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2015 (6) TMI 855 - AT - Income TaxReopening of assessment - disallowance under Section 14A - Held that - In the present case the reasons for re-opening indicate that the re-opening has been initiated on two grounds namely disallowance u/s. 14A and on account of non addition of FBT to determine the book profit for the purpose of computing tax u/s. 115JB. With respect to the disallowance u/s. 14A we find that A.O at para 5 of the original assessment order passed on 26.12.2008 after considering the submissions of the Assessee had come to the conclusion that as against nil expenses said to have been incurred by Assessee and therefore no disallowance u/s. 14A, A.O worked out the disallowance u/s. 14A at ₹ 1.43 crores. Thus it can be seen that the A.O in the course of original proceedings and on the basis of submissions made by the Assessee had formed an opinion about the disallowance to be made u/s. 14A and had accordingly made the disallowance and in such a situation the reopening on account of disallowance u/s. 14A would be in our view a case of change of opinion. With respect to the addition of FBT to book profit, we find that CBDT in Circular No. 8/05 dated 29.08.2005 has opined that FBT is allowable deduction in computation of book profit u/s. 115JB and in such a situation in the present case, it cannot be said that the assessee s action in not adding the FBT to book profit has resulted into escapement of income. Further, before us Revenue has not brought any material on record to demonstrate that the aforesaid Circular issued by CBDT has been withdrawn by the appropriate authorities. Thus in the present case, the re-opening is not permissible as per law. - Decided in favour of assessee.
Issues:
1. Reopening of assessment under section 147 of the Income Tax Act for A.Y. 2006-07 and 2007-08. 2. Disallowance under section 14A of the Act. 3. Addition of Fringe Benefit Tax (FBT) to book profits for computing tax under section 115JB. 4. Disallowance of interest expenditure. 5. Disallowance of administrative expenses related to exempt income. 6. MAT credit and further credit of TDS. Analysis: Reopening of Assessment: The Assessee filed appeals against the order of CIT(A) for A.Y. 2006-07 and 2007-08. The grounds of appeal challenged the reopening of assessments under section 147 of the Act. The Assessee argued that the original assessment proceedings had concluded, and the reassessment was based on a change of opinion. The Tribunal noted that the reasons for reopening were disallowance under section 14A and non-addition of FBT to book profits. The Tribunal held that the reassessment was impermissible as it amounted to a change of opinion, especially regarding the disallowance under section 14A, which had already been considered in the original assessment. The Tribunal also observed that the Circular issued by CBDT allowed FBT as a deduction in computing book profits, further supporting the Assessee's position. Consequently, the Tribunal set aside the reopening of the assessment and allowed the Assessee's appeal. Disallowance under Section 14A: The Tribunal examined the disallowance under section 14A, noting that the Assessee had disclosed all relevant facts during the original assessment. The A.O had made a disallowance under section 14A based on the submissions made by the Assessee. Given that the A.O had already formed an opinion on this matter during the original assessment, the Tribunal deemed the reassessment on this ground as a change of opinion. Consequently, the Tribunal ruled in favor of the Assessee on this issue. Addition of FBT to Book Profits: Regarding the addition of FBT to book profits, the Tribunal referred to a Circular by CBDT allowing FBT as a deduction in computing book profits. As the Revenue failed to provide any material demonstrating the withdrawal of this Circular, the Tribunal held that the Assessee's action in not adding FBT to book profit did not result in income escapement. Therefore, the Tribunal concluded that the reassessment on this ground was not permissible, and accordingly, set aside the reassessment and all consequential orders. Other Grounds: The Tribunal addressed various other grounds raised by the Assessee, including disallowance of interest expenditure, administrative expenses related to exempt income, MAT credit, and further credit of TDS. The Tribunal, considering the identical facts to A.Y. 2006-07, allowed the Assessee's grounds in the appeals for A.Y. 2007-08 based on similar reasoning and set aside the relevant orders. In conclusion, the Tribunal partly allowed both appeals of the Assessee, quashing the reopening of assessments and ruling in favor of the Assessee on various disallowances and additions made by the A.O.
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