AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 567
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.... assessment under section 148 of the Act and hence the impugned reassessment is bad in law, void-ab-initio and liable to be quashed. 1(b). On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) failed to appreciate that the Ld. A.O failed to record valid reasons in the eyes of law which were modified and altered by him while disposing the objection of the Assessee, and hence the impugned reassessment proceeding is bad in law and deserves to be quashed. 1(c). On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) failed to appreciate that the reasons recorded were merely in the nature of 'reason to suspect' and not 'reason to believe' as the reassessment so framed is contrary to the reasons recorded for alleged escapement of income. 1(d). On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in holding that the impugned reassessment order passed by the Ld. AO is correct in law, without taking cognizance of the fact that the impugned reassessment order was passed with variation, modification, altercation of the recorded reasons which is impermissibl....
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....visions have been claimed against income which is assessable as income from other sources. The assessee's claim is not allowable against income from business or profession and also against income from other sources. In the balance sheet the assessee has shown under the head "Reserve and Surplus" a capital reserve of Rs. 31,12,50,000/-. From verification of return for A.Y. 2008-09 it revealed that no such reserve has been transferred from earlier year. So it is crystal clear that the said capital reserve is undisclosed income of assessee introduced as capital. The above amount is income of the assessee from undisclosed source." The assessee vide letter dated 24.07.2013 intimated that he filed Revised Return on 24.07.2013 to be the Return filed U/s. 148 of the I.T. Act, 1961. The reason so recorded u/s.147 was sent to the assessee and objection, if any, for the reason so recorded and reopened u/s.147, was also sent to the assessee vide letter dated 14.02.2014. 4. In compliance to the notice u/s.147 and the reason so recorded for re-opened u/s.147 of the Act, the assessee had filed objection against the proceedings u/s.147 of Income Tax Act, 1961. Which is reproduce....
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....of INR 9,50,000/- as stated above which is less than the threshold of Rupees ten lakhs for application of section 44AB of the Act for the year under consideration. Your kindself will therefore appreciate that the provisions of section 44AB of the Act would not apply to the Firm for the year under consideration. d) During the year, the Firm has made deposits in its ordinary course of business as a measure of good cash management and has earned interest therefrom aggregating to INR 1,10,834 as noted above. Your kindself will note that if such interest income is considered assessable under the head 'income from other sources', there would not be any change in the net result of computation of total income for the year since, as per the provisions of section 71 of the Act, the entire interest received of INR 1,10,834/- would be fully set off against the loss for the year computed under the head 'profits and gains of business or profession'. 2. Capital Reserve of INR 31,12,50,000/- In this connection your kindself will note as undera) The assessee Firm is a member firm of the Pricewaterhouse Coopers global network of firms ("PwC network....
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....n incurred by the Firm for the purpose of representation inter alia before the ICAI, New Delhi in the matter of audit carried out by the Firm of erstwhile Global Trust Bank for the financial year 2002-03. The expenses debited under the account head External Consultants Professional fees have been incurred for drafting and amending legal agreements including non-compete agreements etc. which has also been pointed out in our letter dated 24th July, 2013 filed with your kindself. Thus, from the enclosed details, your kindself will appreciate that none of the expenditure aggregating to INR 1,06,96,210/- are in the nature of provision as alleged. With regard to the observation made by your kindself that the amount of INR 1,06,96,210/- is not incurred for earning of the purported other receipt of INR 10,60,834/- hence the said expenditure is not allowable as deduction, it is submitted before your kindself that it is a settled position in law that it does not require a presence of a receipt on the credit side to justify deduction of an expenses." 5.The ld Assessing officer has considered the above objections raised by the assessee and having examined the objections of the asse....
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....ct. (iii).Capital reserve of Rs. 31.13 Crs. You have disclosed that a foreign company and PWC networking firm Price waterhouse Coopers services BV, Netherlands has given you a sum of Rs. 31.13 Crs for the purpose of maintaining and enhancing the resources and capabilities of the firm. From the copy of agreement between you and PWC BV, filed along with the aforesaid letter, it revealed that this was given as non refundable, for acquisition of a firm M/s. Dalal and Shah. On this basis you simply stated that the non refundable amount was not taxable as income. I have carefully considered your objections raised in this regards. Your contentions are rejected out rightly. In view of the provisions of section 4 and 5 of the Income tax Act, the aforesaid amount was fully taxable being casualand non recurring receipt. In the case of Delhi Stock Exchange Association Ltd. Vs. CIT (41 ITR 495) the Hon'ble Supreme Court has held that "it is not how an assessee treats any money received but what is the nature of the receipt which is decisive of its being taxable". The nature of non refundable amount of Rs. 31.13 Crs being casual and non recurring the same was taxab....
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....g Officer, the assessee carried the matter in appeal before the CIT(A) who has confirmed the action of the assessing officer. Aggrieved, the assessee is in appeal before us. 7. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Before us, ld Counsel reiterated the submissions made before the ld CIT(A). On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. We note that the assessee, firm of Chartered Accountants, filed a return of income on 30.09.2009. The assessee firm has come into existence on 01.04.1996. However, there had been changes in the constitution of the firm from time to time both in respect of partners as well as in their sharing ratio in the profit and loss. Income declared for the AY 2009-10, as per the return of income aggregated to Rs. (-) 96,35,376/-. No assessment has been frame....
