9911796707
TMI Blog2019 (9) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... on, which suggest escapement of income within the meaning of section 147. Therefore, we are of the considered view that there is no merit in the argument taken by the assessee. Reopening after expiry of four years from the end of the relevant assessment year - HELD THAT:- We find that the assessee, neither provided any note in its financial statements explaining, the computation of deduction, nor the AO has examined the issue, at the time of original assessment proceedings u/s 143(3). Therefore, we are of the considered view that there is no merit in arguments taken by the assessee, in light of proviso to section 147 of the I.T.Act, 1961. Insofar as various case laws relied upon by the assessee, we find that although assessee has relied upon various case laws, but none of case laws are directly applicable to facts of assessee case and hence, all case laws relied upon by the assessee have been rejected. CIT(A) was right in upholding reopening of the assessment in the given facts and circumstances of this case. Hence, we are inclined to uphold order of the Ld.CIT(A) and reject ground taken by the assessee challenging reopening of assessment. Disallowances of excess claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . b. On the facts in the circumstances of the case in law, the learned Assessing Officer erred in not appreciating the fact that the assessee has not concealed any income or has not furnished inaccurate particulars of any income. c. The Notice issued u/s 148 of the Income Tax Act, 1961 for reopening of assessment was in the nature of enquiry and hence the same is bad in law. 2. On the facts and in the circumstances of the case, The Honorable Commissioner of Income Tax [Appeals]-22, Mumbai erred in confirming the addition of proposed by the assessing officer by dismissing the objection of assessee for the claim under section 35D of the Income Tax Act, 1961 3. On the facts in the circumstances of the case in law, the honorable Commissioner of Income Tax (Appeals) erred in enhancing the disallowance under section 35D to the tune of ₹ 80,96,690/- and adding it to the total income of the assessee. 4. The Honorable Commissioner of Income Tax (Appeals) erred in restricting the claim for deduction u/s 35D to ₹ 19,16,276/- as against ₹ 1,00,12,966/- claimed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly notice u/s 148 of the I.T.Act, 1961, dated 31/03/2015 was issued and duly served on the assesse. In response to notice, the assessee vide letter dated 11/04/2015, requested to treat, the original return filed on 12/10/2010 as return filed pursuant to the notice issued u/s 148 of the I.T.Act, 1961. Thereafter, the case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act, 1961 were issued. During the course of assessment proceedings, the assessee requested for reasons for reopening of the assessment and the same was provided by AO vide letter dated 31/08/2015. 4. During the course of assessment proceedings, the AO called upon, the assessee to explain as to why, excessive deduction claimed u/s 35D of the I.T.Act, 1961, in respect of share issue expenses shall not be recomputed. In response, the assessee has filed detailed written submissions, vide letter dated 05/10/2015 and argued that the claim made by the assesee u/s 35D is in accordance with provisions of section 35D and accordingly, it has written off an amount equal to 1/5th of the expenditure in assessment year 2009- 10, which was under scrutiny and the same was allowed as deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lok Housing Construction Ltd. vs. DCIT [2012] 348 ITR 154 [Bom] Prashant Joshi vs. ITO-324 ITR 154 [Bom] Similarly, as regards deduction claimed u/s 35D, the assessee has filed written submission and argued that its claim of expenditure related to share issue expenses is in accordance with provision of section 35D and accordingly, the AO was erred in re-computing, such deduction by restricting 5% of capital employed , excluding long term borrowings. 6. The Ld.CIT(A), after considering relevant submissions of the assessee and also by relied upon, the decision of Hon ble Supreme Court, in the case of ACIT vs Rajesh Jaweri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500(SC), rejected legal arguments taken by the assesee challenging validity of reopening of assessment, on the ground that the AO has formed reasons to belief on the basis of materials in his possession, as per which there is a escapement of income on account of excessive claim of deduction u/s 35D. The Ld.CIT(A), further observed that formation of believe by the AO is within the realm of subjective satisfaction as held by the Hon ble Supreme Court ,in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyed for the purpose of determining deduction u/s 35D should be computed as on 31.03.2008. The appellant had, however, computed the capital employed as on 31.03.2009. This material fact was not disclosed in its return of income nor before the Assessing Officer during the original assessment proceedings. I, therefore, hold that there was no true and full disclosure of material facts by the appellant. The appellant s objection to re-opening of assessment on this issue is also dismissed. 7. As regards, additions made by the AO towards disallowances of expenditure claimed u/s 35D, the Ld.CIT(A) observed that explanation (b) to sub section (3) of section 35D defines capital employed , as per which, the aggregate of issued share capital, debentures and long term borrowings as on the last day of the previous year, in which the business of the company commences. Long term borrowing has also been defined in Explanation (c) to sub-section 35D and includes borrowings from banks. Therefore, there is a merit in contention of the assessee that capital employed, includes long term borrowings. However, in respect of computation of capital employed , the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass such orders as the Tribunal thinks fit include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by section 31 of the Act, Consequently, the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income-tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry. The above observation of the Hon ble Supreme Court does not in any way imply that the