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TMI Blog2022 (12) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, in which the aspect of allowability of interest under section 14A was considered alolngwith the other aspects on the basis of the material and conscious decision was taken reflected in the assessment order. It is on the basis of the very facts that the assessing officer wanted to reopen the concluded assessment proceedings. It amounted to change of opinion. It is well settled that mere change of opinion could not be a ground for the AO to reopen the concluded assessment. In Commissioner of Income Tax vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] the supreme court observed that concept of change of opinion was an inbuilt test and it did not stand obliterated after substitution of section 147 in the Act by the Direct Tax Laws (Amendment) Act, 1987 and 1989. AO issued notice u/s148 only to make a roving inquiry into the facts which were already considered and which had gone into his consideration and decision. It appeared that the assessing officer wanted to re-verify the facts, which is not an acceptable ground for exercising powers to reopen the assessment. - Decided in favour of assessee. - R/SPECIAL CIVIL APPLICATION NO. 17583 OF 2021 - - - Dated:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 144(C) of the Act and passed order dated 25.1.2018 after making various additions including disallowance. The actual disallowance under section 14A of the Act was worked out by the then assessing officer to be Rs. 32,17,698/-, however, since the petitioner had itself disallowed Rs. 1,12,869/- suo motu, net disallowance of Rs. 31,04,829/- (Rs. 32,17,698/- - Rs. 1,12,869/-) was made. 3.2 The disallowance under section 14A of the Act made by the authorities came to be challenged by the petitioner by preferring the appeal before the Commissioner of Income Tax (Appeals). The appellate authority passed order dated 20.6.2018 and deleted the disallowance under section 14A observing that the investment made in foreign companies cannot be considered for the purpose of making disallowance under the said section 14A of the Act read with Rule 8D of the income tax rules. 3.3 It is the case of the petitioner that thereafter the respondent issued impugned notice dated 27.3.2021 under section 148 of the Act. The petitioner filed return of income 15.4.2021 in response to the notice and requested the officer to supply the reasons for reopening the assessment. The reasons were supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed exempt income of Rs.1,43,679/- by way of dividend income. It is further noticed that the assessee-company had itself disallowed of Rs.1,12,869/- under section 14A r.w.r. 8D of the IT Rules. It is further noticed from assessment order that, the Assessing Officer in addition to the above disallowed another amount of Rs.31,04,829/- under section 14A r.w.r. 8D(2)(iii) at the time of finalizing the assessed income. It is further noticed from Balance Sheet and Profit Loss Account that assessee-company had invested in equity shares and preference shares a total sum of Rs.69,58,82,489/- as on 31.03.2015 and Rs.59,11,96,725/- as on 31.03.2014 and had incurred interest expenditure of Rs.3,19,34,823/- in P L Account. However, the expenses in relation to the exempt income were disallowed short in terms of the provisions of section 14A of the Income-tax Act r.w.r. 8D(2)(ii) accordance with the formula (A x B/C of the Income-tax Rules. The total amount required to be disallowed under section 14A r.w.s. Rule 8D comes to Rs.99,81,608/- whereas only amount of Rs.32,17,698/- was disallowed. This short disallowance of expenditure has resulted into underassessment of Rs. 67,63,910/- (Rs. 99,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to why proportionate interest expenses should not be disallowed u/s. 36(1)(iii) of the Act or capitalized with the capital assets. Please furnish details of advance recoverable in cash or kind along with justification for non charging of interest on such advance, if any. (ii) Details of holding of shares all the Directors of the company along with their latest addresses. Submit the copies of ledger account for the financial year 2013-14 of all such shareholders who are the beneficial owner of shares in the company holding not less than ten per cent of voting power or who is substantially interested in the Company or of any concerns in which such shareholders are substantially interested within the meaning of section 2(22)(e) of the IT Act, 1961. 5.3 The petitioner responded with the details of working of disallowance under section 14A as under, Particulars Amount INR Opening balance of Investment earning Exempt Income (A) 1,000 Closing balance of Investment earning Exempt Income (B) 4,51,46,499 Investment Balances Opening and Closing (A) + ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be disallowed. In response to the assessee has furnished its reply dated 30/08/2017, the assessee submitted that the working of disallowance of Rs. 1,12,869/- under section 14A is already made while computing the income and no further expenses requires to be disallowed. 5.5 While filling the objections to the reasons recorded, the assessee furnished to the assessing officer Note 15 of the audited accounts, which provided details of investment, that is investment in shares held by the assessee, which included the investment in preference shares of foreign companies/foreign subsidiaries as well. 5.6 It was further pointed out that the petitioner while filed return of income on 27.11.2014 declaring income of Rs. 51,06,77,201/- after diallowing Rs. 1,12,689/- under section 14A. In absence of specific borrowings and availability of sufficient own interest free funds in the hands of the assessee, any adjustment under Rule 8D2(ii) was not made and any interest expenses was not disallowed. It was pointed out that the assessee worked out disallowance as provided in rule 8D2(iii) at 0.5% in absence of any interest expenses. The said details were given in tabular form thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had acted to undertake the assessment, which ended up with the assessment order under section 143(3) of the Act, in which the aspect of allowability of interest under section 14A was considered alolngwith the other aspects on the basis of the material and conscious decision was taken reflected in the assessment order. It is on the basis of the very facts that the assessing officer wanted to reopen the concluded assessment proceedings. It amounted to change of opinion. 6.3 It is well settled that mere change of opinion could not be a ground for the Assessing Officer to reopen the concluded assessment. In Commissioner of Income Tax vs. Kelvinator of India Ltd. [(2010) 320 ITR 561 O(SC)], the supreme court observed that concept of change of opinion was an inbuilt test and it did not stand obliterated after substitution of section 147 in the Act by the Direct Tax Laws (Amendment) Act, 1987 and 1989. The Apex Court stated, ... prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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