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TMI Blog2022 (12) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... e any jurisdiction to issue the notice u/s 148 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] AO issued notice under section 148 of the Act only to make a roving inquiry into the facts which were already considered by the Assessing Officer at the time of framing the original assessment under section 143(3) of the Act. It appears that the Assessing Officer now wants to re-verify the facts which is not permissible to be an acceptable ground for exercising powers to reopen the assessment. The impugned notice issued u/s 148 by the respondent exercising the powers to reopen the assessment for the Assessment Year 2011-2012 is illegal and liable to be set aside. Appeal of assessee allowed. - R/SPECIAL CIVIL APPLICATION NO. 16885 of 2018 - - - Dated:- 16-12-2022 - HONOURABLE MR. JUSTICE N.V.ANJARIA And HONOURABLE MR. JUSTICE BHARGAV D. KARIA MR MANISH J SHAH(1320) FOR THE PETITIONER(S) NO. 1 MR MR BHATT, SENIOR ADVOCATE FOR MR BHATT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Year 2009-2010 wherein the issue of disallowance of interest payment made to entities specified under section 40A(2)(b) of the Act was considered and allowed and the issue under section 14A was also considered. 3.9) The petitioner thereafter submitted its written submissions dated 19.02.2014 and provided the information that was called for by the respondent with regard to Guarantee Commission and details regarding investment in mutual funds, which is taken as tax free income under section 14A of the Act. The petitioner also submitted a further detailed written submission dated 5.03.2014. 3.10) It is the case of the petitioner that after thorough scrutiny of all issues, the respondent passed the assessment order under section 143(3) of the Act dated 6.03.2014 disallowing an amount of Rs.75,000/- under section 14A being dividend from cooperative bank. 3.11) The petitioner thereafter received notice under section 148 of the Act dated 13.03.2018 requiring the petitioner to file return within 30 days from service of the said notice. 3.12) The petitioner vide letter dated 11.06.2018 filed its return in response to the notice under section 148 of the Act and also requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of assessee. Under the above circumstances, the payment of guarantee commission of Rs.27,26,230 to six entities has escaped assessment. 3. The assessee has paid interest at the rate of 12%, 15% and 18% on unsecured loans from certain parties. All the loans were taken from persons covered w/s. 40(A)(2)(b) of the Act. It indicated that assessee has access to funds @ 12% hence there can be no justification for paying higher rate of interest. A reasonable rate of interest for payment of unsecured loan would have been 12% as assessee had itself paid interest at this rate to unsecured lenders. Accordingly, excess payment of interest @ 6% (18% 0 12%) and 3% (15% - 12%) is computed as under:- Sr. No. Name of Lender Interest Paid Rate of Interest Excess payment in excess of 12% 1 Bhargav H. Desai 119962 15 2 Harshad K. Patel 172284 15 3 Deepak J. Jais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The assessee company is having huge investment in shares and secures which derives exempt income. Therefore the disallowance w/s.14A should be made. The disallowance u/s. 144 works out to Rs.3,67,488/- and have escaped assessment. 4. In respect of income reconciliation as per 26AS and books of account revealed that the assessee had shown work contract income of Rs.33,54,39,765 and income declared in IT survey of Rs.2,33,00,000 totalling to Rs.35,87,39,765 as income from works contract. The assessee had made disclosure of Rs.2,33,00,000 during the survey dated 06.01.2011 on account of work-in-progress and inadequate explanation of expenditure. It is noticed from income reconciliation as per 26AS that the assessee has total construction income from P.C. Snehal Construction Pvt. Ltd., of Rs.35,28,19,625 during A.Y.2011-12. Against this, assessee has shown only Rs.33,54,39,765 as contract income. Therefore the difference of Rs. 1,73,79,860 (35,28,19,625 33,54,39,765) has escaped assessment. 3. In view of the above, income to the tune of Rs.2,09,86,944/-( 27,26,230 5,13,366 + 3,67,488+1,73,79,860) has escaped assessment within the meaning of section 147 of I.T. Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate Mr. Shah submitted that the Assessing Officer has issued notice under section 148 for reopening the assessment for the Assessment Year 2011-2012 mainly on four reasons. With regard to payment of Guarantee Commission of Rs. 27,26,230/- to six entities, the petitioner had in the course of assessment proceedings in its replies dated 5.11.2012, 5.03.2014 and 19.02.2014 produced the details of secured loans taken from banks and institutions, details of Guarantee Commission and also the individual details about the name of person, amount of guarantee commission and nature of payment along with copy of Agreement of Guarantee Commission expenses. It was submitted that the Assessing Officer after being satisfied with such details and after application of mind passed the assessment order under section 143(3) of the Act without making any addition towards Guarantee Commission expenses. It was submitted that the Assessing Officer has not unearthed any fresh tangible material on record to prove that the assessee company has failed to disclose truly and fully material facts necessary for assessment. 