AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 912
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....ne by the AO by issuing notice dated 30.03.2019 w/s. 148 of the Act is valid notwithstanding the following facts: a) The assessment was reopened after four years without any mention of failure by the appellant to fully disclose material facts, as required by law. Therefore, the condition for reopening was not satisfied. b) No new tangible material. The AO's reliance on judicial decisions in Tourism Finance Corporation (2010) and National Coop Development Corporation (2012) cannot constitute new material, as these rulings existed at the time of the original assessment. c) Re-opening on the basis of audit objection is on borrowed satisfaction and non-application of mind on the part of the Ld. AO. 1.1. Accordingly, the Ld. CIT(A) ought to have held that the action of the AO of not allowing deduction u/s. 36(1)(viii) on interest income of Rs. 24,11,75,651/- cared from HUDCO Bonds constitutes change of opinion and therefore, ought to have quashed / annulled the reassessment order dated 22.12.2019 passed w/s. 143(3) r.w.s. 147. 1.2. In view of the same, it is humbly prayed that the re-assessment initiated by notice dated 30.03.2019 u/s. 14....
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....19, initiating the reassessment proceedings in the case of the assessee, after the expiry of 4 years from the end of the relevant assessment year, on the basis that the perusal of the record shows that while working deduction under section 36(1)(viii) of the Act, the assessee has considered the interest earned on HUDCO bonds as being eligible for the purpose of quantifying deduction. However, the assessee has failed to explain how the interest earned on these loans can be termed as profit derived from the business of providing long-term finance in India. In response to the notice issued under section 148 of the Act, the assessee filed its return of income on 26/04/2019, declaring a total income of INR 1,311,98,97,340. Upon receipt of the reasons recorded for reopening the assessment, the assessee filed its objections to the reassessment proceedings, which were disposed of vide order dated 11/11/2019. 6. Thereafter, statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee, seeking details regarding the allowability of deduction under section 36(1)(viii) of the Act in respect of interest earned on HUDCO bonds. After considering th....
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....t, the A.O. didn't properly examine or verify the nature of this income in the light of relevant judicial pronouncements. The subsequent recognition of this lapse provided the A.O. with a reason to believe that income had escaped assessment, satisfying the requirement u/s.147. Further, the appellant didn't disclose that this interest income was from investments, not from business operations. Such omission of material facts justifies reassessment beyond four years, as per the proviso to Section 147. Judicial rulings such as Tourism Finance Corporation and National Co-op. Development Corporation make it clear that investment income is not eligible for deduction u/s.36(1)(viii). These decisions, combined with the facts, constitute sufficient tangible material to warrant reassessment. In view of the above discussion and decision of case in the context of the facts of this case which is identical to above-referred case laws, I reach to an inescapable conclusion that there was not only existed new information with AO from credible source but also having enough & sufficient material with AO to form his belief about escapement of income. Hence, I find no infirmity....
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....filed its return of income on 27-09-2012 declaring total income at Rs. 13,14,40,80,112/-. The scrutiny assessment assessment was completed on 17-02-2015, determining the revised total income of the assessee at Rs. 13,16,89,72,260/-. The Assessee Company is engaged in the business such as long term project finance outside India and other export financing activities. 2. It was seen from the records that while working deduction u/s 36(1)(viii) assessee had considered the interest earned on HUDCO bonds as being eligible for the purpose of quantifying admissible deduction. However the assessee failed to explain as to how the interest earned on these bonds can be termed as profit derived from business providing long term finance in India. In the case of M/s Tourism Finance Corporation (2010) 2 ITR (Trib.) 1 Delhi and National Coop Development Corporation (2012204 Taxman 6 Delhi interest earned on deposits etc. do not fall within the ambit of income derived from long term finance and as such no deduction is therefore allowable u/s 36(1)(viii). The income of Rs. 77,15,084/- has escaped assessment and consequently short levy of tax of Rs. 25,03,159/-. Therefore, I have reasons to b....
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....ded in annual report, audited P&L A/c, balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For aforestated reasons, it is not a case of change of opinion by the AO. 6. In view of the above, it is a fit case for initiation of proceedings u/s.147 of Income Tax Act, 1961, in order to frame proper assessment to bring to tax the amount of Rs. 77,15,084/-, which has escaped assessment. 7. In this case more than four years have lapsed from the end of the assessment year under consideration. Hence necessary sanction to issue the notice u/s 148 of the Income Tax Act, 1961 has been obtained separately from Pr. Commissioner of Income Tax-3, Mumbai as per provisions 151 of the Income Tax Act, 1961." 11. At this stage, it is relevant to analyse the provisions of the first proviso to section 147 of the Act, as it stood prior to its substitution by the Finance Act 2021, which reads as follows: - "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 ....
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....site full and true disclosure of all material facts necessary for the assessment was not made by the assessee. However, the AO did not point to any such fact in the reasons recorded that came to its possession after the completion of the scrutiny assessment proceedings, which formed the basis for reopening the assessment. Therefore, from the bare perusal of the reasons recorded for reopening the assessment, it is evident that there was no new or tangible material which formed the basis for "reason to believe" that income chargeable to tax has escaped assessment in the present case. 14. During the hearing, the learned AR brought to our attention the details of the computation of total income, which forms part of the paper book. From the perusal of these details on page 9 of the paper book, we find that the assessee specifically mentioned the interest income earned on HUDCO bonds for the purpose of computing the deduction under section 36(1)(viii) of the Act. The said computation on page 9 of the paper book is reproduced as follows for ready reference: - "STATEMENT SHOWING TOTAL INTEREST INCOME FROM LONG TERM FINANCE FOR QUANTIFYING DEDUCTION U/S 36(1) (viii) OF THE ACT FOR THE....
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....d the belief of escapement of income from assessment as envisaged under section 147; application of mind by the AO to such material; and an inference, based on reason drawn tentatively by the officer that income has escaped assessment. However, in the present case, as noted in the foregoing paragraph, the entire exercise of reassessment was initiated on the basis of material already available on record of the AO, and thus, no new or tangible material came into the possession of the AO to initiate reassessment proceedings. 17. We find that the Hon'ble Jurisdictional High Court in Ananta Landmark (P.) Ltd. vs. Deputy Commissioner of Income-tax, reported in [2021] 439 ITR 168 (Bom.), observed as follows: - "...It is also settled law that the Assessing Officer has no power to review an assessment which has been concluded. If a period of four years has lapsed from the end of the relevant year, the Assessing Officer has to mention what was the tangible material to come to the conclusion that there is an escapement of income from assessment and that there has been a failure to fully and truly disclose material fact. After a period of four years even if the Assessing Officer ha....