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TMI Blog2018 (9) TMI 1754X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Ld.CIT(A) on this issue. The reasons recorded by the AO are sufficient to reopen the assessment. Accordingly, the appeal of the assessee on this ground is dismissed. Disallowance of interest u/s 36(i)(iii) @12% on amounts advanced to Lotus Associates for purchase of land - Held that:- AO has not given any finding with regard to the diversion of funds from the borrowed funds, whereas the Ld.CIT(A) has given a finding that the borrowed funds have been diverted. Disallowance u/s 14A, there was no finding given in the assessment order or in the appellate order with regard to the earning of income. Therefore, both the issues require detailed verification of the facts with regard to the diversion of borrowed funds and earning of divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is dismissed. 5. Ground No.3 is related to the issue of notice u/s 148 of Income Tax Act (hereinafter called as Act ). During the appeal hearing, the Ld.AR argued that the AO recorded the reasons for reopening the assessment as under : As per Balance Sheet for the year ended 31.03.2008, the assessee firm has advanced loan of ₹ 60 lakhs and ₹ 25 lakhs to M/s Kamakshi Steel Private Limited and Lotus Associates respectively on which no interest was charged. The assessee is paying huge interest of ₹ 44.26 lakhs on loans borrowed from banks and others. As the assessee has not charged any interest on loans advanced to the above concerns, the income chargeable to tax has escaped assessment and notice u/s 148 was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of funds. Therefore, it cannot be viewed that the AO had examined the issue at the time of original assessment. Further, the Ld.DR submitted that the assessee had borrowed funds and paid huge interest and the funds in question were advanced as loans to M/s Kamakshi Steel Private Ltd and M/s Lotus Associates as per the reasons recorded. Having advanced the loans to the other concerns and paying huge interest, the proportioned interest on the loans advanced for non-business purposes should have been disallowed by the assessees. Non disallowance of the interest for diversion of funds reduced the taxable income which amounts to escapement of income thus there is no error in reopening the assessment. Ld.DR further submitted that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be reassessed. Therefore, the reasons recorded by the AO cannot be held as insufficient reasons as argued by the Ld.AR. The Ld.CIT(A) has upheld the validity of issue of notice after verifying the ITMR as well as the assessment record in para No.5.1 to 5.3 which reads as under: 5.1. Ground of appeal nos, 1, 15, 16 8 17 are general in nature, They do not require any adjudication. Though several grounds were raised, to put it precisely, appellant Is aggrieved by (I) the reopening of assessment and (ii) the additions made by assessing officer totaling to Rs,10 20,000/-. 5.2. On perusal of ITMR, it could be noted that the appellant had advanced a total amount ofRs.25 Iakhs during the previous year 2005-06 relevant to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of the original assessment proceedings, there is no question of change of opinion in such circumstances. The above decision was held in the following cases: (i) L.A. Firm Vs. CIT (Med) 102 ITR 622. (ii) Ess Kay Engineering Co. (P) Ltd. Vs. CIT (SC) 247 ITR 516. (iii) Revathy C.P. Equipments Ltd. Vs. DC!T Ors, (Mad) 241 ITR 856. (iv) EMA India Ltd. Vs. ACIT (AU) 30 DTR 82. 5.2.2. Appellant cannot rake up issue of reopening once assesses participated in the reassessment proceedings after receipt of order passed by Assessing Officer rejecting his objections towards reopening. This view was held in the case of Sushil Kumar Jalan Vs ITO in I.T.A. No.34/Gau/2011 by Hon ble Guwahati Tribunal. 5.2.3. Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. The reasons recorded by the AO are sufficient to reopen the assessment. Accordingly, the appeal of the assessee on this ground is dismissed. 9. Ground No.4(a) is related to the disallowance of interest u/s 36(i)(iii) amounting to ₹ 3,00,000/- @12% on ₹ 25,00,000/- amounts advanced to Lotus Associates for purchase of land. Similarly Ground No.4(b) is related to the disallowance of interest u/s 14A for an amount of ₹ 7,20,000/- on investments made by the assessee in M/s Kamakshi steels Pvt. Ltd., on a sum of ₹ 60,00,000/-. As far as disallowance of interest on ₹ 25,00,000/- is concerned the AO has not given any finding with regard to the diversion of funds from the borrowed funds, whereas the Ld.CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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