The duty of the assessee is to disclose all primary facts, and once done, no further assistance is required for the assessing authority to make its decision.

JUDGMENT :

(K.R. Shriram, J.)

1. Rule. Rule made returnable forthwith. By consent, taken up for final hearing.

2. Petitioner has impugned notice dated 27th March 2021 issued under Section 148 of the Income Tax Act, 1961 (“Act”) and also the order dated 30th November 2021 rejecting Petitioner’s objections.

3. Petitioner had filed its return of income on 30th November 2015 for Assessment Year (“AY”) 2015-16 declaring loss of Rs.84,81,34,368/- under normal provision of the Act and book loss of Rs.75,29,01,959/- under Section 115JB of the Act. The case was selected for scrutiny and assessment order for AY 2015-16 under Section 143(3) of the Act was passed on 25th December 2018 with assessed loss under the normal provisions of the Act at Rs.82,62,66,577/- and book loss under Section 115JB of the Act at Rs.74,88,93,282/-.

4. Subsequently, Petitioner received the impugned notice dated 27th March 2021 under Section 148 of the Act alleging escapement of the income assessable to tax for AY 2015-16. The reasons were recorded in a communication dated 17th November 2021 and the reasons read as under:

"2. Subsequently on perusal of the records it was observed that the assessee had debited certain expenditure which was not allowable as per different provisions under Income Tax Act:

a. Form 3CD (Annexure V) showed delayed remittance of Employees contribution to Employees Provident Fund on one occasion viz. Rs.3,47,819/- (Due date 20 Sep. 2014, Actual date 01 Oct 2014).

b. Rs.65,00,000/- has been debited under the head Consultancy for project. It should be part of the Capital Work in progress of the project and not part of the P&L as it is not in the nature of revenue expense.

c. Rs.11,08,024/- has been debited under Registrar and Share Transfer agent fees. It was to be treated as capital expenditure instead of revenue expenditure.

Thus, allowance of above three expenses resulted in aggregate under assessment of Rs.79,55,843/- (3,47,819+65,00,000+11,08,024).

2.1 Therefore I am of the view that income to the extent of amount of Rs.79,55,843/-, as explained above, has escaped assessment.

2.2 Further, it was observed that the Independent auditor had expressed its Qualified opinion on the Investment of Rs.69,25,07,000/- (Equity shares: Note-18 of Financials) in the assessees fully owned subsidiary in China M/s EKC Industries (Tianjin) C. Ltd. It mentioned that the investee company had significant accumulated losses and its value had substantially eroded and also that they were unable to comment upon its impact on the assessees financials, in the absence of appropriate evidences.

Note-17 also indicated similar fact wherein majority stake of Rs.4,31,72,000/- was in its another subsidiary M/s Calcutta Compression & Liquefication Engineering Limited (CC&L). The net-worth of the Company had fully eroded.

Provision for diminution in the value of these investments were also debited in the P&L Account however the same was added back in computation.

However, the fact remained that the assessee had debited Rs.50,10,54,000/- (Previous year Rs.48,55,59,000/-) towards finance cost. Average borrowings of the assessee was as under:

The interest rate (Bx100/A) on the above two years average borrowing and the finance cost debited works out to be 13.16%. Keeping in view that the investment was eroded and there was no possibility of any income therefrom, the proportionate interest from the aggregate investments of Rs.73,56,79,000/- (4,31,72,000/- 9,25,07,000/-), at the same rate of 13.16% amounting to Rs.9,68,15,356/- was required to be reversed and added back to income in terms of section 36(1)(iii) of the Act. Exact working