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Facts
The assessee's original assessment for A.Y. 2011-12 was completed u/s 143(3). Subsequently, reassessment proceedings were initiated u/s 147 by the Assessing Officer (AO) on the grounds of unexplained unsecured loans u/s 68 and disallowance of vehicle loan interest u/s 40(a)(ia). The AO made additions which were confirmed by the CIT(A), leading to the current appeal before the Tribunal.
Held
The Tribunal quashed the reassessment proceedings, finding them to be based on a 'change of opinion' without any new tangible material, as the issues were already examined during the original assessment. Citing the Supreme Court's decision in *CIT Vs. Kelvinator of India Ltd.*, the Tribunal held that reassessment cannot be a mere review of the original order. On merits, the Tribunal noted that the assessee had explained the nature and source of unsecured loans and provided evidence, and also observed issues regarding the 40(a)(ia) disallowance.
Key Issues
1. Validity of reassessment proceedings initiated u/s 147 based on 'change of opinion' when issues were already examined in original assessment. 2. Justification of additions for unexplained unsecured loans u/s 68 and disallowance of interest u/s 40(a)(ia).
Sections Cited
143(3), 147, 68, 40(a)(ia), 148, 40A(3), 142(1), 139, 153
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “B”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
1. The captioned appeal at the instance of assessee pertaining to A.Y. 2011-12 is directed against the order dated 15.07.2025 framed by National Faceless Appeal Centre, Delhi (NFAC) arising out of Assessment order dated 26.12.2016 passed u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (in short ‘the Act’).
2. Assessee has raised following grounds of appeal :
“1] The assessee submits that the notice u/s 148 issued on the basis of same-material which was available with the A.O. in the course of scrutiny asst. proceedings, without receipt of any fresh tangible material after completion of the asst. proceedings u/s 143(3), is unsustainable in law and hence, the reasst. order u/s 147 may be declared as null and void. 2] The assessee submits that in the course of the scrutiny asst. proceedings u/s 143(3), the A.O. had already conducted enquiries on the issues which formed the basis for reopening u/s 147 and hence, the notice u/s 148 issued on the basis of change of opinion, may be declared as null and void in law. 3] The learned CIT(A) erred in confirming the addition u/s 68 of Rs.83,56,232 by taxing the unsecured loans received from three parties as unexplained cash credits without appreciating that the identity and creditworthiness of the lenders and the genuineness of the loans was duly established by the appellant by furnishing various documentary evidences and therefore, the above addition made for A.Y.2011-12 was sustainable in law and on facts of the case. 4] The learned CIT(A) further erred in confirming the disallowance of Rs.1,36,378 u/s 40(a)(ia) made by the A.O. towards non deduction of interest paid to Tata Motors Finance Ltd. without appreciating that the payee was a listed NBFC who had offered the impugned interest income on loan to tax and hence, the said disallowance was not justified on facts of the case and in law. 5] The appellant craves leave to add/ alter/ amend any of the grounds of appeal.”
3. We note that the assessee has raised Ground No.2 challenging the validity of reassessment proceedings and the same being jurisdictional issue we will first take up this ground for adjudication.
Brief facts of the case are that the assessee is an individual having source of income from Agriculture and Poultry. Regular return of income for A.Y. 2011-12 furnished on 29.09.2011 declaring total income of ₹11,40,448 and Agricultural income of ₹3,74,600. Case selected for regular scrutiny and various details were called for by the ld. Assessing Officer on multiple occasions to which necessary replies were filed by the assessee and the assessment proceedings u/s.143(3) of the Act completed on 25.02.2014 assessing income of ₹14,75,600 after making additions of ₹3,35,148. Subsequently, ld. Assessing Officer before expiry of four years from the end of the A.Y. 2011-12 issued notice u/s.148 of the Act on 18.02.2016 after recording following reasons :
“1. On perusal of the Profit & Loss account, it is noticed that the assessee has debited vehicle loan interest of Rs.1,36,378/-. On going through Balance Sheet under the head Unsecured Loans, the assessee has taken loans from TATA Motors Finance which is a NBFC (Non Banking Finance Company), TDS has to be made at source, the same is needed to be disallowed u/s 40(a)(ia) of the Act and added back to the total income of the assessee's income.
