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TMI Blog2022 (11) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... to deal with this aspect of the matter first and then, if necessary, deal with the relief granted by the learned CIT(A) on other grounds. 3. The material facts of both cases are common, and the reasons recorded for reopening the assessment are also exactly the same. The reopening was done on the basis of inputs from the investigation wing about the outstanding put options, in respect of which the assessee company is said to have given the guarantee to the ICICI Bank Singapore. The Assessing Office, while recording the reasons for reopening the assessment, formed the view that the assessee and Biomatrix Marketing Pvt Ltd (Biomatrix, in short), on whose behalf the guarantee was said to be given by the assessee, are associated enterprises. The reasons for coming to this conclusion as recorded in the reasons for reopening the assessment, are as follows: The relationship between the assessee company (which has provided Bank guarantee to ICICI Bank, Singapore for sanctioning loan to M/s. Biometrix) and M/s. Biomatrix was examined. The books of the assessee company reveal that one Sandeep Tandon (Since deceased), who was a Director in the assessee company, was 91% shareholder in M/s. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om reasons for reopening the assessment. Learned counsel for the assessee, on the other hand, pointed out that the reasons for reopening of assessment must be examined on standalone basis, as is the mandate of Hon"ble jurisdictional High Court in the case of Hindustan Lever Ltd Vs R B Wadkar [(2004) 268 ITR 332 (Bom)], and as the only reason given in the said reasons is the assessee being stated to be "key managerial person" and "director" of the assessee company, these reasons, in the absence of any shareholdings in the assessee company, cannot be reason enough to concluded that the assessee and Biomatrix were associated enterprises. Learned counsel for the assessee also took us through the definition of associated enterprises in section 92A(2), and submitted that the mention of expression "control" in Section 92A(2)(j) cannot be viewed in isolation of connotations of expression "control" in other clauses of Section 92A(2). It was submitted that merely because a person is described as a key managerial person in annual accounts of a company, he cannot be said to be controlling the said company- and that is the only reason given in the reasons recorded for reopening the assessment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings with, the reassessment. The reasons so recorded must meet judicial scrutiny. Unless this bridge is crossed, there is no occasion to deal with anything else pertaining to the whole process of reassessment. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be deleted from the reasons so recorded. Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. v. R.B. Wadkar [(2004) 268 ITR 332 (Bom)], has, inter alia, observed that "..........It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons." Their Lordships added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence....", and that "The reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol of another company, as stated in section 92A(2)(b) and (f), either such person should hold more than 26% of the voting power of the company or such person appointsmore than half of the directors or members of the governing board or one or more of the executive directors or members of the governing board. Clearly, the connotations of "control" in the scheme of Section 92A(2) are far more cogent than visualized by a simplistic notion of "key managerial person". When a person appointing less than half of the board of directors cannot be said to be in control of a company, it is futile to even suggest that a person can be said to be in control of a company merely because he is a director of the company, or he is described as a "key managerial person" of the said company in its own choice of words in the annual accounts. Nothing recorded in the reasons for reopening even remotely suggests that this person had more than 26% voting rights, or even significant voting rights, in the company, that person had right to nominate less than half the board of directors, or one or more executive directors or the members of the governing body, or that there was anything cogent to signify cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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