MISRILALL JAIN & SONS,SINGHBHUM WEST vs. ACIT, CENTRAL CIRCLE-1, RANCHI

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH-RANCHI VIRTUAL HEARING AT KOLKATA Before Shri Sonjoy Sarma, Judicial Member and Shri Ratnesh Nandan Sahay, Accountant Member I.T.A. No.468/Ran/2024 Assessment Year: 2017-18 Misrilall Jain & Sons….…………….…….…............................……….……Appellant M. D. House, Chaibasa Singhbhum West, Jharkhand – 833201. [PAN: AABFM2851Q] vs. ACIT, CC-1, Ranchi.................……….…..….........……........……...…..…..Respondent Appearances by: Shri Devesh Poddar, Adv., appeared on behalf of the appellant. Shri Kanhaiya Lal Kanak, DR, appeared on behalf of the Respondent. Date of concluding the hearing : December 18, 2025 Date of pronouncing the order : January 21, 2026 ORDER Per Sonjoy Sarma, Judicial Member: This appeal filed by the assessee is directed against the order of the CIT(A)-3, Patna (hereinafter referred to as “CIT(A)”) dated 30.07.2025 passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

I.T.A. No.468/Ran/2025 Misrilall Jain & Sons

Agarwal and CBDT Instructions dated 11.05.2022, notice under section 148A(b) was issued to the assessee. In response, the assessee submitted that the alleged escaped income of ₹1,32,63,010 had already been disclosed in the return filed in response to notice under section 148 of the act and, therefore, there was no further escapement of income. The Assessing Officer rejected the assessee’s explanation and passed an order under section 148A(d) holding it to be a fit case for reopening. Consequently, another notice under section 148 dated 21.07.2022 was issued. In response, the assessee again filed its return declaring total income of ₹1,32,63,010, which was accepted as returned income. However, while completing the reassessment, the Assessing Officer proceeded to make further additions and assessed ₹4,75,23,253 as interest income from other sources, and ₹3,42,60,244 by disallowing business expenses, over and above the returned income. 3. Aggrieved by the order of the Ld. CIT(A) assessee went in appeal before the Ld. CIT(A) where Ld. CIT(A) upheld the addition of ₹4,75,23,253 treating interest income as income from other sources, and the disallowance of expenses of ₹3,42,60,244, granting only an ad hoc relief of ₹10,00,000. 4. Aggrieved, the assessee is in appeal before the Tribunal. At the time of the hearing the Ld. Counsel for the assessee submitted that the alleged escaped income of ₹1,32,63,010 was already disclosed by the assessee in the return filed in response to notice under section 148 of the Act and the same was accepted. Therefore, no further additions could be made beyond the income forming part of the reasons recorded, and the reassessment order making additions over and above the returned income is bad in law. Besides that the interest income of ₹4,75,23,253 arose from fixed deposits maintained as security with

I.T.A. No.468/Ran/2025 Misrilall Jain & Sons

Government departments such as Forest Department, Pollution Control Board and mining authorities for obtaining and renewing mining licences and contracts. No fresh deposits were made during the year. In earlier assessment years, particularly AYs 2008–09, 2010–11 and 2012–13, identical interest income was consistently assessed as business income in orders passed under section 143(3) of the Act and applying the principle of consistency, the interest income cannot be treated as income from other sources. With regard to the disallowance of expenses of ₹3,42,60,244, it was submitted that due to disputes among partners and attachment of the firm’s bank accounts by the Income Tax Department for earlier year demands, the firm was not in a position to make payments. Consequently, the partners incurred expenses on behalf of the firm to protect its business and assets, which were reimbursed in subsequent years. Affidavits of the partners were filed to substantiate that the expenses were genuine business expenses incurred wholly and exclusively for the purpose of business. The ld. AR further submitted the following written submissions:

I.T.A. No.468/Ran/2025 Misrilall Jain & Sons

I.T.A. No.468/Ran/2025 Misrilall Jain & Sons

b) Annam Rajasekher Bindu vs. Income-tax Officer [2024] 158 taxmann.com 406 (Madras)[04-01-2024] – The Hon’ble High Court has held as under:- 11. As regards the first finding, the show cause notice did not contain any reference to the difference between the guideline value and the sale consideration and call for an explanation. Instead, skeletal information regarding the purchase of the relevant immovable property was provided under the first two entries. On this basis, it cannot reasonably be expected of the noticee to provide an explanation with regard to the difference. While the impugned order refers to the lack of documentary evidence with regard to the gifts received from the petitioner's mother, although necessary information was provided by the petitioner, there is no discussion or evidence of consideration of the income tax returns of the petitioner's mother so as to test the veracity of the petitioner's explanation. Moreover, the explanation provided by the petitioner with regard to the receipt of a home loan of Rs. 93,75,000/- from Sundaram BNP Paribas, which formed the alleged principal source for the purchase, has not been dealt with in the impugned order. Unless an assessee's response to the show cause notice is duly considered before a decision is taken to issue notice under section 148, the statutory mandate of a prior show cause notice would be reduced to an empty formality. Therefore, I am of the view that the impugned order calls for interference and the said order is hereby quashed. Consequently, the matter is remanded on terms set out below.

