TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1182
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....ns of the Kele Group namely (i) Yogeshwar Nagari Sahakari Patsanstha and (ii) Kailaswasi Sunanda Kele Mahila Nagari Sahakari Patsanstha. Both the above two Patsansthas were also covered under search u/s 132 of the Income Tax Act, 1961. During the course of search action in the above Patsansthas, several incriminating documents related to the assessee M/s. Prithvi Builders were found and seized. Based on the seized documents it was gathered that the assessee has booked bogus interest expenses. From the copy of ledger extract of the Patsansthas it was noted that the account statements were properly computerized and interest expenses were handwritten. In view of the above facts, it was clear that handwritten noting is nothing but manipulation. Further the assessee also could not furnish any supporting documents to substantiate that it has actually paid interest expenses to the Patsansthas. The Assessing Officer therefore was of the opinion that the assessee has wrongly claimed interest expenses of Rs. 15,83,502/-. He, therefore, reopened case of the assessee by recording the following reasons: "Vide letter dated 22/03/2022, you have requested for reasons recorded for reopening of as....
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....sessment is made in the assessee's case. Thus going through the evidences collected during the search/survey proceedings, it appears that the assessee has claimed bogus interest expense to the extent of Rs. 15,83,502/- in its return of income filed for AY 2013-14 which required to be taxed. 5. Finding of the AO: On analyzing the evidences collected during the course of search/survey enquiry it shows that the assessee has claimed bogus interest expenses to the extent of Rs. 15,83,502/-. Therefore, an amount of Rs. 15,83,502/- leading to income which has escaped of equivalent amount and not been brought to tax. Thus, in view of the discussion made above, there is reason to believe that income of Rs. 15,83,502/- chargeable to tax has escaped assessment for AY 2013-14. 6. Basis of forming reason to believe and details of escapement of income. In view of the facts and findings as discussed in pera-2, 3, 4 and 5 above, I have reason to believe that the assessee has understated its income to the extent of Rs. 15,83,502/- chargeable to tax which has escaped assessment within the meaning of section 147 of the I. T Act. I am therefore satisfied that it is a fit case for initiating pr....
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....ome of the assessee. 5. Before the Ld. CIT(A) it was submitted that the case was reopened on account of wrong claim made by the assessee of interest expenses. However, no such addition was made on this count and the disallowance was u/s 40(a)(ia), therefore, in view of the decision of Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom), the addition made by the Assessing Officer has to be deleted and the re-assessment proceedings be quashed. It was further contended that since the interest expenditure has been capitalized through closing stock, therefore, in absence of claim of expenses, disallowance is unwarranted, even if no tax was deducted u/s 194A. It was also contended that since the assessee has paid interest to the Patsansthas, which are in the nature of credit cooperative societies, therefore, the assessee is not required to deduct any tax since the payer is exempt from TDS on interest payable to the credit cooperative societies. The assessee also relied on various decisions to this proposition. 6. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee. Distinguishing the various submissions made b....
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....dified, deleted etc in the interest of natural justice. 8. The Ld. Counsel for the assessee at the very outset submitted that the Assessing Officer has not made any addition in respect of the issue for which the reasons were recorded u/s 147 of the Act but has made some other addition. He submitted that a perusal of reasons recorded shows that the reopening was made on account of bogus claim of interest expenses. However, instead of making any addition on account of the same, the Assessing Officer had made disallowance u/s 40(a)(ia) for non deduction of tax. Therefore, in view of the decision of Hon'ble Bombay High Court in the case of Jet Airways India Ltd. (supra), the re-assessment proceedings should be quashed. 9. Referring to the decision of the Ld. CIT(A) he submitted that the Ld. CIT(A) has wrongly distinguished the decision in the case of Jet Airways India Ltd. (supra) and held that the case was opened on the reason of prima facie non allowability of interest expenditure. The Assessing Officer during the course of 148 proceedings examined the allowability of interest expenditure and found that they were not allowable u/s 40(a)(ia) because the assessee has not deducted TDS....
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....s not claimed any interest expenditure during this year, therefore, no addition could have been made on such expenditure and at the best the work-in-progress could have been reduced. 13. The Ld. Counsel for the assessee in yet another plank of his argument submitted that if there was any default for non deduction of tax, the Assessing Officer could have levied interest u/s 201(1A) but no disallowance could have been made for the impugned assessment year. He accordingly submitted that the order of the Ld. CIT(A) being not in accordance with law should be set aside and the grounds raised by the assessee be allowed. 14. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A). He submitted that the reopening of assessment was made on account of wrong claim of interest expenditure. The Assessing Officer in the order passed u/s 143(3) r.w.s. 147 has disallowed the interest expenditure on account of non deduction of TDS on such interest, therefore, the decision of Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (supra) is not applicable to the facts of the present case. 15. So far as the various other planks of arguments made by the Ld. Counsel ....
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....e under section 148 would be necessary. 18. In that case the following substantial question of law was before the Hon'ble High Court: "Where upon the issuance of a notice under section 148 of the Income-tax Act, 1961 read with section 147, the Assessing Officer does not assess or, as the case may be reassess the income which he has reason to believe had escaped assessment and which formed the basis of a notice under section 148, is it open to the Assessing Officer to assess or reassess independently any other income, which does not form the subject-matter of the notice?" 19. We find the Hon'ble High Court in the decision held as under (relevant observations only): "16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on an....