Shri Bharat Dhirajlal Shah, Anand V. ITO, Ward-3, Anand

ITA 2189/AHD/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6932 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 28-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.S. SHUKLA
• Keywords: Reopening of assessment; Business income; Source of fund; Initiation of penalty proceedings; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 148; 271(1)(c); 143(3); 142(1); 234B; 143(2); 139(1)

Judgement Text

ITA No.2189/Ahd/2018 A.Y. 2013-14 Page 1 of 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER (Conducted through Virtual Court) ITA No.2189/Ahd/2018 Assessment Year: 2013-14 Shri Bharat Dhirajlal Shah, vs. Income Tax Officer, Himdip, Nr. Radhakrishna Statue, Ward - 3, Anand. Opp. Brahmakumari, Sardarganj, Anand – 388 001. [PAN – AAGPS 3595 Q] (Appellant) (Respondent) Appellant by : Shri S.N. Soparkar, Sr. Advocate with Shri Bandish Soparkar, A.R. Respondent by : Shri S.S. Shukla, Sr. D.R. Date of hearing : 02.12.2021 Date of pronouncement : 07.12.2021 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER : This appeal is filed by the assessee against the order dated 20.09.2018 passed by the CIT(A)-4, Vadodara for the Assessment Year 2013-14. 2. The grounds of appeal raised by the assessee are as under : 1) Ld. CIT(A) erred in law and on facts in dismissing ground challenging validity of reassessment proceedings undertaken by AO on the basis of change of opinion not tenable under law. 2) Ld. CIT(A) erred in law and on facts in confirming disallowance by AO of Rs.3,79,128/- interest expense incurred on loan funds obtained in earlier years while assessing income earned thereon ignoring direct nexus with borrowed funds. ITA No.2189/Ahd/2018 A.Y. 2013-14 Page 2 of 7 3) Ld. CIT(A) erred in law and on facts to confirm disallowance of genuine interest expenses holding that there were neither loan funds nor current liabilities during the year ignoring documentary evidence. 4) Levy of interest u/s 234A, 234B & 234C of the Act is unjustified. 5) Initiation of penalty proceedings u/s 271(1)(c) of the Act is unjustified. 3. The assessee is in the financing business and filed return of income under Section 139(1) of the Income Tax Act, 1961 for the Assessment Year 2013-14 on 29.07.2013 declaring total income of Rs.10,53,550/-. Regular assessment under Section 143(3) of the Act was completed in present assessee’s case on 12.02.2016 at taxable income at the income returned by the assessee in his return of income filed under Section 139(1) of the Act. The assessee e-filed return of income on 29.07.2013 in Part AB-S Column-2 caption Loan Fund as mentioned Nil amount. Subsequently, the Assessing Officer noticed that during the year under consideration the assessee received interest income amounting to Rs.3,83,015/- and interest expenses amounting to Rs.3,79,128/-. Since there was no loan fund or no current liabilities mentioned in the return of income filed on 29.07.2013, the assessee’s claim of deduction under interest expenditure amounting to Rs.3,79,128/- in the computation of business income was not allowable as per the Assessing Officer. The Assessing Officer observed that concealing particulars of income and claiming excess deduction of Rs.3,79,128/- resulted into under-assessment to that extent. During the course of reassessment proceedings, the Assessing Officer also observed that the assessee’s omission to bring to the attention of the Assessing Officer the full and correct particulars of the items in the books of account amounts to non-disclosure of material information within the meaning of Section 147 of the Act. Therefore, the Assessing Officer had the reason to believe and was satisfied that it is a fit case for reopening of the assessment. Accordingly, the reasons dated 09.11.2017 was recorded with the prior approval of the Range Additional Commissioner of Income Tax and the case was reopened by issuing notice under section 148 of the Act dated 22.08.2017. The reasons for reopening the assessment under Section 147 of the Act dated 09.11.2017 is reproduced herein below:- “No.lTO-Wd-3/AND/Reason/l 47/2016-17 Date: 09/11/2017 To, ITA No.2189/Ahd/2018 A.Y. 2013-14 Page 3 of 7 Shri Bharat Dhirajlal Shah HIMDIP, Nr. Radhakrishnan Statue, Opp. Brahmkumari, Sardar Gunj, Anand. Sir, Sub: Reason for reopening the assessment u/s.147 of the I.T. Act- Please refer to your letter dated 02.11.2017 on the above subject. 