2011 (1) TMI 1463

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....see. Subsequently, on 24th March, 2006, a notice under s. 148 of the Act was issued by the AO for reopening the assessment for the reason that certain income had escaped assessment, and such reasons were based on the assessment made by the AO for subsequent assessment year of 2001-02. The reasons recorded by the AO for initiating proceedings under s. 147/148 of the Act are as under : "The verification of the records revealed that as per the balance sheet enclosed to the return of income, the assessee has shown the following advances to the sister concerns : 1. Maruti Woodland Makers (P) Ltd. Rs. 23,74,997 2. Gojal Construction (P) Ltd. Rs. 11,70,000     Rs. 35,44,997 Besides, there is also a machinery advance to Shri S. Tidke. It is noticed that no interest on these investments/advances has been offered to tax. On the other hand, the interest debited on account of bank loan and other creditors is at Rs. 6,99,316. Even if it is so, the aforesaid advances to sister concerns are without charging any interest. The interest at 12 per cent on the amount as Rs. 35,44,997 comes to Rs. 4,25,399 which has escaped assessment within the me....

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....S. Joshi vs. ITO & Anr., Writ Petn. No. 2287 of 2009, dt 22nd Feb., 2010 [reported at (2010) 230 CTR (Bom) 232: (2010) 36 DTR (Bom)227'Ed.]; 2. Bhavesh Developers vs. AO & Ors., Writ Petn. No. 2508 of 2009, dt 12th Jan., 2010 [reported at (2010) 229 CTR (Bom) 160: (2010) 34 DTR (Bom) 125'Ed.]; 3. Grindwell Norton Ltd. vs. Jagdish Prasad Jangid, Asstt. CIT & Ors. (2004) 186 CTR (Bom) 530 : (2004) 267 ITR 673 (Bom); 4. German Remedies Ltd. vs. Dy. CIT & Ors. (2006) 201 CTR (Bom) 193 : (2006) 285 ITR 26 (Bom); 5. CIT vs. Smt. Maniben Valji Shah (2006) 204 CTR (Bom) 249 : (2006) 283 ITR 453 (Bom); 6. SGS India (P) Ltd. vs. Asstt. CIT & Anr. (2007) 208 CTR (Bom) 263: (2007) 292 ITR 93(Bom). 4. On the other hand, the learned Departmental Representative, appearing for the Revenue has defended the initiation of proceedings on the basis of the additions made in a subsequent year. In this connection, reference has been made to the following judgments : 1. Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500 (SC); 2. Raymond Woollen Mills Ltd. vs. ITO & Ors. (1999) 152 CTR (SC....

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....e AO to form a reasonable belief that certain income had escaped assessment and the material was the information obtained during the assessment for the asst. yr. 2001-02. Therefore, having regard to the facts and circumstances of the instant case, the initiation of proceedings under s. 147/148 of the Act is well founded. 6. Before parting, we may refer to the authorities cited before us, on behalf of the assessee. In the case of Prashant S. Joshi (supra), assessee retired from a partnership and on retirement he received certain sum over and above the balance lying to his credit in the account books of the partnership. In the return of income filed, the said sum was not offered to tax, being capital receipt. The AO issued notice under s. 148 of the Act to reopen the assessment and tax the said sum for the reason that the CIT(A) in the case of partnership allowed a claim for treating the payment of the stated sum to the retiring partner as revenue expenditure and, thus, as per the AO the said sum claimed by the assessee as exempt in his hands, being a capital receipt, constituted an income escaping assessment. The aforesaid reason was found to be untenable for initiation of procee....

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....sessment, was based on the findings recorded in the assessment order for the subsequent asst. yr. of 2002-03 to the effect that the transactions were not at arm's length as contemplated under the transfer pricing regulations. The basis of reopening was found to be invalid because the transfer pricing regulations came into force w.e.f. 1st April, 2002, and were not applicable for the asst. yr. 2001-02. In this background, it was held that the findings in asst. yr. 2002-03 could not form the basis to reopen the assessment for the asst. yr. 2001-02. However, the fact position in the present case stands on a different footing. In the present case, assessment has been reopened on the basis of the two additions made in the asst. yr. 2001-02. Though the two additions have been wiped out in the respective appellate proceedings in asst. yr. 2001-02, however, on the date of recording of reasons to issue notice under s. 148 of the Act for the captioned assessment year, the additions were not deleted in entirety and therefore the initiation of proceedings under s. 147/148 of the Act could not be vitiated due to a subsequent development. Hence, the parity of reasoning laid down in the case ....

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....dent from the order of the Tribunal dt. 23rd Nov., 2007 (supra). It was, therefore, contended that the matter be restored to the file of the CIT(A) for adjudication on merits in terms of the precedent in the assessee's own case for asst. yr. 2001-02. 11. On the other hand, the learned Departmental Representative has opposed the prayer by pointing out that reference to s. 14A in the assessment order at p. 5 was only a typographical error and no duty was cast on the CIT(A) to correct the impression of the assessee. Therefore, the action of the CIT(A) in upholding the additions be sustained. 12. We have considered the rival submissions carefully. The dispute pertains to disallowance of interest expenditure in relation to advances given to two sister concerns. The claim of the assessee is that on similar facts, in asst. yr. 2001-02, the additions have been ultimately found to be unsustainable in the appellate proceedings vide order of the Tribunal dt. 23rd Nov., 2007 (supra). Before the CIT(A), the assessee did not press the ground of appeal on merits, though in the memo of appeal, it had challenged such additions. The claim of the assessee that the aforesaid happened on acco....