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....lidity of reopening the assessment under section 147 of the Act, which are given below for ready reference: "I have perused the detailed technical and legal submissions made by the assessee based on various judicial pronouncements in this regard. However, before dealing with the various aspects submitted by the assessee, it is relevant to add that in case where assessment is not completed u/s 143(3) of the Act, it is merely a case of return being processed u/s 143(1)(a) of the Act. Hence, such judicial pronouncements relied upon by the assessee have no bearing on the facts of the present case. Reliance in this regard, is placed on the decision of Hon'ble Delhi High Court in the case of Indu Lata Rangwala vs. DCIT [W.P. (C) 1393/2002], wherein it was held as under: 35.1 The upshot of the above discussion is that where the return initially filed is processed under section 143(1) of the Act, and an intimation is sent to an Assessee, it is not an 'assessment' in the strict sense of the term for the purposes of Section 147 of the Act. In other words, in such event, there is no occasion for the AO to form an opinion after examining the documents enclosed wit....
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....ingly, the income of INR 9,50,000/- billed by the Firm to its clients towards rendering of professional services is taxable under the head ' Profits & gains of business or profession'. Another grievance of the AO was that assessee did not get his accounts audited under section 44AB of the Act. We note that in case of an assessee carrying on profession, (for A.Y. 2009-10), is required to get his accounts audited in terms of section 44AB of the Act if his gross receipts in profession exceeds ten lakh rupees in any previous year. In the assessee`s case under consideration the gross receipts are Rs. 9,50,000/-, therefore assessee is not required to get his accounts audited u/s 44AB of the Act. Interest income of Rs. 1,10,834/- does not fall under the head "income from business or profession" therefore it does not come under the ambit of tax audit. The Assessee which is carrying on profession, had gross receipts in profession of INR 9,50,000/- only, as stated above which is less than the threshold of Rupees ten lakhs for application of section 44AB of the Act for the year under consideration. Therefore, tax audit provisions are not applicable to the assessee. Therefore, so fa....
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....ittance advice received from bank along with copy of the Grant Agreement dated 18th July, 2008 entered between the Firm and PwC Services BV were submitted by the asseseee. The said grant is mentioned in the return of income filed by the assessee u/s 139 of the Act therefore it is not a new tangible material to reopen the assessment u/s 147 of the Act. 9. We note that the issues/items for which AO has reasons to believe that income has escaped assessment, had already been disclosed by the assessee in the return of income filed by the assessee u/s 139 of the Act therefore these issues noted above in para 8 of our order are not tangible material to reopen the assessment u/s 147 of the Act. We note that in assessee`s case no assessment was carried out by AO u/s 143(3) of the Act and only intimation has been issued under section 143(1) of the Act. However, we note that assessing officer has every power to issue notice under section 143(2) of the Act to do the scrutiny assessment u/s 143(3) of the Act, which he has failed to do so in the assessee`s case and for that assessee should not be penalized. The assessee has disclosed every item/issue in the return of income filed by the as....
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....e with the Ld. AO. relevant extracts of the reasons recorded by the Ld. AO in initiating the reassessment proceedings, demonstrating the said fact, has been reproduced below: "On a perusal of return of income for A.Y.2009-10, it revealed that assessee has declared gross receipt of profession at Rs. 10,60,834/- in the profit and loss accounts...." "....Against this receipt of Rs. 10,60,834/- which is assessable as income from other sources, assessee has claimed a sum of Rs. 1,06,96,210/- being other provisions (column no.39 of the profit and loss accounts of the return of income), debited in the profit and loss accounts." "In the balance sheet the assessee has shown under the head "Reserve and Surplus" a capital reserve of Rs. 31,12,50,000/-. From verification of return for A.Y.2008-09 it revealed that no such reserve has been transferred from earlier year....' The ld Counsel submitted before us that AO could not have invoked the provisions of section 147 of the Act, since no fresh tangible material had surfaced, a condition precedent to invoke the provisions of section 147 of the Act. Reassessment proceedings had been initiated merely to scrutinize....
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...., i.e. no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of return already filed are not terminated." 5. From the dates that we have mentioned above and the law as laid down, it is clear that assessment proceedings terminated under s. 143(1) of the Act only on 11th June, 1996. In other words, on 5th June, 1996, when the AO made up his mind to issue a notice to the assessee under s. 147/148 of the Act, a valid return of income filed by the assessee was still pending before him and which could have been processed. 6. It is submitted by learned counsel for the Revenue that since the period for issuing a notice to the assessee under s. 143(2) of the Act had already elapsed, and the AO was of the view that income had escaped assessment, the AO had no option but to resort to cl. (b) of Expln. 2 to s. 147 of the Act for initiating reassessment proceedings. This clause reads as follows : "Sec. 147 xxxxx Explanation 1 : xxxxx Explanation 2 : For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) ....