2. As desired, the reason recorded for reopening the assessment u/s.147 of the income-tax Act, 1961 in your case for A. Y. 2013-14 is given as under : On verification of Income Tax Return (ITR), Computation of Income and submission of assessee in respect of his business income, it has revealed that in his financing business, he has received Rs.3,83,015/- as interest. He claimed expenditure of Rs.3,79,128/- as interest payment. However, it is noticed from Part A-BS (Source of Fund: 2 Loan Fund) of ITR that assessee has shown 'nil' loan Fund. It is also noticed from ITR that assessee has 'nil' current liabilities. As there is no loan fund as per Balance Sheet, as per accounting principles, reported in the Return of Income, the claim of interest expenditure of Rs.3,79,128/- cannot be allowed as deduction in the computation of Business Income. Therefore, the amount of Rs.3,79,128/- being interest on borrowed fund not appearing in the relevant Balance Sheet has been wrongly claimed as expenditure that resulted into under-assessment of income to that extent for A.Y.2013-14 Yours faithfully, Sd/- [Beena R Raval] Income-tax Officer Ward-3, Anand” 4. Upon receipt of the said notice under section 148 of the Act, the assessee vide letter dated 31.08.2017 raised objection to the assessment proceedings which was disposed off vide order dated 23.10.2017. The assessee vide letter dated 02.11.2017 submitted copy of his return of income in response to the notice under section 148 of the Act on 06.11.2017 declaring return of income at Rs.10,54,060/-. The reason for reopening the assessment was also sent to the assessee vide letter dated 09.11.2017. Notice under section 143(2) of the Act was issued on 13.12.2017. A notice under section 142(1) of the Act was issued on 13.12.2017 requesting the assessee to show cause as to why the assessee’s claim of deduction under interest expenditure amounting to Rs.3,79,128/- in the computation of business income be ITA No.2189/Ahd/2018 A.Y. 2013-14 Page 4 of 7 disallowed and added to the taxable income of the assessee. As the assessee has shown nil loan fund and there were no current liabilities during the financial year relevant to the Assessment Year 2014-15, the assessee filed reply dated 20.12.2017 to the show cause notice. The Assessing Officer considered the said reply and made addition of Rs.3,79,128/- thereby disallowing the interest expenses. 5. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 6. The Ld. AR submitted that the assessee is challenging validity of reassessment proceedings undertaken by the Assisting Officer on the basis of change of opinion and thus re-opening is not tenable under law. The Ld. AR submitted that the initiation of reassessment proceedings on the ground that there is interest income and interest expenses which was shown Nil in the column of loan funds, it was only by an inadvertent oversight/error committed by the Tax Consultant. The Ld. AR submitted that the loan funds were reflected in Balance Sheet, Ledger Account and, therefore, this reopening is only change of opinion. The Ld. AR relied upon the decisions of Hon’ble Gujarat High Court in the case of Adani Enterprises, 101 Taxmann.com 91, Shanti Enterprises, 76 Taxmann.com 184, Krupesh Ghanshyambhai Thakkar, 77 Taxmann.com 293 as well as relied upon the decision of the Hon’ble Apex Court in the case of Zee Media Corporation Limited. The Ld. AR submitted that the ratio of the decision of the Hon’ble Apex Court in case of CIT vs. Kelvinator of India Limited, 320 ITR 561 wherein it was held that even post the amendments in Section 147 of the Act w.e.f. 01.14.1989, the concept of change of opinion continuous to apply as long as certain claim made by the assessee was examined by the Assessing Officer, whether the Assessing Officer raised correct queries and came to the correct conclusion or not, in the context of reopening of assessment would be of no consequence. There is vital difference between a conclusion of the Assessing Officer after scrutiny which may appear to the Revenue to be erroneous and a situation where the Assessing Officer during the scrutiny assessment does not examine a particular claim of the assessee altogether. The later will follow within the purview of reopening of assessment, particularly when the notice is issued within a period of 4 years but the former may not. ITA No.2189/Ahd/2018 A.Y. 2013-14 Page 5 of 7 7. As regards merits of the case, the Ld. AR submitted that the loan was shown in the Balance Sheet when the revised return of income was filed in respect of notice under section 148 of the Act and thus the loan was reflected in the income tax return as well as in Balance Sheet. Therefore, the claim of interest expense is a genuine expense and that should have been allowed by the Assessing Officer. 