ARIES AGRO LTD, MUMBAI V. DCIT 14(1)(1), MUMBAI

ITA 557/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2068 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Keywords: Reopening of assessment; Tangible material; Reason to believe
• Section: 271(1)(c); 143(3); 142(1); 143(1); 250; 251; 143(2); 264; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENCH M UMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEM BER ITA NO.557,558 & 559/MUM/201 8 ( ASSESSMENT YEAR :2008-09,2009-10 & 2010-11 ) ARIES AGRO LTD PLOT NO. 24, ARIES HOUSE DEONAR, GOVANDI MUMBAI-400 043 VS. DCIT-14(1)(1) 460, AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 P AN/GIR NO. AAACA5035G APPELLANT ) .. RESPONDENT ) ASSESSEE BY MRUNAL PAREKH & HASMUKH RAVARIA REVENUE BY N.PADMANABAN DATE OF HEARING 2 4 / 07 /201 9 DATE OF PRONOUNCEMENT 06/09/2019 / O R D E R PER G.MANJUNATHA (A.M) : THIS BUNCH OF THREE APPEALS FILED BY THE ASSESSEE A RE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE COMMI SSIONER OF INCOME TAX (APPEAL)-22, MUMBAI, ALL DATED 30/11/201 7 AND THEY PERTAIN TO ASSESSMENT YEAR 2008-09, 2009-10 AND 20 10-11. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED- OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR ALL ASSESSMENT YEARS. THEREFORE, FOR THE SAKE OF BREVITY, GROUNDS OF APPEAL TAKEN FOR AY 2008-09 IN ITA NO. 5 57/MUM/2018 ARE REPRODUCED BELOW:- ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 2 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CAS E & IN LAW, THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN DISMISSING THE FOLLOWING GROUNDS OF APPEAL OF ASSESSEE FOR REOPENI NG THE ASSESSMENT BY ISSUING THE NOTICE U/S 148 OF THE INCOME TAX ACT, 1 961. A. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN REOPENING THE ASSESSMENT BY ISSUING THE NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. B. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN NOT APPRECIATING THE FAC T THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME OR HAS NOT FURNISHED INACC URATE PARTICULARS OF ANY INCOME. C. THE NOTICE ISSUED U/S 148 OF THE INCOME TAX ACT, 1961 FOR REOPENING OF ASSESSMENT WAS IN THE NATURE OF ENQUIRY AND HENC E THE SAME IS BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE HONORABLE COMMISSIONER OF INCOME TAX [APPEALS]-22, MUMBAI ERR ED IN CONFIRMING THE ADDITION OF PROPOSED BY THE ASSESSING OFFICER B Y DISMISSING THE OBJECTION OF ASSESSEE FOR THE CLAIM UNDER SECTION 3 5D OF THE INCOME TAX ACT, 1961 3. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CA SE & IN LAW, THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN ENHANCING THE DISALLOWANCE UNDER SECTION 35D TO THE TUNE OF RS. 8 0,96,690/- AND ADDING IT TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE HONORABLE COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN RESTRICTING THE CLAIM FOR DEDUCTION U/S 35D TO RS. 19,16,276/- AS AGAINST RS. 1,00,12,966/- CLAIMED BY THE ASSESSEE. 5. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CA SE & IN LAW, THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN COMPUTING THE 'CAPITAL EMPLOYED' AT RS. 19,16,27,690/- AS AGAINST RS. 1,02,76,15,571/- AS PER THE EXPLANATION (B)(I) TO SUB SECTION (3) OF SECTION 35D OF THE INCOME TAX ACT, 1961. 6. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CA SE & IN LAW, THE HONORABLE COMMISSIONER OF INCOME TAX [APPEALS] ERRE D IN NOT CONSIDERING RS. 54,01,01,880/-[45,00,849 SHARES OF RS. 120/- EACH ISSUED UNDER IPO) THE SHARE PREMIUM AS PART OF CAPI TAL EMPLOYED AND MAKING ADDITIONAL ADDITION OF RS.39,33,724/- ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 3 7. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CA SE & IN LAW, THE HONORABLE COMMISSIONER OF INCOME TAX [APPEALS] ERRE D IN MAKING THE ENHANCEMENT WITHOUT JURISDICTION TO MAKE ENHANCEMEN T U/S 251(1) OF INCOME TAX ACT, 1961, THE APPELLATE COMMISSIONER'S POWERS TO ENHANCE AN ASSESSMENT IS CONFINED TO FIRST ASSESSMENT U/S 1 43/147 OF INCOME TAX ACT, 1961 AND NOT TO RE-ASSESSMENT (SECOND ASSESSME NT) U/S 147 OF INCOME TAX ACT, 1961. 8.. THE FACTS REFERRING TO ABOVE THE CIT ERRED IN DISMISSING THE GROUNDS OF APPEAL FOR INITIATION OF THE PENALTY PROCEEDINGS U/S 271(1)(C) OF INCOME TAX ACT, 1961 9. ALL THE ABOVE GROUNDS OF APPEAL ARE MUTUALLY E XCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER. 10. THE ASSESSEE PRAYS FOR LEAVE TO ADD, ALTER OR A MEND ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE DATE OF HE ARING. 3. