TMI Blog2019 (3) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of expenditure, we are of the view that there was no specific expenditure which can be termed as incurred exclusively for the personal needs of the Directors. If company wants to pay taxes, that is its discretion, but for that a completed assessment of the director after four years cannot be reopened. Availment of loans from two companies without paying interest - HELD THAT:- Assessee was having share holding of 9% and 4.3% in the aforesaid two companies viz. Umnesh Complex PLtd., and Mihika Buildcon P.Ltd. He was not having substantial interest in these companies. It was brought to the notice of the ld.CIT(A) that assessee has not obtained any loan from Mihika Buildcon P.Ltd. during this year. It was opening balance. As contended that non-charging of interest on the debit balance in the running account of the directors would not constitute a perquisite. Judgment of Hon’ble Supreme Court in the case of V.M. Salgaocar & Bros. Pvt. Ltd. Vs. CIT [2000 (4) TMI 2 - SUPREME COURT] was pressed into service. Again, though the AO has to form a prima facie belief only, but has not analysed any of these details while forming a belief that income has escaped assessment, more particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(3) on 23.12.2010. The ld.AO did not make any addition to the income declared by the assessee and accepted declared income. The assessee was a director in a company named Ganesh Housing corporation Ltd.( GHCL for short). Records of GHCL were subject to audit survey and examined by the Revenue department. The Revenue authorities found that GHCL has disallowed a sum of ₹ 80,38,101/-. In the computation of total income, it made reference to the audit report and observed this amount relates to personal expenditure, hence, it was construed that expenditure incurred on personal needs of the Director ought to have been shown by the Director as perquisite in the return. According to the AO, the assessee failed to recognize that expenditure as his income which has escaped assessment. Therefore, he recorded reasons and reopened the assessment. The reasons recorded by the AO has been reproduced by the ld.CIT(A), which reads as under: Reasons for invoking provisions of section 147 of the I. T. Act 1. The assessee is one of the directors in Ganesh Housing Corporation Limited. The return of income was filed on 27/03/2010 declaring total income of ₹ 49,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the hands of Shri Shekhar G. Patel. 3. On going through the sale deeds submitted by Shri Shekhar G. Patel, is seen that provisions of section 50C has not been complied with. Mr. Shekhar G. Patel has sold non - agriculture land (50% share) situated at Shilaj Village for ₹ 15,00,000/-. The stamp duty paid thereon is ₹ 89,500/-. By applying jantry rate @ 4.9% on stamp duty paid, the cost of the property works out to be ₹ 18,26,530/-. Therefore, there is under valuation of property to the extent of ₹ 3,26,530/-. Since, Shri Shekhar G. Patel had share in the property, under assessment comes to ₹ 1,63,265/- in the hands of Shri Shekhar G. Patel. 4. Similarly a property situated at Shilaj Village, BlockNo. 737 was sold at ₹ 15,00,0007-. Shri Shekhar G. Patel had 173rd share in the said property. The stmp duty paid thereon is ₹ 87,200/-. By applying jantri rate @ 4.9% on stamp duty, the cost of property should have been ₹ 17,79,590/-, so there is undervaluation of property of ₹ 2,79,590/- u7s. 50C of the Act, Since Shri Shekhar G. Patel has 173rd share in the property under assessment comes toRs.93,195/-. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , certain expenditure were not for the purpose of business and the company wants to pay taxes on this count, that would not become automatic as perquisite in the hands of the assessee. 7. We have duly considered rival contentions and gone through the record carefully. There is no dispute that original assessment was made under section 143(3) of the Act. There is also no dispute that four years has lapsed from the end of the assessment year. The question is, whether proviso appended to section147 puts an embargo in the power of the AO for reopening of an assessment order, where a scrutiny assessment has been made, and four years has expired, which would come to the rescue of the assessee or not ? On the other hand, view of the Revenue is that there was no disclosure of material facts fully and truly, therefore, proviso will not come in way of the AO. On the other hand, the stand of the assessee is that AO failed to analysis the nature of expenditure, and therefore, there is no live-link between formation of opinion showing escapement of income vis- -vis information available with the Ld.AO. Let us take into consideration bifurcation of those expenditure. These have been reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that the ld.CIT(A) has rightly quashed the reassessment order. We do not find any merit in this ground of appeal. It is dismissed. 