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2024 (1) TMI 861 - AT - Income TaxValidity of reassessment proceedings - unexplained investments in the NCD Non-convertible debentures - HELD THAT - NCDs were subscribed on 17.06.2014 by the assessee in a company name M/s Hindustan Power Projects P. Ltd. The assessee has also earned interest and that interest has been offered to tax in the assessment year 2015-16 and 201617 and the NCDs were redeemed in the month of September 2015 and October 2015 relevant to the assessment year 201718 and then transferred the funds from Deutesche Bank India, to J.P Morgan Bank in Singapore. Assessee has obtained form 15CB and filed form 15CA with regard to the said remittances to its J.P Morgan Bank account in Singapore. From the above it is apparent that the assessee has only repatriated the amounts invested in the earlier years and hence, no taxability arises during the year. In the case of the assessee company, neither has any income accrued or arisen or is deemed to accrue or arise under that for the assessment year 2017-18 nor any claim has been under any DTAA. It is apparent that the Assessing Office has not examined the relevant records before them wherein the interest earned has been duly offered to tax. Hence it can be concluded that there was no escapement of income during the year and hence, the notice issued u/s. 148 is considered to be void ab initio and consequently the assessment is treated as nullity. Assessee appeal allowed.
Issues involved:
1. Validity of reassessment proceedings. 2. Erroneous treatment of the amount as unexplained investments. 3. Consequential interest under section 234A and 234B of the Act. 4. Initiation of Penalty. Issue 1: Validity of reassessment proceedings The assessee challenged the reopening of the assessment under section 148 of the Income-tax Act, 1961, arguing that it was in excess of jurisdiction and bad in law. The proceedings under section 148 were contended to be not in accordance with the law and should be struck down. Issue 2: Erroneous treatment of the amount as unexplained investments The Assessing Officer was criticized for treating the amount as unexplained investments and income for the year under consideration. The appellant argued that no income was earned nor any investments were made in non-convertible debentures during the relevant year, and the source of investments was adequately explained. It was highlighted that the amount in question was repatriated from the Indian bank account to a foreign bank, and no income was earned or investments were made in non-convertible debentures during the relevant assessment year. Issue 3: Consequential interest under section 234A and 234B of the Act The contention was made against the levy of interest under section 234A and 234B of the Act, arguing that it was not justified in the circumstances of the case. Issue 4: Initiation of Penalty The initiation of penalty proceedings under section 270A r.w.s 274 of the Act was challenged, claiming that it was done mechanically without recording any satisfaction for its initiation. The appellant argued that there was no misrepresentation or suppression of facts to warrant penalty proceedings. The Assessing Officer had reopened the case of the assessee due to non-filing of income tax return for the relevant assessment year. The reasons recorded for reopening the case highlighted the transactions carried out by the assessee and the failure to file a return despite having taxable income. The AO believed that an amount had escaped assessment, leading to the initiation of reassessment proceedings. The appellant contended that the investments made in earlier years were only repatriated during the relevant year, and no tax liability arose. It was argued that there was no escapement of income during the year, rendering the notice issued under section 148 as void ab initio and the assessment as nullity. In the final decision, the appeal of the assessee was allowed, and the assessment was treated as null and void.
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