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been accepted. The assessing officer starts its assessment over and above the income disclosed by the assessee and that being the case, since there was no other issue of escapement of income over and above this amount of Rs. 1,32,63,010/-, the additions made by the assessing officer and confirmed by Ld CIT(A) is arbitrary, bad in law and should be deleted. 10. That with respect to the action of assessing officer in taxing the interest income of Rs. 4,75,23,253/- we would like to submit that the same in regular course is computed as business income of the assessee, however the Ld AO during the year has considered the same as income from other sources to be taxed at the normal slab rate without any deductions. (This issue is identical as that argued and discussed in AY 2014-15). 11. That with respect to the disallowance of expenses of Rs. 3,42,60,244/- made by the Ld AO and confirmed by CIT(A) after allowing ad-hoc relief of Rs. 10,00,000/- we would like to submit that the additions have solely been made on the point that the payments were not made by the assessee firm. The quantum of the expense or its genuineness is not doubted by the lower authorities and as such, addition being made solely on the ground that there was no direct business income and the payment was not made by the firm is uncalled for. 12. That before the lower authorities, we had submitted that the affidavits executed by the partners that expenses have been incurred by them on behalf of the firm and that the same has been reimbursed to them in the later years. The copy of the affidavit is also attached herewith at Page 16 – 21. It is a fact on record that there was a dispute between the partners and that the bank account of the firm was inoperative and attached by income tax department against previous years demands and as such, the firm was not in position to make the payments. Thus the partners in view to protect their capital invested and revival of the business incurred the expenses which were reimbursed to them in the subsequent years. 13. That it is also a settled law that expenses incurred for existence/ revival and continuation of the business should be allowed and that we have submitted that the expenses incurred under the heads of staff salary, security, water sprinkler expenses, Forest cleaning & fencing, depreciation etc and others being incidental to the business should be allowed. 14. That in an alternate plea, we would also like to submit that if income from fixed deposit is considered separately as income from other sources and expenses claimed is allowed, then the assessee will have business loss which would be adjusted with income from other sources and as such, ultimately there would be no loss to the revenue. Revised computation of income (Draft) to that extent is attached herewith at Page 22 – 23. 15. That as such, to conclude, we submit as under:- a) That the alleged escaped income has already been disclosed by the assessee in its return filed in response to notice U/s 148 which stands accepted and over & above which this assessment has been made. b) That no addition is called for on the issues which do not form part of the initial show cause notice U/s 148A(b) and the order U/s 148A(d). c) That the income from fixed deposit should be considered as business income and not income from other sources.

I.T.A. No.468/Ran/2025 Misrilall Jain & Sons d) That the expenses incurred is allowable and merely because the same was not paid by the firm directly, should not be disallowed. Affidavit of the partners should have been considered.”

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Service Pvt. Ltd. (supra), wherein, it has been clearly laid down that reassessment under section 148 of the Act can be framed only on the issues stated in the show-cause notice issued under section 148A(b) of the Act and no addition beyond such issues is permissible in law. Respectfully following the said binding precedent, we hold that the reassessment framed on issues beyond the scope of the notice issued under section 148A(b) and the order passed under section 148A(d) of the Act is without jurisdiction and bad in law. Accordingly, the legal ground raised by the assessee is allowed and the impugned reassessment order is hereby set aside. 7. Even on merits, we find that the interest income was earned on fixed deposits kept as security with Government authorities for obtaining and renewing mining-related permissions. No fresh deposits were created during the year. On identical facts, the Revenue has consistently accepted such interest income as business income in earlier assessment years, particularly AYs 2008–09, 2010–11 and 2012–13, in assessments completed under section 143(3). Though the principle of res judicata does not apply to income-tax proceedings, the principle of consistency, as laid down by the Hon’ble Supreme Court in Radhasoami Satsang v. CIT (193 ITR 321), requires that a consistent view be followed where facts remain unchanged. Accordingly, we hold that the interest income of ₹4,75,23,253 is assessable as business income and not as income from other sources. The addition made on this account is therefore deleted. 8. With respect to the disallowance of expenses, the assessee has demonstrated that due to attachment and non-operation of the firm’s bank accounts, the partners incurred business expenses on behalf of the firm to safeguard its operations and capital. The expenses were subsequently reimbursed to the partners in later years. Affidavits of the

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partners have been filed to substantiate these facts. Merely because the payments were initially made by the partners does not disentitle the assessee from claiming the expenses, when it is established that the expenses were incurred wholly and exclusively for business purposes and were reimbursed by the firm. In view of the above facts, we find that the disallowance of ₹3,42,60,244, sustained by the Ld. CIT(A) except for ad hoc relief of ₹10,00,000, is unsustainable in law. Accordingly, the entire disallowance is directed to be deleted. In view of the above, the addition of ₹4,75,23,253 on account of interest income is deleted and directed to be assessed as business income and the disallowance of expenses of ₹3,42,60,244 is deleted in full.

Sd/- Sd/- [Ratnesh Nandan Sahay] [Sonjoy Sarma] Accountant Member Judicial Member

Dated: 21.01.2026. RS Copy of the order forwarded to: 1. Appellant 2. Respondent 3. CIT(A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches