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TMI Blog2018 (5) TMI 1639X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case Ld. CIT(A) has erred in annulling the reassessment order without appreciating the fact there was actually an under assessment of income of Rs. 3,83,41,573/-. Ground No.2: That the appellant craves for leave to add, delete or modify any of the grounds of the appeal before or at the time of hearing." 4. At the outset itself, the ld. Counsel for the assessee submitted that during the course of reassessment proceedings, the Assessing Officer has passed the order u/s 147/251/143(3) of the Act without recording reasons. In fact, the Assessing officer has reviewed his own order, which is not permitted under the Income Tax Act. While completing the reassessment under section 147/251/143(3) of the Act, the assessing officer noted the reason recorded as follows: "The assessment was completed U/s 143 (3) of the Income Tax Act, 1961 on 27.12.2011. In respect of the assessment order dated 27.12.2011, I had reasons to believe that the disallowance made on account of Section 14A of the Income Tax Act, 1961 in respect of proportionate interest and the average value of investment were not considered properly and hence the income chargeable to tax escaped ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand, the ld Counsel for the assessee has defended the order passed by the ld CIT(A). 7. Having heard the rival submissions and perused the materials available on record, we note that Assessing Officerhas completed assessment U/s 143 (3) of the Income Tax Act, 1961 on 27.12.2011, where he disallowed the amount under section 14A read with Rule 8D to the tune of Rs. 1,23,30,872/-, hence, the issue relating to disallowance under section 14A read with Rule 8D, was on record of the assessing officer. We note that in the reassessment proceedings U/s 147/148, the AO has reviewed his shortcomings, which he committed during the original assessment U/s143(3) of the Act, which is tantamount to review of the original order passed by him U/s 143(3) of the Act, which is not allowed under the Income Tax Act. Order passed by the assessing officer U/s 143(3) can be reviewed by the superior authorities, that is, by CIT(Appeals) or by CIT under section 263 of the Act. We note that assessing officer has not brought on record any new tangible material to show that income has escaped assessment, he reopened the assessment based on the material available on record during the original assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 256 ITR 1 the Full Bench of the Hon`ble Delhi High Court was considering a case of reopening u/s 147 within 4 years from the end of the assessment year. The Court held that when a regular order of assessment is passed in terms of section 143 (3) of the Act, a presumption can be raised that such an order has been passed on application of mind. It was held that if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. It was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. On appeal by the department to the Supreme Court,(reported in 320 ITR 561(SC)) it was held that though the power to reopen under the amended section 147 of the Act, is much wider, one needs to give a schematic interpretation to the words "reason to believe" failing which section 147 of the Act, would give arbitrary powers to the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of depreciation of Rs. 16,40,567/- on plant and machinery purchased out of amount withdrawn from credit available with NABARD was not warranted ignoring the clear provisions of section 33AB(4)(c) of the Act. Ground No.4: On the facts and in the circumstances of the case whether Ld. CIT(A) has erred in deleting the addition of Rs. 1,87,73,760/- made by the Assessing Officer at the time of computation of book profit ignoring the clear provision of clause (f) of Explanation I to section 115JB of the Act. Ground No.5: That the appellant craves for leave to add, delete or modify any of the grounds of the appeal before or at the time of hearing." 14. Ground No.1 raised by the Revenue relates to disallowance u/s 14A r.w.r 8D(2)(ii) of the I.T. Rules. At the outset itself, the ld. counsel for the assessee has pointed out that this issue is squarely covered by the assessee's own case by the judgment of Hon'ble ITAT, Kolkata in ITA No.2009-2010/Kol/2014, dated 02-06-2017 wherein it was held as follows: "7. We have heard rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited and pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness expenditure-Disallowance under section 14A-Apportionment of expenditure- When investments are made from own funds, merely because the assessee had to subsequently borrow the funds for business use, it cannot be said that the borrowed funds have been used for the purposes of investments". CIT -vs.