Further it is seen that the assessee has taken unsecured loan during the year to the tune of Rs.98,50,432/- as under from the four persons:-
Akash Foods and Feeds Rs.14,92,200/- Bajirao Lahanu Shinde (farmer) Rs.15,26,000/- Samadhan Deore (farmer) Rs.45,73,732/- Vaishali Deore Rs.22,56,500/- Rs.98,50,432/-
Only confirmation of loan creditors filed. All the above persons/parties are not assessed to tax. In case of Akash Foods and Feeds, only PAN was given. In case of party at no. 2 & 3 it is only stated that they are farmers. In case of Samadhan Deore 7/12 extract is produced. The total land by him is 3H 24R. In this, the uncultivated land is 2H 62R. In the remaining land of roughly 1H, maize is grown. No Sale bills are produced as evidence. Shri Samadhan Deore has taken a loan of Rs.1.5 Cr on 28/01/2011 and Rs. 2 Cr. On 17/01/2012 from Bank of Maharashtra. After repayment of such a huge loan, it is very evident that he will not be in a position to advance such huge loan to the assessee. Hence payment of Rs.45,73,732/- to the assessee is very impossible. The source of Vaishali Deore is not given. In all the above transactions, assessee has not produced or corroborated with evidence that they are genuine. The conclusion drawn is the assessee introduced her own money in the guise of unsecured loans. The same may be added to the total income u/s 68 of the I.T. Act, 1961, as genuineness and creditworthiness not proved with evidence.”
5. Subsequently, after issuing notice u/s.142(1) of the Act, the assessee filed detailed written submissions stating that the issues referred in the reasons recorded already stands examined and supporting documentary evidences were filed. However, ld. Assessing Officer was not satisfied with these submissions. Except for the issue of cash payments in contravention of section 40A(3) of the Act and unsecured loans taken from Akash Foods and Feeds for which Assessing Officer was satisfied with the reply filed by the assessee and re- assessment proceedings were concluded after making addition u/s.68 of the Act at ₹83,56,232 and disallowed u/s.40(a)(ia) of the Act at ₹1,36,378. Assessed income at ₹99,68,210.
6. Assessee preferred appeal before ld.CIT(A) and also raised the legal issue challenging the jurisdiction assumed by ld. Assessing Officer for carrying out the reassessment proceedings but failed to succeed as ld.CIT(A) held that initiation of reassessment proceedings was within the legal framework to bring taxable income and that ld. Assessing Officer had reason to believe that income had escaped assessment. Now the assessee is in appeal before this Tribunal.
7. Ld. Counsel for the assessee firstly took us through the reasons recorded and submitted that as regard to the issues relating to disallowance u/s.40(a)(ia) of the Act as well as unsecured loans of Rs.83,56,232 received from the relatives, various information was called during the course of original assessment proceedings vide questionnaire issued on 03.07.2013, 20.12.2013 to which written submissions were filed on 12.02.2013, 16.01.2014 and 30.01.2014. He submitted that the AO after being satisfied with the submission filed by the assessee did not make addition u/s.40(a)(ia) of the Act as well as addition u/s.68 of the Act. Now on the basis of very same material which was available with the Assessing Officer and has also been examined thoroughly, notice u/s.148 of the Act for carrying out the reassessment proceedings and therefore the same is bad in law as the same tantamount to reviewing of its own order as well as change of opinion which is not permissible under the Act. Reliance placed on the following decisions :
Asian Paints Ltd. v. DCIT & Anr. (Bombay HC) W.P. No. 1351 of 2008 2. CIT v. Kelvinator of India Ltd. (Delhi HC) (2002) 174 CTR (Del) (FB) 617 3. CIT v. Kelvinator of India Ltd. (Supreme Court) (2010) 228 CTR (SC) 488 4. Shri Saibaba Sansthan Trust (Shirdi) v. Union of India (Bombay HC) [2024] 169 Taxmann 671 5. NYK Line (India) Ltd. v. DCIT (Bombay HC) W.P. No. 159 of 2012 6. Clear Media (India) (P.) Ltd. v. DCIT (Bombay HC) [2023] 150 Taxmann 52 7. Cognizant Technology Solutions India (P.) Ltd. v. ACIT (Madras HC) [2021] 131 Taxmann 346 8. JCIT v. Cognizant Technology Solutions India (P.) Ltd. (Supreme Court) [2023] 146 Taxmann 197 9. PCIT v. Raja Transports (Madras HC) [2023] 154 Taxmann 589
On the other hand, ld. Departmental Representative vehemently argued supporting the order of ld.CIT(A) and submitted that the Assessing Officer has reason to believe that income has escaped assessment and that the reassessment proceedings have been initiated within four years from the end of the assessment year and therefore valid reassessment proceedings have been carried out.
