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TMI Blog2016 (9) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of the audit party on a point of law cannot be regarded as information enabling the income tax officer to initiate reassessment proceedings. In the same judgment, however, it was clarified that the audit party does not possess the power to pronounce on the law, it nevertheless may draw the attention of ITO to it. In case of Commissioner of Income-Tax V/s P.V.S.Beedies Pvt.Ltd.,[1997 (10) TMI 5 - SUPREME Court] it was found that the audit party had merely pointed out the fact which was overlooked by the income tax officer in the assessment. It was observed that there is no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening the case on the basis of factual error pointed out by the audit party is permissible under the law. The present case falls in the former category where the audit party not only brought a certain issue to the notice of the Assessing Officer but compelled her to issue notice of reopening despite her clear opinion that the issue was not valid and that there has been no escapement of income on the grounds so urged by the audit party. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,20,000 7 Insurance claim received 1,39,573 8 Profit on sale of shares 29,55,000 9 Hire charges 6,78,562 10 Soda settlement 2,13,60,088 Out of such other income, dividend ₹ 2,90,800/-, Office rent income ₹ 3,00,000/- and hire charges of ₹ 29,55,000/- relating to ₹ 35,45,800/- only were excluded from profit and remaining income of ₹ 1,78,44,288/- (2,13,60,088 ₹ 35,45,800) was included for considering gross total income of ₹ 10,68,95,864/-. Other income in toto should have been deducted while computing gross total income for working out benefit u/s.80IB. This has been resulted into excess allowing deduction of ₹ 53,44,286/- (30% of ₹ 1,78,44,288/-) u/s.80IB. 3. The Company has granted interest free loans of ₹ 104 lacs to the companies under the same management. The loanee companies' net worth was negative and there was no stipulation of repayment. The auditors' of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome, insurance cover, interest from bank and others, rental income etc. The second ground was that the company had granted interest free loan of ₹ 104 lacs to the companies under the same management and the company had obtained interest bearing loan. The interest of ₹ 18.72 lacs therefore had to be disallowed. 5. In this context, if we peruse the order of assessment, major claim of the petitioner was deduction under Section 80IB of the Act on income of ₹ 10.43 crores. In this context, the Assessing Officer in the order of assessment observed as under: xxxxx 3. The assessee company is engaged in the refining and filtering of edible oils. The accounts are audited and report u/s.44AB is filed. The assessee company has done bare trade in groundnut oil and Palmolein. Some of the purchases made to honour prior commitments is verified. The trading activity has resulted in a loss of ₹ 61,14,620/-. The manufacturing activity has shown a profit of ₹ 11,04,41,664/-. The accounts and the details filed are verified. Shri Dinal Shah, CA appearing for the assessee company pleaded that section 80AB clearly states that the incomes of specific nature are to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing certain details for the assessment year 2001-02, one of them being details of interest paid. Without any further background as to in which context the information was being asked for and being supplied, it would not be possible to hold that the question of al1owancibility or otherwise of the interest expenditure was examined by the Assessing Officer. In this context, however, we find that the Assessing Officer had opposed the suggestion of the audit party and clearly indicated that he does not point a valid one. The original files revealed that the audit party had raised two objections-one regarding the excess claim of deduction under Section 80IB of the Act and the other the present one of not disallowing the interest expenditure. In a letter dated 29.7.2005, one Deepshikha Sharma, the then Assessment Commissioner of Income Tax noted the two audit objections with respect to the interest expenditure. She clearly indicated that the objection is not acceptable. Since a loan was given to revive a sick company and also formed only 10% of a reserve fund of ₹ 2594 lacs, such loan did not have any direct nexus with the loan taken by the assessee company. Thus, she not only op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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