SUDHA DATTATRAY MHAISKAR, THANE V. ACIT CEN CIR 36, MUMBAI

ITA 4859/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0252 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S SHARMA
• Assessee Lawyers: A K GHOSH
• Keywords: Depreciation; Search and seizure; Maximum Marginal Rate; Proportionate interest; Tangible material; Difference of opinion; Corroborative evidences; Commercial expediency; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 40(a)(ia); 194C; 147; 148; 139

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.4859/ MUM/2016 ( / ASSESSMENT YEAR : 2006 - 07) SUDHA D MHAISKAR, MANISH SAF ALYA, M.G. ROAD, VISHNU NAGAR, DOMBIVALI(W), THANE - 421202 / V. D CIT CEN CIR CLE - 5(3) AAYAKAR BHAVAN, MUMBAI - 4 00020 ./ PAN : AATPM1238K ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 5121/ MUM/2016 ( / ASSESSMENT YEAR : 2006 - 07) DCIT CEN CIR CLE - 5(3), ROOM NO. 1906, 19 TH F LOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021 / V. SUDHA D ATTARAY MHAISKAR, MANISH SAF ALYA, M.G. ROAD, VISHNU NAGAR, DOMBIVALI(W), THANE - 421202 ./ PAN : AATPM1238K ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. A.K GHOSH , REVENUE BY : SHRI. C.S. SHARMA (DR) / DATE OF HEARING : 19 .09.2018 / DATE OF PRONOUNCEMENT : 12 .12 .2018 I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 2 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS, FILED BY ASSESSEE AS WELL AS BY R EVENUE , BEING I.T.A. NO.4859/ MUM/2016 & I.T.A. NO.5121/ MUM/2016 RESPECTIVELY FOR ASSESSMENT YEAR 2006 - 07 , ARE DIRECTED AGAINST APPELLATE ORDER DATED 23.03.2016 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 53 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), T HE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM ASSESSMENT ORDER DATED 28.03.2014 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143 R.W.S. 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2006 - 07 . 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND IN LAW THE LD. CIT(A) ERRED IN DISMISSING THE FOLLOWING LEGAL GROUNDS RAISED BY THE APPELLANT RELATING TO RE - OPENING OF ASSESSMENT AND CONSEQUENT ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 147 OF THE ACT: - (A) ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND IN LAW, THE LD. A.O ERRED IN REOPENING THE ASSESSMENT U/S 147 WHICH IS BARRED BY LIMITATION, ILLEGAL, BAD IN LAW, VOID - AB - INITIO OR OTHERWISE VOID FOR WANT OF JURISDICTION AND THE SAME IS LIABLE TO BE QUASHED. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND IN LAW, THE LD. A.O ERRED IN REOPENING THE ASSESSMENT U/S 147 BY ISSUE OF NOTICE DATED 22.03.2013 U/S 148 WHICH IS BARRED BY LIMITATION IN VIEW OF THE FIRST PROVISO TO SE CTION 147 OF THE I.T. ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE A.O'S ACTION OF DISALLOWING A SUM OF RS, 5,33,605/ - ON ACCOUNT OF INTEREST PAID TO BANK BY INVOKIN G THE P ROVISIONS OF SEC. 36(L)(II I) OF THE ACT. I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 3 3. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND AND /OR DELETE ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. THE APPELLANT PRAYS THIS HON'BLE TRIBUNAL TO REQUEST THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) R.W.S 147 OF THE ACT AND/OR DELETE THE ADDITION/DISALLOWANCE TO THE EXTENT CONFIRMED BY THE LD CIT(A). 