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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI G. MANJUNATHA & SHRI RAM LAL NEGI
IN THE INCOME TAX APPELLATE TRIBUNAL “A”, BENCH MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA No.557,558 & 559/Mum/2018 (Assessment Year :2008-09,2009-10 & 2010-11) Aries Agro Ltd Vs. DCIT-14(1)(1) Plot No. 24, Aries House 460, Aaykar Bhawan Deonar, Govandi M.K.Road Mumbai-400 043 Mumbai-400 020 PAN/GIR No.AAACA5035G Appellant) .. Respondent)
Assessee by Mrunal Parekh & Hasmukh Ravaria Revenue by N.Padmanaban
Date of Hearing 24/07/2019 Date of Pronouncement 06/09/2019 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):
This bunch of three appeals filed by the assessee are directed against separate, but identical orders of the Commissioner of Income Tax (Appeal)-22, Mumbai, all dated 30/11/2017 and they pertain to Assessment Year 2008-09, 2009-10 and 2010-11. Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed- off by this consolidated order.
The assessee has more or less raised common grounds of appeal for all assessment years. Therefore, for the sake of brevity, grounds of appeal taken for AY 2008-09 in ITA No. 557/Mum/2018 are reproduced below:-
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On the facts & in the circumstances of the case & in law, the honorable Commissioner of Income Tax (Appeals) erred in dismissing the following grounds of appeal of assessee for reopening the assessment by issuing the Notice u/s 148 of the Income Tax Act, 1961.
a. On the facts & in the circumstances of the case & in law, the learned Assessing Officer erred in reopening the assessment by issuing the Notice u/s 148 of the Income Tax Act, 1961.
b. On the facts & in the circumstances of the case & in law, the learned Assessing Officer erred in not appreciating the fact that the assessee has not concealed any income or has not furnished inaccurate particulars of any income. c. The Notice issued u/s 148 of the Income Tax Act, 1961 for reopening of assessment was in the nature of enquiry and hence the same is bad in law. 2. On the facts and in the circumstances of the case, The Honorable Commissioner of Income Tax [Appeals]-22, Mumbai erred in confirming the addition of proposed by the assessing officer by dismissing the objection of assessee for the claim under section 35D of the Income Tax Act, 1961
On the facts & in the circumstances of the case & in law, the honorable Commissioner of Income Tax (Appeals) erred in enhancing the disallowance under section 35D to the tune of Rs. 80,96,690/- and adding it to the total income of the assessee. 4. The Honorable Commissioner of Income Tax (Appeals) erred in restricting the claim for deduction u/s 35D to Rs. 19,16,276/- as against Rs. 1,00,12,966/- claimed by the assessee. 5. On the facts & in the circumstances of the case & in law, the honorable Commissioner of Income Tax (Appeals) erred in computing the 'Capital Employed" at Rs. 19,16,27,690/- as against Rs. 1,02,76,15,571/- as per the explanation (b)(i) to sub section (3) of section 35D of the Income Tax Act, 1961. 6. On the facts & in the circumstances of the case & in law, the honorable Commissioner of Income Tax [Appeals] erred in not considering Rs. 54,01,01,880/-[45,00,849 shares of Rs. 120/- each issued under IPO) the share premium as part of Capital employed and making additional addition of Rs.39,33,724/-
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On the facts & in the circumstances of the case & in law, the honorable Commissioner of Income Tax [Appeals] erred in making the enhancement without jurisdiction to make enhancement u/s 251(1) of Income Tax Act, 1961, The Appellate commissioner's powers to enhance an assessment is confined to first assessment u/s 143/147 of Income Tax Act, 1961 and not to re-assessment (second assessment) u/s 147 of Income Tax Act, 1961. 8.. The facts referring to above the CIT erred in dismissing the grounds of appeal for initiation of the penalty proceedings u/s 271(1)(c) of Income Tax Act, 1961 9. All the above grounds of appeal are mutually exclusive and without prejudice to each other. 10. The assessee prays for leave to add, alter or amend any or all of the above grounds of appeal at or before the date of hearing.
