SUNIL SUDHIR KOTHARI,MUMBAI vs. DCIT - CC - 1(1), MUMBAI

I have considered the rival contentions and carefully gone through the orders of the authorities below, I have also perused the reasons recorded for reopening. Following reasons were recorded for reopening of the assessment:

The assessee made investments in shares & securities and in registered firms. The assessee also earned income by way of dividend, share of profit from firm which is claimed as exempt in the return filed. The assessee incurred interest and other expenditure and claimed the same in the income and expenditure account filed on record. The provisions of Sec. 14A and Rule 8D are clearly attracted in this case. However in completing the scrutiny assessment, no disallowance as per the above provisions. The inadmissible expense u/s 14A worked out in accordance with Rule 8D of IT Rules 1962 in this case under: This resulted in under assessment of taxable income to the extent Rs. 14,81,906/- Therefore, I have reason to believe that income chargeable to tax for A.Y 2008-09 exceeding Rs. 1 lacs has escaped from assessment. Since the income has escaped assessment, therefore the case is required to be reopened u/s 147 of the Act

There is no dispute of the fact that the original assessment was framed u/s 143(3) of the Act, wherein the assessee has filed details of expenditure incurred, part of which are offered for disallowance u/s 14A of the Act. . Sharad C. Shah, Mumbai. - 3 - Assessment was completed u/s 143(3) of the Act without pointing out any defect in the disallowance offered by the assessee u/s 14A of the Act. I found that neither in the reasons recorded for reopening nor in the notice issued u/s 148 of the Act, there is whisper of any failure on part of the assessee to disclose fully and truly all the material facts. Since the reopening was beyond the period of 04 years, reopening can be made only if there is failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. However, there is no such mention by the A.O either in the notice issued u/s 148 of the Act nor in the reasons recorded for reopening. In terms of decision Hon’ble Jurisdictional High Court in the case of Hindustan Lever Ltd, reported in 268 ITR 332, the reopening of the assessment is invalid when the notice is issued after 04 years in respect of assessment completed u/s 143(3) of the Act.

In view of the above discussion, I set aside reopening made by the A.O without point out any failure on part of the assessee to disclose fully and truly all material facts necessary for assessment. . Sharad C. Shah, Mumbai. - 4 - 6. Even on merit, I found that no expenditure was found to be incurred for earning the exempt income, accordingly the disallowance made by the A.O after reopening is not justified.

In the result the appeal of the assessee is allowed.