3. THE GROUNDS OF APPEAL RAISED BY REVENUE IN ITS APPEAL FILED WITH THE TRIBUNAL IN ITA NO. 5121/MUM/2016 FOR AY 2006 - 07 READS AS UNDER: 1. W HETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 9,60,00,000/ - ON ACCOUNT OF PAYMENT MADE TO IRB INFRASTRUCTURE LTD WITHOUT TAKING INTO CONSIDERATION THE FACT THAT IT IS A PAYME NT MADE IN THE NATURE OF CONTRACTUAL OBLIGATION WHICH IS COVERED U/S 194C OF THE I.T.ACT ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 9,60,00,000/ - WITHOUT APPRECIATIN G THE FACT THAT THE ASSESSEE IS MAKING A LUMP SUM AMOUNT TO IRB INFRASTRUCTURE LTD ON ACCOUNT OF TOLL CHARGES COLLECTED BY THE ASSESSEE AND , THEREFORE , THE ASSESSEE IS LIABLE TO MAKE TDS U/S 194C AND , THEREFORE , THE PAYMENT MADE BY ASSESSEE TO IRB INFR ASTRUCTURE LTD. IS NOT ALLOWABLE AS DEDUCTIBLE U/S 40A(IA) OF THE ACT. 4. THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY REVENUE, THESE CROSS APPEALS AR E HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS COMMON ORDER FOR SAKE OF CONVENI E NCE. TH E BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS PROPRIETOR OF M/S. VIRENDRA BUILDERS AND IS ENGAGED IN THE BUSINESS OF TOLL COLLECTION AND ROAD REPAIRING WORK . THE ASSESSEE ORIGINALLY FILED RETURN OF INCOME ON 31 ST OCT OBER , 2006 , DECLARI NG TOTAL INCOM E OF RS. 23,10,280 / - . THE REVENUE FRAMED ASSESSMENT U/S. 143(3) OF THE 1961 ACT ON 25 TH MARCH, 2008 , DETERMINING TOTAL INCOME OF RS. 23,95,278/ - . T HE CASE OF THE ASSESSEE WAS REOPENED BY THE AO U/S. 147 OF THE ACT BY ISSUE OF NOTICE U/S 148 OF THE 1961 ACT DATED 22.03.2013 WHICH WERE SERVED ON THE ASSESSEE . THE ASSESSEE IN RESPONSE TO THE A FORESAID NOTICE U/S. 148 OF THE 1961 ACT DULY FILED RETURN OF INCOME ON 12.03.2014, I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 4 DECLARING TOTAL INCOME OF RS. 23,95,278/ - . THE AO WHILE FRAMING ASSESSMENT U/S 143(3) R.W.S. 147 OF THE 1961 ACT MADE TWO DISALLOWANCE S, FIRSTLY DISALLOWANCE OF RS. 5,33,605/ - TOWARDS INTEREST PAID ON O VERDRAFT ACCOUNT MAINTAINED WITH DOMB IVALI NAGAR SAHAKARI BANK LTD.. T HE AO OBSERVED THAT T HE ASSESSEE HAS ADVANCED CERTAIN AMOUNTS TO DIFFERENT PARTIES FROM THIS OVERDRAFT BANK ACCOUNT MAINTAINED BY THE ASSESSEE WITH DOMBIVALI NAGAR SAHKARI BANK LIMITED WITHOUT BUSINESS CONSIDERATION AND NO INTEREST THEREON WAS CHARGED. THE AO CONFRONTED THE A SSESSEE AND ASKED AS TO W HY PROPORTIONATE INTEREST CALCULATED AT THE RATE OF 12% ON THE AMOUNT OF SUCH ADVANCES SHOULD NOT BE CURTAILED FROM THE TOTAL INTEREST CLAIMED BY THE ASSESSEE . THE AO OBSERVED THAT ON ONE HAND THE ASSESSEE IS PAYING HUGE INTEREST ON THE AMOUNT BORROWED FROM VARIOUS PARTIES AND ON THE OTHER HAND THE FUNDS WERE DIVERTED FOR ADVANCING INTEREST FREE LOANS/ADVANCES TO SOME PARTIES WITHOUT ANY BUSINESS CONSIDERATION. THE ASSESSEE IN THE COURSE OF REASSESSMENT PROCEEDINGS CONDUCTED BY TH E AO U/S 147 SUBMITTED THAT THIS ISSUE WAS CONSIDERED BY THE AO WHILE FRAMING ORIGINAL ASSESSMENT U/S 143(3) AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO ALLOWED SUCH INTEREST EXPENSES PAID ON OD ACCOUNT MAINTAINED WITH DOMBIVALI NAGAR SAH KARI BANK LIMITED. THE AO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND REJECTED THE SAME AS IT WAS OBSERVED BY THE AO ON