The brief facts of the case extracted from ITA No. 557/Mum/2018 for AY 2008-09 are that the assessee company is engaged in the business of manufacturing and marketing of Micronutrients Fertilizers and Feed Additives, filed its return of income for AY 2008-09 on 24/09/2008, declaring total income of Rs. 13,86,57,050/-. The assessment has been completed u/s 143(3) of the I.T.Act, 1961 on 30/11/2010, determining the total income at Rs. 13,87,82,050/-. Subsequently, the assessment has been reopened u/s 147 of the I.T.Act, 1961, after duly recording reasons, which have been reproduced by the AO at para 2 on pages 1 and 2 of assessment order, as per which income chargeable to tax had been escaped assessment, on account of excessive claim of deduction u/s 35D, in respect of share issue expenses, accordingly notice u/s 148 of the I.T.Act, 1961, dated 31/03/2015 was issued and duly served on the assesse. In response to notice, the assessee vide letter dated 11/04/2015, requested to treat, the original return filed on 12/10/2010 as return filed pursuant to the notice issued u/s 148 of the I.T.Act, 1961. Thereafter, the case was selected for scrutiny and
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notices u/s 143(2) and 142(1) of the Act, 1961 were issued. During the course of assessment proceedings, the assessee requested for reasons for reopening of the assessment and the same was provided by AO vide letter dated 31/08/2015.
During the course of assessment proceedings, the AO called upon, the assessee to explain as to why, excessive deduction claimed u/s 35D of the I.T.Act, 1961, in respect of share issue expenses shall not be recomputed. In response, the assessee has filed detailed written submissions, vide letter dated 05/10/2015 and argued that the claim made by the assesee u/s 35D is in accordance with provisions of section 35D and accordingly, it has written off an amount equal to 1/5th of the expenditure in assessment year 2009- 10, which was under scrutiny and the same was allowed as deduction. The Ld. AO, after considering relevant submissions of the assessee and also taken note of provisions of section 35D, recomputed expenses deductable u/s 35D and restricted such expenses to the extent of 5% of ‘capital employed’ and accordingly, determined total eligible expenses of Rs. 2,92,50,000/- and 1/5th of such expenditure of Rs. 58,50,000/- has been allowed as deduction and balance amount of Rs. 41,62,966/- has been disallowed and added back to the total income of the assessee.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged reopening of assessment , on the ground that there is no reason to believe that income chargeable to tax has been escaped assessment within the meaning of section 147 of the I.T.Act, 1961. The assesee, further submitted that whether, the belief
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exist or not must be tested from the reasons recorded for issue of notice u/s 148 and nothing else. If belief is not evident from a reading of the reasons, the reassessment will be without jurisdiction and illegal. The assessee has also taken another argument, in light of proviso to section 147 of the I.T.Act, 1961, and argued, when original assessment has been completed u/s 143(3), then the assessment cannot be reopened, after a period of four years, unless the conditions prescribed under proviso to section 147 is fulfilled i.e., the AO must allege that there is a failure on the part of the assessee to disclose fully and truly, all material facts necessary for his assessment. If, you go through reasons recorded by the AO, which is at page no. 7 of paper book filed by the assessee, nowhere the AO makes allegations that there is a failure on part of the assessee to disclose fully and truly, all material facts necessary for assessment. In this regard, he relied upon plethora of judicial precedents, including in the decision of Hon’ble Bombay High Court in the case of Hindustan Lever Limited Vs ACIT (2004) 268 ITR 332. The assessee has relied upon following case laws:- “Hindustan Lever Ltd. vs. ACIT [2004]-268 ITR 332 {Bom} Titanor Components vs. ACIT [2011]-60 DTR 273 {Bom} Sound Casting Pvt.Ltd vs. DCIT [2012] 250 CTR 119 {Bom} Sitara Diamond Pvt.Ltd [2012] 345 ITR 91 {Bom} Lok Housing & Construction Ltd. vs. DCIT [2012] 348 ITR 154 [Bom] Prashant Joshi vs. ITO-324 ITR 154 [Bom]
Similarly, as regards deduction claimed u/s 35D, the assessee has filed written submission and argued that its claim of expenditure related to share issue expenses is in accordance with provision of section 35D and accordingly, the AO was erred in re-computing, such deduction by restricting 5% of ‘capital employed’, excluding long term borrowings.
