9911796707
TMI Blog2016 (9) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... 01-02, the petitioner had filed the return of income on 31.10.2001 declaring total income of Rs. 7.23 crores (rounded off). Said return was taken in scrutiny by the Assessing Officer who framed assessment under Section 143(3) of the Act on 30.3.2004 accepting the declaration of income made by the petitioner in the return. One of the main claims of the petitioner under such return was deduction under Section 80IB of the Act of Rs. 3.20 crores (rounded off) which was also accepted. To reopen the said assessment, the Assessing Officer issued impugned notice within a period of four years from the reign of the relevant assessment year. To do so, he had recorded following reasons: "In this case return of income for A.Y.2001- 02 was filed on 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he companies under the same management. The loanee companies' net worth was negative and there was no stipulation of repayment. The auditors' of the company was not able to express their opinion on recoverability of the said loan. As the company had obtained interest bearing loan and given interest free loan to the company under the same management, interest of Rs. 18,72,000/- paid on borrowed money at the prevailing rate of interest at 18% on 104 lacs was required to be disallowed u/s.136(10(iii) of the Act. 4. In view of the above fact, I have reasons to believe that there is an escapement of income within the meaning of Section 147(C) of the Income-Tax Act, 1961. Issue notice u/s.148 of the I.T.Act." 2.2 The petitioner raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under Section 80IB of the Act of Rs. 3.20 crores at 30% of its gross total income of Rs. 10.68 crores. According to him, the income from other sources totalling to Rs. 2.13 crores which was not eligible for such deduction was included. Such income included the dividend income, insurance cover, interest from bank and others, rental income etc. The second ground was that the company had granted interest free loan of Rs. 104 lacs to the companies under the same management and the company had obtained interest bearing loan. The interest of Rs. 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 Rs. 10.43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent from nonconsideration of an issue at the time of assessment. It therefore cannot be stated that this issue was not scrutinized by the Assessing Officer during the original assessment. 7. With respect to the second issue of disallowance of interest expenditure, we do not find any direct proof that the issue was examined during the assessment. There is nothing in the order of assessment suggesting that it was so done. Even in the letter of objection by the petitioner after being supplied the copies of the reasons recorded, it was contended as under: "xxxx Secondly, as regards interest free loan, the company could not charge interest since the amount is doubtful of recovery. The auditors also gave a suitable note in the report. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 Rs. 2594 lacs, such loan did not have any direct nexus with the loan taken by the assessee company. Thus, she not only opposed the audit party suggestion but she gave her brief reasons for the same. In this letter, we do not find any communication whether she accepted the first objection of 80IB of the Act. However, in absence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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