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2017 (2) TMI 337 - GUJARAT HIGH COURT

2017 (2) TMI 337 - GUJARAT HIGH COURT - [2017] 393 ITR 366 - Reopening of assessment - assessee debited an amount under the head interest and finance charges on account of loan as in order to expand the business in USA, the company had established a step down subsidiary in USA. Held that:- As from the reasons recorded, it appears that according to the Assessing Officer, the expenditure was incurred to establish a subsidiary in USA, and therefore, such expenditure was covered under Section 35D [1 .....

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n observation of the assessment records, meaning thereby, while issuing notice, the subsequent Assessing Officer did consider the material which was already on the record, which was considered by the Assessing Officer, while framing the scrutiny assessment under Section 143 of the Act. - As observed hereinabove, even there is no allegation in the reasons recorded that there was any failure on the part of the assessee in not disclosing true and correct facts necessary for the assessment. - R .....

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e case, the present petition is taken up for final hearing today. 2. By way of this petition, preferred under Article 226 of the Constitution of India, the petitioner-assessee has prayed for issuance of writ or order to quash and setaside the impugned Notice dated 31st March 2016, by which in exercise of power under Section 148 of the Income-tax Act, 1961 [hereinafter referred to as, the I.T Act ], the Assessing Officer has sought to reopen the assessment for Assessment Year 2009-2010 on the gro .....

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erest & Finance charges on account of loan of ₹ 488.10 million. The assessee submitted that in order to expand business in U.S.A., the company has established a step-down subsidiary in the U.S.A., and therefore, the assessee claimed interest and finance charges incurred by the company as business expenditure . 3.2 The Assessing Officer, while framing the scrutiny assessment, accepted the claim of the assessee and treated the aforesaid expenditure towards interest and finance charges as .....

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hed the reasons recorded to reopen the assessment, which reads as under : On observation of the assessment records, para 8 [B] of the assessment order revealed that the assessee debited an amount of ₹ 2,36,18,612/- under the head interest and finance charges on account of loan of ₹ 488.10 million. The assessee submitted that in order to expand the business in USA, the company had established a step down subsidiary in USA. Hence, interest and other finance charges incurred by the comp .....

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2009-2010, the petitioner-assessee raised objections. It was mainly contended on behalf of the assessee that there was no failure on the part of the assessee in not disclosing the true and correct facts necessary for the assessment. It is submitted that the claim made by the assessee was as such considered by the Assessing Officer and only thereafter, the amount of expenditure incurred by the assessee towards interest and finance charges on account of loan of ₹ 488.10 million was treated a .....

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assessee and has disposed of the said objections. Hence, the petitioner has preferred the present writ petition under Article 226 of the Constitution of India with the aforestated relief. 4. Shri R.K Patel, learned counsel appearing on behalf of the petitioner-assessee has vehemently submitted that in the facts and circumstances of the case, the impugned notice under Section 148 of the Act for reopening the assessment for A.Y 2009-2010 is bad in law and against the provisions of Section 147 of t .....

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til the conditions precedent for reopening assessment beyond the period of four years, as mentioned in proviso to Section 147 of the Act are satisfied, the Assessing Officer is not justified in reopening the assessment beyond the period of four years. It is submitted by learned advocate Shri Patel that in the present case, even in the reasons recorded, there is no allegation that there was any failure on the part of the assessee in not disclosing true and correct facts. It is submitted that what .....

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rt in the case of Navkar Share & Stock Brokers Private Limited v. Asstt. Commissioner of Income Tax, Circle-1 [3] rendered in Special Civil Application No. 14513 of 2016, it is requested to allow the present petition and to quash and set-aside the impugned notice/reopening of the assessment proceedings. 5. Shri Sudhir Mehta, learned counsel appearing on behalf of the Revenue has tried to oppose the present petition by submitting that in the present case, as it was found that considering Sect .....

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n behalf of the respective parties at length. 7. At the outset, it is required to be noted that in the present case, the Assessing Officer has sought to reopen the assessment for A.Y 2009-2010 beyond the period of four years. Therefore, unless and until the condition precedent to reopen the assessment beyond the period of four years as mentioned in proviso to Section 147 of the I.T Act are satisfied, the Assessing Officer is not justified in initiating the re-assessment proceedings. As per the p .....

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oreover, from the reasons recorded, it appears that according to the Assessing Officer, the expenditure was incurred to establish a subsidiary in USA, and therefore, such expenditure was covered under Section 35D [1] (ii) of the I.T Act, and therefore, only 1/5th of the expenditure ie., ₹ 47,23,722/- was required to be allowed. Instead, the entire amount claimed by the assessee ie., ₹ 2,36,18,612/- is allowed to be debited. Therefore, according to the Assessing Officer, his predecess .....

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