Appellate Assistant Commissioner corresponding to the present Commissioner (Appeals) did not have the power of enhancement. In fact, a proper reading of the Hon ble Supreme Court s observation indicates that the Appellate Assistant Commissioner did have the power of enhancement while possibly the Tribunal may not. The appellant has picked out the words pass such orders as the Tribunal thinks fit and likened it to the provision of section 251(1)(c) which states that in any other case, he may pass such orders in the appeals as he thinks fit , and thereby inferred that this power does not include that power of enhancement. However, the powers of the Commissioner (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst Indian Overseas Bank and HDFC Bank are in the nature of cash credit/overdraft and are not borrowings and, hence, are excluded for computing capital employed. With these observations, the capital employed in the business of the appellant as on 31.03.2008 is computed as under: i. Issued share capital ₹ 4,50,08,490/ (45,00,849 shares of ₹ 10/- each issued under IPO) ii. Long Term Borrowings a. ICICI Bank Bahrain ₹ 14,66,19,200/- Capital employed ₹ 19,16,27,690/- 6.13 As per section 35D (3) of the Act, the total expenses eligible for deduction u/s 35D @5% of capital employed, ie, ₹ 19,16,27,690/-, therefore, comes to ₹ 95,81,384/-. The amount eligible for deduction u/s 35D during the year at 1/5th of ₹ 95,81,384/- is ₹ 19,16,276/- as against ₹ 1,00,12,966/- claimed by the appellant. There is a difference of ₹ 80,96,690/- between the eligible amount and as claimed by the appellant. The Assessing Officer has already disallowed ₹ 41,62,966/- on this account. The disallowance u/s 35D made by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bom.)] 8. German Remedies Ltd. vs. DCIT [(2006) 287 ITR 494 (Bom)] 9. Hindustan Lever Ltd. vs. R.B.Wadkar [(2004) 268 ITR 332 (Bom.)] 10. The Ld. DR, on the other hand, strongly supporting order of the Ld.CIT(A) submitted that the Ld.CIT(A) has brought out clear facts to the extent that the AO has formed reasonable belief of escapement of income within the meaning of section 147 of the I.T.Act,1961 and at the time of initiation of reassessment proceedings, the AO need not to prove escapement of income and what is relevant is there is a some tangible material, which suggest escapement of income within the meaning of section 147 of the I.T.Act, 1961. In this regard, he relied upon the decision of Hon ble Bombay High Court, in the case of Yuvraj vs Union of India ( 2009) 225 CTR 283 (Bom) and the Hon ble Supreme Court in the case of Raymond Wollen Mills vs ITO (1999) 236 ITR 34 (SC). 11. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. The assesee has challenged reopening of assessment on two grounds. The first objection ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered view that there is no merit in the argument taken by the assessee. 12. The second limb of arguments of the assessee for reopening of assessment is that when, original assessment was completed u/s 143(3) of the I.T.Act, 1961, the assessment could not the reopened after expiry of four years from the end of the relevant assessment year, unless there is a allegation by the AO that income chargeable to tax has escaped assessment for such assessment year by the reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. We find that the Ld.CIT(A) has brought out clear facts, in light of proviso to section 147 and facts brought out by the AO, in respect of deduction claimed u/s 35D and observed that there is a failure on the part of the assessee to disclose fully and truly, all material facts necessary for assessment, because the assessee has claimed excessive deduction u/s 35D, which itself goes to prove the fact that the facts disclosed in the return of income or at the time of assessment are not true and correct and also full disclosure of material facts necessary for assessment. We, further noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.CIT(A) were right in re-computation of eligible deduction u/s 35D by excluding share premium from capital employed and accordingly, we are inclined to uphold order of the Ld. CIT(A) and reject ground taken by the assessee. 15. In the result appeal filed by the assessee is dismissed. ITA NO. 558/Mum/2018 16. The facts and issues involved in this appeal are exactly identical to the facts and issues, which we have already considered in ITA No 557/Mum/2018, except to the extent of limited changes in facts in as much as, the reopening of assessment has been done within four years from end of relevant assessment years. Therefore, the argument advanced by the assessee in light of proviso to section 147 has no application. Insofar as, the first argument of the assessee that there is a absence of reason to belief for reopening of assessment, we find that a similar objection raised by the assessee for AY 2008-09 has been negated by us with detailed reasons in preceding paragraph. The reasons given by us in preceding paragraph shall mutatis mutandis apply for this year also. Accordingly, the objection of the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO towards disallowances of excess claim of deduction u/s 35D of the I.T.Act, 1961 and consequent enhancement u/s 251 of the I.T.Act, 1961 by the Ld.CIT(A). We find that Ld. AR for the assessee was not seriously contesting, the issue on merit because, the Hon ble Supreme Court in the case of Berger Paints India Ltd.vs CIT (2017) 393 ITR (113) (SC) held that premium collected by assessee company on its subscribed share capital is not capital employed in business of company within the meaning of section 35D of the Act, so as to enable assessee to claim deduction of said amount. We find that the Hon ble Supreme Court has settled the issue and held that for the purpose of capital employed, share premium collected on issue of share capital is not part of capital employed. Therefore, we are of the considered view that the AO, as well as the Ld.CIT(A) were right in re-computation of eligible deduction u/s 35D by excluding share premium from capital employed and accordingly, we are inclined to uphold order of the Ld. CIT(A) and reject ground taken by the assessee. 18. In the result, appeal filed by the assessee is dismissed. ITA NO. 559/Mum/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
