutiny that Assessing Officer did not disturb the income of higher depreciation on this investment. Reopening on such basis would not permissible. Expenditure towards notified area tax - assessee had made such payment before the due date of filing the returns and the Assessing Officer during the assessment proceedings scrutinised such issue are not in dispute. That being the position it would not be open for the Assessing Officer to revisit such a claim in reassessment. Short deduction of tax at source on freight charges - In the order of assessment, the Assessing Officer had made a detailed discussion on the payment made to clearing and forwarding agent without TDS and whenever necessary, Assessing Officer made disallowance. Thus the entire issue was examined by the Assessing Officer during the scrutiny assessment. Disallowance of interest expenditure under section 14A r.w.r. 8D - This issue also was pointedly in focus before the Assessing Officer during the scrutiny assessment. Non deduction of tax on export commission paid by the assessee - AO noted that such expenditure was allowed without deduction of tax in view of the earlier circulars of CBDT dated 23.7.1969 and 7.2.2000 - assessee had while disclosing that foreign commission was paid to non residents, no TDS was deducted in view of circular dated 7.2.2000. The assessee produced copy of such circular. It was after such inquiry that Assessing Officer made no disallowance, as can be seen from the reasons recorded on account of such circular of the CBDT. It is doubtful whether later circular of CBDT could have been pressed in service to fasten the liability on account of non deduction of tax while making payment which was being done at a time when later circular was not in existence. Quite apart from this legal question, undisputedly, the Assessing Officer was aware about such payments, as was pointed out by the assessee, that no TDS was deducted and the reason why the same was done. If we compare the audit objections and the reasons recorded, we find that the Assessing Officer has included all objections pointed out by the audit party but has also included one more ground namely, of the escaped capital gain on sale of land by the petitioner to Shri Ashwin Kumar B. Patel. This ground was not part of the audit objection. In our opinion, this would indicate that the Assessing Officer had independently applied his mind and formed a belief that on the grounds mentioned by the audit party in its objection letter and additional ground which is recorded in the reasons, the income chargeable to tax in case of assessee had escaped assessment. We may recall the issue of capital gain tax on sale of land was referred in the letter dated 24.10.2003 by the Assessing Officer of Shri Ashwin Kumar B. Patel. In our opinion therefore, on this ground also, petition must fail.
Issues Involved:
1. Reopening of assessment for AY 2009-2010. 2. Capital gain on land transfer. 3. Reduction of interest income. 4. Claim of excess depreciation. 5. Adjustment of interest paid u/s 234B. 6. Depreciation on wind turbine generators. 7. Depreciation on turbo ventilators. 8. Expenditure on notified area tax. 9. Deduction of TDS on freight charges. 10. Disallowance under section 14A. 11. Non-deduction of TDS on export commission. 12. Reopening at the behest of audit party. Detailed Analysis: Issue 1: Reopening of assessment for AY 2009-2010 The petitioner challenged the notice dated 29.3.2014 for reopening the assessment for AY 2009-2010. The original assessment was completed on 29.12.2011 under section 143(3) of the Income Tax Act, 1961. The notice was issued within four years from the end of the relevant assessment year. Issue 2: Capital gain on land transfer The department received information that the petitioner transferred land to Ashwin Kumar B. Patel for ?65.82 lacs but did not offer the gain for capital gain tax. During the original assessment, the petitioner explained that the land transfer agreements were canceled, and no valid transfer occurred during the year, which the Assessing Officer accepted. Reopening on this ground was not permissible as the issue was already scrutinized. Issue 3: Reduction of interest income The petitioner reduced ?71.60 lacs from its income on account of withdrawal of interest received in AY 2009-2010 but withdrawn in AY 2010-2011. The Assessing Officer did not scrutinize this during the original assessment. Thus, reopening on this ground was permissible. Issue 4: Claim of excess depreciation The petitioner claimed excess depreciation of ?11.87 lacs in the revised return. The Assessing Officer had examined the depreciation claims during the original assessment, and reopening on this ground was not permissible. Issue 5: Adjustment of interest paid u/s 234B The petitioner adjusted interest paid u/s 234B against interest income, which was disallowed by the Assessing Officer in the original assessment. Reopening on this ground was based on an inaccurate factual premise and was not permissible. Issue 6: Depreciation on wind turbine generators The petitioner claimed depreciation on wind turbine generators commissioned on 30.9.2008. The Assessing Officer scrutinized this claim during the original assessment, and reopening on this ground was not permissible. Issue 7: Depreciation on turbo ventilators The petitioner claimed higher depreciation on turbo ventilators as energy-saving devices. The Assessing Officer scrutinized this claim during the original assessment, and reopening on this ground was not permissible. Issue 8: Expenditure on notified area tax The petitioner claimed ?10.32 lacs towards notified area tax, but the receipt was issued in the name of M/s. Emtici Hotel Resort. The Assessing Officer scrutinized this claim during the original assessment, and reopening on this ground was not permissible. Issue 9: Deduction of TDS on freight charges The petitioner deducted TDS at a lower rate on freight charges of ?20.34 lacs. The Assessing Officer scrutinized this claim during the original assessment, and reopening on this ground was not permissible. Issue 10: Disallowance under section 14A The petitioner disallowed ?34.36 lacs under section 14A, while the Assessing Officer computed it to be ?67.96 lacs. The Assessing Officer scrutinized this claim during the original assessment, and reopening on this ground was not permissible. Issue 11: Non-deduction of TDS on export commission The petitioner paid export commission of ?1.91 crores to non-residents without deducting TDS, relying on CBDT circulars which were withdrawn before the finalization of the assessment. The Assessing Officer scrutinized this claim during the original assessment, and reopening on this ground was not permissible. Issue 12: Reopening at the behest of audit party The petitioner contended that the reopening was at the behest of the audit party. The court examined the files and found that the Assessing Officer had independently applied his mind and recorded reasons for reopening, including an additional ground not raised by the audit party. Thus, the reopening was valid. Conclusion: The court dismissed the petition, allowing the reopening on the ground of reduction of interest income, while other grounds were not permissible for reopening. The reopening was not solely at the behest of the audit party, as the Assessing Officer had independently formed a belief based on tangible material.
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