2022 (4) TMI 797 - AT - Income Tax

Reopening of assessment u/s 147 - Validity of reason to believe - Addition being notional interest calculated at the rate of 12% on the share application money pending for allotment for the reason that the same is pending for long time - interest on pending share capital money calculated at the nominal rate of 12% was assessed to tax in the absence of any reasoning/reply from the assessee - HELD THAT - In this case, the assessee has not filed any reasons for pending share capital money either before the Assessing Officer or before the ld. CIT(A). However, considering the prayer of assessee to afford one more opportunity to substantiate its case, we are of the opinion that the assessee shall be given an opportunity to substantiate its case before the AO. In view of the above facts and circumstances, we set aside the order of the ld. CIT(A) and remit the matter back to the file of the AO to decide the issue afresh in accordance with law by affording an opportunity of being heard to the assessee to substantiate its case and the assessee is also directed to furnish complete details before the Assessing Officer for verification and deciding the issue. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against order of Commissioner of Income Tax (Appeals) regarding assessment year 2012-13, Addition of notional interest on pending share capital money, Failure to provide reasons for pending share capital money, Request for opportunity to substantiate case before Assessing Officer.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The appellant raised various grounds of appeal, including contentions that the order was contrary to law and principles of natural justice, and objections against the addition of notional interest on pending share capital money. The appellant argued that the re-assessment proceedings were invalid and that the share application money was invested from its own funds in a subsidiary company engaged in the same line of business. Additionally, objections were raised against the levy of interest under section 234B.

The assessment under section 143(3) of the Income Tax Act, 1961 was reopened due to pending share application money, and notional interest at a rate of 12% was added to the tax liability. The Commissioner of Income Tax (Appeals) upheld the addition made by the Assessing Officer. During the appeal hearing, the appellant requested another opportunity to provide details to substantiate its case, citing circumstances beyond its control. The Departmental Representative supported the orders of the authorities below.

After considering both sides and reviewing the available materials, the Appellate Tribunal decided to grant the appellant another opportunity to substantiate its case before the Assessing Officer. The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and remitted the matter back to the Assessing Officer for a fresh decision. The appellant was directed to furnish complete details for verification. Consequently, the appeal filed by the assessee was allowed for statistical purposes.

In conclusion, the Tribunal's decision allowed the appellant the chance to present additional information and substantiate its case before the Assessing Officer. The matter was remitted back for a fresh decision in accordance with the law, emphasizing the importance of providing complete details for verification purposes.