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TMI Blog2017 (5) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be held that, there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for the purposes of assessment. The impugned notice u/s 148 for reopening the assessment is purely based on material already on record which has been also considered by the Assessing Officer and once that is so, then ostensibly, reopening u/s 147 is not permissible in law as it amounts to “change of opinion”. Not only that, as submitted by the ld. counsel and also noted by the Learned CIT(Appeals), the amount of interest which is a subject matter of reassessment in the impugned proceedings was not payable to any Public Financial Institution or any Scheduled Bank, albeit out of total interest accrued but not due for sums amounting to ₹ 184.66 lakhs, interest aggregating to ₹ 44.33 lakhs was paid before filing of the return on which deduction was allowed u/s 43B and balance interest payable of ₹ 140.33 lakhs was unpaid liability on cumulative FDR (Rs. 137.90 lakhs) and other interest liability (Rs. 2.41 lakhs) and therefore, prima facie such interest amount was not hit by the provision of section 43B. On this count also, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) has erred inquashing the assessment order passed u/s 147/143(3) of the Act. 2. On the facts and circumstances of the case and in law, the CIT(A) has erred inholding that the reasons recorded for initiation of reassessment proceeding formreview or change of opinion. 3. On the facts and circumstances of the case and in law, the CIT(A) has erred indeleting the addition of ₹ 1,40,33,000/- made on account of disallowance u/s 43Bwithout examining the facts of the case. 4. The appellant craves leave to add, alter or amend any ground of appeal raisedabove at the time of hearing. 3. Brief facts qua the issue of reopening u/s 147 as challenged by the revenue vide ground nos. 1 and 2 are that, the assessee had filed its return of income on 30.10.2004 for the A.Y. 2004-05, declaring income of ₹ 4,15,84,748/- which was processed u/s 143(1). Later on, revised return of income was filed on 29.3.2006 which was also processed on 31.3.2006. The said revised return was selected for scrutiny and consequently, assessment order was passed u/s 143(3) vide order dated 27.12.2006 at an income of ₹ 4,62,11,350/-. The said order of the Assessing Officer ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise. 3. Therefore, the action of the assessee in claiming deduction of the entire amount has resulted in under assessment of income to the extent of ₹ 140.33 lacs. The under assessment has resulted because of the failure of the assessee to disclose the material facts of the components of interest accrued but not due . The assessee has claimed deduction of interest amount in contravention to the amended provisions of section 43B. 3. Thus, the assessee s case was reopened for the purpose of disallowance u/s 43B for sum of ₹ 1,40,33,000/- on the ground that the said amount of interest was payable and had not been actually paid before the due date of filing of return of income. As noted by the ld. Assessing Officer, the assessee did not file any return of income in response to notice u/s 148 and assessee s objection regarding reopening had also been disposed off by him vide letter dated 03.11.2011. Since, there was not much response from the assessee, he therefore, added the amount of ₹ 1,40,33,000/- u/s 43B. 4. Before the Learned CIT (Appeals), the assessee after explaining the entire background of the case and previous history of various assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 534 v. CIT vs. Kelvinator, (2010) 2CC 723 /320 ITR 561 (Supreme Court) vi. CIT vs. Orient Craft, (2013) 354 ITR 536 (Del) The final conclusion of the Learned CIT (Appeals) for quashing the reassessment order reads as under:- In this case, the original assessment was completed by the Assessing Officer u/s 143(3) of the Act on 27.12.2006. The details of the interest payable were filed by the appellant before the Assessing Officer vide letter dated 24th March, 2011. It was categorically stated by the assessee that the provisions of section 43B are not applicable as the interest is not payable to the Public financial institutions and scheduled banks. The records do not show any tangible material that created the reason to believe that the income had escaped the assessment. The reassessment proceedings amount to a review or change of opinion. In view of the judicial pronouncements discussed above, it is held that the reassessment proceedings are bad in law and the consequent assessment order passed by the Assessing Officer is null and void. 5. Before us the ld. DR, strongly relied upon the order of the Assessing Officer and submitted that even though the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a specific finding as well as observation in the impugned order that during the course of the original assessment proceedings the Assessing Officer in his detailed questionnaire had required the assessee to furnish all the details of interest payment as appearing in the balance sheet. In response thereof, the entire details were furnished by the assessee along with the details of liabilities and also the interest accrued but not due and interest payable as appearing in the balance sheet. Based on such scrutiny assessee s claim was allowed by the AO. Once all these facts relating to interest and claim of deduction, both in relation to interest paid and interest payable were there before the Assessing Officer during the time of the original assessment proceedings, then without there being tangible material coming on record, it cannot be held that, there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for the purposes of assessment. It is a trite law that, where an assessment has been completed u/s 143(3), then there is a limitation upon the AO to take any action for reopening the assessment u/s 147 beyond the period of 4 years from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 11. The brief facts of the case qua the aforesaid issue are that the assessee company is engaged in the business of manufacturing, supply and distribution of automobile components, etc. During the course of the assessment proceedings the Assessing Officer noted that the assessee has paid interest amounting to ₹ 36.44 crores on the loans. He further noted that the assessee has also advanced a sum of ₹ 811.90 lakhs to its 100% subsidiary company, M/s. Satara Rubber Chemicals Ltd . In view of these facts the Assessing Officer required the assessee to substantiate its claim of interest amount and also why the proportionate interest should not be disallowed. The assessee in response submitted that it has incurred certain expenses on behalf of its subsidiary company which was shown as recoverable loan and therefore, no amount of interest was attributable on notional basis. The ld. Assessing Officer, held that since it was interest free loan given to the subsidiary, therefore, disallowance of interest has to be made in view of the decision of Hon ble Punjab and Haryana High Court in the case of Abhishek Industries Ltd. (286 ITR 1) and accordingly, worked out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it is found that the assessee company had huge surplus funds then it can be safely presumed that any such advance or interest free loan given to subsidiary is out of such surplus funds only unless the department brings on recrd that the surplus funds have been utilized for some other purposes and borrowed funds have been diverted to subsidiary/sister concern. The sole reliance placed by the Assessing Officer on the judgment of CIT vs. Abhishek Industries Ltd. (supra) for making the disallowance, now does not hold ground in view of the judgment of Supreme Court in the case of Munjal Sales Corporation vs. CIT (supra), wherein the judgment of CIT vs. Abhishek Industries Ltd. (supra) has been reversed and it has been specifically held by the Hon ble Apex Court that so long as funds have been given to the sister concern out of interest free funds, no disallowance u/s 36(1)(iii) can be made. Thus, without their being material to controvert the finding of the Learned CIT (Appeals) that advance standing in the name of the subsidiary is out of assessee s own interest free funds, we do not find any reason to deviate from such a finding of fact. Accordingly, the order of the Learned CIT (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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