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The Ld.CIT(A), after considering relevant submissions of the assessee and also by relied upon, the decision of Hon’ble Supreme Court, in the case of ACIT vs Rajesh Jaweri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500(SC), rejected legal arguments taken by the assesee challenging validity of reopening of assessment, on the ground that the AO has formed reasons to belief on the basis of materials in his possession, as per which there is a escapement of income on account of excessive claim of deduction u/s 35D. The Ld.CIT(A), further observed that formation of believe by the AO is within the realm of subjective satisfaction as held by the Hon’ble Supreme Court ,in the case of ACIT vs Rajesh Jaweri Stock Brokers Pvt.Ltd (supra). Insofar as second argument of the assessee regarding proviso to section 147 of the I.T.Act, the Ld.CIT(A) held that there is a failure on part of the assessee to disclose fully and truly, all material facts necessary for assessment, which is evident from the fact that the assessee has failed to disclose ‘capital employed’ for the assessment year 2008-09 which itself goes to prove that the facts declared in the return of income are not full and true,therefore, proviso to section 147 has no application. The relevant finding of the Ld.CIT(A) are as under:-
5.3 I have considered the facts of the case and the appellant’s submissions. The first limb of the appellant’s objection to the re-opening of assessment is that the Assessing Officer’s reason to belief that income chargeable to tax had escaped assessment was without any foundation and that a belief without any foundation was as good as non-existent and cannot be sustained. In this regard, it is pertinent to note here that it is not a statutory requirement that the reason to belief should be proved to the hilt before re-opening of assessment. The requisite condition is that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment. The Assessing Officer had reasons to believe that the deduction claimed by the appellant u/s 35D was
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excessive. And formation of belief by the Assessing Officer is within the realm of subjective satisfaction as held by the Hon’ble Supreme Court in the case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt.Ltd reported in (2007) 291 ITR 500 (SC). The appellant’s objection on this count is dismissed. 5.4 The second limb of the appellant’s objection to the re-opening of assessment is that since the assessment in its case was already completed u/s 143(3) of the Act, the assessment could not have been re- opened after the expiry of four years from the end of the assessment year as per proviso to section 147 of the Act as there was no failure on its part to disclose fully and truly all material facts necessary for its assessment. This contention of the appellant is also not tenable. The appellant had claimed deduction u/s 35D for the first time in A.Y. 2008-09. It follows logically that the ‘capital employed’ for the purpose of determining deduction u/s 35D should be computed as on 31.03.2008. The appellant had, however, computed the ‘capital employed’ as on 31.03.2009. This material fact was not disclosed in its return of income nor before the Assessing Officer during the original assessment proceedings. I, therefore, hold that there was no true and full disclosure of material facts by the appellant. The appellant’s objection to re-opening of assessment on this issue is also dismissed.
