TMI Blog2012 (8) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... t of payment has been offered for disallowance u/s 40(a)(ia. Issue on declared short term capital gains in respect of income earned out of investments had to be taxed as business Income is not disputed as that the treatment given was consistent with the earlier year practice and accepted by the Respondent - no reason to believe that income has escaped assessment - notice issued for reassessment is quashed - in favour of assessee. - WRIT PETITION NO. 430 OF 2012 - - - Dated:- 20-7-2012 - S.J.VAZIFDAR M.S.SANKLECHA, JJ. Ms. Aarti Vissanji alongwith Mr. S.J.Mehta for the Petitioner. Mr. Tejveer Singh for the Respondents. (JUDGMENT PER M.S.SANKLECHA, J.) 1 Rule. Returnable forthwith. Respondents waive service. At the instance of the Advocates for both the parties, the petition is taken up for final disposal. 2 This petition under Article 226 of the Constitution of India challenges: a) Notice dated 24.03.2011 (hereinafter referred to as 'impugned notice') issued under Section 148 read with Section 147 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') seeking to reopen the assessment for the assessment year 20062007; and b) Order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther verification the tax effect on this lapse works out to Rs.17,36,35,929/. II) Perusal of the Profit and Loss Account and the submissions on record reveal that TDS has remained to be deducted on advertisement and sales promotion expenses to tune of Rs.22,48,91,672/under the head Establishment and other expenses in accordance with Chapter XVIIB of the I.T. Act, 1961. The aforementioned expenses are to be disallowed under section 40(a)(ia) r/w Section 200(1) of the I.T.Act, 1961 for non deduction of tax at source. Tax effect on this account is Rs.6,74,67,501/. Further, the quantum of TDS that has remained to be deducted could be quantified at Rs.22,48,916/. Penalty under Section 271C for non compliance of TDS provision could be quantified at Rs. 22,48,916/. III) The assessee company has declared short term capital gain to the tune of Rs.36300587/. However, the submissions on record does not reveal that details of the transactions relating to these short term capital gains in order to ascertain as to why the same could not be classified as business income. The correctness of these transactions therefore, has prima facie, remained to have been examined during the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une of Rs.22,48,91,672/under the head Establishment and other expenses in accordance with Chapter XVIIB of the I.T. Act, 1961. The aforementioned expenses are to be disallowed under section 40(a)(ia) r/w Section 200(1) of the I.T.Act, 1961 for non deduction of tax at source. The company has declared short term capital gain to the tune of Rs.3,63,00,587/. Prima facie, from the records it appears that as per the guidelines and directions laid down in instruction no. 4 of 2007 dated 15th June, 2007 for distinguishing shares held as stockintrade and shares held as investment this STCG is to be treated as the business income has remained to have been followed In view of the above, I have reason to believe that income of Rs.83,99,78,690/chargeable to tax has escaped assessment. Hence, the assessment is proposed to be reopened and notice under Section 148 is to be issued. e) On 28.11.2011, the Petitioner filed its objection to the reasons communicated on 24.10.2011 for reopening the assessment for assessment year 20062007. In its objection, the Petitioner pointed out that there has been no escapement of income for the assessment year 20062007. In any event, all facts in respect of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been complied with in this case which says that the objection of the assessee, if any, are to be disposed off by passing a speaking order. Besides the impugned order relied upon extract of various case laws without mentioning how the same are relevant to the present purposes. 4 Ms. Aarti Vissanji, the learned Counsel for the Petitioner in support of the Petition submits as under: a) The said notice is completely without jurisdiction as the Assessing Officer does not have any independent reason to believe that the petitioner's income for the assessment year 20062007 has escaped assessment. The only basis for the notice is the audit objection dated 29.12.2009. In particular, she invited our attention to the fact that the reasons for audit objection and the reasons recorded to reopen the assessment are identical. b) All facts with regard to the reasons mentioned for reopening the assessment for the assessment year 20062007 was a subject matter of examination by the Assessing Officer while passing the assessment order dated 31.12.2008 for the assessment year 20062007. c) The impugned order is without reasons and displays a nonapplication of mind to the objections made to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imself. The Assessing Officer cannot blindly follow the opinion of an audit authority for the purpose of arriving at a belief that income has escaped assessment. In the present facts, it would be noticed that the reasons for which the assessment for the assessment year 20062007 is sought to be reopened by communication dated 12.10.2011 are identical to the objection of the audit authority dated 29.12.2009. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there was no independent application of mind by the Assessing Officer before he issued the impugned notice. On this ground alone, the assumption of jurisdiction by the Assessing Officer can be faulted. 7 However, as submissions were made on other issues also we are examining them also. It is a settled position in law that where assessment sought to be reopened is before the expiry of four years from the end of the relevant assessment year, then in such cases the power to reopen an assessment is very wide. However, even though such a power is very wide yet such a power would not justify a review of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also viewed the very issues on which the assessment is sought to be reopened. So far as, the issue in respect of provisions claimed as deduction for arriving at taxable profit aggregating to Rs.52.87 crores is concerned, the same was not only dislcosed in the notes to account filed with the return of Income but also in response to specific queries raised during the assessment proceeding. It was reiterated at the hearing that on the aforesaid account of provision, the tax had already been paid in the earlier years and the amounts were merely written back in this year to the extent they were in excess of the provisions required. So far as, failure to deduct TDS on advertisement and sales promotion are concerned leading to disallowance of the entire amount of Rs.22.48 crores under Section 40(a)(ia) the same was also subject to scrutiny by the Assessing Officer during the assessment proceedings. In fact, the clause 17(f) of the tax audit report submitted alongwith return of income clearly brings out the fact that where tax has not been deducted, then the entire amount of payment has been offered for disallowance under Section 40(a)(ia). In fact, by letters dated 10.11.2008 and 26.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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