2019 (12) TMI 31 - AT - Income Tax

Reopening of assessment u/s 147 - HELD THAT - No doubt that in the reopening of assessment notice issued beyond four years, the AO has established the fact that the assessee has not disclosed all the facts fully and truly to complete the assessment. From the reading of the above reasons recorded by the AO, we find that the AO after examining the entire file of the assessee came to the conclusion that the assessee has not disclosed true facts before him to complete the assessment. AO also clearly mentioned that the assessee has failed to disclose truly and fully all the material facts to complete the assessment. Thus, we find that the AO has rightly reopened the assessment. Even the CIT(A) in his order gave ca categorical finding that the statements given by Chairman/Promoter of the SCSL dated 07/01/2009 with reference to 33 specified companies fudged all the books of account and the AO based on the statement given by the Chairman of the SCSL and information gathered from the books of account of the assessee and other documents, came to a prima facie conclusion that the assessee has not disclosed the true facts and all other materials to complete the assessment. AO has rightly reopened the assessment and accordingly we uphold the order of CIT(A) in confirming the reopening of assessment made by the AO u/s 147 Disallowance u/s 14A - HELD THAT - No infirmity in the decision of the CIT(A) in restricting the disallowance to ₹ 50,000/- and accordingly, we uphold the order of CIT(A) on this issue and dismiss the ground raised by the assessee. Similar ground u/s 14A was raised by the assessee. CIT(A) has restricted the disallowance to ₹ 50,000/- as against the disallowance made by the AO. Accordingly, we find no reason to interfere with the decision and hence, uphold the order of CIT(A) on this issue and dismiss the ground raised by the assessee. Computation of income and segregation of loss from speculation business - HELD THAT - As perused the material on record as well as gone through the orders of revenue authorities. We are of the view that the CIT(A) has rightly directed the AO to verify the true nature of the transactions and decide the issue in accordance with law and recompute the income of the assessee accordingly. We do not find any reason to interfere with the decision of the CIT(A) and accordingly, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee on this issue.

Summary

Issues Involved:
1. Reopening of assessment.
2. Disallowance under section 14A of the Income Tax Act.
3. Computation of income and segregation of 'loss from speculation business'.
4. Charging of interest under sections 234B, 234C, and 234D.

Issue-wise Detailed Analysis:

1. Reopening of Assessment:
The main contention was against the reopening of the assessment by the Assessing Officer (AO) beyond four years. The AO reopened the assessment based on the confessional statement made by the Chairman of M/s Satyam Computer Services Ltd., revealing the manipulation of accounts. The AO believed that the assessee had not disclosed all material facts fully and truly, leading to an under-assessment of income. The CIT(A) upheld the reopening, noting the significant background of the Chairman’s confession and the subsequent investigations. The Tribunal found that the AO had rightly reopened the assessment, as the assessee failed to disclose true facts, and upheld the CIT(A)'s order.

2. Disallowance under Section 14A:
The AO disallowed ?3,08,059/- under section 14A, reasoning that the expenditure incurred was mainly towards earning exempt income. The CIT(A) restricted the disallowance to ?50,000/-. The Tribunal found no infirmity in the CIT(A)'s decision and upheld the order, dismissing the ground raised by the assessee.

3. Computation of Income and Segregation of 'Loss from Speculation Business':
The AO observed that the assessee had not provided a specific answer regarding the computation of income from other sources and treated the trading in shares as speculative transactions. The CIT(A) directed the AO to verify whether the transactions were speculative and recompute the income accordingly. The Tribunal agreed with the CIT(A) that the AO should first identify specific speculative transactions before altering the computation. The Tribunal upheld the CIT(A)'s order, directing the AO to verify the transactions and recompute the income as per the law.

4. Charging of Interest under Sections 234B, 234C, and 234D:
The Tribunal noted that the charging of interest under these sections is consequential in nature and directed the AO to charge interest accordingly.

Conclusion:
All appeals were dismissed, and the Tribunal upheld the orders of the CIT(A) and the AO on all issues. The reopening of the assessment was deemed justified, the disallowance under section 14A was restricted appropriately, and the computation of income and segregation of speculative loss were to be verified and recomputed as per the CIT(A)’s directions. The interest charges were to be applied consequentially.