As regards, additions made by the AO towards disallowances of expenditure claimed u/s 35D, the Ld.CIT(A) observed that explanation (b) to sub section (3) of section 35D defines ‘capital employed’, as per which, the aggregate of issued share capital, debentures and long term borrowings as on the last day of the previous year, in which the business of the company commences. Long term borrowing has also been defined in Explanation (c) to sub-section 35D and includes borrowings from banks. Therefore, there is a merit in contention of the assessee that capital employed, includes long term borrowings. However, in respect of computation of ‘capital employed’, the assessee has included share premium collected from issue of capital, but such share premium cannot be part of capital employed has held by the Hon’ble Supreme Court, in the case of Berger Paints India Ltd. vs CIT (2017) 393 ITR 1993 (SC) and accordingly, issued enhancement notice u/s 251 of the
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I.T.Act,1961 and after considering relevant submissions of the assessee rejected assessee objections and recomputed capital employed by excluding share premium and including long term borrowings from bank to determine total capital employed of Rs. 19,16,27,690/- and on such ‘capital employed’ computed eligible deduction u/s 35D @5% of ‘capital employed’, which comes to Rs. 95,81,384/-. Further, on such eligible deduction, allowed 1/5th of Rs. 95,81,384/- and determined deduction of Rs. 19,16,276/- as against Rs. 1,00,12,966/- and balance amount has been added back to the total income of the assessee. The relevant finings of the Ld.CIT(A) are as under:- 6.8 The appellant’s response to the enhancement notice has been considered. The appellant has sought to argue that the power of the Commissioner (Appeals) to enhance an assessment is restricted to an assessment made for the first time and not to a reassessment u/s 147 of the Act. The appellant has contended that clause (a) of section 251(1) is confined to appeals against first assessment and not second assessment. This proposition is neither acceptable nor tenable. Section 251(1)(a) of the Act provides that in disposing of an appeal against an order of assessment, the Commissioner (Appeals) shall have the power to confirm, reduce, enhance or annul the assessment. And ‘assessment’ by its very definition as per section 2(9) of the Act includes reassessment. Section 251 of the Act makes no distinction between assessment and reassessment regarding the powers of the Commissioner (Appeals). The appellant’s contention being without substance is rejected. 6.9 The appellant’s reliance on the decision of the Hon’ble Supreme Court in the case of Hukuchand Mills vs CIT (1967) 63 ITR 332 (SC) is also misplaced. In that case, the Hon’ble Supreme Court had held that the Tribunal had the power to remand the matter back to the Assessing Officer. In reaching this conclusion, the Hon’ble Supreme Court had made the following observations: “The words “pass such orders as the Tribunal thinks fit” include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by section 31 of the Act, Consequently, the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income-tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry.”
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The above observation of the Hon’ble Supreme Court does not in any way imply that the Appellate Assistant Commissioner corresponding to the present Commissioner (Appeals) did not have the power of enhancement. In fact, a proper reading of the Hon’ble Supreme Court’s observation indicates that the Appellate Assistant Commissioner did have the power of enhancement while possibly the Tribunal may not. The appellant has picked out the words “pass such orders as the Tribunal thinks fit” and likened it to the provision of section 251(1)(c) which states that “in any other case, he may pass such orders in the appeals as he thinks fit”, and thereby inferred that this power does not include that power of enhancement. However, the powers of the Commissioner (Appeals) and that of the Tribunal are not same and cannot be equated with each other. In any case, it is reiterated here that the enhancement is being made under section 251(1)(a) of the Act which expressly confers the power of enhancement on the Commissioner (Appeals) and not under the residuary clause.
6.10 On merits, the appellant has simply stated that “share premium is nothing but the price paid for capital issued and therefore, its character has to be same as ‘share capital’ which is also a price paid at par for the capital issued. Hence, no enhancement ought to be made on this account too.” 6.11 The issue of whether share premium is part of issued share capital for the purpose of deduction u/s 35D is no longer res integra. The Hon’ble Supreme Court in the case of Berger Pints India Ltd. VS CIT [2017] 393 ITR 113 (SC) has held that ‘premium’ collected by assesee-company on its subscribed share capital is not ‘capital employed in business of company’ within meaning of section 35D so as to enable company to claim deduction of said amount.
