TaxTMI 
TaxTMI 
2016 (8) TMI 1511
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....icer took the return under scrutiny. After detailed examination of various documents, he framed assessment under section 143(3) of the Act on 29.12.2011 assessing the petitioner's gross income at Rs. 61.28 crores (rounded off). 3. To reopen such assessment, the Assessing Officer issued impugned notice which, as can be seen, was done within a period of four years from the end of relevant assessment year. In order to do so, he had recorded the following reasons : "Reasons for issue of notice u/s. 148 of the IT Act, 1961 In this case, the assessment was finalized u/s.143(3) on 29/12/2011 assessing the total income at Rs. 61,10,65,280/- . 1. There were information with the department that Shri Ashwin Kumar B Patel, has sold immovable property exceeding Rs. 3O Lakhs & more. As a consequence to the enquiry conducted by ITO Ward2 Anand, certain information regarding the assessee Elecon Engineering Ltd. has come to his knowledge, The Income Tax Officer, Ward- 2. Anand forwarded the said information alongwith documents that during the year under consideration, the assessee had executed "exchange sale agreement" dated 17/11/2008, which shows that the assessee has transferred the....
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..... 4. On verification, it is noticed that the assessee has claimed depreciation of Rs. 15,47,30,488/- ( Rs. 13,79,30,488/- being 80% normal depreciation on wind mill + Rs. 3,09,46,098/- being 20% additional depreciation) on the addition of assets in the form or wind turbine generators (WTG) of Rs. 15,47,30.488/- prior to 1 Oct 2008. It was also noticed that the investment in assets contained three items viz i. windmill of Rs. 13,79,30,488/- ( added on 30 Sept 2008). ii. Rs. 84,00,000/- of power evacuation facility for 4 nos windmills & Rs. 84,00,000/- of power evacuation facility for 4 nos windmills (added on 30 Sept 2008). It was further noticed that, there was no opening balance of WTC as on 1st Apr 2008. The assessee also did not purchase any WTG during the year and it manufactured only 2 WTG during the year which too were sold during the year. This indicates that 4 WTG which were claimed to be commissioned in earlier years were not commissioned in those years and assessee commissioned those in this AY 2009-10 on 30 Sept 2008. This is also substantiated from the fact that assessee has claimed expenditure of Rs. 84,00,000/- on power evacuation facility for 4 windmills added on ....
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....000/- ) the TDS was required to be made at normal rate. Thus, after giving credit of TDS made by the assessee, it is noticed that assessee had not made TDS in respect of payment of Rs. 18,86,230/- . Accordingly claim of expenditure of Rs. 18,86,230/- is not an allowable expenditure in view of provisions of section 40(a)(ia) of the IT Act and requires to be disallowed. 8. On examination, it was found that while computing disallowance u/s14A, the assessee excluded interest payment on term loan, vehicle loan etc. from the total interest payment amount and calculated disallowance of Rs. 34.36,054/- . As per provisions of section 14A of the IT Act read with rule 8D(ii) proportionate interest expenditure is to be disallowed in the ratio of average investment to the average total assets. However, there is nothing in rules to exclude interest pertaining to the term loans for computation of disallowance u/s.14A of the IT Act. As per rule 8D of the IT Act, the disallowance u/s. 14A worked out to Rs. 67,96,000/- as against disallowance of Rs. 34,36,054/- computed by the assessee which resulted in short disallowance of Rs. 33,59,946/- which requires to be disallowed. 9. On verification, ....
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....hartered Accountant in Form3CD. (3) The assessee had received total interest of Rs. 2.00 crores (rounded off) on the income tax refund, against which, the assessee had paid interest of Rs. 31.39 lacs (rounded off) under section 234B of the Act, which was adjusted against the interest income which was not allowable. (4) The assessee had claimed depreciation of Rs. 15.47 crores(rounded off) on wind turbine generators. The assessee claimed that these were commissioned on 30.9.2008. It was noticed that no power evacuation facility for four windmills was added as on 30.9.2008. (5) The assessee had claimed depreciation on turbo ventilators as energy saving devices at 80% of the investment. These machines were not included in the list of qualified machinery for higher depreciation and that higher depreciation was therefore, wrongly claimed. (6) The assessee had claimed expenditure of Rs. 10.32 lacs(rounded off) towards payment of notified area tax. It was noticed that receipt for payment was not issued in the name of the assessee, but one M/s. Emtici Hotel Resort. Since the expenditure pertained to some other entity, such claim was not allowable. (7) The assessee had paid f....
