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TMI Blog2022 (12) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer had reasons to believe that the income of the petitioner chargeable to income tax for the Assessment Year under consideration had escaped assessment within the meaning of section 147 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 3. The facts are that the petitioner is engaged in the business of providing clinical research services. In the year under consideration, its non-current investment as on 31.3.2013 and 31.3.2014 aggregated to Rs. 59,11,96,725/- and Rs. 69,58,82,489/- as reflected in the annual accounts. It was stated that majority of investments were in the shares of the foreign companies and dividend from the shares of the foreign companies is taxable. The petitioner incurred interest expenses of Rs. 3,19,34,823/- as is evident from the profit and loss account. In the final return of income filed by the petitioner on 27.11.2014, it made disallowance of Rs. 1,12,869/- under section 14A of the Act on its own. 3.1 The case of the petitioner was selected for scrutiny assessment. The notice was issued on 2.8.2017 under section 142(1) of the Act. The assessing officer called from the petitioner the information regarding suo motu disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 and Rs.59,11,96,725/- as on 31.03.2014 and had incurred interest expenditure of Rs.3,19,34,823/- in P&L Account. However, the expenses in relation to the exempt income were disallowed short in terms of the provisions of section 14A of the Income-tax Act r.w.r. 8D(2)(ii) accordance with the formula (A x B)/C of the Income-tax Rules. The amount of Rs 99,81,608/- required to be disallowed under section 14A r.w.s. Rule 8D works out as under: Particulars Working Amount (In Rs.) Total interest paid during the year (i) 3,19,34,823/- Average Investment [69588489+591196725]/2 64,35,39,607/- Average total assets [3078889101+2997868844]/2 3,03,83,78,8724/- Interest x Average Investment Average- Total 31934823 x 643539607/3038378872 Assets (ii) 67,63,910/- Add:0.5% of Average- Investment (iii) 0.5% 643539607 32,17,698/- Total Disallowable Amount (i + ii + iii) 99,81,608/ 3. Analysis of information collected/received: As discussed in Para-2 above, it can be seen from the case records that, assessee-company had claimed and allowed exempt income of Rs.1,43,679/- by way of dividend income. It is further noticed that the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 + Rs.31,04,829) was made under section 14A of the Act. Thus, there was a short disallowance of Rs,67,63,910/- (Rs.99,81,608 - Rs.32,17,698) under section 14A of the Act. 5.1 Now there is no gainsaying that prior to the impugned notice seeking to reopen the assessment, the scrutiny assessment was undertaken in the case of the petitioner. The petitioner was issued notice dated 2.8.2017 under section 142(1) of the Act. The petitioner had responded to the same by letter dated 30.8.2017. The final final order was passed on 25.1.2018 under section 143(3) read with section 144C of the Act. 5.2 In notice dated 2.8.2017, the following details were asked for amongst other details, "(i) Details of interest free and interest bearing loans and advances made by the company, viz. name and address of such persons to whom the loans and advances were made and the specific purpose of such loan and advances. Also give clarification regarding whether any interest bearing fund has been diverted for non business purposes or for acquisition of capital asset. If yes then explain as to why proportionate interest expenses should not be disallowed u/s. 36(1)(iii) of the Act or capitalized with the capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he borrowings amounting to Rs.2,86,97,897/- in the year under consideration. The assessee has made investment in shares of the subsidiary company. In view of the above, during the assessment proceedings, the assessee vide notice dated 2/08/2017 was asked to show cause as to why expenses u/s. 14A r.w.r. 8D should not be disallowed. In response to the assessee has furnished its reply dated 30/08/2017, the assessee submitted that the working of disallowance of Rs. 1,12,869/- under section 14A is already made while computing the income and no further expenses requires to be disallowed." 5.5 While filling the objections to the reasons recorded, the assessee furnished to the assessing officer Note 15 of the audited accounts, which provided details of investment, that is investment in shares held by the assessee, which included the investment in preference shares of foreign companies/foreign subsidiaries as well. 5.6 It was further pointed out that the petitioner while filed return of income on 27.11.2014 declaring income of Rs. 51,06,77,201/- after diallowing Rs. 1,12,689/- under section 14A. In absence of specific borrowings and availability of sufficient own interest free funds in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 14A was considered alolngwith the other aspects on the basis of the material and conscious decision was taken reflected in the assessment order. It is on the basis of the very facts that the assessing officer wanted to reopen the concluded assessment proceedings. It amounted to change of opinion. 6.3 It is well settled that mere change of opinion could not be a ground for the Assessing Officer to reopen the concluded assessment. In Commissioner of Income Tax vs. Kelvinator of India Ltd. [(2010) 320 ITR 561 O(SC)], the supreme court observed that concept of change of opinion was an inbuilt test and it did not stand obliterated after substitution of section 147 in the Act by the Direct Tax Laws (Amendment) Act, 1987 and 1989. The Apex Court stated, "... prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act with effect from 1st April, 1989, they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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