TaxTMI 
TaxTMI 
2020 (10) TMI 716
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....ary cost be awarded to the assessee." The hearing of the appeal is concluded 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 respe....
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....nd change of opinion is not valid and bad in law based on various judicial decisions as summarized above. Hence re-opened 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 i....
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....ment year 2010-11 had escaped assessment within the meaning of Section 147 of the Act and consequently, he proposed to reassess the assessee's income for the said year. The assessee filed a return on 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 jurisdictio....
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....ssued by the Hon'ble Supreme Court is a mere technicality and breach of such technicality can be made good by remanding the matter back to the file of the Assessing officer. Alternatively, whether the same is in nature of an illegality which has prejudiced the interest 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. Couns....
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....ass an order on the notice of reopening i.e. within one year from the end of the financial year in which the notice was issued. In fact, Section 153 (2A) of the Act as in force at the relevant time itself provides that an order of fresh assessment, consequent to the order of Tribunal under Section 254 of the Act, would have to be 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 o....
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....see and consequently the assessment order is quashed for want of disposal of the objections raised by the assessee against the notice issued under section 148 before passing the reassessment order. Ground No. 2 is regarding disallowance of addition of Rs. 2,64,318/-. 6. The ld. A/R of the assessee has submitted that the assessee claimed the interest payment of Rs. 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 ag....