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TMI Blog2024 (11) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... s that in the reasons recorded for the reopening of the assessment, AO has formed his reason to believe on the basis of the fact that original return filed by the assessee was not picked up for scrutiny. However, the record show that return of income of the assessee was scrutinised and assessment order u/s. 143(3) was passed. Once the issue of reopening was examined in the scrutiny assessment proceedings, the reason framed under wrong facts are not valid reason, therefore such reasons to believe cannot be sustained. In view of this, assessee s ground against reopening of assessment is allowed reassessment based on such invalid reason is quashed. Assessee appeal allowed. - Shri Br Baskaran, Accountant Member And Shri Sunil Kumar Singh, Judicial Member For the Assessee : Shri. Dharmesh Shah a/w Ms. Mitali Parekh For the Revenue : Shri. P.D. Chougule (Addl. CIT) SR. DR ORDER PER SUNIL KUMAR SINGH (J.M): 1. This appeal has been preferred against the impugned order dated 13.10.2023 passed in Appeal no. CIT(A) 18, Mumbai/10147/2019-20 by the Ld. Commissioner of Income tax(Appeals)/ National Faceless Appeal Centre (NFAC) [hereinafter referred to as the CIT(A) ] u/s. 250 of the Income-Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order, assessee filed an appeal before learned CIT(A), who dismissed assessee s appeal. 4. Aggrieved by the impugned order, assessee has raised following grounds in this appeal: 1. The Ld. CIT(A) erred in law and in facts in not appreciating that the reopening of the assessment u/s. 147 of the Act and issue of notice u/s. 148 of the Act was invalid and bad in law. 2. The Ld. CIT(A) erred in law in confirming the assessment order passed in gross violation of principles of natural justice. 3. The Ld. CIT(A) has erred in law and in facts in confirming addition of Rs. 35,00,000/- made on account of alleged bogus loans u/s 68 of the Act. 4. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance made towards interest payment of Rs. 2,81,688/- on loan taken during the year. 5. Learned AR has submitted that the reasons recorded by learned assessing officer are based on fundamentally erroneous premises, wherein learned assessing officer has wrongly stated that the issue under consideration was never examined by assessing officer as there was no regular assessment done for the year under consideration, whereas the scrutiny assessment was carried out for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though proviso to Section 147 of the Act would not apply, and the Assessing Officer has to only make out availability of tangible material, it is settled law that if the re- opening is based on mere change of opinion, the notice issued under Section 148 of the Act has to be set aside. Paragraph No.12 of the judgment dated 23rd November, 2021 Reserve Bank Officers Co-operative Credit Society Ltd. vs. The Income Tax Officer 17(3)(1) and Ors. (w.p. 3332/2019) (unreported) reads as under: 12. Section 147 enables the Assessing Officer to assess or reassess any income chargeable to tax which he has reason to believe has escaped assessment for an assessment year. The proviso to section 147 imposes additional requirements where an assessment is sought to be reopened beyond a period of four years from the end of the relevant assessment year. In the present case, the exercise of power is within a period of four years and, therefore, the requirements of the proviso are not attracted. Where the Assessing Officer purports to exercise power under section 147 within a period of four years of the end of the relevant assessment year, the condition precedent to the exercise of the power, is the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 2019 determining total income of Rs. 1,20,89,790/-. The JAO however states Subsequently, an information was received on 20.01.2019 in this case from Investigation Directorate, Mumbai During the course of survey, it was found that assessee has taken interest bearing loan from various institutions in market and advanced part of loan so taken to group companies either at low interest rate or at NIL interest rate. Therefore, the information on which reliance has been placed was received before the assessment order dated 21 December, 2019 was passed. On this ground alone, we can safely conclude that the conditions precedent to the exercise of the powers to re-assessment, i.e., existence of a reason to believe that income chargeable to tax has escaped assessment has not been met. 4. We have to also note that after the information on 20th January, 2019 was received, as noted in the assessment order dated 21 December, 2019 five notices were issued by the Assessing Officer under Section 142(1) of the Act. In the notice dated 1 October, 2019 a specific query has been raised by which petitioner was called upon to provide party wise details alongwith address of the parties to whom loan a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 7. According to the JAO, survey report submitted by DDIT investigation indicate that interest should be charged at 12% per annum on loan given to sister concern totaling to Rs. 4,17,04,380/- and therefore income chargeable to tax has been under assessed by the said amount. According to the JAO this interest income of Rs. 4,17,04,380/- has escaped assessment. We find it rather strange that such an opinion is formed by the JAO. It is an accepted position that petitioner has in fact not received any interest in respect of the loans/advances given to seven of its group companies in the assessment order 2017-18. When no income is received there is no question of paying any tax on income which respondent think should have been received but was in fact not received. Income which accrues to a person is taxable in his hands but we have not seen any provision of law which says that income which he could have earned but he has not earned is taxable as income accrued to him. It will be useful to reproduce paragraph no.7 of the judgment of this court in India Finance Construction Co. (P) Ltd. vs. B.N. Panda, Deputy Commissioner,[1993] 200ITR 710 (Bom). The same reads as under: 7. The second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can be discerned that the Guwahati High Court held that there was nothing to show that the assessee had, in fact, received interest or that the company to whom the loan was given had, in fact, paid interest to the assessee. There was also nothing on record to show that the alleged interest was not reflected in the accounts. The only finding recorded was that the assessee ought to have charged interest. Referring to an earlier decision of the Guwahati High Court, in Highways Construction Co. (P) Ltd. v. CIT [1993] 199 ITR 702, the Court observed that their attention had not been invited to any provision of the Income-Tax Act empowering the income- tax authorities to include in the income, interest which was not due or not collected. 6. In similar vein, when we asked Mr Sahni, who is appearing for the respondent to point out some provision of the Income Tax Act, whereunder such 'notional' interest could be made the subject matter of tax, the only reference he made was to Section 144 of the said Act. However, we are clear that Section 144 does not at all apply to the present proceedings because the present proceedings originate from an assessment under Section 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of the assessee was already carried out and order u/s. 143(3) of the Act dated 18.02.2015 was passed, which is part of the assessee s assessee s paper book at page 44, wherein it is mentioned that after verification of various details filed by the assessee the return of income filed by the assessee is accepted and income is assessed at Rs. 6,68,55,810/-. It is further noticed that before passing the original order, learned assessing officer issued notice u/s. 142(1) of the Act dated 01.09.2014 which is placed at page 38-39 of the assessee s paper book. It further transpires that the learned assessing officer called for the details of unsecured loans along with the loan confirmation and interest paid. In response thereof assessee submitted his letters date 09.10.2014 and 21.11.2014, which are part of assessee s paper book at page 40-43. Statement of unsecured loan from M/s. Tribhuvan Dealtrade Pvt. Ltd. is also shown of an amount of Rs. 35,00,000/-. This shows that in the reasons recorded for the reopening of the assessment, learned assessing officer has formed his reason to believe on the basis of the fact that original return filed by the assessee was not picked up for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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