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....ch would permit the Assessing Officer to reexamine such issues. Counsel submitted that some of these grounds were legally also invalid and untenable. Counsel lastly contended that the entire exercise of reopening is being undertaken at the behest of the audit party. Notice of reopening has not been issued by the Assessing Officer on his own account but was under compulsion by audit party to reopen the assessment. The petitioner's objection in this regard were not dealt with by the Assessing Officer. The specific averments made in the petition have not been denied by the respondents. Learned counsel placed reliance on the decision of this Court in case of Gujarat Power Corporation Ltd. v. Assistant Commissioner of Income Tax reported in (2013) 350 ITR 266 (Guj), to contend that once the Assessing Officer examines certain claim during the assessment proceedings in the order of assessment, but gives no reasons for not disturbing the claim of the Assessing Officer, would not permit the Assessing Officer to reopen the assessment on such ground. In the context of assessment being reopened at the instance of audit party, counsel relied on decision in case of Cadila Health Car....
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....tion 147 of the Act. It was held that such tangible materials need not be alien to the record. While saying so, the Court also considered the question of accepting certain claim of the assessee after scrutiny but without recording reasons in the final order of assessment. In this context, it was held and observed as under : "41. The powers under section 147 of the Act are special powers and peculiar in nature where a quasijudicial order previously passed after full hearing and which has otherwise become final is subject to reopening on certain grounds. Ordinarily, a judicial or quasijudicial order is subject to appeal, revision or even review if statute so permits but not liable to be reopened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving large number of assessees concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time frame. To protect the interest of the revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scruti....
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....lable under law would be too much to expect him to carry. Irrespective of this, in a given case, if the Assessing Officer on his own for reasons best known to him, chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the revenue that the Assessing Officer can not be seen to have formed any opinion on such a claim. Such a contention, in our opinion, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a nonreasoned order but not of acceptance of a claim without formation of opinion. Any other view would give arbitrary powers to the Assessing Officer. 43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt ....
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....transfer is not required. It is therefore, submitted that we have not made any transaction for sale of land on this count during the year. We enclose herewith copies of all above agreements. Kindly refer to Annexure37." The copies of the agreements mentioned in this reply were also produced. Thus during the original assessment itself, the Assessing Officer had desired to know from the assessee the details of all transactions of immovable properties. In fact, in the queries itself, the Assessing Officer pointed out that the assessee had purchased immovable property of Rs. 50.72 lacs and sold such property for Rs. 66.34 lacs. It was in response to such a query that the assessee replied pointing out that two different agreements of mutual exchange of land were executed on 17.11.2008. Subsequently, both these agreements were cancelled by a deed dated 12.3.2009 which was also registered. Thus there was no legal or valid transfer of the land during the year under consideration and therefore, the assessee had not made any transaction of sale of land. It was after such scrutiny that the Assessing Officer framed assessment wherein no demand of capital gain tax was raised. If the view of ....
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....ter withdrawal of interest, the assessee could have claimed effect thereof during the earlier year. Being at a stage where the assessment is yet to be framed, we would not give our conclusive opinion on this aspect. Suffice it to say, this issue was not examined by the Assessing Officer in the original assessment. Ground (2b) 13. Ground (2b) pertains to higher depreciation of Rs. 11.87 lacs made by the assessee. According to the Assessing Officer, in the revised return, out of additional depreciation of Rs. 21.90 lacs, Rs. 11.87 which was on account of increase in opening WDV did not match the figures contained in the report of the Chartered Accountant. In this context, we may notice that in the letter dated 30.6.2011, the Assessing Officer had raised the following queries : "12. Details of addition in the fixed assets with copies of a/c. and copies of purchase bill/invoice of above Rs. 1000000/- Please furnish the evidences of putting the assets into use in respect of the new/additional fixed assets added in the month of March, 2008 and having the addition value of Rs. 5000000/- and above and other new/ additional fixed assets having the addition value of Rs. 1 crore and ....
