TaxTMI 
TaxTMI 
2012 (8) TMI 399
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....e Assessing Officer furnished such reasons which read as under:- "The assessee company has taken loan of Rs.6 crores and the same was diverted to a group company and interest expenses incurred was of Rs.1.30 crores. As against interest expenses of Rs.1.30 crores, the assessee has charged interest of Rs.25.77 lakhs only and incurred excess expenditure of Rs.76.34 lakhs. Then it appears that by claiming interest expenses of Rs.1.30 crores resulted in net under assessment of income of Rs.76.34 lakhs." 3. Upon receipt of the reasons, the petitioner submitted its objections contending that earlier the case of the petitioner was taken up for limited scrutiny on two issues (i) interest bearing funds diverted for non-business purpose and (ii) selling and distribution expenses increased disproportionately vis-a-vis turnover. That in connection with the first issue, the petitioner had made detailed submissions which had been considered by the Assessing Officer on merits. That the Assessing Officer was fully satisfied regarding the claim of the assessee for interest paid and accordingly allowed the claim of the petitioner and did not make any separate addition on account of disallowance of ....
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....refore, the reopening is based on a mere change of opinion which is not permissible in law. In support of the submission, the learned advocate placed reliance upon the decision of the Supreme Court in the case of Commissioner of Income-Tax vs. Kelvinator of India Ltd., 320 ITR 561. It was accordingly submitted that reopening of the assessment being based upon mere change of opinion, the assumption of jurisdiction by the Assessing Officer under section 147 of the Act is without authority of law and as such, the impugned notice deserves to be quashed and set aside. 6. Opposing the petition, Mrs. Mauna Bhatt, learned senior standing counsel for the respondent, strenuously argued that the petitioner had during the course of the regular assessment proceedings failed to disclose that M/s. Nachmo Textiles was a sister concern of the petitioner company. It was submitted that at the material time when the assessment came to be framed under section 143(3) of the Act, the Assessing Officer was not aware of the fact that M/s. Nachmo Textiles to whom interest bearing funds had been advanced was a sister company of the petitioner. Under the circumstances, it cannot be said that the reopening of....
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....aring on 30-10-2002. In response to which Mr. Manan Shah, C.A. attended and case was discussed with him. Subsequently notices u/s 143(2) was issued and in response to which the assessee filed its submissions dated 4th February 2004, 9th February 2004 and 18th February 2004, which were personally delivered in the office by Mr. Manan Shah, C.A. The assessee company is dealing in 100% cotton knitted fabrics which the assessee is purchasing from Nachmo Textiles, a division of Nachmo Knitex Ltd. Considering the market trend of the said product the assessee has decided to increase its sale by tapping various market resources and for that purpose the assessee wrote a letter to the said Nachmo Textiles, from whom assessee was purchasing 100% cotton knitted fabrics. The assessee received a reply from the said Nachmo Textiles, a division of Nachmo Knitex Ltd. informing that for the purpose of supplying the higher demand of goods they are making negotiations with their bankers for required funds but they may take time and hence in the meantime the assessee was requested to give required advance of the finance required against the manufactured goods to be supplied to the assessee. As the asses....
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....The said amount of receipt of interest is shown under the head "Other Income". Therefore ultimately net interest burden of the assessee is only Rs.76,34,036/- which have been claimed as a business expenditure u.s.36(1)(iii). The assessee earned substantial amount of gross profit amounting to 12.76% which in terms of rupees by way of incremental GP as compared to last year works out to Rs.82,60,946/- which covers the interest burden of Rs.76,34,036/- of the assessee and hence your assumption that interest bearing funds are diverted for non-business purpose is incorrect and we have to request your goodselves to allow our claim for interest payment u/s.36(1)(iii) of the Act." 10. On the basis of the aforesaid submissions made by the assessee, the Assessing Officer recorded his finding as under:- "4.1 The contentions made by the assessee in its above referred three written submissions were duly verified and it was found that the amount borrowed by the assessee were utilized for the business purpose as contended by the assessee company. The assessee had provided advance to M/s Nachmo textiles from whom the assessee is purchasing 100% cotton knitted fabrics and in turn the said Nachmo ....
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....en stated that M/s. Nachmo Textiles is a sister concern of the petitioner company and that by borrowing loan at a higher rate, the petitioner had diverted the same to a sister concern at a lower rate of interest, it is nowhere stated that such fact had come to the notice of the Assessing Officer only subsequently pursuant to some fresh information received by him. Moreover, assuming that the fact regarding Nachmo Textiles being a sister concern of the petitioner company has come to the notice of the Assessing Officer for the first time subsequent to the framing of the original assessment, the ground on which the assessment is sought to be reopened is that the claim of the petitioner that Nachmo Textiles had agreed to given sufficient trade discounts on the product to be supplied to the petitioner to enable it to meet with the interest cost from the trading margin was unsupported and no evidence had been produced. From the facts noted hereinabove, more particularly the submissions made by the petitioner during the course of regular assessment and the findings recorded by the Assessing Officer, it is apparent that the said ground raised by the Assessing Officer is contrary to the rec....