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA N O. 557/MUM/2018 FOR AY 2008-09 ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKET ING OF MICRONUTRIENTS FERTILIZERS AND FEED ADDITIVES, FILE D ITS RETURN OF INCOME FOR AY 2008-09 ON 24/09/2008, DECLARING TOTA L INCOME OF RS. 13,86,57,050/-. THE ASSESSMENT HAS BEEN COMPLETED U /S 143(3) OF THE I.T.ACT, 1961 ON 30/11/2010, DETERMINING THE TO TAL INCOME AT RS. 13,87,82,050/-. SUBSEQUENTLY, THE ASSESSMENT HAS BE EN REOPENED U/S 147 OF THE I.T.ACT, 1961, AFTER DULY RECORDING REASONS, WHICH HAVE BEEN REPRODUCED BY THE AO AT PARA 2 ON PAGES 1 AND 2 OF ASSESSMENT ORDER, AS PER WHICH INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT, ON ACCOUNT OF EXCESSIVE CLAIM O F DEDUCTION U/S 35D, IN RESPECT OF SHARE ISSUE EXPENSES, ACCORD INGLY NOTICE U/S 148 OF THE I.T.ACT, 1961, DATED 31/03/2015 WAS ISSU ED AND DULY SERVED ON THE ASSESSE. IN RESPONSE TO NOTICE, THE A SSESSEE VIDE LETTER DATED 11/04/2015, REQUESTED TO TREAT, THE OR IGINAL RETURN FILED ON 12/10/2010 AS RETURN FILED PURSUANT TO THE NOTIC E ISSUED U/S 148 OF THE I.T.ACT, 1961. THEREAFTER, THE CASE WAS SELECTE D FOR SCRUTINY AND ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 4 NOTICES U/S 143(2) AND 142(1) OF THE ACT, 1961 WERE ISSUED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE REQUESTED FOR REASONS FOR REOPENING OF THE ASSESSMENT AND THE SAM E WAS PROVIDED BY AO VIDE LETTER DATED 31/08/2015. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED UPON, THE ASSESSEE TO EXPLAIN AS TO WHY, EXCESSIVE DEDUCTION CLAIMED U/S 35D OF THE I.T.ACT, 1961, IN RESPECT OF SHARE ISSUE EXPENSES SHALL NOT BE RECOMPUTED. IN RESPONSE, THE ASSESSEE HAS FILED DETAILED WRITTEN SUBMISSIONS, VIDE LETTER DAT ED 05/10/2015 AND ARGUED THAT THE CLAIM MADE BY THE ASSESEE U/S 35D I S IN ACCORDANCE WITH PROVISIONS OF SECTION 35D AND ACCORDINGLY, IT HAS WRITTEN OFF AN AMOUNT EQUAL TO 1/5 TH OF THE EXPENDITURE IN ASSESSMENT YEAR 2009- 10, WHICH WAS UNDER SCRUTINY AND THE SAME WAS ALL OWED AS DEDUCTION. THE LD. AO, AFTER CONSIDERING RELEVANT S UBMISSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF PROVISIONS OF SECTI ON 35D, RECOMPUTED EXPENSES DEDUCTABLE U/S 35D AND RESTRICT ED SUCH EXPENSES TO THE EXTENT OF 5% OF CAPITAL EMPLOYED AND ACCORDINGLY, DETERMINED TOTAL ELIGIBLE EXPENSES OF RS. 2,92,50,0 00/- AND 1/5 TH OF SUCH EXPENDITURE OF RS. 58,50,000/- HAS BEEN ALLOWE D AS DEDUCTION AND BALANCE AMOUNT OF RS. 41,62,966/- HAS BEEN DISA LLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS CHALLENGED REOPENING OF ASSESSMENT , ON THE GRO UND THAT THERE IS NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO T AX HAS BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 1 47 OF THE I.T.ACT, 1961. THE ASSESEE, FURTHER SUBMITTED THAT WHETHER, THE BELIEF ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 5 EXIST OR NOT MUST BE TESTED FROM THE REASONS RECORD ED FOR ISSUE OF NOTICE U/S 148 AND NOTHING ELSE. IF BELIEF IS NOT E VIDENT FROM A READING OF THE REASONS, THE REASSESSMENT WILL BE WI THOUT JURISDICTION AND ILLEGAL. THE ASSESSEE HAS ALSO TAKEN ANOTHER AR GUMENT, IN LIGHT OF PROVISO TO SECTION 147 OF THE I.T.ACT, 1961, AND ARGUED, WHEN ORIGINAL ASSESSMENT HAS BEEN COMPLETED U/S 143(3), THEN THE ASSESSMENT CANNOT BE REOPENED, AFTER A PERIOD OF FO UR YEARS, UNLESS THE CONDITIONS PRESCRIBED UNDER PROVISO TO SECTION 147 IS FULFILLED I.E., THE AO MUST ALLEGE THAT THERE IS A FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY, ALL MATERIAL FACTS NEC ESSARY FOR HIS ASSESSMENT. IF, YOU GO THROUGH REASONS RECORDED BY THE AO, WHICH IS AT PAGE NO. 7 OF PAPER BOOK FILED BY THE ASSESSE E, NOWHERE THE AO MAKES ALLEGATIONS THAT THERE IS A FAILURE ON PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY, ALL MATERIAL FACTS NEC ESSARY FOR ASSESSMENT. IN THIS REGARD, HE RELIED UPON PLETHORA OF JUDICIAL PRECEDENTS, INCLUDING IN THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LIMITED VS ACIT (200 4) 268 ITR 332. THE ASSESSEE HAS RELIED UPON FOLLOWING CASE LAWS:- HINDUSTAN LEVER LTD. VS. ACIT [2004]-268 ITR 332 { BOM} TITANOR COMPONENTS VS. ACIT [2011]-60 DTR 273 {BOM} SOUND CASTING PVT.LTD VS. DCIT [2012] 250 CTR 119 { BOM} SITARA DIAMOND PVT.LTD [2012] 345 ITR 91 {BOM} LOK HOUSING & CONSTRUCTION LTD. VS. DCIT [2012] 348 ITR 154 [BOM] PRASHANT JOSHI VS. ITO-324 ITR 154 [BOM] SIMILARLY, AS REGARDS DEDUCTION CLAIMED U/S 35D, TH E ASSESSEE HAS FILED WRITTEN SUBMISSION AND ARGUED THAT ITS CLAIM OF EXPENDITURE RELATED TO SHARE ISSUE EXPENSES IS IN ACCORDANCE WI TH PROVISION OF SECTION 35D AND ACCORDINGLY, THE AO WAS ERRED IN RE -COMPUTING, SUCH DEDUCTION BY RESTRICTING 5% OF CAPITAL EMPLOY ED, EXCLUDING LONG TERM BORROWINGS. ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 6 6. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMIS SIONS OF THE ASSESSEE AND ALSO BY RELIED UPON, THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF ACIT VS RAJESH JAWERI STOCK B ROKERS PVT. LTD. (2007) 291 ITR 500(SC), REJECTED LEGAL ARGUMENTS TA KEN BY THE ASSESEE CHALLENGING VALIDITY OF REOPENING OF ASSESS MENT, ON THE GROUND THAT THE AO HAS FORMED REASONS TO BELIEF ON THE BASIS OF MATERIALS IN HIS POSSESSION, AS PER WHICH THERE IS A ESCAPEMENT OF INCOME ON ACCOUNT OF EXCESSIVE CLAIM OF DEDUCTION U /S 35D. THE LD.CIT(A), FURTHER OBSERVED THAT FORMATION OF BELIE VE BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION AS HEL D BY THE HONBLE SUPREME COURT ,IN THE CASE OF ACIT VS RAJESH JAWERI STOCK BROKERS PVT.LTD (SUPRA). INSOFAR AS SECOND ARGUMENT OF THE ASSESSEE REGARDING PROVISO TO SECTION 147 OF THE I.T.ACT, TH E LD.CIT(A) HELD THAT THERE IS A FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY, ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, WHICH IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS FAILED TO DISCL OSE CAPITAL EMPLOYED FOR THE ASSESSMENT YEAR 2008-09 WHICH I TSELF GOES TO PROVE THAT THE FACTS DECLARED IN THE RETURN OF INC OME ARE NOT FULL AND TRUE,THEREFORE, PROVISO TO SECTION 147 HAS NO APPLI CATION. THE RELEVANT FINDING OF THE LD.CIT(A) ARE AS UNDER:- 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANTS SUBMISSIONS. THE FIRST LIMB OF THE APPELLANTS OBJE CTION TO THE RE-OPENING OF ASSESSMENT IS THAT THE ASSESSING OFFICERS REASO N TO BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WAS WITHOU T ANY FOUNDATION AND THAT A BELIEF WITHOUT ANY FOUNDATION WAS AS GOO D AS NON-EXISTENT AND CANNOT BE SUSTAINED. IN THIS REGARD, IT IS PERTINEN T TO NOTE HERE THAT IT IS NOT A STATUTORY REQUIREMENT THAT THE REASON TO BELIEF S HOULD BE PROVED TO THE HILT BEFORE RE-OPENING OF ASSESSMENT. THE REQUISITE CONDITION IS THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE ASSESSING OFFICE R HAD REASONS TO BELIEVE THAT THE DEDUCTION CLAIMED BY THE APPELLANT U/S 35D WAS ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 7 EXCESSIVE. AND FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION AS HELD BY THE HON BLE SUPREME COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX V. RAJESH JHAVERI STOCK BROKERS PVT.LTD REPORTED IN (2007) 291 ITR 50 0 (SC). THE APPELLANTS OBJECTION ON THIS COUNT IS DISMISSED. 5.4 THE SECOND LIMB OF THE APPELLANTS OBJECTION TO THE RE-OPENING OF ASSESSMENT IS THAT SINCE THE ASSESSMENT IN ITS CASE WAS ALREADY COMPLETED U/S 143(3) OF THE ACT, THE ASSESSMENT COU LD NOT HAVE BEEN RE- OPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AS PER PROVISO TO SECTION 147 OF THE ACT AS THERE W AS NO FAILURE ON ITS PART TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ITS ASSESSMENT. THIS CONTENTION OF THE APPELLANT IS ALSO NOT TENABL E. THE APPELLANT HAD CLAIMED DEDUCTION U/S 35D FOR THE FIRST TIME IN A.Y . 2008-09. IT FOLLOWS LOGICALLY THAT THE CAPITAL EMPLOYED FOR THE PURPO SE OF DETERMINING DEDUCTION U/S 35D SHOULD BE COMPUTED AS ON 31.03.20 08. THE APPELLANT HAD, HOWEVER, COMPUTED THE CAPITAL EMPLOYED AS ON 31.03.2009. THIS MATERIAL FACT WAS NOT DISCLOSED IN ITS RETURN OF IN COME NOR BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PR OCEEDINGS. I, THEREFORE, HOLD THAT THERE WAS NO TRUE AND FULL DIS CLOSURE OF MATERIAL FACTS BY THE APPELLANT. THE APPELLANTS OBJECTION TO RE-O PENING OF ASSESSMENT ON THIS ISSUE IS ALSO DISMISSED. 7. AS REGARDS, ADDITIONS MADE BY THE AO TOWARDS DIS ALLOWANCES OF EXPENDITURE CLAIMED U/S 35D, THE LD.CIT(A) OBSER VED THAT EXPLANATION (B) TO SUB SECTION (3) OF SECTION 35D D EFINES CAPITAL EMPLOYED, AS PER WHICH, THE AGGREGATE OF ISSUED SH ARE CAPITAL, DEBENTURES AND LONG TERM BORROWINGS AS ON THE LAST DAY OF THE PREVIOUS YEAR, IN WHICH THE BUSINESS OF THE COMPANY COMMENCES. LONG TERM BORROWING HAS ALSO BEEN DEFINED IN EXPLAN ATION (C) TO SUB-SECTION 35D AND INCLUDES BORROWINGS FROM BANKS. THEREFORE, THERE IS A MERIT IN CONTENTION OF THE ASSESSEE THAT CAPITAL EMPLOYED, INCLUDES LONG TERM BORROWINGS. HOWEVER, IN RESPECT OF COMPUTATION OF CAPITAL EMPLOYED, THE ASSESSEE HAS INCLUDED SH ARE PREMIUM COLLECTED FROM ISSUE OF CAPITAL, BUT SUCH SHARE PRE MIUM CANNOT BE PART OF CAPITAL EMPLOYED HAS HELD BY THE HONBLE SU PREME COURT, IN THE CASE OF BERGER PAINTS INDIA LTD. VS CIT (2017) 393 ITR 1993 (SC) AND ACCORDINGLY, ISSUED ENHANCEMENT NOTICE U/S 251 OF THE ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 