6.12 In view of the above, the ‘capital employed’ in the business of the appellant is being computed by excluding the share premium of Rs. 54,01,01,880/-. Explanation (b) to sub section (3) of section 35D defines ‘capital employed’ as the aggregate of the issued share capital, debentures and long term borrowings as on the last day of the previous year in which the business of the company commences. Long term borrowings has also been defined in Explanation (c) to sub-section(3) of section 35D and includes borrowings from banks. Perusal of the details of capital employed submitted by the appellant shows the following borrowings from banks as on 31.03.2008:
i. ICICI Bank Bahrain Rs. 14,66,19,200/- ii. India Overseas Bank-Cash credit/Overdraft Rs.66,12,961/- iii. HDFC Bank-Cash credit/Overdraft Rs. 57,43,163/-
The Hon’ble Gujrat High Court in the case of Dy. CIT vs. Core Health Care Ltd. (2009) 308 ITR 263 (Guj) has held that all borrowings from banks are included in the expression ‘long term borrowings’ without any reference to the tenure of the bank loans. The borrowings from ICICI
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Bank Bahrain is, therefore, being included for computing capital employed. However, the outstanding against Indian Overseas Bank and HDFC Bank are in the nature of cash credit/overdraft and are not borrowings and, hence, are excluded for computing capital employed. With these observations, the ‘capital employed’ in the business of the appellant as on 31.03.2008 is computed as under: i. Issued share capital Rs. 4,50,08,490/ (45,00,849 shares of Rs.10/- each issued under IPO) ii. Long Term Borrowings a. ICICI Bank Bahrain Rs.14,66,19,200/- Capital employed Rs.19,16,27,690/- 6.13 As per section 35D (3) of the Act, the total expenses eligible for deduction u/s 35D @5% of capital employed, ie, Rs. 19,16,27,690/-, therefore, comes to Rs. 95,81,384/-. The amount eligible for deduction u/s 35D during the year at 1/5th of Rs.95,81,384/- is Rs. 19,16,276/- as against Rs.1,00,12,966/- claimed by the appellant. There is a difference of Rs. 80,96,690/- between the eligible amount and as claimed by the appellant. The Assessing Officer has already disallowed Rs.41,62,966/- on this account. The disallowance u/s 35D made by the Assessing Officer is, therefore, enhanced by Rs. 39,33,724/-.
Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before us.
The Ld. AR for the assessee submitted that the Ld.CIT(A) was erred in dismissing grounds taken by the assessee challenging reopening of the assessment on two told arguments. The Ld. AR, further submitted that in order to reopen assessment, the AO must have reason to believe that income of assessee has escaped assessment. Further, whether the belief exist or not must be tested from the reasons recorded for issue of notice and nothing else. If, the belief is not evident from a reading of the reasons, the reassessment will be without jurisdiction and illegal. The Ld. AR, further submitted that reopening of assessment is bad in law, even on this count, because the assessment has been reopened after four years from the end of the relevant assessment year, unless making an allegation against the assessee that there is a failure on
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the part of the assessee to disclose fully and truly, all material facts necessary for assessment for that assessment years. If you go through reasons recorded by the AO, for reopening of assessment, nowhere the Ld.AO alleged that income chargeable to tax has escaped assessment by the reason of failure on part of assessee to disclose fully and truly all material facts necessary for his assessment. In this regard, he relied upon the decision of ITAT, Mumbai, in the case of Kalyan Bank vs DCIT(International Taxation) (2012) 54 SOT 111. The assessee has also relied upon the decision of Hon’ble Punjab & Haryana High court, in the case of Hari Iron Trading company vs CIT (2003) 263 ITR 437 (Punjab and Haryana). The assessee has also relied upon the following judicial precedents:-
CIT vs. Foramer France [(2003) 264 ITR 566 (SC)] 2. Precilion Holdings Ltd. vs. DCIT (IT) [(2019) 103 taxmann.com 291 (Bom)] 3. DIT vs. Rolls Royce Industrial Power India Ltd. [(2017) 394-ITR 547 (Delhi)] 4. Tao Publishing (P.) Ltd. vs. DCIT [(2015) 370 ITR 135 [(Bom)] 5. Sound Casting (P.) Ltd. vs. DCIT [(2012) 250 CTR 119 (Bom.)] 6. Sitara Diamond (P.) Ltd. vs. DCIT [(2012) 345 ITR 91 (Bom.)] 7. Titanor Components Limited vs. ACIT [(2011) 60 DTR 273 (Bom.)] 8. German Remedies Ltd. vs. DCIT [(2006) 287 ITR 494 (Bom)] 9. Hindustan Lever Ltd. vs. R.B.Wadkar [(2004) 268 ITR 332 (Bom.)]
The Ld. DR, on the other hand, strongly supporting order of the Ld.CIT(A) submitted that the Ld.CIT(A) has brought out clear facts to the extent that the AO has formed reasonable belief of escapement of income within the meaning of section 147 of the I.T.Act,1961 and at the time of initiation of reassessment proceedings, the AO need
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not to prove escapement of income and what is relevant is there is a some tangible material, which suggest escapement of income within the meaning of section 147 of the I.T.Act, 1961. In this regard, he relied upon the decision of Hon’ble Bombay High Court, in the case of Yuvraj vs Union of India ( 2009) 225 CTR 283 (Bom) and the Hon’ble Supreme Court in the case of Raymond Wollen Mills vs ITO (1999) 236 ITR 34 (SC).
We have heard both the parties, perused the material available on record and gone through orders of the authorities below. The assesee has challenged reopening of assessment on two grounds. The first objection taken by the assessee for reopening of the assessment is that the AO has reopened assessment without formation of reason to believe that income chargeable to tax had been escaped assessment, which is evident from the reasons recorded for reopening of the assessment. We find that the AO has recorded reasons for reopening of the assessment , on the basis of tangible material, as per which, income chargeable to tax had been escaped assessment within the meaning of section 147 of the I.T.Act, 1961, on account of excessive claim of deduction u/s 35D of the I.T.Act, 1961, in respect of share issue expenses. We, further noted that it is not a statutory requirement that the reasons to belief should be proved to the hilt before reopening of assessment. The requisite condition is that the AO should have reason to believe that income chargeable to tax has escaped assessment. In this case, the AO had reasons to believe that deduction claimed u/s 35D was excessive and formation of belief by the AO is within realm of subjective satisfaction as held by the Hon’ble Supreme Court in the case of ACIT vs Rajesh Jaweri Stock Brokers Pvt Ltd. (2007) 291
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ITR 500. We, further noted that at the time of reopening of assessment, the AO need not to prove escapement of income. Whether, the materials would conclusively prove, the escapement is not the concern at that stage. This is so because, the formation of belief by the AO is within realm of subjective satisfaction. At that stage final outcome of the proceedings is not relevant. In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income, at the stage of issue of notice. The only question is whether, there was relevant material on which a reasonable person could have formed a requisite belief. This legal proposition is supported by the decision of Hon’ble Supreme Court, in the case of Raymond Wollen Mills vs ITO (1999) 236 ITR (34) (SC). The Hon’ble Bombay High Court had also took some view in the case of Yuvraj Vs Union of India (2009) (225 CTR 283). In this case, on perusal of facts available on record, we find that the AO has formed reasonable belief of escapement of income, on the basis of tangible materials in his possession, which suggest escapement of income within the meaning of section 147 of I.T.Act, 1961. Therefore, we are of the considered view that there is no merit in the argument taken by the assessee.
The second limb of arguments of the assessee for reopening of assessment is that when, original assessment was completed u/s 143(3) of the I.T.Act, 1961, the assessment could not the reopened after expiry of four years from the end of the relevant assessment year, unless there is a allegation by the AO that income chargeable to tax has escaped assessment for such assessment year by the reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. We find that the
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Ld.CIT(A) has brought out clear facts, in light of proviso to section 147 and facts brought out by the AO, in respect of deduction claimed u/s 35D and observed that there is a failure on the part of the assessee to disclose fully and truly, all material facts necessary for assessment, because the assessee has claimed excessive deduction u/s 35D, which itself goes to prove the fact that the facts disclosed in the return of income or at the time of assessment are not true and correct and also full disclosure of material facts necessary for assessment. We, further noted that mere furnished a return of income with a claim of deduction u/s 35D is not sufficient enough. When, the assessee is claiming a deduction, it has to disclose necessary facts in form of a notes to accounts explaining , the manner in which, such deduction has been claimed and also whether, such deduction is in accordance with provisions of Act. In this case, on perusal of facts, we find that the assesee, neither provided any note in its financial statements explaining, the computation of deduction, nor the AO has examined the issue, at the time of original assessment proceedings u/s 143(3) of the I.T.Act, 1961. Therefore, we are of the considered view that there is no merit in arguments taken by the assessee, in light of proviso to section 147 of the I.T.Act, 1961. Insofar as various case laws relied upon by the assessee, we find that although assessee has relied upon various case laws, but none of case laws are directly applicable to facts of assesee case and hence, all case laws relied upon by the assesee have been rejected.
