TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2382
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.... of trading of tea, sugar & milk powder, letting out of property on hire and generation of electricity. That the assessee filed return of income for AY 2009-10 declaring total income at Rs. 30,75,229/-. That the case was selected for scrutiny assessment by issuing notice under Section 143(2) of the Act. That thereafter, and after detailed questionnaire, AO finalized the assessment for AY 2009-10 and made the addition of Rs. 2,56,52,410/- and assessed the income at Rs. 2,87,27,710/-. That the AO passed the assessment order on 26.12.2011. That thereafter and within a period of four years from the date of relevant assessment year, the AO has issued and served the notice under Section 148 of the Act dated 30.3.2013 upon the petitioner assessee whereby the respondent has assumed the jurisdiction on reassessed income for AY 2009-10. That having been served with the notice under Section 148 of the Act, the petitionerassessee vide communication / letter dated 3.4.2014 asked for / requested for copy of the reasons recorded to reopen the assessment and also requested the respondent to treat original income as return of income in response to the above notice. That vide communication dated 16.....
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....harging of the interest by the firm from the partners. It is submitted that while replied dated 14.11.2011 to the notice dated 28.11.2011 the assessee specifically replied vide point no.2 and point no.6. 3.4. It is submitted that the assessment is reopened for the reason that amount is advanced to partners and no interest has been charged by the firm from the partners and on the other side, firm has paid the interest on interest bearing fund available with it. It is submitted that during the scrutiny proceedings, the AO has inquired in detail each and every aspect of the said claim. 3.5. It is submitted that vide reply dated 14.11.2011 to notice dated 28.10.2011 assessee has replied vide point no.2 as, "in respect of your query as why capital is shown under "application of funds" we would like to submit that since partner's closing capital balance is in debit, the same has been shown under "Application of funds" in the balance sheet of the firm." 3.6. It is further submitted that in the same reply vide point no.6, assessee has submitted as, 'As desired by your goodself, the copy of ledger account of Jivraj Tea Limited appearing in our books of accounts for the period fro....
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.... submitted that therefore, assumption of jurisdiction by the AO to reopen the concluded assessment for AY 2009-10 while issuing impugned notice under Section 148 of the Act is absolutely illegal and same shall be wholly without jurisdiction, which deserves to be quashed and set aside. 3.12. In support of his above submissions, Shri Vora, learned advocate for the petitioner has heavily relied upon the following decisions of this Court. 1. Sarla Rajkumar Varma vs. Assistant Commissioner of Income Tax reported in (2014) 43 Taxmann.com 372 (Guj) 2. Reckitt Benckiser Healthcare India Ltd vs. Assistant Commissioner of Income Tax (OCD), Circle 5, reported in (2013) 35 Taxmann. Com 539 (Guj). 3. Cliantha research Ltd. vs. Deputy Commissioner of Income Tax, Ahmedabad Circle-I reported in (2013) 35 Taxmann. Com 61(Guj). Making above submissions and relying upon the above decisions, it is requested to allow present Special Civil Application and quash and set aside the impugned notice under Section 148 of the Act and consequently to quash and set aside the impugned reopening of the assessment for AY 2009-10. 4.0. Present petition is opposed by Shri Sudhir Mehta, learned advocate for the ....
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.... prima facie the sundry credit balance shown in the name of Jivraj Tea Ltd is actually an interest bearing loan, which has been reflected in the books under the guise of sundry credit balance. It is submitted that said loan has been diverted to partners for their personal purpose. Hence, interest borrowing fund have been utilized for non business purpose. It is submitted that moreover, the partners of assessee firm are share holders of M/s. Jivraj Tea Ltd and they could not have taken loans from the company directly as that would have attracted provision of Section 2(22)(e) i.e. Deemed Dividend. It is submitted that to circumvent such legal complications, arrangement had been made to route the funds from the company to the directors through assessee firm. It is submitted that therefore, having satisfied on the aforesaid , the income chargeable tax has escaped assessment for AY 2009-10, the AO / respondent has rightly issue the notice under Section 148 of the Act. 4.5. It is submitted that thereafter the questions were asked by the AO while holding the inquiry during the original assessment proceedings, the same were with respect to interest paid to the Jivraj Tea Limited and even ....
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....2007-08 18,594,986/- 4,66,55,621 0 2,59,80,020 1,85,94,986 2008-09 29,365,542/- 7,02,45,077 82,28,679 3,87,23,180 2,93,65,542 2009-10 44,019,886/- 7,78,99,328 78,33,765 5,12,06,512 4,40,19,866 It was observed that at one hand, the credit balance of M/s. Jivraj Tea Ltd is increasing and on the other hand, amount advance to partners is also increasing every year. In fact, the debit balance in capital account is also increasing continuously. Prima facie the sundry credit balance shown in the name of Jivraj Tea Ltd is actually and interest bearing loan, which has been reflected in the books under the guise of sundry credit balance. This loan has been diverted to partners for their personal purpose. Moreover, the partners of the assessee firm are share holders of M/s. Jivraj Tea Ltd and they could not have taken loans from the company directly for avoiding legal complications. To circumvent such legal requirements, arrangement has been made to route the funds from the company to the directors through assessee firm. Further perusal of balance sheet revealed that the assessee was not having any interest free fund at all and part of the interest bearing funds hav....
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....spect to interest free loan to the partners who were also partners of Gujarat Tea Limited. From the material on record and even show cause notice / queries / questionnaires and the reply of the asssessee, it appears that as such there was no inquiry and / or application of mind by the AO with respect to interest free loan to the partners and / or any query with respect to the interest on the amount advance to the partners, more particularly, with respect to reasons recorded while reopening of the assessment. Whatever the question that was with respect to interest paid to Jivraj Tea Limited and the petitioner assessee was requested to show cause as to why the interest paid to Jivraj Tea Limited disallowed and even assessee also replied to the same. The AO at the time of framing original assessment did not address himself with respect to interest free loan paid to the partners and with respect to the case on the disallowance to the interest at the rate of 12% p.a. on the amount advance to the partners. Under the circumstances, it cannot be said that reopening of the assessment for AY 2009-10 is mere change of opinion of the AO. It is required to be noted that reopening of the assessm....