8 I.T.ACT,1961 AND AFTER CONSIDERING RELEVANT SUBMISS IONS OF THE ASSESSEE REJECTED ASSESSEE OBJECTIONS AND RECOMPUTE D CAPITAL EMPLOYED BY EXCLUDING SHARE PREMIUM AND INCLUDING LONG TERM BORROWINGS FROM BANK TO DETERMINE TOTAL CAPITAL EMP LOYED OF RS. 19,16,27,690/- AND ON SUCH CAPITAL EMPLOYED COMPU TED ELIGIBLE DEDUCTION U/S 35D @5% OF CAPITAL EMPLOYED, WHICH COMES TO RS. 95,81,384/-. FURTHER, ON SUCH ELIGIBLE DEDUCTION, ALLOWED 1/5 TH OF RS. 95,81,384/- AND DETERMINED DEDUCTION OF RS. 19,16,2 76/- AS AGAINST RS. 1,00,12,966/- AND BALANCE AMOUNT HAS BEEN ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE RELEVANT FININGS OF THE LD.CIT(A) ARE AS UNDER:- 6.8 THE APPELLANTS RESPONSE TO THE ENHANCEMENT NOT ICE HAS BEEN CONSIDERED. THE APPELLANT HAS SOUGHT TO ARGUE THAT THE POWER OF THE COMMISSIONER (APPEALS) TO ENHANCE AN ASSESSMENT IS RESTRICTED TO AN ASSESSMENT MADE FOR THE FIRST TIME AND NOT TO A REA SSESSMENT U/S 147 OF THE ACT. THE APPELLANT HAS CONTENDED THAT CLAUSE (A ) OF SECTION 251(1) IS CONFINED TO APPEALS AGAINST FIRST ASSESSMENT AND NO T SECOND ASSESSMENT. THIS PROPOSITION IS NEITHER ACCEPTABLE NOR TENABLE. SECTION 251(1)(A) OF THE ACT PROVIDES THAT IN DISPOSING OF AN APPEAL AGAINST AN ORDER OF ASSESSMENT, THE COMMISSIONER (APPEALS) SHA LL HAVE THE POWER TO CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT . AND ASSESSMENT BY ITS VERY DEFINITION AS PER SECTION 2(9) OF THE A CT INCLUDES REASSESSMENT. SECTION 251 OF THE ACT MAKES NO DISTINCTION BETWEEN ASSESSMENT AND REASSESSMENT REGARDING THE POWERS OF THE COMMISSION ER (APPEALS). THE APPELLANTS CONTENTION BEING WITHOUT SUBSTANCE IS R EJECTED. 6.9 THE APPELLANTS RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HUKUCHAND MILLS VS CIT (1967) 63 ITR 332 (SC) IS ALSO MISPLACED. IN THAT CASE, THE HONBLE SUPREME C OURT HAD HELD THAT THE TRIBUNAL HAD THE POWER TO REMAND THE MATTER BAC K TO THE ASSESSING OFFICER. IN REACHING THIS CONCLUSION, THE HONBLE S UPREME COURT HAD MADE THE FOLLOWING OBSERVATIONS: THE WORDS PASS SUCH ORDERS AS THE TRIBUNAL THINKS FIT INCLUDE ALL THE POWERS (EXCEPT POSSIBLY THE POWER OF ENHANCEMEN T) WHICH ARE CONFERRED UPON THE APPELLATE ASSISTANT COMMISSIONER BY SECTION 31 OF THE ACT, CONSEQUENTLY, THE TRIBUNAL HAS AUTHO RITY UNDER THIS SECTION TO DIRECT THE APPELLATE ASSISTANT COMMISSIO NER OR THE INCOME-TAX OFFICER TO HOLD A FURTHER ENQUIRY AND DI SPOSE OF THE CASE ON THE BASIS OF SUCH ENQUIRY. ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 9 THE ABOVE OBSERVATION OF THE HONBLE SUPREME COURT DOES NOT IN ANY WAY IMPLY THAT THE APPELLATE ASSISTANT COMMISSIONER CORRESPONDING TO THE PRESENT COMMISSIONER (APPEALS) DID NOT HAVE THE POWER OF ENHANCEMENT. IN FACT, A PROPER READING OF THE HONB LE SUPREME COURTS OBSERVATION INDICATES THAT THE APPELLATE ASSISTANT COMMISSIONER DID HAVE THE POWER OF ENHANCEMENT WHILE POSSIBLY THE TRIBUNA L MAY NOT. THE APPELLANT HAS PICKED OUT THE WORDS PASS SUCH ORDER S AS THE TRIBUNAL THINKS FIT AND LIKENED IT TO THE PROVISION OF SECT ION 251(1)(C) WHICH STATES THAT IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN THE APPEALS AS HE THINKS FIT, AND THEREBY INFERRED THAT THIS POWER D OES NOT INCLUDE THAT POWER OF ENHANCEMENT. HOWEVER, THE POWERS OF THE CO MMISSIONER (APPEALS) AND THAT OF THE TRIBUNAL ARE NOT SAME AND CANNOT BE EQUATED WITH EACH OTHER. IN ANY CASE, IT IS REITERATED HERE THAT THE ENHANCEMENT IS BEING MADE UNDER SECTION 251(1)(A) OF THE ACT WHICH EXPRESSLY CONFERS THE POWER OF ENHANCEMENT ON THE COMMISSIONER (APPEA LS) AND NOT UNDER THE RESIDUARY CLAUSE. 6.10 ON MERITS, THE APPELLANT HAS SIMPLY STATED THA T SHARE PREMIUM IS NOTHING BUT THE PRICE PAID FOR CAPITAL ISSUED AND T HEREFORE, ITS CHARACTER HAS TO BE SAME AS SHARE CAPITAL WHICH IS ALSO A P RICE PAID AT PAR FOR THE CAPITAL ISSUED. HENCE, NO ENHANCEMENT OUGHT TO BE M ADE ON THIS ACCOUNT TOO. 6.11 THE ISSUE OF WHETHER SHARE PREMIUM IS PART OF ISSUED SHARE CAPITAL FOR THE PURPOSE OF DEDUCTION U/S 35D IS NO LONGER R ES INTEGRA. THE HONBLE SUPREME COURT IN THE CASE OF BERGER PINTS INDIA LTD . VS CIT [2017] 393 ITR 113 (SC) HAS HELD THAT PREMIUM COLLECTED BY A SSESEE-COMPANY ON ITS SUBSCRIBED SHARE CAPITAL IS NOT CAPITAL EMPLOY ED IN BUSINESS OF COMPANY WITHIN MEANING OF SECTION 35D SO AS TO ENA BLE COMPANY TO CLAIM DEDUCTION OF SAID AMOUNT. 