10. In ground no.2, Revenue has pleaded that the ld.CIT(A) has erred in deleting addition of ₹ 26,79,366/-. As observed earlier, the assessee is a director in GHCL. The GHCL has disallowed a sum of ₹ 80,38,101/-. According to the AO, 1/3rd of this amount i.e. of ₹ 26,79,366/-has a perquisite value in the hands of the assessee, which ought to have been shown by him as income. The ld.CIT(A) has considered this aspect and noticed the break-up of this expenditure. Thereafter observed that, this is not an expenditure which can be termed as personal in nature. The finding recorded by the ld.CIT(A) reads as under: I have carefully considered the facts of the case, the reassessment order and the written submission of the appellant. The AO has made the addition of ₹ 26,79,366/- being l/3rd of the amount of ₹ 80,38,101/- in respect of the total expenditures disallowed in the case of M/s.Ganesh Housing Corporation Ltd. in which the appellant was one of the directors. This addition has been made by the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant from incurring such expenses. 4.7. The appellant further submitted that the advertisement expenses of ₹ 46,29,768/- was incurred by the company Ganesh Housing Corporation Ltd. for advertisement in various periodicals for felicitation function of the then chairman of the company Shri Govindbhai C. Patel. Likewise the printing and stationary expenses of ₹ 18 lakhs was incurred towards publication of a book namely 'Sheshthi' in the form of a biography on the life and achievement of then chairman of the company Shi Govindbhai C. Patel. Both the above expenditures were in no way related to the personal benefits of the appellant. It was also submitted that the books and magazine expenses of ₹ 2,50,000/- was incurred for printing and publishing of the book Gujarat Goories- Power People 50 which contained a write up of the director of the company i.e. appellant which is again no way related to the personal benefits of the appellant. 4.8. The company namely M/s. Ganesh Housing Corporation Ltd. being a public limited company it has got credit recognition, increase in good will, good faith and trust of the general public at large due to publishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be taken as income being perquisite as per the provisions of Section 2(24) (iv) and thus no addition in the hands of the appellant is called for. 4.11. Similarly the expenditure of ₹ 18 lakhs have been made in respect of the printing and stationery for the booklet in the name of 'Shreshthi' from which also the appellant did not get any personal benefits as it was also in respect of Shri Govind C. Patel. The ultimate beneficiary of this expenditure was M/s.Ganesh Housing Corporation Ltd, 4.12. Further with regard to the expenditure of ₹ 2,50,000/- incurred by Ganesh Housing Corporation in respect of the book and multimedia disk in the name of Gujarat Glorius Power People 50 and also the beneficiary was M/s. Ganesh Housing Corporation Ltd. and not the appellant since no personal benefit has been obtained nor it was the obligation of the appellant to make the payment thereof which was paid by Ganesh Housing Corporation. 4.13. In view of the aforesaid discussion, the expenditures made in respect of above heads are in no way personally benefited to the appellant and therefore the same cannot be treated as perquisites as income and hence the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant as interest on the loans taken from the company is considered as income in the hands of the appellant. 5.5. On the other side the appellant has submitted that he was not an employee and not drawing any remuneration or salary from the aforesaid two companies from whom loans have been taken, therefore, he was not an employee of the above companies and hence perquisite value cannot be taxed in the hands of the appellant. It was also submitted that the appellant was not having any substantial interest in the aforesaid companies. The appellant had 9% and 4.37% share holding in the aforesaid companies namely Unmesh Complex Pvt. Ltd. and Mihika Buildcon Pvt. Ltd. respectively. Since the appellant had not obtained any benefit or perquisite in the capacity of the employees on the aforesaid companies therefore no income can be taxed in the hands of the appellant more so when a company has not paid any sum of money which is by way obligation payable by the appellant. It has also been submitted that no loan has been taken in the year under consideration from Mihika Buildcon Pvt. Ltd. but the same was the opening balance which remained as closing balance at the end of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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