TMI Blog2015 (11) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... es, all other charges are more or less commensurate with the expenditure in earlier years. Therefore, we are of the opinion that the expenditure cannot be disallowed on adhoc basis as far as these other expenditures are concerned. Car hire charges, the same has been increased from ₹ 78,580/- in earlier year to ₹ 1,99,933/-. The reasons were not explained and in the absence of any vouchers, we are of the opinion that 20% of the car hire charges can be disallowed. Professional charges and reimbursement of expenses to consultants, there is also manifold increase in this expenditure. Whether the amounts were covered by provisions of TDS or not could not be verified in the absence of any details. Moreover, justification for payment of professional charges was also not available on record. In the absence of any justification of expenditure claims and further in the absence of books of accounts available at this point of time, we are of the opinion that disallowance of 10% of expenditure would meet the ends of justice. Accordingly, the disallowance stands modified as directed above. - Decided partly in favour of assessee. - ITA No. 1227/HYD/2014 to 1231/HYD/2014 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure, as was done in other reopened assessments, of the expenditure claimed. 3. Assessee contested before the Ld. CIT(A) that reopening of assessment is bad in law and further, disallowance of expenditure is not warranted. Ld. CIT(A) however, rejected assessee's contentions and dismissed the appeals. Hence, the present appeals. Except for AY. 2007-08, in all other assessment years, assessee is mainly contesting the issue of reopening. Apart from that, in all the assessment years, the disallowance of expenditure @30% is an issue. Assessee has raised as many as 9 grounds on these issues which are nothing but detailed submissions on the issue of reopening, disallowance of expenditure and levy of interest which is contested in Ground No. 8. 4. Ld. Counsel contended that reopening of assessments was done without having any belief that incomes of assessee have escaped assessment in the impugned assessment years. It was submitted that notices were issued u/s. 148 for AYs. 2002-03 to 2005-06, beyond the period of four years from the specified period. In AYs. 2002-03 to 2004-05, there were scrutiny assessments and order u/s. 143(3) was already passed whereas for AY. 2005-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals dt. 11-08-2014. It was submitted that reopening of assessments is bad in law. 5. Coming to disallowance of 30% expenditure made in all the impugned assessment years, it was submitted that from AY. 2002-03 to 2004-05 the assessments have been originally completed u/s. 143(3) and expenditure claims were allowed after due verification. So, disallowance of expenditure in reassessment does not arise. For disallowance made in AY. 2005-06 and 2007-08, it was submitted that AO even after reopening u/s. 148 in AY. 2006-07, has accepted assessee's claims. Therefore, there is no need for disallowing any expenditure. It was submitted that disallowance of expenditure at this point of time in re-assessment does not arise and therefore, it is bad in law. 6. Ld. DR however, supported the reopening of assessment on the statement given by Shri Raju which pre-supposes identical modus opparandi being followed with regard to other companies. He justified the reopening the assessments in four assessment years. He also submitted that the disallowance of 30% expenditure in AY. 2007-08 is warranted as assessee failed to furnish the Books of Accounts or vouchers so as to examine the veracity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no evidence of siphoning of funds or escapement of income. What the Assessing Officer has done in the assessment is denial of the explanations given by the assessee with reference to various investments made through the books of accounts, various credits and loans obtained and also addition to fixed assets on the reason that the evidences have not been filed. Thus as can be seen from the order, there is no nexus at all with reference to the reasons for reopening and the assessment completed. 19. Hence, there being no nexus or live-link with the reasons recorded and the 'formation of belief' to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being 'no tangible material' for the reopening of the assessment, the CIT(A) erred in confirming the order of the Assessing Officer. We, therefore, hold that the reopening of the jurisdiction under section 147 is bad in law and is to be quashed. 20. Following the principles on the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 1 (FB) and CIT v. Eicher Ltd. (2007) 294 ITR 310 affirmed. 147. Income escaping assessment.- If the AO has reason to believe that any income me chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in ss. 148 to 153 referred to as the relevant assessment year). After the Amending Act, 1989, s. 147 reads as under : 4. On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go by and only one condition has remained, viz., that where the AO has reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Amending Act, 1989, has again amended s. 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new s. 147, however, remain the same. 5. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs 10. We also find that CIT(A) erred in holding that the Assessing Officer had valid reasons to reopen the assessment of Assessee-company to examine the veracities and financial implications between Assessee-company and M/s. Satyam Computer Services Limited. We find there is no rationale nexus with such statement by Sri Ramalinga Raju and reassessment made. As seen from the order of AO even though the assessment was reopened to examine the transaction between M/s Satyam computers and assessee, no such exercise was undertaken and no findings were given on that issue. The additions made are routine disallowances out of already allowed expenditure in original assessment. There is no nexus between the reasons recorded and additions made in the guise of escapement of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not necessary to consider the disallowance of expenditure in the impugned assessment years. The orders of AO and CIT(A) are accordingly set aside. Accordingly, assessee's grounds on the issue of reopening are accepted and appeals in ITA Nos. 1227/Hyd/2014, 1228/Hyd/2014, 1229/Hyd/2014 and 1230/Hyd/2014 are accordingly allowed. 10. Coming to ITA No. 1231/Hyd/2014 for AY. 2007-08, this is not a reopened assessment but a regular scrutiny assessment. In the scrutiny assessment, AO as in other assessment years, disallowed 30% of the total expenditure claimed i.e., 30% of ₹ 1,47,10,886/- thereby making disallowance of ₹ 44,13,265/-. It was stated that the matter was referred to special audit but in their report dt. 31-05-2010 it was stated that they are unable to conduct audit of assessee due to non-availability of books of accounts and relevant records, referring to assessee's letter stating that the records were seized by the investigating agencies. 11. However, considering the nature of expenditure, we are of the opinion that both AO and Ld. CIT(A) has routinely disallowed and confirmed the expenditure without examining the nature of expenditure. For example ..... X X X X Extracts X X X X X X X X Extracts X X X X
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