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TMI Blog2015 (11) TMI 1450X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment through which the business is carried on by the assessee and applying the test of permanent establishment the income from the plantation would be taxable only in Malaysia and not in India. The assessee already filed its return of income and the return filed for all these assessment years which was kept in record. Accordingly, in our opinion the order of the Commissioner of Income Tax (Appeals) is to be confirmed. - Decided in favour of assessee. Disallowance of expenditure - according to the assessee the said amount was incurred by the Malaysain branch of the company and the expenditure incurred by the head office of the company at Chennai was 15,65,918/- only which is allowable as income from business/other sources - Held that:- Under section 57 only expenditure incurred in connection with earning of income was allowable as deduction. The assessee admitted that the entire income is by way of interest from the bank deposits. It was seen that the expenditure made by the assessee towards salary, remuneration, commission, building maintenance etc, these expenses have no nexus with earning of interest on bank deposits and cannot be allowed as deduction u/s.57 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the affairs of the Malaysian Branch is situated in India as the Share Holders and Annual General Meeting were conducted in India; the income of the Malaysian Branch is included in the accounts of the company and the profits appropriated. 4. The CIT(A) ought to have noted that the Apex Court's decision in the case of CIT vs. P.V.A. Kulandagan Chettiar (267 ITR 657) is not applicable to the present case since the control and management of the affairs of the Malaysian Branch of the assessee is situated in India as the Share Holders and Annual General Meeting were conducted in India''. 3. The facts of the case are that the assessee filed its return of income for the AY 2006-07 on 21.11.2006 declaring a total income of ₹ 13,77,120/-. The return was processed u/s 143(1)(a) on 15.02.2008. As income chargeable to tax has escaped assessment, proceedings u/s 147 was initiated by issue of notice u/s 148 dt. 22.03.2012. The reasons for initiating proceedings u/s 147 are reproduced below: During the course of assessment proceedings for the AY 2007-08, the expenditure claimed against the interest income was disallowed on the ground that the interest income had to be assessed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermanent establishment in India. In Article 5(2)(g) the term ''permanent establishment'' shall include especially ''a farm or plantation''. 6. In this case, the plantation in Malaysia would be the permanent establishment through which the business is carried on by the assessee and applying the test of permanent establishment the income from the plantation would be taxable only in Malaysia and not in India. The assessee already filed its return of income and the return filed for all these assessment years which was kept in record. Accordingly, in our opinion the order of the Commissioner of Income Tax (Appeals) is to be confirmed. This appeal of the Revenue is dismissed. ITA No.2773/Mds/2014, assessment year 206-2007, (Assessee Appeal) 7. In this appeal, the first ground raised by the assessee is with regard to disallowance of expenditure at ₹ 43,35,061/- and according to the assessee the said amount was incurred by the Malaysain branch of the company and the expenditure incurred by the head office of the company at Chennai was ₹ 15,65,918/- only which is allowable as income from business/other sources. 8. The facts relating to the issue are that the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- made by the Assessing Officer being 'exchange rate fluctuation' brought to charge by the Assessing Officer without any discussion or assigning reasons in the assessment order. 11. The facts of the issue are that the Assessing Officer noted that the assessee received ₹ 8,04,623/- on account of exchange rate fluctuation which was not offered as income. The Assessing Officer proceeded to tax ₹ 8,04,623/- as income of the assessee. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 12. The Commissioner of Income Tax (Appeals) observed that the assessee had earned ₹ 8,04,623/- due to exchange rate fluctuation. Gain due to exchange rate on the foreign exchange held on revenue account is to be treated as income. During appeal proceedings, the assessee had not adduced any argument as to why the gain is not income except arguing that the Assessing Officer had added ₹ 8,04,623/- without reason. The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us. 13. The ld. Authorised Representative for assessee submitted that the sum of ₹ 8,06,42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r initiating proceedings u/s 147 amounts to change of opinion. 2.3 The learned Commissioner (Appeals) has failed to note that the provisions of clauses (b) and (c) of the Explanation (2) to section 147 are clearly applicable in the assessee's case for the assessment year 2007-08 under consideration because the assessee. had deliberately kept away the income of Malaysian Plantation from Indian Taxation laws when the company affairs are controlled in India. 