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TMI Blog2016 (7) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... business. He could have questioned the assessee within the purview of section 80IA(10) read with section 10AA(9) of the Act. This would be relevant since the notice for reopening is issued beyond a period of four years from the end of relevant assessment year. In any case therefore, there was no failure on the part of the assessee to disclose truly and fully all material facts in this regard. Purchase of gold from AEL at a rate lower than the prevailing market rate - Held that:- We have reproduced the portions of the assessee's communications to the Assessing Officer. Particularly, in the letter dated 02.03.2010, the assessee pointed out that the firm had purchased gold bar from AEL. The assessee submitted sample copy of comparable purchases and sale invoices of gold bar of AEL and the purchases the AEL had made from the overseas buyers. On the basis of such material, the assessee had contended that the transactions were at the arm's length price. Thus, according to the assessee, the supply of gold by AEL to the assessee firm was at the prevailing market price. This explanation had to have relation only to the question of proper pricing of gold purchased by the assessee from AEL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership deed dated 8.5.2006 the assessee is a partnership firm consisting of two partners, viz. Adani Enterprise Limited (PAN:AABCA2804L) and Adani Agro Private Limited (PAN:AABCA3138G) with profit/loss sharing ratio of 99 percent and 1 percent respectively, came into existence from 1st day of June, 2006 having its registered office at Ahmedabad. As per the convents of the partnership deed simple interest at the rate of 9 percent per annum or such other rates prescribed under section 40(b)(iv) of the Income Tax Act i.e. @ 12 percent per annum shall be payable by the partnership on the balance amount to the credit of the capital and/or current account. 2.1 As per the convents of the partnership deed the partners were eligible for interest on the balance of their capital account at the maximum rates permissible under section 40(b)(iv) of the Income Tax Act i.e. @12% per annum. 2.2 However, it was observed that the assessee had not provided for the interest to the partners during the year under consideration. Thus, by not providing for the interest and remuneration to the partners, the assessee firm had more profits than reasonable profits which would have accrued to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack to the partners AEL (99%) and AAPL (1%) in the form of exempted income u/s 10(2A). Thus, owing to the close connection between the assessee firm and partner, the assessee earned more profit to the extent of ₹ 28,48,40,727/- ( as detailed in Statement 7 enclosed) than the ordinary profits which might be expected to arise in normal course of business attracting the provisions section 80IA(10) r.w.s. 10AA(9) of the Act. 3.2 Since, the assessee firm had made more profits to the extent of ₹ 384840727/- than reasonable profits which would have accrued resulting into higher claim of deduction u/s 10AA. In view of the provisions of 80IA(10) r.w.s. 10AA(9) of the Act, an amount of ₹ 38,48,40,727/- limited to exemption claimed u/s 10AA was required to be disallowed. 3.3 In view of the above, I have therefore reason to believe that the income chargeable to tax to the extent of ₹ 69,15,09,161/- has escaped assessment for the A.Y.2008-09 due to the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Hus, the case needs to be reopened by issuing notice u/s. 148 of the I.T.Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny on the two aspects mentioned by the Assessing Officer in the reasons, on the basis of which, the assessments have been reopened. 8. In background of such contentions, we may peruse the reasons recorded by the Assessing Officer more minutely. From such reasons, we gather that the assessee which is in the business of manufacturing an export of gold and diamond jewelery, was a partnership firm comprising of two partners viz. AEL and AAPL which had profit/loss sharing ratio of 99:1% respectively. The reasons cite two different grounds for the Assessing Officer to form a belief that income chargeable to tax has escaped assessment. First was that, as per the partnership deed dated 01.06.2006, the partners would receive simple interest at the rate of 9% per annum or such other rates as may be prescribed under section 40(b)(iv) of the Act on the balance amount to the credit on the capital or current account of the firm. Despite this covenant, the assessee firm did not pay any interest to its partners which had the effect of increasing the assessee's profit from the eligible business. Thus, the assessee claimed higher deduction than what was justified. The second ground was that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the fineness rate and it is not difference in the books of the assessee firm or AEL. On consideration of the above explanation, your honour will find a fact that the figure of ₹ 11.01 crore is nothing but notional difference and the audit objection requires to be dropped. 10. Thus, primafacie atleast at one stage, the Assessing Officer was convinced that the audit objection was not valid. However, for want of full clarity on this issue, we are not inclined to conclude the matter only on this aspect. It is by now well settled that if the Assessing Officer has recorded his own reasons uninfluenced by audit objection, such action would not be bad in law merely because certain issues were brought to his notice by the audit party. It is equally well settled that when the Assessing Officer does not accept the audit objections, but has issued the notice for reopening based solely on the audit objections, such action would not be valid. 11. Coming to the remaining issues, we may recall that the notices for reopening were issued in both cases beyond the period of four years from relevant assessment year. Here also, both the assessments proceeded more or less along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced, it would imply that the Assessing Officer was guided by a partnership deed which made a specific provision for payment of interest to the partners for the borrowed capital. The fact that despite said covenant in the partnership firm, no such interest was paid was very much before him during the original assessment. On the other hand, if the amended partnership deed was produced, he could still have questioned the assessee about nonpayment of interest to a partner who had 99% profit sharing stake in the partnership business. He could have questioned the assessee within the purview of section 80IA(10) read with section 10AA(9) of the Act. This would be relevant since the notice for reopening is issued beyond a period of four years from the end of relevant assessment year. In any case therefore, there was no failure on the part of the assessee to disclose truly and fully all material facts in this regard. 14. Coming to the question of purchase of gold from AEL at a rate lower than the prevailing market rate, counsel for the petitioner would argue that there was no failure on part of the assessee to disclose truly and fully all material facts. On the other hand, the counsel of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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