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TMI Blog2017 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... .P.(C) 526/2016 - - - Dated:- 25-10-2017 - MR. SANJIV KHANNA MS. PRATHIBA M. SINGH JJ. Petitioner Through: Dr. Rakesh Gupta, Mr. Ashwani Taneja, Mr. Somil Agarwal, Mr. Rohit Kumar Gupta and Mr. Lakashya Goyal, Advocates. Respondents Through: Mr. Ashok Manchanda and Mr. Raghvendra Singh, Advocates. SANJIV KHANNA, J. (ORAL) We with the consent of the parties have heard the arguments and the writ petitions are taken up for final disposal. 2. M/s. Samvardhana Motherson International Ltd. (formerly known as Samvardhana Finance Ltd.) has filed the present writ petitions impugning two notices dated 30th March, 2015, issued by the Additional Commissioner of Income Tax, Circle 22(1), New Delhi under Section 148 of the Income Tax Act, 1961 ( the Act for short) relating to Assessment Years ( AY ) 2010-2011 and 2011-2012. 3. The Petitioner has also placed on record a copy of the order dated 16th December, 2015 passed by the Assessing Officer ( AO ) disposing of objections of the Petitioner against reopening of assessments under Section 147/148 of the Act on the ground of `change of opinion'. 4. The undisputed position is that the Petitioner company is enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure which is Disallowed is ₹ 97,526,937/-, hence it is restricted to ₹ 97,526,937 ₹ 73,566,653) 50,854,376 23,960,283 Total Amount 124,421,029 97,526,937 Working Interest expense allocated Interest expense allocated = Interest * Average Value of Investment Average of Total Assets Interest Total Interest Cost as per Balance Sheet 79,528,600 Less: Expenses incurred to earn Interest Income 5,937,096 Less: Interest on delay in ITDS 24,851 Expenses made directly for Investment 73,566,653 Average Value of Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23,960,284 8. After examining the aforesaid information and details, the assessment order for AY 2010-11 dated 18th February, 2013 was passed under Section 143(3) of the Act, accepting the returned income of the Assessee of ₹ 88,56,759/-. Original assessment proceedings for AY 2011-12 9. For the AY 2011-12, the return filed by the Petitioner company had disclosed dividend income of ₹ 28,55,09,111/-, which it claimed as exempt from tax under Section 10(34) of the Act. The Assessee had disallowed expenditure amounting to ₹ 12,44,11,096/- for earning the exempt income under Section 14A of the Act for the AY 2011-12. 10. The case was taken up for scrutiny. During the course of the assessment proceedings, the Assessing Officer (AO) issued a questionnaire, enclosed as Annexure 3 to the writ petition, which had required the Petitioner to file detailed computation of disallowance made under Section 14A of the Act, in the computation of the total income. 11. In response to the aforesaid questionnaire, the Petitioner filed its reply dated 29th January, 2014, enclosed therewith as Annexure 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assets, Loans and Advances 649,670,082 218,130,657 Deffered Tax Asset 181,144 12,009,361,581 11,747,491,657 Average Value 11,878,426,619 Total disallowance Total Expenses 251,139,740 Less : Interest Expenses to earn Interest Income 44,402,599 206,737,141 Less : Expenses for Consultancy others 32,397,824 174,339,317 Less : Expenses which is disallowed as per Provisions of PGBP Donation 1,300,000 Provision for diminution in the value of Investment 43,841,819 Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (net) - 43,841,819 43,841,819 Printing and Stationery 6,439 - 6,439 Donation - 1,300,000 1,300,000 Miscellaneous Expenses 431,406 10,100 441,506 Total (B) 26,236,216 51,176,406 77,412,622 Interest and Finance Charges Interest on Secured Term loans from Other than banks 44,402,599 115,883,363 160,285,962 Unsecured loans from Other than banks - 512,781 512,781 Bank Charges - 919,846 919,846 Processing Fee - 4,265,266 4,265,266 Total (C) 4,402,599 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above mentioned facts, it is clear that the assessee company has not disclosed fully and truly all material facts before the A.O. resulting in under assessment of income. Hence, I have reasons to believe that a sum of ₹ 2,68,94,092/- has escaped assessment in the case of assessee relevant to A.Y. 2010-11, within the meaning of Section 147 of the IT Act. Reasons recorded for initiating proceedings u/s 147/148 for AY 2011-2012. In this case, the assessment proceedings u/s 143 (3) of the I.T. Act, 1961 for the A.Y. 2011-12 was completed on 28.02.2014 at an income of ₹ 3,59,35,409/-. On scrutiny of records it was found that an amount of ₹ 5,00,95,760/- has escaped assessment on account of incorrect computation of disallowance u/s 14A of the I.T. Act, 1961. It was noticed that the assessee had claimed deduction of ₹ 28,55,09,111/- on account of Dividend income and disallowed expenditure amounting to ₹ 12,44,11,096/- u/s 14A. Further scrutiny revealed that the assessee had major income from Dividend and had investments of ₹ 11,52,90,17,479 (as on 31.03.2010) and ₹ 11,35,93,10,551/- (as on 31.03.2011) respectively. The tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les. The AO not only raised a specific query but did so twice in respect of the disallowances for the AY 2010-11. The details called for in the two notices/questionnaires for AY 2010-11 read as under: Notice dated 16.5.2012: 21. Details of dividend received, if any. Also give details of expenses attributable for earning this income. Notice dated 18.10.2012: -Calculation of Disallowance U/s 14A read with Rule 8D. In AY 2011-12, the AO had asked for the details vide questionnaire dated NIL as under: Questionnaire dated NIL: 45. Detailed computation of Disallowance made u/s 14A of the Act as per the Computation of Total Income. 16. From the queries raised during the course of assessment proceedings and the replies thereto, there can be no doubt that the AO specifically examined and went into the question of disallowance of expenditure under Section 14A of the Act as the Assessee had declared substantial dividend income, which was exempt from tax. The AO was certainly conscious and aware of the nature of business activities undertaken by the Petitioner as a strategic investor in shares, making majority or minority investments. 17. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of change of opinion. (emphasis supplied) 18. The Supreme Court recently in Godrej and Boyce Manufacturing Company Limited v. Deputy Commissioner of Income Tax, Mumbai Anr., (2017) 7 SCC 421 on the question of disallowance under Section 14A of the Act and the effect of Rule 8D of the Rules has held as under: 37. We do not see how in the aforesaid fact situation a different view could have been taken for Assessment Year 2002-2003. Subsections (2) and (3) of Section 14-A of the Act read with Rule 8-D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the assessing officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8-D or in the best judgment of the assessing officer, what the law postulates is the requirement of a satisfaction in the assessing officer, what the law postulates is the require ..... X X X X Extracts X X X X X X X X Extracts X X X X
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