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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Joginder Singh,
आदेश / O R D E R
The instant appeal has been filed by the assessee for Assessment Year 2007-08 against the order of Ld. Commissioner of Income Tax (Appeals)-41, Mumbai, arising out of assessee’s appeal related to assessment u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the Act). The assessee has raised two grounds of appeal, one of which relates to the challenge to reopening of assessment u/s 147 of the Act.
The assessee is a partnership firm and filed its return of income for Assessment Year 2007-08 on 23/11/2007 declaring nil income. The return of income was processed u/s 143(1) of the Act and subsequently, taken for scrutiny assessment u/s 143(3) of the Act. The assessment u/s 143(3) was completed by the ld. Assessing Officer vide its order dated 21/08/2009 accepting the return of income as such. Subsequently, the case of the assessee was sought to be reopened by the Ld. Assessing Officer u/s 147 of the Act vide notice dated 26/09/2012. The assessee requested for reason of reopening which was supplied by the Ld. Assessing Officer vide its letter No. ITO/24(1)(3)/Ashray 148/12-13 dated 01/11/2012. The following reasons were supplied for reasons of reopening of assessment:-
“On perusal of details and balance sheet of the assessee, it is noticed that the assessee has paid huge interest of Rs.59,48,641/- on borrowed loans of Rs.9,58,46,107/- @ 6%. However, on the other hand, it has given interest free loans amounting to Rs.3,66,32,152/- to four parties. As on one hand assessee is paying huge interest on the amounts borrowed and on the other hand it is advancing interest free loans/advances to some parties for without any business consideration. On perusal of records, it is seen that the assessee has not given any explanation in this regard. It can be seen from the balance sheet that the assessee utilized bank OD on which the assessee has paid interest. In view of aforesaid facts, the interest amount to the tune of Rs.21,97,929/- (6% of Rs.3,66,32,152/-) has escaped assessment.” 2.1. The assessee agitated the reopening both on technical ground as well as on merit. The AO completed the assessment u/s 143(3) r.w.s. 147 of the Act vide its order dated 31/12/2013. Adjustments with respect to interest were made and the total income was assessed at Rs.21,97,929/-, against which, the assessee preferred appeal before the Ld. Commissioner of Income Tax (Appeals) assailing the order of the Ld. Assessing Officer. The appeal of the assessee was rejected by the Ld. Commissioner of Income Tax (Appeals) vide its order dated 18/03/2015. The assessee is in second appeal before us and assailed the order of the Ld. Commissioner of Income Tax (Appeals). The assessee has challenged the reopening of assessment as well as raised contention on merits to support his case.
2.2. Before us, the assessee has raised various contentions in its support and submitted copies of questionnaires raised during original assessment proceedings and submission made thereto. The facts are not in dispute. The initial and foremost contention of the Ld. AR is that the notice issued u/s 147 of the Act is not valid on the ground that it is based on mere change of opinion and no new material facts has come to the knowledge of Ld. Assessing Officer so as to justify the reopening of the case. All queries in respect of unsecured loans were raised by the Ld. Assessing Officer during original assessment proceedings and all necessary details were supplied by the assessee. The submissions of the assessee inter-alia included complete details of unsecured loans. The material facts were well appreciated and examined by ld. Assessing Officer while framing the assessment. The assessment is sought to be reopen on the basis that assessee has obtained interest bearing loans but it has advanced interest free loans. The Ld. Assessing Officer has sought to tax notional interest on interest free unsecured loans given by the assessee. On the other hand, the ld. DR contended that assessee did not provide the complete details as called for by the Ld. Assessing Officer and has justified the reopening of assessment.
We have heard both the parties and perused the material available on record. We have gone through the questionnaire seeking details from the assessee and the submissions made by the assessee before the ld. Assessing Officer during the original assessment proceedings. We find that adequate details have been provided in this regard by the assessee. The reasons supplied by the Ld. Assessing Officer for reopening of the assessment shows that there is no new tangible material which has come to the possession/knowledge of the Ld. Assessing Officer and reopening is being initiated only on the basis of mere change of opinion. All the material and records including financial statements and submissions of the assessee were already available with him during the original assessment proceedings and the same conclusion is drawn by him at that time only. The assessment year in question is 2007-08 and the notice of reassessment is issued on 26/09/2012 which is beyond the period of four years from end of relevant assessment year. The Original assessment has been completed u/s 143(3) of the Act. I also quote the relevant statutory provisions of section 147 of the Act to settle the dispute in hand:-
“147. If the Assessing Officer 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) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:” (emphasis supplied by me) 3.1. Accordingly, if assessment has been completed u/s 143(3) of the Act and the case is sought to be reopen beyond four years then one of the conditions for reopening is that there is either failure on the part of the assessee to make prescribed returns or failure to disclose fully and truly all the material facts necessary for the assessment. As all the material facts has been disclosed by the assessee at the stage of original assessment and the ld. Assessing Officer has duly scrutinized the same and further no new material has come before the AO so as to justify the reopening and it is mere change of opinion, therefore, the reopening is bad in law as per the statutory provisions. Therefore, the reopening is invalid. The issue is decided in favour of the assessee on technical grounds itself and accordingly the consequent assessment done is quashed. There is no need to go into the merits of case.
Finally, the appeal of the assessee is allowed.
This order was pronounced in the open in the presence of ld. representative from both sides at the conclusion of the hearing on 05/07/2016.