TaxTMI 
TaxTMI 
2018 (8) TMI 124
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....the same as on a perusal of the reasons recorded for re-opening of the assessment; the same cannot be basis to form a belief that income may have escaped assessment. 2. The learned CIT(A) erred in upholding the action of Assessing Officer in treating a sum of Rs. 7,00,66,000/- being amount of loan waived by the lender as income under section 41(1) observing that taking loan is an ordinary trade transaction of the appellant as the same was obtained in the course of the regular business. 3. The learned CIT (A) erred in upholding the levy of interest under section 234B amounting to Rs. 78,81,595/-. 4. The appellant submits that the Assessing Officer be directed: a. to delete the addition of Rs. 7,00,66,000/- in respect of waiver of loan; b. to delete interest levied under section 234B; and to modify the assessment in accordance with the provision of the Act. 3. Brief facts of the case are that the assessment u/s. 143(3) was completed on 15.03.2005. Subsequently, the assessment was reopened u/s. 147 of the Act on the following reasons recorded: The assessee took loan of US $ 3 Million from M/s. Doshin Hongknong Ltd., Hongkong for....
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....ld. Commissioner of Income Tax (Appeals) elaborately considered the issue. However, he upheld the reopening by holding as under: 4.3 I have carefully considered the issue. The plea of the appellant is that once the assessment is completed u/s.143(3) after due consideration of facts, the assessment is not subject to re-opening. The appellant has relied on various judicial pronouncements in this regard. However, it is observed that the decisions in the cases cited by the Ld.AR of the appellant have no applicability to the facts and issue of re-opening of assessment in this case. There is a proper and valid material before A.O., who has recorded the reason properly for issue of notice u/s.148. The decision in the case of Praful Chunilal Patel also supports the action taken by A.O. where it was held that - "On a proper interpretation of section 147, it would appear that the power to make assessment or reassessment, where the initiation has been made within four years of the end of the relevant assessment year, would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the f....
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....on of facts that he makes and if he infers from any information that he receives. Justification of belief of AO is not to be judged from the standards of proof required to coming to the final decision. 4.6 There is a valid existence of belief of A.O. in this case based on the existing material duly recorded. The existence of belief in this case is proved. The adequacy of grounds cannot be questioned, neither it is a matter open for investigation - S. Narayanappa Vs. CIT (1967) 63 ITR [SC]. 4.7 The case of non assessment of an item of income can warrant information of requisite belief under main section 147 - "If there is material placed on record which would show existence of income chargeable to tax and which ordinarily ought to have been included in the ascertainment of taxable income made in the assessment order but was not \ so included, that would itself provide a cause or justification for a belief to the Assessing Officer that such income had escaped assessment and the Assessing Officer in such cases would be ex facie justified in initiating the ' proceedings on such basis. The cases of non-assessment of an item of income chargeable to tax woul....
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....ssee placed reliance upon the several case laws. 9. Upon merits, the ld. Counsel of the assessee submitted that the loan in question which was written off during the year was utilized to pay old loans taken from the other financial institutions. He further submitted that the old loans taken were utilized for acquisition of fixed assets. In this regard, the ld. Counsel of the assessee referred to loan agreements with financial institutions with respect to old loans. The ld. Counsel of the assessee further submitted that the assessee has placed reliance upon the decision of the Hon'ble jurisdictional High Court in the case of Mahindra & Mahindra Ltd. vs. CIT [2003] 261 ITR 501 (Bom). He further submitted that against the said judgement, the Revenue has preferred an appeal to the Hon'ble Apex Court and the Hon'ble Apex Court has decided the issue in favour of the assessee. 10. In this regard, it is noted that the assessee has also filed an affidavit through director making the following submissions: 1) I say that SPL Polymers Limited (Formerly known as Shin-ho Petrochemicals (India) Limited) having its office in Chennai was incorporated sometime around 1989 and it b....
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....erused the records. We may gainfully refer to the provisions of section 147 which reads as under: Income escaping assessment. 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 proceedings72 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 sectio....
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....d on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.-For the purpose of assessment or reassessment79 under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. ....
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....er the profit for the year has been determined, in an adjustment from the brought forward losses for earlier years, there is a deduction named as 'part waiver of ECB loan - principal amount'. We find that the above cannot at all be taken as full disclosure of the actual fact that it was waiver of a loan which was to be used by the borrower as its general funding requirement. It has been held earlier in a catena of case laws that the waiver of capital loans cannot be considered to be income of the assessee. However, general funding requirements loan cannot be taken to be falling under the span of capital funding requirement. Moreover, there is no disclosure as such. Hence, by no stretch of imagination, it can be said that there is a due disclosure of the fact by the assessee. 18. Hence, by no stretch of imagination, it can be said that there was due disclosure by the assessee. Rather there was a misleading disclosure as detailed in para nos. 16 & 17 above. All the decisions referred by the ld. Counsel of the assessee have been rendered in the context that there was due disclosure by the assessee. In fact, in the case of Idea Cellular Ltd. (supra) the Hon'ble Bombay High Court....