ITAT Mumbai: Reopening of Assessment Upheld under Section 147

The ITAT Mumbai upheld the reopening of assessment under section 147 of the Income Tax Act due to errors in income assessment. The appeal against treating interest income on inter corporate deposits as "Income from other sources" instead of "Business income" was partly allowed for statistical purposes. The ITAT remanded the issue back to the AO for verification, considering the assessee's business nature and historical assessment as business income.

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Issues:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Treatment of interest income on inter corporate deposits as "Income from other sources" instead of "Income from Business or Profession."

Issue 1: Reopening of assessment under section 147 of the Income Tax Act:
The appeal was against the Commissioner of Income Tax (Appeals) order confirming the Assessing Officer's decision to reopen the assessment under section 147 for the assessment year 2006-07. The AO found that certain income of the assessee was assessable under "Income from other sources" and not as declared by the assessee. The assessee contended that the reopening was based on audited objections and a mere change of opinion. The AO held that the income was under-assessed, resulting in a short levy of tax. The ITAT considered both parties' contentions and found that the AO's opinion for reopening the assessment was justified based on admitted errors in the assessment of certain income under the wrong head. The appeal on this issue was decided against the assessee.

Issue 2: Treatment of interest income on inter corporate deposits:
The assessee challenged the treatment of interest income on inter corporate deposits as "Income from other sources" instead of "Business income." The assessee argued that being engaged in the business of financing and investments, such income should be assessed under "Profit and Gains from Business or Profession." The ITAT noted that historically, the income had been assessed as business income. The assessee also claimed that the sale proceeds were invested in section 54EC Bonds, not inter corporate deposits. The matter was remanded back to the AO to verify the assessee's claims and, if found correct, to assess the income from inter corporate deposits as business income. The appeal was partly allowed for statistical purposes.

In summary, the ITAT Mumbai addressed the issues of reopening the assessment under section 147 and the treatment of interest income on inter corporate deposits. The judgment upheld the reopening of assessment based on errors in income assessment under the wrong head. Additionally, the ITAT remanded the issue of interest income on inter corporate deposits back to the AO for further verification, allowing the appeal partly for statistical purposes.

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