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TMI Blog2024 (2) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner admittedly gave detailed reply and an assessment order came to be passed. In the assessment order, there was a disallowance u/s 14A of the Act and the same was added to the total income of Petitioner under the normal provision as well as under Section 115JB. Therefore, as correctly submitted by assessee, the points raised in the reasons recorded for reopening were also the subject of consideration during the assessment proceedings. Admittedly, the reopening has been made based on audit objections. It is settled law as laid down in Indian Eastern Newspaper Society [ 1979 (8) TMI 1 - SUPREME COURT] that in every case, the Income Tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has come to his notice, he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. Therefore, the true evaluation of the law in its bearing on the assessment mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act alleging escapement of the income assessable to tax for AY 2015-16. The reasons were recorded in a communication dated 17th November 2021 and the reasons read as under: 2. Subsequently on perusal of the records it was observed that the assessee had debited certain expenditure which was not allowable as per different provisions under Income Tax Act: a. Form 3CD (Annexure V) showed delayed remittance of Employees contribution to Employees Provident Fund on one occasion viz. Rs. 3,47,819/- (Due date 20 Sep. 2014, Actual date 01 Oct 2014). b. Rs. 65,00,000/- has been debited under the head Consultancy for project. It should be part of the Capital Work in progress of the project and not part of the P L as it is not in the nature of revenue expense. c. Rs. 11,08,024/- has been debited under Registrar and Share Transfer agent fees. It was to be treated as capital expenditure instead of revenue expenditure. Thus, allowance of above three expenses resulted in aggregate under assessment of Rs. 79,55,843/- (3,47,819+65,00,000+11,08,024). 2.1 Therefore I am of the view that income to the extent of amount of Rs. 79,55,843/-, as explained above, has escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken as base. Thus, the allowance of the same resulted in underassessment to the same extent. 2.3 Therefore I am of the view that income to the extent of amount of Rs. 9,68,15,356/-, as explained above, has escaped assessment. 5. Since the notice under Section 148 of the Act has been issued more than four years after the expiry of the relevant Assessment Year, proviso to Section 147 of the Act shall apply inasmuch as reassessment is not permissible unless there has been failure to truly and fully disclose necessary facts required for the assessment. A bare perusal of the reasons recorded would indicate that there is not even allegation in the notice that there was failure to fully and truly disclose material facts. Moreover, the entire basis is on perusal of the records filed by Petitioner. Paragraph 2 starts with words Subsequently on perusal of the records, it was observed ., Form 3CD (Annexure V) showed----------Rs. 65,00,000/- has been debited under the head Consultancy for project. Rs. 11,08,024/- has been debited under Registrar and Share transfer agent fees ........... . Paragraph 2.2 says Further it was observed that the independent auditor had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details regarding finance cost, working of disallowance under Section 14A of the Act read with Rule 8D, etc. Petitioner was also called upon to show cause as to why the disallowance under Section 14A of the Act, disallowance of penalty expenses and mismatch in Section 26AS be added to Petitioner s income. Petitioner admittedly gave detailed reply vide its letter dated 6th December 2018 and an assessment order dated 25th December 2018 came to be passed. In the assessment order, there was a disallowance of Rs. 37 lakhs under Section 14A of the Act and the same was added to the total income of Petitioner under the normal provision as well as under Section 115JB of the Act. Therefore, as correctly submitted by Mr. Pardiwala, the points raised in the reasons recorded for reopening were also the subject of consideration during the assessment proceedings. 8. Further and admittedly, the reopening has been made based on audit objections. Petitioner was informed about the audit objections and Petitioner, vide its letter dated 10th July 2019, explained why there was no escapement of income as regards delayed remittance of employees contribution to Employees Provident Fund, consultancy cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truly all primary relevant facts, it does not extend beyond that. 10. A Division Bench of this Court in Aroni Commercials Limited v. Deputy Commissioner of Income-tax - 2(1) [2014] 44 taxmann.com 304 (Bombay) has held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. The Court held that only requirement is that AO ought to have considered the objections now raised in the grounds for issuing notice under Section 148 of the Act during the original assessment proceedings. If that has been done, it would follow that the reopening of assessment by impugned notice will merely be on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. 11. It will be useful to re-produce par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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