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TMI Blog2012 (12) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... n the upholding the action of the AO in reopening the assessment under section 147 of the Income Tax Act, 1961 ('the Act'). 2.2 The Appellant prays that the reopening under section 147 of the Act be held as ab-initio void and/or otherwise bad-in-law. Without prejudice to Ground I and Ground II above: Ground III: Charging 'Income from Business' as 'Capital Gains' 3.1 On the facts and in the circumstances of the case and in law, the CIT(A) erred in the upholding the action of the AO in charging income/loss earned by the Appellant from buying and selling of shares and securities as 'Capital Gains', as against 'business income' as offered by the Appellant. 3.2 The Appellant prays the income/loss from buying and selling of shares and securities be held as chargeable under the head 'Profits and Gains of Business Profession' as offered by the Appellant. Without prejudice to Ground I and Ground II above: Ground IV: Disallowance of Miscellaneous Expenses of ₹ 3,01,453/- 4.1 On the facts and in the circumstances of the case and in law, the CIT(A) erred in the upholding the action of the AO in disallowing the Miscel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped from assessment. 3. Therefore, in view of the above, I have reason to believe that income amounting to ₹ 44,90,600/- of the assessee has escaped assessment within the meaning of provision of section 147 Notice u/s. 148 of the IT. Act is issued. ' 2.1 In response to the notice issued by the AO, assessee-company vide its letter dt. 07-04-2010 requested him to consider the original return as filed in response to notice issued u/s. 148 of the Act. On request of the assessee, AO furnished the reasons of re-opening to the assessee vide his office letter dt. 16-07-2010. Assessee filed objections before the AO vide its letter dt. 04-08-2010.As per the decision of the Hon'ble Supreme Court delivered in the case of GKN Driveshaft (India) Ltd. v. ITO [2003] 259 ITR 19, objections filed by the assessee were dealt with by the AO by his letter dt.06-08-2010. After considering the submissions of the assessee, AO initiated the reassessment proceedings. Dealing with the issue of sale of shares he determined the profit/loss on sale of equity shares as under: Profit on sale of un-quoted Equity Shares of Calcutta Electric Supply Co. Ltd., (CESCL) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from sale of investments should have been shown as capital loss, that appellant had shown the same as business loss, that from the Balance Sheet it transpired that the appellant had included shares of CESCL and EIL during the year under consideration, that appellant had earned profit on sale of shares of CESCL and had suffered loss on sale of shares of EIL, that AO had given a set-off between the two transactions and determined the Capital Loss at ₹ 45.9 Lakhs, that the appellant had not challenged the basic facts, that appellant had failed to give sufficient reasons to show as to how the capital loss was claimed as 'Business Loss', that as a trader of shares and securities if the appellant was holding the investment as stock-in-trade he was fully justified to show the profit/loss as business profit/loss, that if the securities/shares were held as investment the profit/loss should have been shown as capital loss/profit, the facts of appellant's case justified the issuance of notice u/s. 148 of the Act, that judicial decisions relied upon by the assessee were distinguishable on facts, that the issuance of notice u/s. 148 was entirely based on the appellant's f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigated, that no specific question was asked by the AO during the original assessment proceedings with regard to sale of the shares. He referred to Pg. No. 16 of the PB in this regard. He further referred to Pg. No. 8 and 55 of the PB to prove that the assets in questions were investment. He finally submitted that on sale of investment profit/loss had to be shown under proper head. He relied upon the case of Yuvraj delivered by the Aurangabad Bench of the Hon'ble High Court of Bombay Yuvraj v. Union of India [2009] 315 ITR 84. 5. We have heard the rival submissions and have perused the material available on file. In the case of Kelvinator of India Ltd. (supra) Hon'ble Supreme Court had Kelvinator of India Ltd. (supra) had framed the following question while deciding the appeals filed before it: 'A short question which arises for determination in this batch of civil appeals is, whether the concept of 'change of opinion' stands obliterated with effect from 1st April, 1989, i.e., after substitution of section 147 of the Income-tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987 ?' After considering the rival submissions the Hon'ble Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the judgments cited above, and considered the relevant provisions of the Income-tax Act and the Rules and the material placed on record. We have perused the assessment order passed under section 143(3) of the Income-tax Act, 1961, on January 9, 1998. The Assistant Commissioner of Income-tax, Circle 2(1), Dhule, while passing the assessment order observed in paragraph 3 that the assessee had sold his right to purchase open plot (NA) at Kothrud, Pune, and copy of the agreement of acquisition of right to purchase and deed in respect of right to purchase executed by the builders were filed on record. After saying so the Assistant Commissioner observed that subject to the above remarks the total income was computed as per the chart mentioned in the order. From the perusal of the order we do not find any application of mind on the part of the Assistant Commissioner of Income-tax to the facts of the case, the issue to be dealt with and the reasons for passing the order. The value of the land was not determined by the Revenue. The issue relating to capital gain or casual income was also not addressed by the Revenue. In the light of the same, in the facts of the case, we find that the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e letter