8. The Ld. DR relied upon the Assessment Order and the order of the CIT(A) and submitted that the assessee has deliberately not mentioned the loan funds in the original return of income and there is no Balance Sheet available before us which is showing that loan funds were taken from the particular parties. The Ld. DR further submitted that the assessee himself is admitting that there was error/mistake on the part of the assessee not to mention any loan fund in the income tax return. But the assessee could not demonstrate that in the original assessment under Section 143(3) of the Act. The assessee has not given any explanation regarding interest claim. On merit, the Ld. DR submitted that the assessee never explained the parties who has given the loan fund before the Assessing Officer as well as before the CIT(A). Therefore, the Ld. DR prayed that the appeal of the assessee be dismissed. 9. We have heard both the parties and perused all the relevant materials available on record. The reopening in the present case has been done on the claim of interest expenses. The assessee in the original return of income has not mentioned the amount regarding loan funds. The Ld. AR pointed out page no.80 dated 26.06.2015 and there is no mention of loan fund before the earlier Assessing Officer. As regards notice under section 142(1) of the Act dated 09.10.2015, the Assessing Officer has specifically asked query that copy of the interest expenses and interest income during the year should be produced. The assessee vide letter dated 28.10.2015 has given the details regarding the interest income but the details lack the mention of loan fund. As per Section 147, Explanation-3 for the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issues which are escaped assessment and such issue comes to the notice subsequently in the course of proceedings under this section, notwithstanding that the reason for said issue has not been included in the reasons recorded under sub Section-2 of Section 148. The contention of the assessee that there is change of opinion is not a valid contention as in the present case the assessee has not mentioned the loan fund and simply claimed the interest expense. The decision of the ITA No.2189/Ahd/2018 A.Y. 2013-14 Page 6 of 7 Hon’ble Supreme Court in the case of Pr. CIT vs. Zee Media Corporation Limited (supra) decided the issue related to notice whether issue within the period of four years from the end of relevant Assessment Year. The observation of the Hon’ble Supreme Court in the case of Kelvinator of India Limited that as long a certain claim made by the assessee was examined by the Assessing Officer, whether the Assessing Officer raised correct queries or not will not have a bearing on the assessment. The Hon’ble Apex Court has never commented on the issue of reopening in respect of cases where the assessee has failed to give the correct and true disclosure of its Profit & Loss Account and Balance Sheet. In the present case, the assessee admittedly stated that Tax Consultant committed error by not mentioning loan fund in the original return of income. The Assessing Officer in the original assessment dated 12.02.2016 has never doubted the claim of interest and there is no mention of actual disclosure of claim of interest at any stage of its Assessment Order. Thus, the Assessing Officer in assessment under Section 143(3) of the Act has not noticed that there is escapement of certain issues in the Assessment Order/assessment proceedings. Thus, explanation of section 147, to be specific Explanation-3, will come into picture and it will not amount to change of opinion. Thus, ground no.1 of assessee’s appeal is dismissed. 10. As regards merits of the case are concerned, the assessee has explained before the Assessing Officer that the loan fund was mentioned in the return of income filed in response to notice under Section 148 of the Act and thus the assessee has made valid claim of interest expenses on borrowed fund. The same should have been allowed by the Assessing Officer. Hence, the appeal of the assessee is partly allowed. 11. In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on this 7 th day of December, 2021. Sd/- Sd/- (WASEEM AHMED) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 7 th day of December, 2021 PBN/* ITA No.2189/Ahd/2018 A.Y. 2013-14 Page 7 of 7 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad