2022 (9) TMI 1096 - AT - Income Tax

Reopening of assessment u/s 147 - reliance on seized material belonging to, pertaining to relating to the group companies - HELD THAT - Reasons do not disclose that any material belonging, pertaining relating to the assessee says that during the search proceedings in the case of M/s Kapil consultancy services private Ltd. There is no expiration forthcoming from the assessee as to how the case on hand is different either in fact or law from the ones in the case of group companies. Apart from this, the reasons recorded by AO in this matter, as could be found at paragraph No. 3 of the assessment order, do not reveal any information gathered at the time of the sec. since the proceedings in the case of M/s Kapil consultancy services private Ltd nor any reference to the sec, since the proceedings in the case of M/s Kapil consultancy Pvt. Ltd to be found therein. The reopening in this matter has nothing to do with the search and seizure proceedings in the case of M/s Kapil consultancy Pvt. Ltd. Merely because they happen to be certain search action against M/s Kapil consultancy services Pvt. Ltd, it need not ipso facto be inferred that the present reopening proceedings have something to do with such search action. The reopening in this matter is altogether independent, as could be gathered from the reasons recorded in this matter, and therefore, the non obstante cause has no obligation to the facts of the case. We accordingly hold that the learned AO had rightly initiated the proceedings u/s 147 by issuing notice under section 148 - Ground No. 2 is accordingly dismissed. Addition relating to the notional interest on redeemable debentures - Since there is no change in facts or law, while respectfully following the view taken in the case of group companies 2022 (3) TMI 1422 - ITAT HYDERABAD we set aside the findings of the authorities below and restore the issue to the file of the learned Assessing Officer to verify the fact relating to the debentures the scheme and also whether the assessee received and credited any such interest in their books in the relevant previous year. This ground is allowed for statistical purpose.

Summary

Issues:
1. Reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Addition of notional interest on redeemable debentures.

Reopening of Assessment:
The case involved an appeal by the assessee against an order passed by the Learned Commissioner of Income Tax(Appeals)-12, Hyderabad. The assessee challenged the additions and the reopening of the assessment. The Ld. CIT(A) held that there were valid reasons and material for the reopening, citing relevant case laws. The Ld. CIT(A) dismissed the appeal on the addition towards interest on redeemable debentures. The Tribunal found that the reasons for reopening did not disclose any material related to the assessee, and the proceedings were independent of the search conducted on another company. The Tribunal upheld the initiation of proceedings under section 147, dismissing the appeal on the reopening issue.

Addition of Notional Interest on Redeemable Debentures:
Regarding the addition of notional interest on redeemable debentures, the Ld. AR argued that the addition was based on estimates and surmises without concrete evidence. The assessee contended that no interest was received on debentures, and the amount transferred to other companies was mistakenly shown as debentures. The Ld. CIT(A) and the Ld. DR supported the Assessing Officer's decision. The Tribunal noted that similar issues were addressed in a case involving group companies and decided to restore the matter to the Assessing Officer for further examination. The Tribunal allowed the ground related to the addition of notional interest on redeemable debentures for statistical purposes, following the decision in the case of group companies.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes, with the Tribunal upholding the reopening of assessment under section 147 and restoring the issue of notional interest on redeemable debentures for further examination by the Assessing Officer.