of the assessee or the assessment order. Head of a particular item of income is very important factor to determine the tax liability of an assessee for a particular AY. In absence of such a vital piece of information, it can easily be said that the AO had not formed any opinion about the transaction in question. If purpose behind the reassessment proceedings is taken in to consideration it becomes clear that the parliament wanted that informed decisions should form basis for invoking provisions of section 147/148 of the Act. As per the settled principles of law Sovereign cannot demand even a single rupee form a taxpayer, if it is not due. But, at the same time State cannot be deprived of the taxes that are due from citizens. It can also be said that for determining due taxes a logical and informed assessment is the basic pre-condition. So, if in the original assessment particular income escapes taxation and results in depriving the Exchequer its due revenue, it is the duty of the AO to reassess the same. To save the tax-payers from unnecessary harassment by over enthusiastic tax-administrators Hon'ble Supreme Court has held that change of opinion cannot and should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Delhi High Court has laid down rules as to when invoking of provisions of section 147 would be against the law. It was held that if any query is raised and decided in favour of the assessee by the AO reassessment proceedings cannot be upheld. Similarly, if query is raised by the AO and is answered by the assessee. We find that facts of the case, as discussed earlier are distinguishable from the matter of Usha International Ltd. (supra). In the case of Ashwamegh Co-op Hsg. Soc. Ltd., (supra) Hon'ble Gujarat High Court had found that issue in question; where reassessment proceedings were initiated; was deliberated upon by the AO and the assessee had filed detailed reply in that regard. Other cases relied upon by the AR are also distinguishable of facts, as held by the FAA. As a result, Ground 2 and 3 are decided against the assessee. 6. Next Ground of Appeal is about disallowance of 'Miscellaneous Expenses Written Off' amounting to ₹ 3.01 lakhs. During the re-assessment proceedings, AO found the appellant had debited ₹ 3.01 Lakhs being 1/10th of the total expenses under the head Miscellaneous Expenses Written-off. He directed the appellant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RBI guidelines cannot be treated an industrial undertaking. Word industrial undertaking have a definite meaning in taxation laws and as per our humble opinion the assessee is not entitled to the deduction u/s. 35D of the Act claiming itself an industrial undertaking. Amortisation of preliminary expenses are covered by the provisions of section 35D and the details filed by the appellant with regard to the expenditure incurred do not support its claim. AO has rightly pointed out that even if the expenditure was for increase of share capital it was not to be allowed. Therefore, we are of the opinion that orders of the Revenue Authorities do not need any interference from our side. 6.2.1 In the case of Ship Scrap Traders (supra) provisions dealing with deductions under sections 80 HHA and 80-I have been discussed and it has nothing to do with the Sec. 35D of the Act. Similarly, in the case of Emirates Commercial Bank Ltd. (supra) issue of investment allowance (Sec. 32A) was decided-issue of Amortisation of certain preliminary expenses (Sec. 35D) was not before the Hon'ble Bombay High Court. 6.3 As far as non-recording of reasons with regard to Miscellaneous Expenses Writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently in the course of the proceedings under the section. In these circumstances we are of the opinion that the AO / FAA was following a correct legal path when he had disallowed /confirmed the an amount of ₹ 3.01 lakhs under the head Miscellaneous Expenses Written-off. 6.4 We have perused the case laws relied upon by the AR. We find that the case of Sun Engineering Works (P.) Ltd. (supra) deals with provision as existed before the insertion of Explanation 3 to the section and hence not applicable to the case under consideration. We find that decision of Travancore Cements Ltd. (supra) was overruled by decision of the Full Bench of the same Hon'ble High Court delivered in the case of CIT v. Best Wood Industries Saw Mills [2011] 331 ITR 63 (Ker.). In the case of Vipan Khanna (supra) principles enumerated by the decision of Sun Engineering Works (P.) Ltd. (supra) have been relied upon. As stated earlier, decision of the Hon'ble Supreme Court does not deal with amended provisions of the Act. Therefore, Ground No.4 filed by the appellant company is decided against it. 7. Last Ground of Appeal deals with disallowance of Administrative Expenses of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details were filed by the appellant company, except for the debit note, before the AO or the FAA, that burden was on the assessee to prove such expenditure was incurred for business, that in the absence of evidences by the assessee, AO/FAA rightly disallowed confirming the part expenditure claimed to have been incurred under the head 'Administrative Expenses'. 7.3 We have heard the rival submissions and perused the material before us. It is found from the record that assessee had claimed the said expenditure on the basis of debit note received from the parent company. Neither before the AO nor before the FAA appellant had produced any evidence establishing the facts that the said expenditure was directly incurred for the purposes of the business carried on by the assessee. It was claimed that assessee was sharing the expenditure with the parent- company. The basis for sharing the expenditure in question was never produced before any of the authorities. As per the settled principles of taxation, the burden for claiming deduction is on assessee. We find that in the case under consideration, initial onus was not discharged by the appellant company with regard to the expend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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