In this view of the matter and also considering the case laws discussed hereinabove, we are of the considered view that the Ld.CIT(A) was right in upholding reopening of the assessment in the
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given facts and circumstances of this case. Hence, we are inclined to uphold order of the Ld.CIT(A) and reject ground taken by the assessee challenging reopening of assessment.
The next issue that came up for our consideration from ground No. 2 to 7 is additions made by the AO towards disallowances of excess claim of deduction u/s 35D of the I.T.Act, 1961 and consequent enhancement u/s 251 of the I.T.Act, 1961 by the Ld.CIT(A). We find that Ld. AR for the assessee was not seriously contesting, the issue on merit because, the Hon’ble Supreme Court in the case of Berger Paints India Ltd.vs CIT (2017) 393 ITR (113) (SC) held that premium collected by assessee company on its subscribed share capital is not ‘capital employed’ in business of company within the meaning of section 35D of the Act, so as to enable assessee to claim deduction of said amount. We find that the Hon’ble Supreme Court has settled the issue and held that for the purpose of capital employed, share premium collected on issue of share capital is not part of capital employed. Therefore, we are of the considered view that the AO, as well as the Ld.CIT(A) were right in re-computation of eligible deduction u/s 35D by excluding share premium from capital employed and accordingly, we are inclined to uphold order of the Ld. CIT(A) and reject ground taken by the assessee.
In the result appeal filed by the assessee is dismissed.
ITA NO. 558/Mum/2018
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The facts and issues involved in this appeal are exactly identical to the facts and issues, which we have already considered in ITA No 557/Mum/2018, except to the extent of limited changes in facts in as much as, the reopening of assessment has been done within four years from end of relevant assessment years. Therefore, the argument advanced by the assessee in light of proviso to section 147 has no application. Insofar as, the first argument of the assessee that there is a absence of reason to belief for reopening of assessment, we find that a similar objection raised by the assessee for AY 2008-09 has been negated by us with detailed reasons in preceding paragraph. The reasons given by us in preceding paragraph shall mutatis mutandis apply for this year also. Accordingly, the objection of the assessee that there was a absence of reason to belief of escapement of income has been rejected. Coming to second objection of the assessee for reopening of the assessment. The assessee has taken an argument and submitted that the assessment has been reopened for fishing and revolving enquiry, which is not permissible u/s 147 of the I.T.Act, 196. We find that Ld.CIT(A) had negated arguments of the assessee, in light of reasons recorded for reopening of assessment and came to the conclusion that whether, the extension of undertaking was completed or its new unit had started production would not mean that the assessment was reopened only making fishing enquiries. Facts remain unchanged. The assessee failed to file, further evidences or any judgments to controvert findings of facts recorded by Ld.CIT(A) and hence, we reject second argument taken by the assessee. The third objection of the assessee for reopening of the assessment is that reopening was on the basis of change of opinion without there being any fresh tangible material. The assessee
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contended that in the course of original assessment u/s 143(3), the issue has been examined by the AO and after being satisfied with explanation of the assessee has accepted the claim. We find that the Ld.CIT(A) had recorded categorical finding to the effect that the assessment has been originally completed u/s 143(3) by accepting income returned by the assesee without any discussion on the issue of deduction claimed u/s 35D of the I.T.Act, 1961. The Ld.CIT(A), further observed that the assessee has also brought nothing on record to show that details of capital employed in the business was submitted to the AO, it is crucial for determining for eligibility for deduction u/s 35D of the I.T.Act, 1961. Facts remain unchanged. The Ld. AR for the assessee fails to counter, the facts recorded by the Ld.CIT(A), in light of reasons recorded for reopening of assessment and the assessment order passed by the AO u/s 143(3) of the I.T.Act, 1961. Hence, we reject third arguments of the assessee. As a result, the assesee has failed in his attempt to satisfy that reopening of assessment was bad in law, consequently, we are inclined to uphold the order of the Ld.CIT(A) and reject legal grounds taken by the assesse.
