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TMI Blog2014 (12) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30.11.2006 determining the total loss at Rs. 37,96,922/-. Proceedings u/s 147 of the Act were initiated and notice u/s 148 was issued on 30.3.2011 by the ACIT, Circle-51, New Delhi. Later on the case was assigned to the ACIT, Range 15, New Delhi. Reasons recorded for the reopening were provided to the assessee along with the notice u/s 143(3) of the Act. The assessee filed a letter on 28.4.2011 and requested that the revised return filed by him on 9.12.2005 be treated as a return filed in response to notice u/s 148 dt. 30.3.2011. The assessee vide his letter dt. 4.11.2011 objected to the reopening of assessment u/s 148 of the Act. These objections were disposed of vide order dt. 12.12.2011. 2.2. Thereafter the AO, after considering the submissions of the assessee at para 4 of his order, held as follows. "4. On examination of the details filed during the assessment proceedings, it is seen that the assessee has shown dividend income exempt amounting to Rs. 1,63,63,336/- u/s 10(34) of the Income Tax Act, 1961. A company is a juridical person and it cannot work through itself. In order to manage and supervise any investment and to account for it and its resulted income in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed submissions on the issue have been made by the assessee vide letters dated 20.11.2006, 24.11.2006 and again vide letter dated 28.11.2006. Therefore reopening is based on change of opinion and hence invalid, void and without jurisdiction. 3. The learned CIT (A) has erroneously ignored the legal contention of the assessee that the reopening is based on the opinion of the audit authorities and the AO has specifically rejected the view of the audit vide letters dated 12.06.2008, 03.03.2008 and 18.02.2008 addressed to the Audit officer. Refer Cadila Healthcare Ltd v ACIT 2012DTR385 (Guj). 4. The learned CIT (A) has ignored the vital fact that the condition contained in the proviso to section 147 is not fulfilled in as much as all primary facts had been disclosed and considered by the AO during original proceedings and no tangible material has been brought on record in support of invoking the proviso to section 147. 5. The learned CIT (A) has misdirected herself in upholding the reopening of assessment by the AO in direct conflict to the various decisions of the High Courts and Supreme Court including the latest Full Bench decision of Delhi High Court in CIT v Usha Internationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at proportionate management expenses should be deducted from gross dividend for the purpose of deduction. After deduction of proportionate administration expenses of Rs. 128.35 lakhs, allowable deduction works out to Rs. 35.28 lakhs as against Rs. 163.63 lakhs allowed. The omission resulted underassessment of income of Rs. 128.35 lakhs involving tax effect of Rs. 46.04 lakhs. Thus the assessee has failed to disclose all material facts truly and fully that were necessary for assessment. Here it is relevant to mention the explanation 1 in section 147 that states that "production before the AO of account books or other evidence from which material evidence would with the diligence have been discovered by the AO will not necessarily amount to disclosure with the meaning of the proviso in sec.147." In view of the above, facts I have reason to believe that income chargeable to tax amounting to Rs. 128.35 lakhs has escaped assessment in the case and the same is to be brought to tax u/s 147/148 of the Act. Sanction for issue of notice u/s 148 as prescribed u/s 151, to reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying out exports. Besides the assessee company has also earned a commission of Rs. 5,94,172/- on account of sale of online lottery tickets. Besides the assessee company has also earned business income from lending the money at Rs. 7,01,14,633/-. The details of the above mentioned transactions have already been placed on record. Thus the assessee company carried out different business activities during the year. The assessee company has claimed an expenditure of Rs. 13.46 lacs as personnel cost and Rs. 22.03 lacs as administrative expenditure. Besides a sum of Rs. 2,56,829/- has been claimed as selling and distribution expenses. It is submitted that all the above mentioned expenses have been incurred by the assessee in respect of the business carried on by the assessee and these expenses have been laid out wholly and exclusively for the purpose of business. All the above mentioned expenses are fully vouched and verifiable. The details of expenditure included under the above mentioned Heads have been duly reflected in schedules attached with the Profit & Loss account A perusal of the nature of expenditure included under the above mentioned heads clearly reveals that all such expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities effected to various departments, Banks, etc. The Electricity Charges claimed at Rs. 1,78,787/- are in respect of the payment to electricity department in respect of electricity bills of the premises. The selling expenses mainly consists of advertisement expenditure of Rs. 2,46,930/-, which is also for business. As submitted herein above all the expenses have been incurred for the purpose of business, of the assessee company and are fully vouched and verifiable. It is submitted 'that all the above mentioned expenditures are allowable under Section 37(1) of the Income Tax Act. The attention is also invited to the following judicial pronouncements: "Commercial expediency - In deciding whether a payment of money is deductible expenditure, one has to take into consideration question of commercial expediency and the principles of commercial trading. If a payment or expenditure is incurred for the purpose of the trade 'of the assessee, it is deductible even if it may bring a benefit to a third party- CIT Vs Chandulal Keshavlal & Co.(1960) 38.1TR 601(SC) ..... * ....in applying the test of commercial expediency for determining whether an expenditure is wholly and exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In view of the above it is clear that the reopening in this case is made on a change of opinion which is not permissible in law. 4.6. The Jurisdictional High Court in the case of CIT vs. Usha International Ltd. 77 DTR (Del) (FB) 369 in the judgement at para 39 held as follows. "There may be cases where the AO does not and may notarise any written query but still the AO in the first round/original proceedings may have examined the subject-matter, claim etc. because the aspect or question may be too apparent and obvious. To hold that the AO in the first round did not examine the question or subject-matter and form an opinion, would be contrary and opposed to normal human conduct. Such cases have to be examined individually. Some matters may require examination of the assessment order or queries raised by the AO and answers given by the assessee but in others cases, a deeper scrutiny or examination may be necessary. The stand of the Revenue and. the assessee would be relevant. Several aspects including papers filed and submitted with the return and during the original proceedings are relevant and material. Sometimes application of mind and formation of opinion can be ascertained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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