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TMI Blog2024 (5) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it had not received any income during AY 2015-2016. During the course of discussion that Petitioner s Chartered Accountant had with the AO, Petitioner was called upon to furnish details of the statement showing closing stock of NCDs - Petitioner furnished a statement showing closing stock of NCDs as also a statement giving details of investment in NCDs during the year. The opening stock and the closing stock were unchanged. Thereafter, the assessment order dated 30th August 2017 came to be passed. In the assessment order, it is accepted that Petitioner is the resident of Cyprus and its nature of business is to act as investment holding company. In our view, since Petitioner was called upon and Petitioner supplied the details of investment in NCDs during the year, the issue of holdings in the NCDs and the interest on the NCDs was certainly a subject of consideration of the AO. Discussion in the assessment order or not? - As decided in Aroni Commercials Limited [ 2014 (2) TMI 659 - BOMBAY HIGH COURT ] once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 2021 under Section 148 of the Act alleging that there were reasons to believe that Petitioner s income chargeable to tax for AY 2015-2016 has escaped assessment within the meaning of Section 147 of the Act. Petitioner was provided the reasons to believe why the tax had escaped assessment. In the reasons to believe, it was alleged that : i. It is observed from the case records of assessment year 2014-15 that Petitioner offered to tax interest income of Rs. 16,71,24,000/- from investment in NCDs from 2 companies namely NDL and LPMIPL. ii. It is seen that Petitioner is still invested into debentures of the said two companies during assessment year 2015-16 but no interest income has been offered to tax. It is also noted that closing stock of NCDs for assessment year 2015-16 is the same as that for assessment year 2014-15. It is also noted from the return of income for assessment year 2015-16 and 2014-15 that Petitioner follows Mercantile system of accounting. iii. It is observed that Petitioner has not offered any interest income from NCDs during the year under consideration even though Petitioner is following Mercantile system of accounting. Therefore, accrued interest of Rs. 16,71, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs were not exactly on the issue of non-disclosure of interest on the NCDs and therefore, is no change of opinion. 9. In our view, the notice dated 30th March 2021 issued under Section 148 of the Act, the order dated 27th March 2022 rejecting Petitioner s objections and the draft assessment order dated 31st March 2022, all have to be quashed and set aside. 10. Section 147 of the Act as was in force at the relevant time, provided that if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153 of the Act, assess or re-assess such income. . The proviso to Section 147 of the Act states that such re-assessment is not permissible where it is proposed to re-assess after the expiry of four years from the end of the relevant assessment year and an assessment under Section 143 (3) of the Act has been completed unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of Assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. . 11. In this case, since the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. Paragraph 14 of Aroni Commercials Limited (supra) reads as under : 14. We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon CBDT Circular No. 4/2007 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places reliance upon CBDT Circular dated 15 June 2007). It would therefore, be noticed that the very ground on which the notice dated 28 March 2013 seeks to reopen the assessment for assessment year 2008-09 was considered by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication and/or reasons to believe that income chargeable to tax has escaped assessment. 16. Therefore, it is clear that the reopening of assessment by the impugned notice dated 30th March 2021 is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceeding leading to the order dated 30th October 2017. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. 17. Moreover, Petitioner s objection to reopening that under the DTAA, interest income can be taxed only when the same was received by the payee under the provisions of Article 11, has not been controverted in the order rejecting the objections. This has also been raised by Petitioner in petition in Grounds L M. In the affidavit-in-reply, this has not even been denied. Respondents only state that Petitioner failed to disclose the interest part in the return of income, but when such an income can be taxed only if it is paid by the payer, the question of disclosing the same in the return of income or in its account does not arise. This has been accepted by the AO because specific query has been ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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