6.12 IN VIEW OF THE ABOVE, THE CAPITAL EMPLOYED I N THE BUSINESS OF THE APPELLANT IS BEING COMPUTED BY EXCLUDING THE SHARE PREMIUM OF RS. 54,01,01,880/-. EXPLANATION (B) TO SUB SECTION (3) OF SECTION 35D DEFINES CAPITAL EMPLOYED AS THE AGGREGATE OF THE ISSUED S HARE CAPITAL, DEBENTURES AND LONG TERM BORROWINGS AS ON THE LAST DAY OF THE PREVIOUS YEAR IN WHICH THE BUSINESS OF THE COMPANY COMMENCES . LONG TERM BORROWINGS HAS ALSO BEEN DEFINED IN EXPLANATION (C) TO SUB-SECTION(3) OF SECTION 35D AND INCLUDES BORROWINGS FROM BANKS. PER USAL OF THE DETAILS OF CAPITAL EMPLOYED SUBMITTED BY THE APPELLANT SHOWS T HE FOLLOWING BORROWINGS FROM BANKS AS ON 31.03.2008: I. ICICI BANK BAHRAIN RS. 14,66,19, 200/- II. INDIA OVERSEAS BANK-CASH CREDIT/OVERDRAFT RS .66,12,961/- III. HDFC BANK-CASH CREDIT/OVERDRAFT R S. 57,43,163/- THE HONBLE GUJRAT HIGH COURT IN THE CASE OF DY. CI T VS. CORE HEALTH CARE LTD. (2009) 308 ITR 263 (GUJ) HAS HELD THAT AL L BORROWINGS FROM BANKS ARE INCLUDED IN THE EXPRESSION LONG TERM BOR ROWINGS WITHOUT ANY REFERENCE TO THE TENURE OF THE BANK LOANS. THE BORR OWINGS FROM ICICI ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 10 BANK BAHRAIN IS, THEREFORE, BEING INCLUDED FOR COMP UTING CAPITAL EMPLOYED. HOWEVER, THE OUTSTANDING AGAINST INDIAN O VERSEAS BANK AND HDFC BANK ARE IN THE NATURE OF CASH CREDIT/OVERDRAF T AND ARE NOT BORROWINGS AND, HENCE, ARE EXCLUDED FOR COMPUTING C APITAL EMPLOYED. WITH THESE OBSERVATIONS, THE CAPITAL EMPLOYED IN THE BUSINESS OF THE APPELLANT AS ON 31.03.2008 IS COMPUTED AS UNDER: I. ISSUED SHARE CAPITAL RS. 4,50,08,490/ (45,00,849 SHARES OF RS.10/- EACH ISSUED UNDER IPO) II. LONG TERM BORROWINGS A. ICICI BANK BAHRAIN RS.14,66,19,200/- CAPITAL EMPLOYED RS.19,16,27,690/- 6.13 AS PER SECTION 35D (3) OF THE ACT, THE TOTAL E XPENSES ELIGIBLE FOR DEDUCTION U/S 35D @5% OF CAPITAL EMPLOYED, IE, RS. 19,16,27,690/-, THEREFORE, COMES TO RS. 95,81,384/-. THE AMOUNT ELI GIBLE FOR DEDUCTION U/S 35D DURING THE YEAR AT 1/5 TH OF RS.95,81,384/- IS RS. 19,16,276/- AS AGAINST RS.1,00,12,966/- CLAIMED BY THE APPELLANT. THERE IS A DIFFERENCE OF RS. 80,96,690/- BETWEEN THE ELIGIBLE AMOUNT AND AS CLAIMED BY THE APPELLANT. THE ASSESSING OFFICER HAS ALREADY DISALL OWED RS.41,62,966/- ON THIS ACCOUNT. THE DISALLOWANCE U/S 35D MADE BY T HE ASSESSING OFFICER IS, THEREFORE, ENHANCED BY RS. 39,33,724/-. 8. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE I S IN APPEAL BEFORE US. 9. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) WAS ERRED IN DISMISSING GROUNDS TAKEN BY THE ASSESSEE C HALLENGING REOPENING OF THE ASSESSMENT ON TWO TOLD ARGUMENTS. THE LD. AR, FURTHER SUBMITTED THAT IN ORDER TO REOPEN ASSESSMEN T, THE AO MUST HAVE REASON TO BELIEVE THAT INCOME OF ASSESSEE HAS ESCAPED ASSESSMENT. FURTHER, WHETHER THE BELIEF EXIST OR N OT MUST BE TESTED FROM THE REASONS RECORDED FOR ISSUE OF NOTICE AND N OTHING ELSE. IF, THE BELIEF IS NOT EVIDENT FROM A READING OF THE REA SONS, THE REASSESSMENT WILL BE WITHOUT JURISDICTION AND ILLEG AL. THE LD. AR, FURTHER SUBMITTED THAT REOPENING OF ASSESSMENT IS B AD IN LAW, EVEN ON THIS COUNT, BECAUSE THE ASSESSMENT HAS BEEN REO PENED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS MAKING AN ALLEGATION AGAINST THE ASSESSEE THAT THE RE IS A FAILURE ON ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 11 THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRU LY, ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEARS. IF YOU GO THROUGH REASONS RECORDED BY THE AO, FOR REOPENING O F ASSESSMENT, NOWHERE THE LD.AO ALLEGED THAT INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT BY THE REASON OF FAILURE ON PAR T OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT. IN THIS REGARD, HE RELIED UPON THE DECI SION OF ITAT, MUMBAI, IN THE CASE OF KALYAN BANK VS DCIT(INTERNAT IONAL TAXATION) (2012) 54 SOT 111. THE ASSESSEE HAS ALSO RELIED UPO N THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF HARI IRON TRADING COMPANY VS CIT (2003) 263 ITR 437 (PUNJAB A ND HARYANA). THE ASSESSEE HAS ALSO RELIED UPON THE FOLLOWING JUD ICIAL PRECEDENTS:- 1. CIT VS. FORAMER FRANCE [(2003) 264 ITR 566 (SC)] 2. PRECILION HOLDINGS LTD. VS. DCIT (IT) [(2019) 10 3 TAXMANN.COM 291 (BOM)] 3. DIT VS. ROLLS ROYCE INDUSTRIAL POWER INDIA LTD. [(2017) 394-ITR 547 (DELHI)] 4. TAO PUBLISHING (P.) LTD. VS. DCIT [(2015) 370 IT R 135 [(BOM)] 5. SOUND CASTING (P.) LTD. VS. DCIT [(2012) 250 CTR 119 (BOM.)] 6. SITARA DIAMOND (P.) LTD. VS. DCIT [(2012) 345 IT R 91 (BOM.)] 7. TITANOR COMPONENTS LIMITED VS. ACIT [(2011) 60 D TR 273 (BOM.)] 8. GERMAN REMEDIES LTD. VS. DCIT [(2006) 287 ITR 49 4 (BOM)] 9. HINDUSTAN LEVER LTD. VS. R.B.WADKAR [(2004) 268 ITR 332 (BOM.)] 10. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORT ING ORDER OF THE LD.CIT(A) SUBMITTED THAT THE LD.CIT(A) HAS BROUGHT OUT CLEAR FACTS TO THE EXTENT THAT THE AO HAS FORMED REASONABLE BELIEF OF ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE I.T.ACT,1961 AND AT THE TIME OF INITIATION OF REASSESSMENT PROCEEDI NGS, THE AO NEED ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 12 NOT TO PROVE ESCAPEMENT OF INCOME AND WHAT IS RELEV ANT IS THERE IS A SOME TANGIBLE MATERIAL, WHICH SUGGEST ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE I.T.ACT, 1961. IN THIS REGARD, HE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COU RT, IN THE CASE OF YUVRAJ VS UNION OF INDIA ( 2009) 225 CTR 283 (BO M) AND THE HONBLE SUPREME COURT IN THE CASE OF RAYMOND WOLLEN MILLS VS ITO (1999) 236 ITR 34 (SC). 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE ASSESEE HAS CHALLENGED REOPENING OF ASSESSMENT ON T WO GROUNDS. THE FIRST OBJECTION TAKEN BY THE ASSESSEE FOR REOPE NING OF THE ASSESSMENT IS THAT THE AO HAS REOPENED ASSESSMENT W ITHOUT FORMATION OF REASON TO BELIEVE THAT INCOME CHARGEAB LE TO TAX HAD BEEN ESCAPED ASSESSMENT, WHICH IS EVIDENT FROM THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. WE FIND T HAT THE AO HAS RECORDED REASONS FOR REOPENING OF THE ASSESSMENT , ON THE BASIS OF TANGIBLE MATERIAL, AS PER WHICH, INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE I.T.ACT, 1961, ON ACCOUNT OF EXCESSIVE CLAIM OF DED UCTION U/S 35D OF THE I.T.ACT, 1961, IN RESPECT OF SHARE ISSUE EXPENS ES. WE, FURTHER NOTED THAT IT IS NOT A STATUTORY REQUIREMENT THAT THE REASONS TO BELIEF SHOULD BE PROVED TO THE HILT BEFORE REOPENING OF A SSESSMENT. THE REQUISITE CONDITION IS THAT THE AO SHOULD HAVE REAS ON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THIS CASE, THE AO HAD REASONS TO BELIEVE THAT DEDUCTION CLAIMED U/ S 35D WAS EXCESSIVE AND FORMATION OF BELIEF BY THE AO IS WIT HIN REALM OF SUBJECTIVE SATISFACTION AS HELD BY THE HONBLE SUPR EME COURT IN THE CASE OF ACIT VS RAJESH JAWERI STOCK BROKERS PVT LTD . (2007) 291 ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 13 ITR 500. WE, FURTHER NOTED THAT AT THE TIME OF REOP ENING OF ASSESSMENT, THE AO NEED NOT TO PROVE ESCAPEMENT OF INCOME. WHETHER, THE MATERIALS WOULD CONCLUSIVELY PROVE, TH E ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE, THE FORMATION OF BELIEF BY THE AO IS WITHIN REALM OF SUBJECTIVE S ATISFACTION. AT THAT STAGE FINAL OUTCOME OF THE PROCEEDINGS IS NOT RELEV ANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE, BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOM E, AT THE STAGE OF ISSUE OF NOTICE. THE ONLY QUESTION IS WHETHER, THER E WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE F ORMED A REQUISITE BELIEF. THIS LEGAL PROPOSITION IS SUPPORT ED BY THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF RAYMOND WOLLE N MILLS VS ITO (1999) 236 ITR (34) (SC). THE HONBLE BOMBAY HIGH C OURT HAD ALSO TOOK SOME VIEW IN THE CASE OF YUVRAJ VS UNION OF IN DIA (2009) (225 CTR 283). IN THIS CASE, ON PERUSAL OF FACTS AVAILA BLE ON RECORD, WE FIND THAT THE AO HAS FORMED REASONABLE BELIEF OF ES CAPEMENT OF INCOME, ON THE BASIS OF TANGIBLE MATERIALS IN HIS P OSSESSION, WHICH SUGGEST ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF I.T.ACT, 1961. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN THE ARGUMENT TAKEN BY THE ASSESSEE. 12. THE SECOND LIMB OF ARGUMENTS OF THE ASSESSEE FO R REOPENING OF ASSESSMENT IS THAT WHEN, ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T.ACT, 1961, THE ASSESSMENT COULD N OT THE REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEAR, UNLESS THERE IS A ALLEGATION BY THE AO THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT Y EAR BY THE REASONS OF FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT. WE FIND THAT THE ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 14 LD.CIT(A) HAS BROUGHT OUT CLEAR FACTS, IN LIGHT OF PROVISO TO SECTION 147 AND FACTS BROUGHT OUT BY THE AO, IN RESPECT OF DEDUCTION CLAIMED U/S 35D AND OBSERVED THAT THERE IS A FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY, ALL MATER IAL FACTS NECESSARY FOR ASSESSMENT, BECAUSE THE ASSESSEE HAS CLAIMED EX CESSIVE DEDUCTION U/S 35D, WHICH ITSELF GOES TO PROVE THE F ACT THAT THE FACTS DISCLOSED IN THE RETURN OF INCOME OR AT THE TIME O F ASSESSMENT ARE NOT TRUE AND CORRECT AND ALSO FULL DISCLOSURE OF M ATERIAL FACTS NECESSARY FOR ASSESSMENT. WE, FURTHER NOTED THAT ME RE FURNISHED A RETURN OF INCOME WITH A CLAIM OF DEDUCTION U/S 35D IS NOT SUFFICIENT ENOUGH. WHEN, THE ASSESSEE IS CLAIMING A DEDUCTION, IT HAS TO DISCLOSE NECESSARY FACTS IN FORM OF A NOTES TO ACCO UNTS EXPLAINING , THE MANNER IN WHICH, SUCH DEDUCTION HAS BEEN CLAIME D AND ALSO WHETHER, SUCH DEDUCTION IS IN ACCORDANCE WITH PROVI SIONS OF ACT. IN THIS CASE, ON PERUSAL OF FACTS, WE FIND THAT THE AS SESEE, NEITHER PROVIDED ANY NOTE IN ITS FINANCIAL STATEMENTS EXPLA INING, THE COMPUTATION OF DEDUCTION, NOR THE AO HAS EXAMINED T HE ISSUE, AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I.T.ACT, 1961. