2023 (4) TMI 1173 - AT - Income Tax

Validity of reassessment proceedings u/s 147 - notice after the expiry of 4 years from the end of the relevant assessment year - business loss claimed by the assessee, which is chargeable to tax has escaped assessment and the assessee has failed to disclose true and full particulars of income for the year under consideration - HELD THAT - All the details sought by the AO were provided by the assessee during the course of scrutiny assessment proceedings, and the said details were accepted by the AO under section 143(3) of the Act. Further, from the perusal of reasons recorded for reopening the assessment, it is evident that the only basis available with the AO for initiating the impugned reassessment proceedings was the perusal of the profit and loss account and balance sheet i.e. the information which was already considered and examined during the course of original scrutiny assessment proceedings. Reassessment proceedings u/s 147 of the Act, in the present case, are set aside being bad in law. Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of Delay in Filing the Appeal
2. Validity of Reassessment Proceedings under Section 147 of the Income Tax Act, 1961
3. Allowance of Interest Expenditure as Business Expenditure

Summary:

Condonation of Delay in Filing the Appeal:
The appeal was delayed by 130 days. The learned Departmental Representative (DR) cited the Supreme Court's order extending the limitation period due to Covid-19, and the appeal was filed within this extended period. The learned Authorised Representative (AR) did not object, and hence, the delay was condoned, allowing the appeal to be heard on merits.

Validity of Reassessment Proceedings under Section 147 of the Income Tax Act, 1961:
The assessee challenged the reassessment proceedings initiated after four years from the end of the relevant assessment year. The conditions in the 1st proviso to Section 147 of the Act were examined, which require that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The Tribunal found that all necessary details were provided by the assessee during the original assessment proceedings under Section 143(3), and there was no failure to disclose material facts. The reasons for reopening the assessment were based on information already considered during the original assessment. Consequently, the reassessment proceedings were deemed invalid, and the order by the learned CIT(A) upholding these proceedings was set aside.

Allowance of Interest Expenditure as Business Expenditure:
The Revenue's grounds challenged the allowance of interest expenditure of Rs. 10,84,88,390 as business expenditure. However, since the reassessment proceedings were set aside, the grounds on merits became academic and were dismissed.

Conclusion:
The appeal by the Revenue was dismissed, and the petition under Rule 27 of ITAT Rules, 1963, filed by the assessee, was allowed. The reassessment proceedings under Section 147 were set aside as invalid, rendering the Revenue's grounds on merits academic.