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....ounsel for the Revenue was unable to controvert this aspect. This ground thus was based on inaccurate factual premise. Ground (4) 15. Ground no.(4) pertains to depreciation of windmill. The assessee had claimed such depreciation for a total investment of 15.47 crores. The Assessing Officer was of the opinion that four wind turbine generators were not commissioned on 30.9.2008. The depreciation relatable to such investment was not allowable. Under letter dated 30.6.2011, the Assessing Officer, as noted, in para 12 and 13 called for full details of fixed assets above Rs. 10 lacs acquired during the year under consideration and also to justify the claim of additional depreciation on such investment. With respect to wind mills, the assessee in reply dated 11.7.2011 had contended as under : "5. Reply to your point No.13: Claim for additional deprecation. Claim for additional deprecation is made under section 32(1)(iia) on the eligible additions during the year. Such claim is made on various items falling within the block of plant and machinery. Details of assets on which additional deprecation is claimed are as per the attached list of assets. a. Plant and Machinery ....
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.... and plant. It is submitted that it is fulfilling all the conditions narrated in section 32(1)(iia) and therefore it is eligible for additional deprecation." Thus it was after a minute scrutiny that Assessing Officer did not disturb the income of higher depreciation on this investment. Reopening on such basis would not permissible. Ground (6) 17. Ground (6) pertains to expenditure of Rs. 10.32 lacs towards notified area tax. It is not in dispute that such tax was paid by the assessee but the receipt was issued in favour of M/s. Emtici Hotel Resort. The Assessing Officer was therefore, of the opinion that such expenditure could not have been claimed by the assessee. 31.08.2016 In this respect in letter dated 30.6.2011, the Assessing Officer had raised the following queries : "As per AnnexureG( 1) and G(2) (regarding payment of liability u/s 43B) to balance sheet, it is mentioned that various liabilities prima facie attracting provisions of section 43B have been paid on or before the due date of filing of return u/s.139(1) of the Act. Please furnish the evidence for verification of this aspect." Thus the Assessing Officer desired to get full information from the ....
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....e Act read with Rule 8D of the Income Tax Rules. According to the Assessing Officer, such disallowance was short by Rs. 33.59 lacs. In this respect, the Assessing Officer in his letter dated 30.6.2011 had required the following information from the assessee : "20. Details of income claimed exempt with nature and expenditure incurred for earning such income. Please furnish the working of disallowance of expenditure in respect of exempt income in terms of provisions of section 14A of the Act rwr 8D." The assessee replied to such query in the letter dated 11.7.2011 as under : "8. Reply to your point no.20 Income claimed exempt and expenditure incurred thereon. During the year an amount of Rs. 71,77,309/- is earned on account of dividend. This income is claimed as exempt u/s.10(34). As shown in detailed calculation and reported in Tax Audit Report, an amount of Rs. 34,36,054/- has been disallowed under rule 8D while filing return of income." Thus this issue also was pointedly in focus before the Assessing Officer during the scrutiny assessment. Ground (9) 20. Ground (9) pertains to non deduction of tax on export commission of Rs. 1.19 crores paid by the assessee. T....
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....question of notice of reopening having been issued by the Assessing Officer at the behest of the audit party assumes significance. The law on the point laid down by the Supreme Court in judgement in case of Commissioner of Income-tax v. P.V.S. Beedies Pvt. Ltd. reported in (1999) 237 ITR 13 and in case of Indian and Eastern Newspaper Society v. Commissioner of Income-tax reported in (1979) 119 ITR 996 is well settled. We also have the decision of this Court in case of Adani Exports v. Deputy Commissioner of Income Tax reported in (1999) 240 ITR 224(Guj) on this issue. In case of Indian and Eastern Newspaper Society (supra), the Supreme observed that the opinion of the audit party on a point of law could not be regarded as information enabling the Assessing Officer to initiate reassessment proceedings. This aspect was elaborated by Division Bench judgement of this Court in case of Adani Exports (supra) observing that it is the satisfaction of the Assessing Officer for the purpose of reopening which is subjective in nature but when the reasons recorded show a nexus between the formation of belief and the escapement of income, a further enquiry about the adequacy or sufficient of the ....