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TMI Blog2012 (11) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2003-04 and the same have also been filed by the assessee during the course of appellate proceedings before the ld. CIT(A) for A.Y. 2004-05 wherein a similar issue is involved – matter remanded to AO Disallowance u/s 14A by applying Rule 8D of the I T Rules - alleged that assessee has no business during the year and it had invested in the shares including in the Group Companies for earning dividend income which has been claimed as exempt u/s 10(34) as well as long term capital gains claimed u/s 10(38) of the IT Act - expenditure is for earning the exempt income i.e. dividend and long term capital gain – Held that:- Assessee has closed its business; therefore, even if there is no business during the year under consideration the entire expenditure cannot be assigned to exempt income i.e. dividend and capital gain. As it is clear from the details of the expenses that these expenses are for general administration and for maintaining the status of the assessee as a company; therefore, these expenses are not directly related to the exempt income. Further, Rule 8D is not applicable for the Assessment Year under consideration – matter remanded to AO X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted. 5. Alternatively, without prejudice Assessing Officer has erred in estimating annual value of properties at Rs.23,38,740/- on the basis of 1% per month of total cost of properties overlooking the Municipal value of similar properties fixed by the Municipal Corporation and not considering the settled law that in case of properties which are not let out the basis of determining Annual Value should be the Annual Value as fixed by Municipal Corporation for similar properties. 3 Ground no. 1 is regarding validity of reopening of the assessment. 3.1 The facts relevant to the issue as culled out by the CIT(A) in para 3 and 3.2 of his order are as under: "3. The facts related to the issues in appeal are as follows: The appellant is an investment company. The appellant filed its return of income for asst.year 2001-02 on 31-10-2001 declaring loss of Rs.4,92,491/-. The assessment was completed u/s. 143(3) of the I.T. Act on 25-03-2004 determining total income (loss) at Rs.1,09,563/- and income from capital gains (loss) at Rs.4,94,291/-. 3.1 Subsequently the A.O. noted that the assessee in its balance sheet filed along with return of income has shown investment in immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out as under: Annual value of the property taken at 1% of value of the properties i.e. 1,94,895x 12 months which works out to Rs.23,38,740 Less: 30% Deduction u/s.24(1) Rs. 7,01,622 Income from house property Rs. 16,37,118" The assessee challenged the action of the Assessing Officer before the CIT(A) and raised the issue of validity of reopening. The CIT(A) confirmed the action of the Assessing Officer and justified the reopening of the assessment vide impugned order. 4. Before us, the ld AR of the assessee has submitted that the notice u/s 148 was issued after the expiry of four years from the end of the assessment year. He has further contended that the assessee disclosed all the relevant particulars fully and truly and the facts of the property in question were also disclosed by the assessee. He has referred the balance sheet and P&L account for the year ending 31.3.2001 and submitted that the assessee has shown the office premises in question as well as 12 residential flats at Spring Fields CHS Ltd under investment in immovable properties in Schedule F to the balance sheet. He has further submitted that even in Schedule N i.e. notes attached to and forming part of bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r years from the end of the assessment year. Therefore, in view of the first proviso to sec. 147, the requirement of twin conditions for reopening of the assessment are existence of reasons to believe that the income assessable to tax has escaped assessment and the said escapement is due to the failure on the part of the assessee to disclose fully and truly all the relevant material necessary for assessment. 5.1 As evident from the reasons recorded for reopening that the Assessing Officer came to know that the assessee shown the investment in the property in question but not offered the income from house property. Further, the Assessing Officer in the subsequent year i.e. 2003-04 has examined the issue and assessed the income from house property by determining the ALV u/s 23(1)(a). Thus, the Assessing Officer has already made an enquiry and on the basis of the information and the evidence gathered during the assessment proceedings for the Assessment Year 2003-04 has taken a view. Therefore, the material gathered during the assessment proceedings for the subsequent year is a tangible material to form a belief that the income assessable to tax has escaped assessment. However, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the