TaxTMI 
TaxTMI 
2020 (10) TMI 716
X X X X Extracts X X X X
X X X X Extracts X X X X
....cluded through Video Conference due to prevailing condition of COVID 19 pandemic. Ground No. 1 is regarding validity of reassessment order passed under section 147 of the IT Act. 2. The assessee filed his return of income under section 139(1) on 27.08.2013 declaring total income of Rs. 7,47,850/-. The assessment was completed under section 143(3) at a total income of Rs. 8,23,430/- on 30th January, 2016. Thereafter, the AO reopened the assessment by issuing a notice under section 148 on 23rd February, 2018 to assess the income on account of excess deduction of interest paid under section 57(3) of the IT Act. The reassessment was completed on 26th November, 2018 whereby the AO has disallowed interest of Rs. 2,64,318/- being an excess amount claimed against the income from other sources. The assessee challenged the action of the AO before the ld. CIT (A) and also challenged the validity of reopening as well as reassessment order passed under section 147. The ld. CIT (A) has dismissed the ground raised by the assessee against the validity of reopening of the assessment. However, no finding is given in respect of the objections raised by the assessee against the validity of the reass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pened Assessment is bad in law and deserves to be quashed. (b) That the assessment was re-opened on the basis of Audit objection by Audit Party as clear from record of the assessee. (c) That the interest paid in nexus with interest income earned and interest is fully allowable and the addition deserves to be deleted. (d) That the objection of re-assessment was not rejected by speaking order then the order U/sec 147 is not a valid order and deserves to be rejected. Therefore, it is clear that re-opened assessment is bad in law, illegal, unjustified and deserves to be cancelled. So the interest paid is fully allowed and no disallowances to be made of the same." 4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that AO had in his possession, the information that the excess interest of Rs. 2,64,318/- was allowed by the AO while completing the assessment u/s 143(3) on 30.01.2016. It is not a case of change of opinion. Therefore, it is held that the AO had sufficient material with him to form the belief that excess deduction of the interest of Rs. 2,64,318/- was allowed by the AO while completing t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n dt. 19/05/2017 acknowledgment number 777637460190517 in response to your above referred notice u/s 148. The assessee requested for the reasons for reopening and pursuant to its request, your honour provided the reasons as recorded. The assessee wants to object the reasons which were recorded for reopening of assessment. The reason are as under :- "The assessee has f i led his return of income for the year under consideration on 30/07/2011 declaring total income of Rs. 106440/-. The ITO, Jaipur conducted enquiry in this case. It is gathered that the assessee has deposited cash in his bank account amounting to Rs. 297000/-. Source of which was found unverifiable. In view of the above and on the basis of material available on record I have reason to believe that , income of Rs. 2,97,000/- has escaped assessment within the meaning of sect ion 147 of the IT Act 1961". In the present case, the petitioner questions the assumption of jurisdiction to reopen the assessment principally on the ground that there has been no failure on the part of the petitioner to fully and truly disclose all material facts necessary for its assessment. The petitioner has not failed to disclose fully ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st of the assessee to challenge the same before the Courts as the Assessing officer has already passed the reassessment order and thus cannot be cured and will result in quashing of the reassessment order. In this regard, we find that similar issue has come up for consideration before the Hon'ble Rajasthan High Court in case of M/s K.C. Mercantile vs. CIT (supra) wherein the Tribunal has remanded the matter back to the file of the Assessing officer for disposing off the objections and in that context, the following substantial question of law was framed by the Hon'ble High Court which reads as under: "whether under the facts and circumstances of the case, the ld Tribunal was justified in not declaring the reassessment proceedings and consequential assessment order passed thereto as nullity?" And the relevant facts and findings are contained in Para 4, 4.1 and 8 which reads as under:- "4. Counsel for the appellant has contended that the present appeal is arising out of the judgment and order of the tribunal whereby tribunal has upheld the contention of the appellant and remitted back the matter for reassessment which will give a second inning to the Assessing Officer who has t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e passed within one year from the end of the financial year in which the order under section 254 of the Act, was passed by the Tribunal and received by the Commissioner of Income tax." The Hon'ble Rajasthan High Court, thereafter, has given its findings as under: "8. Before proceeding with the matter, it is not out of place to mention that the law declared by the Supreme Court in GKM Driveshafts (supra) clearly held that the preliminary objection is to be decided as the first, it cannot be decided subsequently. The argument which has been canvassed by the assessee is required to be considered very seriously more particularly in view of the observations made by the Supreme Court in the case of KS Petron Private Ltd. (supra) which is followed in Hotel Blue Moon (supra), the law declared by the Supreme Court is taken in true spirit whether it will open a second inning in how own. Section 153(3) is to be read very cautiously as 153 powers are given to the Department, the Court has to look into whether the law declared by the Supreme Court is given away or protected. In the present case, as the Assessing Officer has clearly ignored the law declared by the Supreme Court, in that view ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4,50,147/- against the income from other sources being the interest income of Rs. 1,85,829/-. The AO has disallowed the proportionate interest on the ground that the excess interest paid of Rs. 2,64,318/- cannot be allowed under section 57(3) as this is not incurred for earning the interest income. The ld. A/R has submitted that the borrowed fund has been utilized by the assessee towards capital contribution in proprietorship concern as well as partnership firm from which the assessee has declared business profit of Rs. 14,96,823/-. Therefore, the interest expenditure is an allowable business expenditure against the business income. The assessee has committed an error by claiming the entire interest expenditure against the income from other sources instead of bifurcating the same and claiming proportionate amount against the business income as well as income from other sources. Thus the ld. A/R has submitted that an error of claiming the deduction under one head instead of two separate heads would not have any revenue effect but the net outcome will remain the same. In support of his contention he has relied upon the decision of Hon'ble Supreme Court in case of Rajasthan State Ware....