TaxTMI 
TaxTMI 
2017 (11) TMI 62
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.... on record a copy of the order dated 16th December, 2015 passed by the Assessing Officer ('AO') disposing of objections of the Petitioner against reopening of assessments under Section 147/148 of the Act on the ground of `change of opinion'. 4. The undisputed position is that the Petitioner company is engaged in the business of establishing subsidiaries, making majority or minority investments and/or to promote technical collaborations and to act as a holding company. The Petitioner in paragraph 4 of the petition has stated that the Petitioner company makes strategic investments. Original Assessment proceedings for AY 2010-11. 5. For the AY 2010-2011, the return filed by the Petitioner company had disclosed dividend income of Rs. 20,48,37,585/- which it claimed as exempt from tax under Section 10(34) of the Act. The Assessee had disallowed expenditure amounting to Rs. 9,75,26,937/- for earning the exempt income under Section 14A of the Act for AY 2010-11. 6. The return was taken up for scrutiny assessment after issue of notice under Section 143(2) of the Act. In terms of notice dated 16th May, 2012 under Section 142(1) of the Act, the Petitioner was required to furnish seve....
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.... 10,461,007,077 Total disallowance Total Expenses 171,277,589 Less: Interest Expenses to earn Interest Income 5,937,096 165,340,493 Less: Expenses for Consultancy 13,085,569 Less: Expenses which is disallowed as per Provisions of PGBP 152,254,924 Donation 50,000 Provision for diminution in the value of Investment 53,891,189 Provision for Leave Encashment 311,096 Loss on Sale of Investment 178,403 Gratuity Provision 272,448 Interest Paid on TDS 24,851 Less: Expenses Incurred directly for investments 54,727,987 97,526,937 73,566,653 23,960,284 8. After examining the aforesaid information and details, the assessment order for AY 2010-11 dated 18th February, 2013 was passed under Section 143(3) of the Act, accepting the returned income of the Assessee of Rs. 88,56,759/-. Original assessment proceedings for AY 2011-12 9. For the AY 2011-12, the return filed by the Petitioner company had disclosed dividend income of Rs. 28,55,09,111/-, which it claimed as exempt from tax under Section....
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....Expenses for Consultancy & others 32,397,824 174,339,317 Less: Expenses which is disallowed as per Provisions of PGBP Donation 1,300,000 Provision for diminution in the value of Investment 43,841,819 Provision for Leave Encashment 745 Loss on Sale of Investment Gratuity Provision 490,436 Less: Interest Expenses un allocated 45,633,000 128,706,317 121,581,256 7,125,060 Operating Non-Operating Section 14A (Rule 8D) Total Income (X) 120,471,781 285,509,111 405,980,892 Personnel Expenses Salary & Wages 5,414,576 896,779 6,311,355 Employer's Contribution to PF 460,806 638,466 1,099,273 Bonus 286,227 46,409 332,636 Total (A) 6,161,608 1,581,654 7,743,263 Administrative Expenses Regd. Office Rent - 39,708 39,708 Repair & Maintenance (Others) 353,718 247,012 600,730 Courier & Postage Expenses - 62,583 62,583 Rates and Taxes - 87,020 87,020 Legal and Professional Charges 20,359,985 3,786,410 24,146,395 Business Promotion 3,184,063 152,390 3,336,453 Travelling Expenses 1,862,969 1,6....
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....1,029- Rs. 9,75,26,937). In this case, it has also been observed that the assessee had itself calculated disallowance u/s 14A amounting to Rs. 12,44,21,029/- but restricted the same to Rs. 9,75,26,967 /-. As Section 14A of the I.T. Act, 1961 r/w Rule 8D does not permit any restriction in this regard and therefore the whole amount of Rs. 12,44,21,029/-, should have been disallowed. In view of the above mentioned facts, it is clear that the assessee company has not disclosed fully and truly all material facts before the A.O. resulting in under assessment of income. Hence, I have reasons to believe that a sum of Rs. 2,68,94,092/- has escaped assessment in the case of assessee relevant to A.Y. 2010-11, within the meaning of Section 147 of the IT Act." Reasons recorded for initiating proceedings u/s 147/148 for AY 2011-2012. "In this case, the assessment proceedings u/s 143 (3) of the I.T. Act, 1961 for the A.Y. 2011-12 was completed on 28.02.2014 at an income of Rs. 3,59,35,409/-. On scrutiny of records it was found that an amount of Rs. 5,00,95,760/- has escaped assessment on account of incorrect computation of disallowance u/s 14A of the I.T. Act, 1961. It was noticed that the as....
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....ness of the expenditure which was disallowed by the Assessee under Section 14A of the Act. The AO was aware of the difference between the disallowance of expenditure made by the Assessee in its computation under Section 14A of the Act, and disallowance if made by applying Rule 8D of the Rules. The AO not only raised a specific query but did so twice in respect of the disallowances for the AY 2010-11. The details called for in the two notices/questionnaires for AY 2010-11 read as under: "Notice dated 16.5.2012: 21. Details of dividend received, if any. Also give details of expenses attributable for earning this income." "Notice dated 18.10.2012: -Calculation of Disallowance U/s 14A read with Rule 8D." In AY 2011-12, the AO had asked for the details vide questionnaire dated NIL as under: "Questionnaire dated NIL: 45. Detailed computation of Disallowance made u/s 14A of the Act as per the Computation of Total Income." 16. From the queries raised during the course of assessment proceedings and the replies thereto, there can be no doubt that the AO specifically examined and went into the question of disallowance of expenditure under Section 14A of the Act as the Assessee had dec....
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....rect, when jurisdiction under Section 263 is invoked. 14. Thus where an Assessing Officer incorrectly or erroneouslyapplies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of change of opinion." (emphasis supplied) 18. The Supreme Court recently in Godrej and Boyce Manufacturing Company Limited v. Deputy Commissioner of Income Tax, Mumbai & Anr., (2017) 7 SCC 421 on the question of disallowance under Section 14A of the Act and the effect of Rule 8D of the Rules has held as under: "37. We do not see how in the aforesaid fact situation a different view could have been taken for Assessment Year 2002-2003. Subsections (2) and (3) of Section 14-A of the Act read with Rule 8-D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the assessing officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula pres....