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN ARGUMENTS TAKEN BY THE ASSESSEE, IN LIGHT OF PRO VISO TO SECTION 147 OF THE I.T.ACT, 1961. INSOFAR AS VARIOUS CASE L AWS RELIED UPON BY THE ASSESSEE, WE FIND THAT ALTHOUGH ASSESSEE HAS RE LIED UPON VARIOUS CASE LAWS, BUT NONE OF CASE LAWS ARE DIREC TLY APPLICABLE TO FACTS OF ASSESEE CASE AND HENCE, ALL CASE LAWS RELI ED UPON BY THE ASSESEE HAVE BEEN REJECTED. 13. IN THIS VIEW OF THE MATTER AND ALSO CONSIDERING THE CASE LAWS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED VIE W THAT THE LD.CIT(A) WAS RIGHT IN UPHOLDING REOPENING OF THE A SSESSMENT IN THE ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 15 GIVEN FACTS AND CIRCUMSTANCES OF THIS CASE. HENCE, WE ARE INCLINED TO UPHOLD ORDER OF THE LD.CIT(A) AND REJECT GROUND TAKEN BY THE ASSESSEE CHALLENGING REOPENING OF ASSESSMENT. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO. 2 TO 7 IS ADDITIONS MADE BY THE AO TOWARDS DISA LLOWANCES OF EXCESS CLAIM OF DEDUCTION U/S 35D OF THE I.T.ACT, 1 961 AND CONSEQUENT ENHANCEMENT U/S 251 OF THE I.T.ACT, 1961 BY THE LD.CIT(A). WE FIND THAT LD. AR FOR THE ASSESSEE WAS NOT SERIOUSLY CONTESTING, THE ISSUE ON MERIT BECAUSE, THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD.VS CIT (2017 ) 393 ITR (113) (SC) HELD THAT PREMIUM COLLECTED BY ASSESSEE COMPAN Y ON ITS SUBSCRIBED SHARE CAPITAL IS NOT CAPITAL EMPLOYED IN BUSINESS OF COMPANY WITHIN THE MEANING OF SECTION 35D OF THE AC T, SO AS TO ENABLE ASSESSEE TO CLAIM DEDUCTION OF SAID AMOUNT. WE FIND THAT THE HONBLE SUPREME COURT HAS SETTLED THE ISSUE AND HEL D THAT FOR THE PURPOSE OF CAPITAL EMPLOYED, SHARE PREMIUM COLLECTE D ON ISSUE OF SHARE CAPITAL IS NOT PART OF CAPITAL EMPLOYED. THER EFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO, AS WELL AS THE LD.CIT( A) WERE RIGHT IN RE-COMPUTATION OF ELIGIBLE DEDUCTION U/S 35D BY EXC LUDING SHARE PREMIUM FROM CAPITAL EMPLOYED AND ACCORDINGLY, WE A RE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) AND REJECT GROUND TA KEN BY THE ASSESSEE. 15. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 558/MUM/2018 ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 16 16. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL AR E EXACTLY IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAVE AL READY CONSIDERED IN ITA NO 557/MUM/2018, EXCEPT TO THE EXTENT OF LIM ITED CHANGES IN FACTS IN AS MUCH AS, THE REOPENING OF ASSESSMENT H AS BEEN DONE WITHIN FOUR YEARS FROM END OF RELEVANT ASSESSMENT Y EARS. THEREFORE, THE ARGUMENT ADVANCED BY THE ASSESSEE IN LIGHT OF PROVISO TO SECTION 147 HAS NO APPLICATION. INSOFAR AS, THE FIR ST ARGUMENT OF THE ASSESSEE THAT THERE IS A ABSENCE OF REASON TO BELIE F FOR REOPENING OF ASSESSMENT, WE FIND THAT A SIMILAR OBJECTION RAISE D BY THE ASSESSEE FOR AY 2008-09 HAS BEEN NEGATED BY US WITH DETAILED REASONS IN PRECEDING PARAGRAPH. THE REASONS GIVEN BY US IN PRE CEDING PARAGRAPH SHALL MUTATIS MUTANDIS APPLY FOR THIS Y EAR ALSO. ACCORDINGLY, THE OBJECTION OF THE ASSESSEE THAT THE RE WAS A ABSENCE OF REASON TO BELIEF OF ESCAPEMENT OF INCOME HAS BEE N REJECTED. COMING TO SECOND OBJECTION OF THE ASSESSEE FOR REOP ENING OF THE ASSESSMENT. THE ASSESSEE HAS TAKEN AN ARGUMENT AND SUBMITTED THAT THE ASSESSMENT HAS BEEN REOPENED FOR FISHING AND REVOLVING ENQUIRY, WHICH IS NOT PERMISSIBLE U/S 147 OF THE I. T.ACT, 196. WE FIND THAT LD.CIT(A) HAD NEGATED ARGUMENTS OF THE ASSESSE E, IN LIGHT OF REASONS RECORDED FOR REOPENING OF ASSESSMENT AND CA ME TO THE CONCLUSION THAT WHETHER, THE EXTENSION OF UNDERTA KING WAS COMPLETED OR ITS NEW UNIT HAD STARTED PRODUCTION WO ULD NOT MEAN THAT THE ASSESSMENT WAS REOPENED ONLY MAKING FISHIN G ENQUIRIES. FACTS REMAIN UNCHANGED. THE ASSESSEE FAILED TO FILE , FURTHER EVIDENCES OR ANY JUDGMENTS TO CONTROVERT FINDINGS O F FACTS RECORDED BY LD.CIT(A) AND HENCE, WE REJECT SECOND ARGUMENT TAKEN BY THE ASSESSEE. THE THIRD OBJECTION OF THE ASSESSEE FOR R EOPENING OF THE ASSESSMENT IS THAT REOPENING WAS ON THE BASIS OF CH ANGE OF OPINION WITHOUT THERE BEING ANY FRESH TANGIBLE MATERIAL. THE ASSESSEE ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 17 CONTENDED THAT IN THE COURSE OF ORIGINAL ASSESSMENT U/S 143(3), THE ISSUE HAS BEEN