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2022 (2) TMI 643 - AT - Income TaxAddition of interest paid on bogus unsecured loan borrowed by the assessee from bogus lenders - HELD THAT - Tribunal in 2021 (10) TMI 215 - ITAT SURAT once the addition of unsecured loan for which the disallowance of interest was made has been deleted, the order for disallowance of interest would not survive. Accordingly, we affirm the order of Ld. CIT(A). Considering the fact that as we have affirm the order of Ld. CIT(A) on merit, therefore adjudication of other various submission raised either by Ld. Sr.DR for the Revenue and Ld. AR of the assessee would be academic. In the result, appeal of Revenue is dismissed.
Issues:
Validity of re-opening of the case under section 147/148 of the Income Tax Act, 1961 and deletion of interest paid on a bogus unsecured loan borrowed by the assessee. Analysis: 1. Validity of Re-opening: - The case involved a re-opening under section 147 on the grounds that the assessee paid interest on an unsecured loan treated as bogus. The assessee challenged the validity of re-opening, arguing it was based on a change of opinion and contrary to settled law. - The Assessing Officer initiated re-assessment proceedings without new material, solely on the basis of the original assessment. The Ld. CIT(A) upheld the re-opening, stating that the Assessing Officer had reason to believe income had escaped assessment, which was sufficient for initiating proceedings under section 147. - The Ld. CIT(A) held that the re-assessment was valid, even though the assessee had already explained the loan's genuineness in a previous appeal. 2. Deletion of Interest on Unsecured Loan: - The Assessing Officer disallowed interest of ?23,29,482 paid on the unsecured loan. The assessee had earlier successfully challenged the addition of the unsecured loan itself. - The Ld. CIT(A) upheld the deletion of the unsecured loan addition, stating the assessee had proven the loan's genuineness. As a result, the disallowance of interest did not stand. - The Tribunal affirmed the Ld. CIT(A)'s decision, emphasizing that once the addition of the unsecured loan was deleted, the disallowance of interest could not be sustained. 3. Tax Effect and Jurisdictional Issues: - The Revenue argued that the tax effect was below the prescribed limit for appeal. However, the Ld. AR of the assessee contended that the re-opening was not valid and the appeal was not maintainable. - The Ld. AR of the assessee cited relevant case law to support the argument that the re-opening was either based on audit objections or a change of opinion, both of which were legally unsustainable. - The Tribunal dismissed the Revenue's appeal on merit, rendering the jurisdictional and tax effect arguments academic. 4. Final Decision: - The Tribunal dismissed the Revenue's appeal on merit, as the addition of the unsecured loan had been previously deleted. Consequently, the disallowance of interest was also invalidated. - As a result of dismissing the Revenue's appeal, the arguments regarding the validity of re-opening and the assessee's Cross Objection became academic and were consequently dismissed. - The final order was pronounced during a Virtual court hearing on 11th February 2022, affirming the decision to dismiss the Revenue's appeal and the assessee's Cross Objection.
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