4.5) With regard to payment of excess interest over 12% of Rs. 5,13,366/-, it was sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined at length during the course of assessment proceedings and the Assessing Officer after being satisfied with such explanation thought it fit not to make any addition on account of income difference in 26AS statement and books of account. 4.8) Learned advocate Mr. Shah submitted that reopening is based on audit objections and therefore, also the notice of re- assessment of a previously scrutinized assessment beyond a period of four years is bad in law and therefore, the impugned notice and consequential orders may be quashed and set aside. 4.9) In support of his contention that reopening of an already completed scrutiny assessment beyond a period of four years cannot be undertaken, reliance was placed on the following decisions of this Court: 1) In case of Kalpataru Sthapatya (P) Ltd. v. Income tax Officer, Ward 1(3) reported in (20130 29 taxmann.com 218 Gujarat. 2) In case of Dhruv Dipakbhai Panchal v. Income Tax Officer Ward 5(2)(2) reported in (2018) 93 taxmann.com 206 (Gujarat). 4.10) It was submitted that there is nothing stated in the reasons recorded or from the material on record which suggest that the assessee failed to disclose truly and fully all m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of five entities/individual except Moti Hira Land Developers to substantiate the claim of payment of such guarantee commission. The petitioner in its reply dated 05.03.2014 had submitted nature of payment of commission to such entities, however did not produce any agreement with these entities/individual to justify payment of guarantee commission. It was submitted that the agreements on the basis of which such guarantee commission was paid was essential and material fact for the Assessing Officer to arrive at a conclusion as to whether such commission paid was for business purposes or not. It was submitted that the deduction of TDS in itself does not lead to conclusion that such payment was for business purpose. Therefore, there is a failure on the part of the petitioner to truly and fully disclose all material facts necessary for assessment. 5.4) Relying upon the Explanation 1 to Section 147 of the Act, it was submitted that the said explanation clearly states that production of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned, the assessee had supplied details of secured loans with name, addresses, type of loan and loan limit of individual banks and institutions. The assessee had also tendered details of individuals to whom the assessee had paid Guarantee Commission and also produced the copy of Agreement of Guarantee Commission executed with said entities. The assessee had filed replies for claim of Guarantee Commission expenses during the assessment proceedings and the Assessing Officer passed the assessment order without making any addition under the head Guarantee Commission expenses. Therefore, there was no failure on part of the assessee to make full and true disclosure of material facts necessary for assessment. 8.Insofar as payment of excess interest over 12% to the tune of Rs.5,13,366/- is concerned, the petitioner had submitted audited balance sheet with its reply showing bifurcation of interest expenses during the course of assessment proceedings. The Assessing Officer after being satisfied with such documents made no addition on account of reason of higher rate of interest expense. 9.Insofar as disallowance under section 14A of the Act to the tune of Rs. 3,67,488/- is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it appears that the notice for reopening is based upon the audit objection and there is nothing on record to suggest that such reopening is made on account of new tangible material available on record. It is therefore, apparent that there is change of opinion by the Assessing Officer to reopen the assessment for the Assessment Year 2011- 2012, more particularly, when the issue raised in the reopening assessment is already considered during the original assessment proceedings. The Assessing Officer cannot have any jurisdiction to issue the notice under section 148 of the Act, 1961 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. reported in (2010) 320 ITR 561(SC) as under: 2. 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 Direct Tax Laws (Amendment) Act, 1987? xxxx 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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