The next issue that came up for our consideration is additions made by the AO towards disallowances of excess claim of deduction u/s 35D of the I.T.Act, 1961 and consequent enhancement u/s 251 of the I.T.Act, 1961 by the Ld.CIT(A). We find that Ld. AR for the assessee was not seriously contesting, the issue on merit because, the Hon’ble Supreme Court in the case of Berger Paints India Ltd.vs CIT (2017) 393 ITR (113) (SC) held that premium collected by assessee company on its subscribed share capital is not capital employed in business of company within the meaning of section 35D
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of the Act, so as to enable assessee to claim deduction of said amount. We find that the Hon’ble Supreme Court has settled the issue and held that for the purpose of capital employed, share premium collected on issue of share capital is not part of capital employed. Therefore, we are of the considered view that the AO, as well as the Ld.CIT(A) were right in re-computation of eligible deduction u/s 35D by excluding share premium from capital employed and accordingly, we are inclined to uphold order of the Ld. CIT(A) and reject ground taken by the assessee.
In the result, appeal filed by the assessee is dismissed.
ITA NO. 559/Mum/2018
The facts and issues involved in this appeal are exactly identical to the facts and issues, which we have already considered in ITA NO. 557/Mum/2018, except to the extent of limited changes in facts, in as much as, the assessment for the impugned assessment order has been completed u/s 143(1) and reopening of assessment was within four years from the end of relevant assessment year. Therefore, the reasons given by us in preceding paragraph in ITA No. 557 and 558/Mum/2018, we reject legal ground taken by the assessee challenging reopening of assessment.
The next issue that came up for our consideration is additions made by the AO towards disallowances of excess claim of deduction u/s 35D of the I.T.Act, 1961 and consequent enhancement u/s 251 of the I.T.Act, 1961 by the Ld.CIT(A). We find that Ld. AR for the assessee was not seriously contesting, the issue on merit because,
19 ITA No.557 to 559/Mum/2018 Aries Agro Ltd.
the Hon’ble Supreme Court in the case of Berger Paints India Ltd.vs CIT (2017) 393 ITR (113) (SC) held that premium collected by assessee company on its subscribed share capital is not ‘capital employed’ in business of company within meaning of section 35D, so as to enable assessee to claim deduction of said amount. We find that the Hon’ble Supreme Court has settled the issue and held that for the purpose of capital employed, share premium collected on issue of share capital is not part of capital employed. Therefore, we are of the considered view that the AO, as well as the Ld.CIT(A) were right in re-computation of eligible deduction u/s 35D by excluding share premium from capital employed and accordingly, we are inclined to uphold order of the Ld. CIT(A) and reject ground taken by the assessee.
In the result appeal filed by the assessee is dismissed.
As a result, all appeals filed by the assessee are dismissed.
Order pronounced in the open court on this 06 /09/2019
Sd/- Sd/- (RAM LAL NEGI) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 06/09/2019 Thirumalesh Sr.PS p Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4.
20 ITA No.557 to 559/Mum/2018 Aries Agro Ltd.
DR, ITAT, Mumbai 5. 6. Guard file. स�यािपत �ित //True Copy// BY ORDER,
(Asstt. Registrar) ITAT, Mumbai