We have heard the rival contentions and perused the record placed before us. The validity of reassessment proceedings and assumption of jurisdiction for carrying out the reassessment proceedings has been challenged by the assessee on the ground that the reasons for which the reassessment proceedings have been initiated are on the issues which already stood examined by the Assessing Officer during the course of first round of assessment proceedings u/s.143(3) of the Act and there being no new tangible material found against the assessee or any other material or evidence which was not disclosed by the assessee in the income tax return during the course of assessment proceedings u/s.143(3) of the Act, therefore in such situation, the reassessment proceedings initiated in the instant case are bad in law and liable to be quashed.
On going through the reasons recorded which have been extracted (supra) we find that first major issue referred therein is regarding unsecured loans of ₹98,50,432 received from the following four parties :
a. Akash Foods and Feeds b. Bajirao Lahanu Shinde (farmer) c. Samadhan Deore (farmer) d. Vaishali Deore
From the above four parties, ld. Assessing Officer has not made addition for the unsecured loans taken from Akash Foods and Feeds at ₹14,92,200. Remaining three parties are the relatives of the assessee of which Mr. Bajirao Lahanu Shinde is Son-in-law, Mr. Samadhan Deore is Son and Ms. Vaishali Deore is Daughter-in-law and that the unsecured loans were received through Account payee cheque. Ld. Counsel for the assessee took us through the questionnaire issued by the Assessing Officer during the course of regular scrutiny assessment dated 03.07.2013 and 20.12.2013 placed in the paper book from pages 20 to 24. We note that in Question No.10 ld. Assessing Officer asked for the information about unsecured loans along with furnishing of details and the nature of confirmation, Address, PAN details and the year and mode of existing loan. In continuation to this Question No.10, ld. AO further vide letter dated 20.12.2013 asked the assessee to furnish information regarding squared up loan account also, if any, along with documents supporting the creditworthiness of the parties. We find that in reply to the questions raised by the Assessing Officer about unsecured loans assessee vide letter dated 12.12.2013 has furnished copies of confirmation of unsecured loans, Address, PAN, mode of payment which are appearing at pages 27 and 28 of the paper book. Further certain more details were filed by the assessee vide letter dated 16.01.2014 about unsecured loans taken during the year which have duly been acknowledged by the Assessing Officer. Assessee has also furnished the details in support of the unsecured loans vide letter 30.01.2014 which has also been considered by the Assessing Officer. These facts clearly demonstrate that the issue of unsecured loans was well taken up by the Assessing Officer during the course of assessment proceedings u/s.143(3) of the Act and the same has been examined from each and every angle to which the assessee in order to explain the nature has furnished available details including PAN, Address, Confirmations, 7/12 extract and also bank details through which loans were received. Regarding genuineness of the transactions assessee stated that the alleged loans were mainly taken from the relatives. Now on due consideration of all these details ld. Assessing Officer has accepted the submissions of the assessee and did not made any addition u/s.68 of the Act.
Now at the time of issuing notice u/s.148 of the Act, ld. Assessing Officer had no new tangible material which has been independently procured or any other information which was not submitted by the assessee during the course of assessment proceedings along with return of income. It is a clear case of change of opinion and rather reviewing of its own order because the very same details have been again considered by the Assessing Officer for issuing notice u/s.148 of the Act.
Similarly for the issue of disallowance u/s.40(a)(ia) of the Act the same pertains to interest paid to Tata Motors Finance Ltd. which is a Non Banking Financial institution for non deduction of tax at source on the vehicle loan interest of ₹1,36,378. This issue was also specifically raised by the Assessing Officer and the assessee furnished the details of TDS deducted by the assessee along with copies of TDS returns, proof of payment of challans, expenditure has been duly shown in the Tax Audit Report and also the assessee has made the total payment of interest to the registered NBFC which is also subjected to income tax provisions and the payment of interest made by the assessee is to the account of Tata Motors Finance Ltd. We therefore find that both the issues referred in the reasons recorded for reopening, ld. Assessing Officer has initiated proceedings based on the material available in the assessment records taken from the assessee during the course of regular assessment proceedings u/s.143(3) of the Act and there being no new tangible material available with the Assessing Officer. Though the assessee has referred to plethora of decisions, we take note of the judgment of Hon’ble Apex Court in the case of CIT Vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) and the ratio laid down by the Hon’ble court on the very same issue reads as under :
“2. A short question which arises for determination in this batch of civil appeals is, whether the concept of change of opinion" stands obliterated w.e.f. 1st April 1989, ie, after substitution of s. 147 of the IT Act, 1961 by the Direct Tax Laws (Amendment) Act, 19877
To answer the above question, we need to note the changes undergone by s. 147 of the IT Act, 1961 (for short," the Act"). Prior to the Direct Tax Laws (Amendment) Act, 1987, s. 147 reads as under:
“147. Income escaping assessment-If-
(a) the ITO has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under s. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assess ment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in cl. (a) on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year)."
