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TMI Blog2023 (9) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings u/s 147/148 of the Act cannot be undertaken on a mere change of opinion or audit objection raised by the internal auditors of the Department. Similar view has been taken by the Mumbai Bench of the Tribunal in the case of Lionbridge Technologies Pvt. Limited [ 2020 (6) TMI 314 - ITAT MUMBAI] - The various other decisions relied upon by assessee also support his case to the proposition that re-assessment proceedings cannot be initiated on the basis of audit objections. We hold that the reassessment proceedings initiated on the basis of audit objection are not valid in law and accordingly, the re-assessment proceedings are quashed. Since we quash the re-assessment proceedings initiated by the AO on the basis of the audit objections, therefore, the grounds raised by the Revenue challenging the deletion on merit become academic in nature and therefore, are not being adjudicated. Decided against revenue. - Shri R.K. Panda, Vice President And Shri K. Narasimha Chary, Judicial Member For the Appellant : Sri P. Murali Mohan Rao, C.A. For the Respondent : Ms. Sheetal Sarin, Sr. A.R. ORDER The Revenue has filed this Miscellaneous Application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n verification, he found that the assessee has advanced a loan of Rs.5,25,14,837/- to one of its sister concerns namely, M/s. Pragathi Kamadhenu Finance Limited. However, no interest income has been offered to tax although it has claimed expenditure of Rs.1,85,54,522/- under the head interest and bank charges . In view of the above, the Assessing Officer initiated re-assessment proceedings under section 147 of the Act after recording the following reasons : 2.1 In view of the above, the proceedings u/s 147 were initiated after recording the following reasons: It was seen from the balance sheet as on 31.3.2007, that the assessee company took secured loans (scheduled -2) of Rs. 12,18,87,3131- during the year from Andhra Pitink (Term Loan Rs.11,35,19,647/- and Rs.83,67,666/- being vehicle finance). Interest and bank charges totalling to Rs.1,85,54,522/- were debited to the Profit. L A/c for the year ended 31/3/2007 (Apprx. 1522%). It was noticed that the assessee had advanced a loan of Rs.5,25, 14,827/- to M/s Pragati-Kamadhenu Finance Private Limited towards unsecured loans as at 31.3.2006 (sister concern with same directors, as per confirmation letter issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any satisfactory explanation given by the assessee, the Assessing Officer computed the interest @ 12.75% on the interest free advances of Rs.5,25,14,827/- and disallowed an amount of Rs.66,95,640/- by making addition of the same to the total income. 9. In the appeal, the ld.CIT(A) deleted the addition made by the Assessing Officer by observing as under: 5.2 I carefully considered the view of Assessing, Officer and submissions made by the AR. The issue under consideration was whether the interest free advance was given to sister concerns on commercial expediency is allowable or not. 5.3 In the case of S.A. Builders Ltd. Vs. CIT (A), Chandigarh, [2007] 158 Taxman 74 (SC), the Apex court held that borrowed funds advanced to a third party should be for commercial expediency, if it is sought to be allowed u/s. 36(1)(iii), amount advanced to sister concern was by way of commercial expediency, matter was to be remanded to Tribunal for a fresh decision in accordance with law. 5.4 The Hon'ble High Court of Delhi in case of CIT v. Dalmia Cement (P) Ltd. (2002) 174 CTR (Del) 188 where it was, held that no portion of the interest paid by the assessee on its borrowed fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anjith Reddy v/s DC1T - 6(1) in ITA NO 292/H/2012 vide order dated 07/06/2013. 11.1 The assessee also raised the following additional ground which reads as under : In view of the Supreme Court s decision in the case of M/s. National Thermal Power Co., Limited Vs. CIT reported in (1998) 229 ITR 383 (SC), the appellant is justified in taking the grounds of appeal bearing nos. 1 to 6 which have not been raised before the CIT(Appeals). 12. The learned counsel for the assessee referring to the decision of Hon ble Supreme Court in the case of National Thermal Power Co., Limited Vs. CIT reported in (1998) 229 ITR 383 submitted that the additional ground is purely a legal ground and all material facts are already available on record and no new facts are required to be investigated and therefore, the additional ground raised by the assessee should be admitted. 13. Ld. DR on the other hand, objected to the admission of the additional ground raised by the assessee. 14. After hearing both sides and considering the fact that the additional ground raised by the assessee is purely a legal one and all material facts necessary for adjudication of the ground are already availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, the learned counsel for the assessee heavily relied on the order of learned CIT(A). 18. The ld. DR on the other hand strongly challenged the arguments advanced by the learned counsel for the assessee. She submitted that the report of the internal audit party constitutes an information and the Assessing Officer is fully justified in reopening the assessment. 19. So far as the merit of the case is concerned, she submitted that when admittedly, the assessee has advanced interest free loans to sister concerns, therefore, the Assessing Officer was fully justified in charging interest @ 12.75% which the assessee is paying to the banks for availing the loan. 20. We have considered the rival arguments made by the sides, perused the orders of Assessing Officer and the learned CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the re-assessment proceedings were initiated on the basis of objections raised by the audit internal party which read as under : No.RAIT/ITRAP XVI/10-11/..No.21 Dt.08.06.2010. To The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be undertaken on a mere change of opinion or audit objection raised by the internal auditors of the Department. Similar view has been taken by the Mumbai Bench of the Tribunal in the case of Lionbridge Technologies Pvt. Limited (supra). The various other decisions relied upon by the learned counsel for the assessee also support his case to the proposition that re-assessment proceedings cannot be initiated on the basis of audit objections. 23. In view of the above discussion, we hold that the reassessment proceedings initiated on the basis of audit objection are not valid in law and accordingly, the re-assessment proceedings are quashed. Since we quash the re-assessment proceedings initiated by the Assessing Officer on the basis of the audit objections, therefore, the grounds raised by the Revenue challenging the deletion on merit become academic in nature and therefore, are not being adjudicated. 24. In the result, the appeal filed by the assessee is allowed and the appeal filed by the Revenue is dismissed. 25. To sum up, the Miscellaneous Application filed by the Revenue is allowed and the appeal filed by the Revenue is dismissed and the appeal filed by the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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