2.4 The learned Commissioner (Appeals) has failed to appreciate that the assessee's total income for the assessment year 2007-08 had been under assessed in the original assessment order dated 22.12.2009, inter alia to an extent of RS.9841036/- being income from Plantation from Malaysia which was not earlier included to the total income of the assessee company in the said original assessment thereby attracting application of provisions of clause © of Explanation (2) to section 147 of the. Income tax Act, 1961 i.e "where an assessment has been made but income chargeable to tax has been under assessed". 2.5 The learned Commissioner (Appeals) ought to have noted the fact that the assessee had deliberately kept away the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the share holders and the annual general meeting was conducted in India. As there is omission or failure to make a true and full disclosure by the assessee, the Assessing Officer has a valid reason to believe that income has escaped assessment for the A.Y. 2007-2008 in respect of this case. 2.8 The learned Commissioner (Appeals) ought to have upheld the reopening of assessment u/s.147 for the assessment year 2007-2008. 19. The facts of the case are that the assessee filed its return of income for the AY 2007-08 on 23.110.2007 declaring a total income of ₹ 10,13,510/-. The return was processed u/s 143(1)(a). The case was selected for scrutiny and assessment u/s.143(3) was completed on 22.12.2009 raising the demand of ₹ 6,01,419/-. As income chargeable to tax has escaped assessment, proceedings u/s 147 was initiated by issue of notice u/s 148 dt. 22.03.2012. The reasons for initiating proceedings u/s 147 are reproduced below: During the course of assessment proceedings for the AY 2007-08, the expenditure claimed against the interest income was disallowed on the ground that the interest income had to be assessed under the head "Income from other sources". Since the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as examined the issue and applied his mind. Therefore, reopening of assessment again on the same issue is not permissible under law. In the case of Kelvintor of India Ltd (supra) the Hon'ble Supreme Court has observed that ''after 1st April, 1989, the Assessing Officer has power to reopen the assessment under section 147 provided the Assessing Officer has reasons to believe that income has escaped assessment and there is no tangible material to come a conclusion that there is an escapement of income. Mere change of opinion cannot per se to be reason to reopening'. 17. In the present case, the Assessing Officer, having considered entire material and after applying the mind, completed assessment t under section 143(3) of the Act. Thereafter, a notice under section 148 was issued on 24.03.2011 i.e. after four years and reopened the assessment. In our opinion, the Assessing Officer has reopened the assessment is change of opinion, which is not permissible under law. Therefore, the reopening is invalid. The Commissioner of Income Tax (Appeals) observed that reopening is invalid. Against this, the Revenue is in appeal before us. 21. We have heard both the sides and perused the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 148 after expiry of four years cannot be sustained as escapement of income, if any, not on account of any failure on the part of the assessee to disclose material facts fully and truly. The Hon'ble Jurisdictional High Court in the case of CIT v. Elgi Finance Ltd. [286 ITR 674] has observed that " the assessee company having truly and fully disclosed all material facts necessary for working out the quantum of depreciation, notice under section 148 issued after expiry of four years from the end of relevant assessment year to withdraw the excess depreciation allowed to the assessee is barred by limitation and illegal". The Hon'ble Jurisdictional High Court has further observed that "the law relating to reassessment has undergone to a change from 01.04.1989. The change was brought by Direct Tax Law (Amendment) Act, 1987. Two sets of provisions are available under section 147 in clause (a) and clause (b). This distinction has now been taken away by the Amendment Act. Previously, the line of distinction was a limitation period of four years and the limitation period exceeding four years. The Assessing Officer would reopen a back assessment within a period of four years as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. 20. In the present case, the notice under section 148 was issued after four years. There is no specific finding by the Assessing Officer in the reasons recorded as extracted from the assessment order that the assessee failed to disclose fully and truly all the particulars required to complete the assessment. Therefore, we find that the notice issued under section 148 is not valid. 21. In similar circumstances, the Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. v. ACIT (268 ITR 332) has observed that "reasons recorded by the Assessing Officer nowhere stating that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and, reopening of assessment made under section 143(3), after expiry of four years from the end of the relevant assessment was not valid. 22. In Sadbhav Engineering Ltd. v. DCIT (333 ITR 483), the Hon'ble Gujarat High Court has observed that in the absence of any averment that the assessment is sought to be reopened by reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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