TaxTMI 
TaxTMI 
2014 (7) TMI 429
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....ks which were subjected to make specific disallowances. iv. The CIT(A) ignored the fact that the notice was issued after obtaining the prior approval of Hon'ble CIT-IV, Hyderabad and duly served on the assessee on 31/03/2011. v. The CIT(A) ignored the decisions made in the case of Raymond Woolen Mills Ltd., Vs. ITO [1999] 236 ITR 34 (SC) wherein, it was held that in determining where commencement of re-assessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. vi. The CIT(A)-V, Hyderabad is not correct on the ground that during the course of assessment proceedings, the assessee has given a statement showing that the total amount of interest paid to the investor, i.e., India Value Fund Trust at Rs. 6,99,75,456/- on the investment of Rs. 15 crores from 20/08/2001 to the date of allotment i.e. 08/02/2004. vii. The CIT(A) has ignored the fact that the interest at Rs. 6,99,76,000/- is calculated on the total investment of Rs. 15 crores instead of total amount of share application money refunded i.e. ....
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....each from M/s India Value Fund Trustee Company Pvt. Ltd., during the previous year, which was kept as share application money. However, subsequently, the investor since opted to convert the share application money to an extent of Rs. 1,40,76,000/- by picking up 11,50,000/- equity shares, the balance share application of money of Rs. 13,59,24,000/- together with interest of Rs. 6,99,76,000/- was paid back to the investor company. It was submitted by the assessee that the inference drawn by the AO that deduction claimed of Rs. 6,99,76,000/- by the assessee in computation of statement as against charged to P&L A/c of Rs. 2,26,01,000/- is incorrect as the AO is only making a mere comparison of the figures stated in the computation of statement and P&L A/c. The AO, however, did not accept the contentions of the assessee. He was of the view that the assessee though has debited the amount of Rs. 2,26,01,000/- to the P&L A/c after capitalizing interest of Rs. 4,73,75,000/-, but, in the computation of income, the assessee has claimed deduction of an amount of Rs. 6,99,76,000/-. Further, the AO was also of the view that the interest claimed computed by the assessee at Rs. 6,99,76,000/- is no....
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....dit and which was thoroughly explained by the assessee apart from the fact that it was also examined by the AO in course of assessment proceeding initiated u/s 153A of the Act. Further explaining, it was submitted by the assessee that the funds raised from M/s India Value Fund Trustee Company Pvt. Ltd., were entirely deployed in the business of the assessee company partly for working capital and partly for expanding the existing business of health care. The amount paid by M/s India Value Fund Trustee Company Pvt. Ltd., as per the terms of agreement entered between them dated 05/09/2001 will attract interest @ 15% to 18%. Therefore, interest calculated at year-wise only compounded rate of 18% for the FY 2001-02 to 2003-04 of Rs. 6,99,76,000/-. It was submitted by the assessee in accordance with accepted accounting principles AS-16, the assessee has capitalized portion of interest to the extent advanced from M/s India Value Fund Trustee Company Pvt. Ltd., are utilized for purchase of capital equipment and leasehold improvements for expanding existing line of business. It was submitted that after deducting interest portion to capital asset amounting to Rs. 34,730,012/- and netting of ....
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....essment. Therefore the AO's stand of "sufficiency of reasons recorded" and its examination during the course of assessment proceedings stands vitiated. 9.5 The Hon'ble Apex Court in the case of CIT v. Foramer France (2003) reported in 264 ITR 566 has clearly laid down the principle, that where there is no failure on the part of the assessee to disclose material facts, the reassessment proceedings after the expiry of four years is not possible in view of the provisions of Sec.147 of the Act. 9.6 The Hon'ble Apex Court in the case of CIT v Kelvinator of India Ltd (2010) 320 ITR 561 (SC) has clearly laid down that the Assessing Officer has to have a reason to believe that income has escaped assessment but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an inbuilt test to check the abuse of power. The assessing officer has power to reopen an assessment provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have link with the formation of the belief. &n....
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....as amended w.e.f. 1 st April, 2004 by adding a proviso effective from 1 st April, 2004 to be applied in relation to the asst. yr. 2004-05 and subsequent years, clarifying that the interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. 11.1 The AR argued that the appellant was already carrying on business of heath care and for this purpose has established reputed hospitals at Nampally, Banjara Hills and Secunderabad in the course of expansion of its business. It is not that the business had not commenced. In order to extend state of the art health services to the residents of Hyderabad and improve its standing as one of the best cardiology hospitals in the country, the assessee company expanded its existing business operations by purchasing latest medical equipment, augmenting the number of beds and facilities by improving the leasehold structures. &....
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.... appellant on the claim of the Interest expenditure in the context of the Assets having been put to use by the appellant. The AO has ignored the fact that the appellant has obtained the Advance Share Application Money in the year 2001-02 amounting to Rs. 15 crores which were deployed in the assets of the company, and by the time the liability for payment of Interest has crystallized in the financial year 2003-04, the assets have been put to use. 11.2.1 The AO apparently must have assumed that since the Interest cost has been capitalized as per the financial statements, the assets may have not been put to use and has applied the provisions of Sec. 36(1) (iii) and has disallowed the amount of Interest claimed by the appellant. 11.2.2 Explanation 8 to Sec.43(1) is clear and unambiguous. The asset acquired by an assessee for expansion of its existing business or industry, by reason of Explanation. 8 will not stand in a different footing. It is the actual cost of the asset that has to be ascertained on the cutoff date as to when such asset is first put to use. The interest paid in connection with acquisition of asset with the borrowed capital ....
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....ble material before the AO to initiate proceeding u/s 147 of the Act, reopening of assessment is merely on change of opinion. Drawing our attention to the reasons recorded, the learned AR submitted that the AO on consideration of the self-same material, which is available on record at the time of completion of assessment u/s 143(3) read with section 153A of the Act, initiation of proceeding after expiry of 4 years from the end of the assessment year is invalid in law as neither there is allegation by the AO that assessee has failed to disclose truly and fully all material facts nor there is actually any such non-disclosure of facts by the assessee. It was, therefore, submitted that action of the CIT(A) in holding that initiation of proceeding u/s 147 legally unsustainable is correct. 10.1 So far as the finding of the CIT(A) on merits of the issue is concerned, the learned AR submitted that CIT(A) having exhaustively dealt with the issue and come to a reasonable conclusion there is no need to interfere with his finding. In support of his contention, the learned AR relied upon following decisions: 1. CIT Vs. Kelvinator of India Ltd., 320 ITR 561 (SC)  ....
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....end beyond making a true and full disclosure of primary fact. It is for the AO to draw correct inference from the primary facts. It is not the responsibility of the assessee to advise the AO with regard to inference which he should draw from the primary fact. If the AO draws an inference which appears to be erroneous, subsequently mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. It is very much evident that entire reassessment is on the basis of the materials disclosed by assessee, which formed part of the record at the time of completion of the original assessment u/s 143(3) read with section 153A of the Act. Therefore, the AO having completed original assessment on verifying all these facts and materials, reopening of assessment on self-same facts and material on a mere change of opinion, that too after expiry of four years from the assessment year is not permissible in law. In these circumstances, the action of the AO u/s 147 of the Act is clearly without jurisdiction in view of the ratio laid down by the Hon'ble Supreme Court in case of Kelvinator of India Ltd and Hon'ble Delhi High Court in case of Usha Inter....