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2017 (9) TMI 1591 - HC - Income TaxReopening of assessment - addition u/s 14A - Held that:- AO is obliged to indicate the tangible material on the basis of which he has formed the reason to believe that expenditure in relation to exempt income by the Assessee during the year in question must, in terms of Section 14A of the Act, be disallowed. If indeed there has been no exempt income during the AY in question and that explanation of the Assessee should be accepted by the CIT(A), it is incumbent on the AO to explain on what basis he infers that some expenditure from the alleged income has actually to be disallowed. This appears to be a clear case of non-application of mind. Further, considering that the assessment took place under Section 143(3) of the Act and a specific query was raised in this regard by the AO, revisiting the same issue on the basis of the same material was not justified. Consequently, the first reason for reopening the assessment appears not to be sustainable in law. Excess depreciation was claimed by the Petitioner @ 15% in respect of the electrical installation instead of at the eligible rate of 10% - Held that:- AO has failed to indicate the basis for forming reason to believe that income has escaped assessment. This appears to be based on mere change of opinion. As is the case with the first reason, Explanation 2(c)(iv) to Section 147 would not come to the aid of the AO unless the basis for forming such reason to believe is indicated in the reasons for reopening the assessment. Excess credit of tax deducted at source - Held that:- Nothing has been indicated by the AO in the reasons for reopening the assessment that should explain the basis for forming reasons to believe that income had escaped Expenses claimed on account of payment made to approved gratuity fund assessment - Held that:- Petitioner, in its objections, pointed out that the above reason was based on the original income tax return and not the revised return filed by the Petitioner in which the Petitioner had claimed ₹ 1,98,317/- instead of ₹ 1,98,06,804/- on account of gratuity paid during the AY in question. Obviously, the AO failed to note the changed figures in the revised return. This, being an instance of non-application of mind by the AO, could not constitute a valid reason to believe that income had escaped assessment. None of the reasons for re-opening of the assessment could be said to be valid. - Decided in favour of assessee.
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