9911796707
TMI Blog2013 (7) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai dated 16.9.2010 for the AYs 2003-2004 & 2004-2005. Grounds raised in both the appeals are reproduced as under: "Grounds raised for the AY 2003-04: 1. The Ld CIT (A) erred in confirming the action of AO of reopening assessment us 147 of the Act. Your appellant submits that the reopening is illegal, void and same ought to be quashed. Without prejudice to the above, your appellant submits that the Ld CIT (A) erred in confirming the disallowance by restricting allowance of expenses only to 10% of fees received. Your appellant submits that the expenses claimed by your appellant are allowable as claimed. 2. The Ld CIT (A) erred in confirming the action of AO of charging interest u/s 234B at ₹ 1,41,493/- from the first day of the assessment year to the date of assessment year to the date of assessment order u/s 143(3) r.w.s. 147. Your appellant submits that interest u/s 234B ought to have been charges from the date of determination of total income u/s 143(1) / 143(3) ie regular assessment till the completion of reassessment u/s 143(3) r.w.s. 147 of the Act." Grounds raised for the AY 2004-05: 1. The Ld CIT (A) erred in confirming the action of AO of reopening assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- Interest on debenture ₹ 3612/- ₹ 36325/- The assessee has wrongly set off ₹ 6,92,448/- of his personal expenses against the above cited incomes. The wrong claim of the assessee resulted in escapement of income from tax. In view of this, I have reason to believe that income of ₹ 6,92,448/- chargeable to tax has escaped assessment. Proceedings u/s 147 of the IT Act, 1961 is being initiated in the matter." 5. Bring our attention to the above extract, Ld Counsel mentioned that the source of the information is the "statements of income" which is filed by the assessee. Thus, AO does not have any tangible material gathered from any source other than the return and its enclosures before issue of notice u/s 147 of the Act. Further, she mentioned that the assessment reopened for the AY 2003-04 is a summary assessment and the assessment for AY 2004-2005 is a regular assessment made u/s 143(3) of the Act. With these submissions Ld Counsel mentioned that when there is no tangible material in possession of the AO for formation of a reason to believe about the concealment of income and in such cases, the assessments, whether completed u/s 143(1) or 143(3), cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussed. This order of the Tribunal applies to cases of assessment originally completed summarily or u/s 143(3) of the Act. For the sake of completeness of the order, we reproduce the contents of para 8 of the said Tribunal's order which are as under: "8. We have considered the rival submissions and also perused the relevant material on record. It is observed that the assessment completed in this case originally u/s 143(1) was reopened by the AO for the following reasons recorded u/s 148(2):………………………….. As is clearly evident from the reasons recorded by the AO, there was no new material coming to the possession of the AO on the basis of which the assessment completed u/s 143(1) was reopened and this position has not been disputed even by the learned DR. Relying on the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), he, however, has contended that the reopening of assessment completed originally u/s 143(1) is permissible without there being any new material coming to the possession of the AO if the reasons recorded for reopening of the assessment are otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to challenge the notice on the ground that there is no reason to believe that income chargeable to tax has escaped assessment. As regards the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd (supra) cited by the Revenue and relied upon by the Accountant Member, the Third Member held that the same was applicable in cases where the return was processed u/s 143(1) but later on notice was issued u/s 148 and the assessee challenges the notice on the ground that it is prompted by a mere change of opinion. The Third Member then referred to the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India (supra) wherein it was held that there should be "tangible material" to come to the conclusion that income had escaped assessment. Relying on the said decision, it was held by the Third Member that while resorting to section 147 even in case where only an intimation had been issued u/s 143(1)(a), it is essential that the AO should have before him tangible material justifying his reason to believe that income had escaped assessment. Since, there was no such tangible material before the AO from which he could entertain the belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se three appeals are filed by the assessee on 7.12.2010 is against the different orders of CIT (A)-22, Mumbai commonly dated 16.9.2010 for the AYs 2005-2006, 2006- 2007 & 2007-2008 respectively. In these appeals the assessee commonly raised the following ground relevant to the AY 2005-2006 . "The Ld CIT (A) erred in confirming the disallowance by restricting allowance of expenses only to 10% of fees received. Your appellant submits that the expenses claimed by your appellant are allowable as claimed." 13. Briefly stated facts relevant to the addition are that the assessee is a Managing Director of Geometric Software Solutions Co. Ltd and declared the income from salary and business income (professional fee received from a solitary party). The AY-wise professional fee earned by the assessee for all the three assessment years are ₹ 1.1 lacs; ₹ 1.75 lacs and ₹ 1.5 lacs respectively. Against these business income, assessee debited expenditure in the P & L Account amounting to ₹ 8,52,460/- (AY: 2005-2006); ₹ 8,49,107/- (AY:2006-2007) and ₹ 7,94,270/- (AY: 2007-2008). 14. During the assessment proceedings, AO noted that assessee earned the said bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be restricted uniformly to 10% of business income (professional fee) in all the assessment years under consideration. Para 3.3 of the impugned order for the AY 2003-2004 being a speaking order contains relevant discussion in this regard which was relevant for all these assessment years also. While restricting to 10% of the income, the CIT (A) essentially considered the fact that the assessee failed to prove that the expenditure under consideration was incurred for business purposes. He also referred to AO's remand report where no evidences in support of the expenses was claimed in the return and were not furnished even during the remand proceedings. He also mentioned about the absence of any letter issued to the assessee in this regard. Thus, CIT (A) restricted the disallowance on ad-hoc basis adopting the flat rate of 10% of the income reported by the assessee in all these assessment years. Aggrieved with the above decision of the CIT (A), the assessee is in appeal before the Tribunal. 16. During the proceedings before us, Ld Counsel for the assessee claims that the assessee has filed all the evidences as demanded by the AO during the assessment proceedings. Further, Ld Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, we are of the opinion that the assessee failed to discharge the onus by furnishing cogent evidences. The revised expenditure offered by the assessee also are not backed with the evidences and detailed workings. Further, on the perusal of the orders of the CIT (A), it is noticed that he relied on the remand report which does not contain any investigation and evidence-based conclusions. Further, the order of the CIT (A) restricted the disallowance to a flat rate of 10% of the income without any base. It is not clear as to why 10% constitutes a reasonable percentage and why the same is linked to the professional fee/income of the assessee. In our opinion, such disallowances linking to the income without any comparables is not sustainable in law. The Revenue should also consider the facts in subsequent years that the income earned by the assessee is much higher than the expenditure debited to the P & L Account. Considering all the above said facts, we are of the opinion that the issues must be set aside to the files of the AO for detailed examination into the facts, investigation into the claims of the assessee. In the set aside assessments, assessee is directed to dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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