- HDFC Bank Ltd reported in 366 ITR 505 (Bom.) Held, dismissing the appeal, (i) that the finding of fact given by the Tribunal was that the assessee's own funds and other noninterest bearing funds were more than the investment in the tax-free securities. This factual position was not one that was disputed. Undisputedly, the assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in the tax free securities. In view of this factual position, it would have to be presumed that the investment made by the assessee would be out of the interest free funds available with the assessee. 6.1. Similar views were expressed in the following decisions:- Woolcombers of India Ltd. -vs.- CIT reported in 134 ITR 219 (Cal.) East India Pharmaceuticals Works Ltd. -vs.- CIT reported in (1997) 224 ITR 627 (SC). 6.2. We find that though the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case by the judgment of Hon'ble ITAT, Kolkata in ITA No.2009-2010/Kol/2014, dated 02-06-2017 wherein it was held as follows: "11. At the outset, we find that similar issue is decided by this co-ordinate Bench of this Tribunal in assessee's own case in ITA No.684/Kol/2012 for A.Y. 2008-09 dated 08.02.2013 wherein the necessary observation in respect of the issue involved as under:- "5. The second issue in this appeal of revenue is as regards to the order of CIT(A) deleting the disallowance on account of notional interest on sticky loans. For this, revenue has raised following ground no.2: '2. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the disallowance of Rs. 36,25,000/- on account of notional interest on sticky loan not accounted for though the AO has added it back on the basis of note on account of 24D of the Annual report.' 6. The Ld. CIT(DR) has stated that this issue is also covered in assessee's own case by Tribunal's decision in ITA No.2248/K/2010 for AY 2006-07 but he placed reliance on assessment order. We have gone through the Tribunal's decision as well as the order of CIT(A) for this assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cost being nil in terms of u/s. 43(1) of the Act, which defines 'actual cost' to mean the cost of an asset to the assessee, as reduced by that portion thereof as met directly or indirectly by any person/s or authority. Actual cost of the relevant plant and machinery would thus only be nil, warranting no claim toward depreciation. The ld. AR, on the other hand, placed reliance on the decision by the Tribunal in the assessee's own case for A.Y. 2004-05 (in ITA No.1573/Kol/2008 date 24-10-2008 / copy on record). 12. We have heard the parties and perused the material on record. The tribunal's decision in the assessee's case for A.Y. 2004-05 is on record. The tribunal decided the same by following its earlier decision in the case of CIT v. Goodrick Group Ltd. (ITA No. 255/Kol/2004 dated 10-06-2005). The basis of its decision, as stated by the tribunal vide it's order in the assessee's case for A.Y. 2004-05 (at para 24-25 at page 6), is that though the purchase of the relevant assets is funded out of withdrawals from NABARD, depreciation is not an expenditure but only a statutory allowance. Though we observe no reference to any decision by any higher auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 096/- on account of the expenses u/s. 14A to ascertain book profit u/s. 115JB disregarding Explanation 1(f) to section 115JB." 10. We have heard Ld. CIT(DR) and gone through the written submission filed by assessee. Ld. CIT(DR) stated that this issue is covered by Tribunal's decision in assessee's own case for AY 2006-07 in ITA No.2248/K/2010 but he placed reliance on assessment order. We find that the assessee in its written submission has relied on sub-section (1) of section 14A of the Act, which reads as under: "From the language of sub-section (1) of section 14A, it is crystal clear that the disallowance u/s. 14A is required to be made while computing the total income under chapter IV of the Income Tax Act, 1961 whereas the computation of book profit is under chapter XIIB and hence section 14A has no implication in the computation of book profit u/s. 115JB." 11. We find from the written submission of assessee wherein it has relied on the decision of Hon'ble Madras High Court in the case of CIT Vs. KovaiMaruthi Papers and Board Pvt. Ltd. 294 ITR 57. We find that the Ld. CIT(DR) stated that this issue is covered in favour of assessee by Tribunal's decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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