4. After the enactment of the Direct Tax Laws (Amendment) Act, 1987, ie, prior to 1st April 1989, s. 147 of the Act, reads as under:
147: Income escaping assessment. If the AO, for reasons to be recorded by him in writing, is of the opinion that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)"
After the Amending Act, 1989, s. 147 reads as under:
Income escaping assessment 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, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)."
On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 of the Act (with effect from 1st April 1989), they are given a go-by and only one condition has remained, viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion" as an in-built test to check abuse of power by the AO. Hence, after 1st April 1989, the AO has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word" opinion" in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words" reason to believe", Parliament reintroduced the said expression and deleted the word" opinion" on the ground that it would vest arbitrary powers in the AO. We quote hereinbelow the relevant portion of Circular No. 549 dl. 31st Oct., 1989 ((1990) 182 ITR (St.) 1, 29), which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression reason to believe in s. 147.-A number of representations were received against the omission of the words reason to believe' from s. 147 and their substitution by the opinion' of the AO. It was pointed out that the meaning of the expression, reason to believe' had been explained in a number of Court rulings in the past and was well settled and its omission from s. 147 would give arbitrary powers to the AO to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended s. 147 to reintroduce the expression has reason to believe' in place of the words for reasons to be recorded by him in writing, is of the opinion'.
For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs.”
Respectfully following the above judgment of Hon’ble Apex Court and the same being squarely applicable on the issues raised in the instant appeal, we are of the considered view that the reassessment proceedings in question before us are merely based on change of opinion and no new tangible material available with the Assessing Officer and in such situation law does not permit the Assessing Officer to revisit the assessee with the reassessment proceedings on the issues which already stands examined. We therefore set aside the finding of ld.CIT(A) and quash the reassessment order as untenable and bad in law. The legal issue raised by the assessee n Ground No.2 is allowed.
Dealing with remaining grounds raised on merit would be merely academic in nature. Even otherwise on merits of the case are concerned, on the issue of unsecured loans, it has been contended that the same has been taken from the relatives of the assessee who are having source of income from Agriculture and 7/12 extract of the lands owning agricultural land has been placed on record. Payments received through banking channel and that cash creditors have accepted that they have given the unsecured loans to the assessee and they are regularly assessed to tax, filed copy of PAN details and also furnished confirmation letters. All these evidences clearly indicate that the assessee has successfully explained the nature and source of the alleged sum and also discharged the primary onus casted upon her and that Revenue authorities have not controverted these details by placing any other contrary material on record nor any discrepancy is noticed in those details. Therefore, on merits of the case, assessee deserves to succeed on the impugned addition u/s.68 of the Act and is hereby deleted.
In sofar as disallowance u/s.40(a)(ia) of the Act, we note that the interest has been paid by the assessee on the vehicle loan to Tata Motors Finance Ltd. which is an NBFC. Payments have been in the form of Easy Monthly Instalments and the assessee has to either give the post dated cheques or the instructions are given to the bank for debiting the EMI from payments and no possibility for the small assessees to deduct the tax at source from the NBFC having huge business. However, the assessee has already requested for Form No.27BA from the Tata Motor Finance Ltd. for the confirmation that the interest payment has been made by the assessee to Tata Motors Finance Ltd. and which has been included in the revenue of Tata Motors Finance Ltd. and income has been offered to tax. Therefore, the issue deserves to be restored to the file of ld. Jurisdictional Assessing Officer for necessary examination of this detail and the assessee shall furnish Form No.27BA.
In the result, the appeal filed by the assessee is allowed as per terms indicated above.
Order pronounced on this 20th day of January, 2026.