EXAMINED BY THE AO AND AFTER BEING S ATISFIED WITH EXPLANATION OF THE ASSESSEE HAS ACCEPTED THE CLAIM. WE FIND THAT THE LD.CIT(A) HAD RECORDED CATEGORICAL FINDING TO THE E FFECT THAT THE ASSESSMENT HAS BEEN ORIGINALLY COMPLETED U/S 143(3) BY ACCEPTING INCOME RETURNED BY THE ASSESEE WITHOUT ANY DISCUSSI ON ON THE ISSUE OF DEDUCTION CLAIMED U/S 35D OF THE I.T.ACT, 1961. THE LD.CIT(A), FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO BROUGHT NOTHING ON RECORD TO SHOW THAT DETAILS OF CAPITAL EMPLOYED IN THE BUSINESS WAS SUBMITTED TO THE AO, IT IS CRUCIAL FOR DETERMINING FOR ELIGIBILITY FOR DEDUCTION U/S 35D OF THE I.T.ACT, 1961. FACTS REMAI N UNCHANGED. THE LD. AR FOR THE ASSESSEE FAILS TO COUNTER, THE F ACTS RECORDED BY THE LD.CIT(A), IN LIGHT OF REASONS RECORDED FOR REO PENING OF ASSESSMENT AND THE ASSESSMENT ORDER PASSED BY THE A O U/S 143(3) OF THE I.T.ACT, 1961. HENCE, WE REJECT THIRD ARGUME NTS OF THE ASSESSEE. AS A RESULT, THE ASSESEE HAS FAILED IN HI S ATTEMPT TO SATISFY THAT REOPENING OF ASSESSMENT WAS BAD IN LAW, CONSEQ UENTLY, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD.CIT(A) AND REJECT LEGAL GROUNDS TAKEN BY THE ASSESSE. 17. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCES OF EXCESS CLAI M OF DEDUCTION U/S 35D OF THE I.T.ACT, 1961 AND CONSEQUENT ENHANCE MENT U/S 251 OF THE I.T.ACT, 1961 BY THE LD.CIT(A). WE FIND THAT LD. AR FOR THE ASSESSEE WAS NOT SERIOUSLY CONTESTING, THE ISSUE ON MERIT BECAUSE, THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAI NTS INDIA LTD.VS CIT (2017) 393 ITR (113) (SC) HELD THAT PREMIUM COL LECTED BY ASSESSEE COMPANY ON ITS SUBSCRIBED SHARE CAPITAL IS NOT CAPITAL EMPLOYED IN BUSINESS OF COMPANY WITHIN THE MEANING OF SECTION 35D ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 18 OF THE ACT, SO AS TO ENABLE ASSESSEE TO CLAIM DEDUC TION OF SAID AMOUNT. WE FIND THAT THE HONBLE SUPREME COURT HAS SETTLED THE ISSUE AND HELD THAT FOR THE PURPOSE OF CAPITAL EMPL OYED, SHARE PREMIUM COLLECTED ON ISSUE OF SHARE CAPITAL IS NOT PART OF CAPITAL EMPLOYED. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO, AS WELL AS THE LD.CIT(A) WERE RIGHT IN RE-COMPUTATION OF ELIGIBLE DEDUCTION U/S 35D BY EXCLUDING SHARE PREMIUM FROM C APITAL EMPLOYED AND ACCORDINGLY, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) AND REJECT GROUND TAKEN BY THE ASSESSEE. 18. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 559/MUM/2018 19. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL AR E EXACTLY IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAVE AL READY CONSIDERED IN ITA NO. 557/MUM/2018, EXCEPT TO THE EXTENT OF LIMITED CHANGES IN FACTS, IN AS MUCH AS, THE ASSESSMENT FOR THE IMP UGNED ASSESSMENT ORDER HAS BEEN COMPLETED U/S 143(1) AND REOPENING OF ASSESSMENT WAS WITHIN FOUR YEARS FROM THE END OF RE LEVANT ASSESSMENT YEAR. THEREFORE, THE REASONS GIVEN BY US IN PRECEDING PARAGRAPH IN ITA NO. 557 AND 558/MUM/2018, WE REJEC T LEGAL GROUND TAKEN BY THE ASSESSEE CHALLENGING REOPENING OF ASSE SSMENT. 20. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCES OF EXCESS CLAI M OF DEDUCTION U/S 35D OF THE I.T.ACT, 1961 AND CONSEQUENT ENHANCE MENT U/S 251 OF THE I.T.ACT, 1961 BY THE LD.CIT(A). WE FIND THAT LD. AR FOR THE ASSESSEE WAS NOT SERIOUSLY CONTESTING, THE ISSUE ON MERIT BECAUSE, ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 19 THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAI NTS INDIA LTD.VS CIT (2017) 393 ITR (113) (SC) HELD THAT PREMIUM COL LECTED BY ASSESSEE COMPANY ON ITS SUBSCRIBED SHARE CAPITAL IS NOT CAPITAL EMPLOYED IN BUSINESS OF COMPANY WITHIN MEANING OF SECTION 35D, SO AS TO ENABLE ASSESSEE TO CLAIM DEDUCTION OF SAID AMOUNT. WE FIND THAT THE HONBLE SUPREME COURT HAS SETTLED THE ISSU E AND HELD THAT FOR THE PURPOSE OF CAPITAL EMPLOYED, SHARE PREMIUM COLLECTED ON ISSUE OF SHARE CAPITAL IS NOT PART OF CAPITAL EMPL OYED. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO, AS WELL AS THE LD.CIT(A) WERE RIGHT IN RE-COMPUTATION OF ELIGIBLE DEDUCTION U/S 35D BY EXCLUDING SHARE PREMIUM FROM CAPITAL EMPLOYED AND A CCORDINGLY, WE ARE INCLINED TO UPHOLD ORDER OF THE LD. CIT(A) AND REJECT GROUND TAKEN BY THE ASSESSEE. 21. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS D ISMISSED. 22. AS A RESULT, ALL APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06 /09 /2019 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI ; DATED 06/09/2019 THIRUMALESH SR.PS P COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT ITA NO.557 TO 559/MUM/2018 ARIES AGRO LTD. 20 BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//