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2013 (3) TMI 200 - BOMBAY HIGH COURTRe opening of assessment - violation of provisions of section of 36(1)(ii) in making claim of commission payment to Directors as expenditure - AY 2005-06 and 2006-07 - Held that:- The notices purporting to reopen the assessments for all the years do not even allege that there was any such failure on the part of the assessee to disclose the claim. On the contrary, the record would indicate that the assessee had initially by a letter dated 12 March 2007 and subsequently by a letter dated 31 August 2007 placed on the record before the A.O. the nature of payments, the agreements with the two directors in pursuance of which they were paid a fixed monthly remuneration and a commission/ performance bonus representing 35% of the net profit before taxation and a justification for the payment. The A.O. was apprised by the Assessee of all the material facts necessary for the assessment and there was no suppression. No such submission has in addition, been urged by the Revenue. The A.O. has stated that a payment made to a shareholder would not be covered by the section to be eligible for deduction as the payment could have been made to a director who is a shareholder as disbursement of profit or dividend. These reasons are not postulated on there being any suppression on the part of the assessee or a failure on the part of the assessee to state fully and truly all material facts necessary for the assessment. Thus the reopening orders of the assessments for 2005-06 and 2006-07 have to be quashed and set aside. AY 2007-08 AND 2008-09 - revenue submitted it to be within a period of four years - Held that:- This is a case where the nature of the payment, the basis of the computation and the rationale for computing the remuneration to the two directors with reference to a fixed remuneration in part and a proportion of the net profits in balance was brought in focus before the A.O. And as before this Court it is not in dispute at the hearing that the two directors have been assessed under section 143(3) on the amounts paid by the assessee to them as salary income and their assessments have been completed accordingly. Thus the reopening of the assessments for the two AY must be held to be based on a pure change of opinion and not on tangible material - appeal in favour of assessee.
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