Assessing Officer has taken note of this important item and made an addition of income by computing the ALV of the property u/s 23(i)(a), then mere production of balance sheet, P&L account or books of account would not amount to disclosure of all material facts necessary for assessment fully and truly within the meaning of proviso to sec. 147. The Hon'ble Delhi High Court in case of Honda Siel Power Products Ltd reported in 340 ITR 53 has observed and held as under: "The petitioner has relied upon the proviso to section 14A of the Act. The proviso, according to us, is not applicable in view of the factual matrix of the present case and does not protect or come to the aid of the petitioner. In the present case, after return of income for the assessment year 2000- 01 was filed on November 30, 2000, the case was taken up in scrutiny. Assessment order under section 143(3) of the Act was passed on March 7, 2003. The proviso only bars reassessment/rectification and not original assessment on the basis of the retrospective amendment. The proviso does not stipulate and state that section 14A of the Act cannot be relied upon during the course of the original assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, merely because material lies imbedded in material or evidence, which the Assessing Officer could have uncovered but did not uncover is not a good ground to deny or strike down a notice for reassessment. Whether the Assessing Officer could have found the truth but he did not, does not preclude the Assessing Officer from exercising the power of reassessment to bring to tax the escaped income. There was an omission and failure on the part of the petitioner to point out the expenses incurred relatable to tax-free/exempt income which prima facie have been claimed as a deduction in the income and expenditure account. There was, therefore, omission and failure on the part of the petitioner to disclose fully and truly material facts." The Hon'ble Supreme Court confirmed the decision of the Hon'ble High Court in 340 ITR 64 as under: "In our view, the reopening of assessment is fully justified on the facts and circumstances of the case. However, on the merits of the case, it would be open to the assessee to raise all contentions with regard to the amount of Rs 98.46 lacs being offered for tax as well as its contention on sec 14A of the I T Act, 1961. Subject to the above, the special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantial justice. We, therefore, admit the said additional evidence and restore this issue to the file of the A.O. for deciding the same afresh in the light of the said additional evidence. Ground No. 1 & 2 of the assesse's appeal are accordingly treated as allowed for statistical purposes. 8. As regards ground No. 3, it is observed that the issue involved therein relating to determination of annual rental value of office premises and residential flats held by the assessee company at Pune is consequential to the main issue involved in ground No. 1 & 2 of the assessee's appeal. As the said main issue is restored by us to the file of the A.O. for deciding the same afresh, we deem it fair and proper to restore this consequential issue relating to the determination of annual rental value also to the file of the A.O. for deciding the same in accordance with law depending on the outcome of the main issue. Ground No. 3 of assessee's appeal is accordingly treated as allowed for statistical purposes. 9. Accordingly, this issue is remanded to the record of the Assessing Officer to decide the issue afresh in the light of the observation of the Tribunal (supra). ITA No. 4118/Mum/2010 (Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii) Sundry expenses 1,660/- TOTAL 1,53,159/- 12.1 Since is it not the case of the revenue that the assessee has closed its business; therefore, even if there is no business during the year under consideration the entire expenditure cannot be assigned to exempt income i.e. dividend and capital gain. As it is clear from the details of the expenses that these expenses are for general administration and for maintaining the status of the assessee as a company; therefore, these expenses are not directly related to the exempt income. Further, Rule 8D is not applicable for the Assessment Year under consideration as held by the Hon'ble jurisdictional High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. DCIT reported in328 ITR 81(Bom). Therefore, the entire expenditure cannot be disallowed by applying provisions of sec. 14A. However, this issue is required to be considered afresh in view of the decision of the Hon'ble jurisdictional High Court (supra). Accordingly, we set aside this issue to the record of the Assessing Officer to decide the same in the light of the decision of the Hon'ble jurisdictional High Court in the case of Godrej & Boyece Mfg Co Ltd (supra). ITA No.411 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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