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2022 (5) TMI 298 - HC - Income TaxRevision u/s 264 - validity of Reopening of assessment u/s 147 - disallowance of interest paid by the Assessee to banks/financial institutions - Petitioner responded to notice reiterating that he had sufficient funds to make such advances and there was no nexus between the borrowed funds and such advances - HELD THAT - PCIT has failed to deal with one of the principal grounds of challenge to the assessment order viz., that without considering the Petitioner's objection to the reopening of the assessment under Section 147 of the IT Act, the reassessment order could not have been framed and that this was contrary to the dictum of the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer 2002 (11) TMI 7 - SUPREME COURT On a perusal of the impugned order, it reveals that the above objection was in fact not considered by the PCIT. The Court is of the view that the impugned order of the PCIT is unsustainable in law in so far as it is failed to consider the principal objection of the Petitioner to the opening of the assessment. Therefore, the flaw vitiates the order of reassessment equally vitiates the impugned order of the PCIT as well. In this connection, references were being made to the decision of this Court in Viresh Hemani v. Income Tax Officer 2021 (4) TMI 1175 - ORISSA HIGH COURT and the recent decision M/s. Tuff Tubes (Orissa) Pvt. Ltd. v. The Deputy Commissioner of Income Tax 2022 (2) TMI 1228 - ORISSA HIGH COURT - Reassessment order set aside - Decided in favour of assessee.
Issues:
Challenge to order rejecting reassessment under Section 264 of the Income Tax Act for the Assessment Year 2008-09. Analysis: The petition challenges an order passed by the Principal Commissioner of Income Tax rejecting a reassessment order by the Assessing Officer for the Assessment Year 2008-09. The petitioner, deriving income from mining, filed a return of income in 2008, which was picked up for scrutiny. The assessment was completed by the AO in 2010, determining assessable income. Subsequently, a notice was issued to reopen the assessment based on certain reasons related to temporary advances provided for non-business purposes and interest expenses claimed on secured loans. The petitioner objected to the reopening, highlighting the purpose of advances made and the availability of interest-free funds. Despite objections, a reassessment order was passed by the AO, leading to the challenge before the PCIT under Section 264 of the IT Act. The petitioner's grievance was that the PCIT failed to consider the principal objection to the reopening of the assessment, as required by legal precedent. The PCIT's order did not address this crucial objection, which was contrary to established legal principles. Despite issuing a notice in 2017, the Department failed to respond. The Court, after hearing both parties, found the PCIT's order unsustainable in law due to the failure to consider the petitioner's objection. The Court referenced previous decisions to support its findings and concluded that the flaw in the reassessment equally affected the PCIT's order. Based on the above analysis and legal reasoning, the Court set aside the impugned orders of the PCIT and the AO. The writ petition was allowed with no order as to costs, emphasizing the importance of addressing objections raised by taxpayers in reassessment proceedings to ensure procedural fairness and compliance with legal standards.
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