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TMI Blog2019 (2) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO. This was subject matter of the appeal before the Commissioner. On the ground of merger, this issue could not have been raised by the Assessing Officer for reopening the assessment. Even otherwise, where the Assessing Officer himself had disallowed the expenditure in its entirety, we do not understand how he can seek to reassess the expenditure which in the original assessment he disallowed in its entirety. The impugned notice is quashed. - WRIT PETITION NO. 3364 OF 2018 - - - Dated:- 1-2-2019 - AKIL KURESHI B.P. COLABAWALLA, JJ. Mr. V. Sridharan, Sr. Counsel a/w Mr. S. Sriram, Mr. Mayank Thosar i/by B.V. Jhavaeri for the Petitioner Mr. Charanjeet Chanderpal a/w Ms. Namita Shirke and Ms. Pragya Chandra for the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00% holding company on day rate charter basis as the assessee does not own such vessels. 2. The assessee has filed return of income declaring the total income of ₹ 43279942/- on 30.9.2011 and the same was processed u/S. 143(1) of the Act on 13.1.2012. 3. In this case, information has been received from DDIT(Inv.), Mumbai vide letter No. DDIT(Inv.) Unit 3(3)/Information- USCL/2017-18 dated 20.3.2017 stating that search action u/S. 132 of the IT Act was conducted on the assessee wherein it was seen that the assessee had not bench marked its transaction with Associate Enterprises (AE) or Closing Connected Person. In accordance with the transfer pricing provision or section 115VI(8) of the I.T. Act and therefore, unreasonable hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and for the said reason, I have reason to believe that the said expenses as per the provisions of section 37(1) of the I.T. Act are not allowable in the hands of the assessee and the same has escaped assessment. Further, the victualling expenses are stated to be incurred in cash. 6. As there is failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the undersigned had reason to believe that the income chargeable to tax amounting to ₹ 18,85,16,555/- has escaped assessment for A.Y. 2011-12, within the meaning of section 147 of the I.T. Act, 1961. Provisions for issuance of notice u/s. 148 as per the provisions of Sec. 151(2) of the I.T. Act, 1961 is solicited. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o additional material found during the search which would in any manner show that the disclosures made by the assessee during the original scrutiny assessment were incorrect. He, therefore, submits that the issue which was scrutinized could not have been reopened that too by issuing notice beyond the period of four years from the end of relevant assessment year. 6. On the question of disallowance of expenditure towards gift items, the learned counsel for the petitioner submitted that the petitioner had voluntarily reduced the expenditure by 50% and the remaining 50% was disallowed in the scrutiny assessment. The petitioner had challenged said disallowance before the Commissioner (Appeals) and has in fact succeeded in such appeal. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if it is found that such disclosures were incorrect. 9. As noted, the reasons recorded by the Assessing Officer cites two grounds for reopening the assessment. With respect to the action of the assessee to transfer its profit to its AE, the reasons refer to the search operation carried out against the assessee. However, the reasons, nowhere either contain or cite any material found during such search which would show that the disclosures made by the assessee during the original assessment proceedings were incorrect. In other words, the Assessing Officer was merely proceeding on the basis of the documents already on record. This is, therefore, not a case where after completion of assessment, the Departmental Authorities came in posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will clarify the nature of expenses. Along with this letter, the petitioner had annexed a set of submissions. On the issue this is what the petitioner had represented to the Assessing Officer:- 5. It bears mention that SML is covered under tonnage tax scheme under Chapter XXIG of the Income Tax Act. As per Section 115VZB, SML has to demonstrate that it has not entered into any transaction or arrangement which produces to the tonnage tax company more than ordinary profits which might be expected to arise from tonnage tax activities. This condition has been substantiated by SML in its assessment proceedings for A Y 2011-12 as manifested in the acceptance of its tonnage tax income in the assessment framed under Section 143(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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