TaxTMI 
TaxTMI 
2018 (3) TMI 226
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....-11. The reasons recorded in support of the impugned notice dated 30 March 2017 for reopening indicates the basis of the reasonable belief on the part of the Assessing Officer that income chargeable for tax escaped assessment was the special audit report dated 21st April 2014 of Pricewater House Coopers Private Ltd. (PWC) at the direction of the Forward Markets Commission as directed by its letter dated 17th October 2013. The recorded reasons as communicated to the Petitioner are as under:- The assessee is electronic spot exchange for commodities. The case of the assessee for A.Y.2010-11 was assessed u/s.143(3) of the Income Tax Act on 31.01.2013 assessing the total income at Rs. 3,00,51,25,092/- A special audit was directed by the Forward Market Commission (FMC) in the affairs of the assessee company from inception till 30th September, 2013 to submit its report on the following aspects:- * Identification or related parties (as defined by FMC in the terms of reference and a working definition arrived at for the purpose of review) * review of non-trading transactions between MCX and significant relevant parties. * Review of transactions of expenses i....
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....Shreekant Javalgekar, the then director of FTIL (associate concern of the assessee). Therefore, the assessee has claimed excess deduction of Rs. 19.53 crores. 2. Financial Technologies Knowledge Management Company Ltd. (FTKMC) was a 100% subsidiary of Financial Technologies India Ltd. (FTIL). The assessee is also a subsidiary company of FTIL. The assessee has claimed to have paid training, consultancy and certification charges to FTKMC. In the report, the auditor has stated that there were various non-compliance of contract terms and that they were not in accordance of agreement and the expenses of Rs. 8.82 crores was not genuine. A perusal of report makes it apparent that these amounts were recorded as expenses to merely claim deduction with no real activity being carried out. The payments also being governed by section 40A(2) (b) are also excessive and unreasonable. Therefore, the assessee has wrongly claimed deduction of Rs. 8.82 crores. 3.The assessee has claimed to have engaged Vardhman International (Vardhaman|) for the purpose of creating trader's database and paid a sum of Rs. 2.21 crores. The site visits by the auditor has revealed that Vardhman does ....
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....ion. This shows that highly unreasonable expenditure is paid to the related concern. FTIL and has been claimed by the assessee in the year under consideration. 9. The assessee disclosed around 235 related parties. A background and public domain check has identified 676 additional related parties of the assessee. Various payments to these parties have been made without underlying documents or agreements. In this regard, the genuineness and reasonableness of these expenses stands unsubstantiated. In view of above and considering the material on record coupled with the fact of voluminous and complex nature of the accounts, it is established that the accounts of the assessee are manipulated on various grounds. Hence, the assessee has not disclosed fully and truly all material facts necessary for the assessment carried out u/s. 143(3) for the year under consideration. Accordingly, I have reason to believe that the income chargeable to tax of the assessee of more than Rs. 36.80 crores for the year under consideration has escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961 for Assessment Year 2010-11. Hence, the assessee's case is required to b....
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....t produced. Nevertheless the regular assessment was completed without awaiting the auditor's opinion. In the above circumstances, the Court held that there is no failure to disclose fully and truly all basic facts. As against the above in this case the special audit report dated 21st April 2014 is not available during the regular assessment, leading to order dated 22 March 2013. The special audit report is the fresh tangible material now available with the Assessing Officer. On examination of the special audit report dated 21 August 2014, the Assessing Officer found that claims made by the assessee - Petitioner for deduction and expenditures were excessive and to that extent the claims made were prima facie bogus (subject to examination in assessment proceedings). In fact the Supreme Court in Phool Chand Bajrang Lal & Anr. v. Income Tax Officer & Anr. (Vol.2013 ITR p.456 has observed as under:- "... Acquiring fresh information, specific in nature and reliable in character, relating to a concluded assessment which went to expose the falsity of the statement made by the assessee at the time of the original assessment was different from drawing a fresh inference from the same f....
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....ure. d) All major financial transactions above value of Rs. 25 lakh. 9. Further attention is also invited to the disclaimer clause of audit report dated 21st April 2014 that the audit report has been prepared for Forward Market Commission and the Petitioner. Thus, the same cannot be relied upon by third party and further that the it does not constitute examination / review in accordance with the generally accepted audit standards prescribed by Institute of Chartered Accountants of India. Therefore, the report prepared on certain information which may be hearsay and may not be accurate and reliable could not be relied upon which is a hearsay, has been identified in the report. 10. We find that the power of the Assessing Officer to reopen an assessment under Section 147/148 of the Act on the basis of reasonable belief is not fettled or circumscribed, to be formed only on material found during a tax audit or with material found during examining a case of tax evasion. In fact the basis of fresh tangible material is unqualified i.e. the source of the material could be from any place, however, the only pre-condition is that on the basis of the material so found / obtained by the....