VERIFICATION OF THE DETAILS OF THE ASSESSEE THAT INTEREST ON SUCH LOANS IS HIGHER THAN THE INTEREST PAID BY THE ASSESSEE TO THE BANK ON OD. THEREFORE , THE AO DISALLOWED THE ENTIRE INTEREST TO THE TUNE OF RS. 5,33,605/ - PAID BY THE ASSESSEE WHICH WAS ADDED BACK TO THE INCOME OF THE ASSESSEE , VIDE ASSESSMENT ORDER DATED 28.03.2014 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. THE SECOND DISALLOWANCE WAS MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE 1961 ACT , WHEREIN DISALLOWANCE WAS MADE TO THE TUNE OF RS. 9,60,00,000/ - . THE AO ASKED THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO FILE DETAILS OF I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 5 VARIOUS EXPENSES CLAIMED AND DETAILS OF INCOME - TAX DEDUCTED AT SOURCE AND TDS DEPOSITED TO THE CREDIT OF CENTRAL GOVERNMENT . THE ASSESSEE SUBMITTED DETAIL S OF VARIOUS EXPENSES AS ALSO SUBMITTED COPIES OF TDS RETURN S AND DETAILS OF TDS MADE IN RESPECT OF VARIOUS PAYMENTS . O N VERIFICATION OF THE DETAILS, IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS MADE PAYMENT OF RS. 9,60,00,000/ - T O M/S. IRB INFRASTRUCTURE LTD. ( HEREINAFTER CALLED IRB) , ON ACCOUNT OF T OLL COLLECTION CHARGES . THE AO OBSERVED THAT THESE PAYMENTS ARE IN THE NATURE OF CONTRACT PAYMENTS AS LUMP SUM PAYMENT WAS MADE BY THE ASSESSEE TO THE SAID PARTY ON ACCOUNT OF TOLL COLLECTION CHARGES , WHILE IT WAS OBSERVED BY THE AO THAT NO INCOME - TAX WAS DEDUCTED AT SOURCE WHILE MA KING SUCH PAYMENT KEEPING IN VIEW PROVISION S OF SECTION 194C OF THE 1961 ACT. THE AO INVOKED PROVISIONS OF SECTION 40(A)(IA) OF THE 1961 ACT AND THE ASSESSEE WAS ASKED BY THE AO TO EXPLAIN AS TO WHY NO INCOME - TAX WAS DEDUCTED AT SOURCE BY THE ASSESSEE WHIL E MAKING AFORESAID PAYMENT TO IRB. THE ASSESSEE HAD CONTENDED THAT PROVISION OF SECTION 194C OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE IN THE AY 2006 - 07 . THE ASSESSEE IS AN INDIVIDUAL HAVING A PROPRIETARY CONCERN VIRENDRA BUILDERS. THE AO REJECTED T HE CONTENTIONS OF THE ASSESSEE. THE AO OBSERVED THAT PROVISIONS OF SECTION 194C OF THE 1961 ACT IS APPLICABLE TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS THIS IS NOT A CASE WHERE THE AUDIT IS DONE FOR THE FIRST YEAR. THE AO OBSERVED THAT THE ASSES SEE WAS LIABLE FOR AUDIT IN AY 2005 - 06 ALSO . THUS , THE AO CONCLUDED THAT THE ASSESSEE HAS COMMITTED DEFAULT BY NOT DEDUCTING INCOME - TAX AT SOURCE IN RESPECT TO TOLL COLLECTION CHARGES OF RS. 9,60, 00, 000/ - WHICH WAS DISALLOWED BY THE AO AND ADDED BACK TO THE INCOME OF THE ASSESSEE IN VIEW OF SPECIFIC PROVISION OF SECTION 40(A)(IA) OF THE 1961 ACT , VIDE REASSESSMENT ORDER DATED 28.03.2014 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT . 5. THE ASSESSEE FILED FIRST APPEAL WITH LEARNED CI T(A) AND RAISED CONTENTION S BOTH ON LEGAL GROUNDS CHALLENGING THE REOPENING OF CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT AS WELL CONTENTIONS I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 6 WERE RAISED ON MERITS BY THE ASSESSEE BEFORE THE LD. CIT(A) . THE LEARNED CIT(A) HELD AS UNDER: - 5 . .3.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING COPIES OF JUDICIAL DECISIONS RELIED UPON BY HER. THE ISSUE FOR ADJUDICAT ION IS WHETHER THE A.O. . WAS JUSTIFIED IN MAKING DISALLOWANCE OF TOLL COLLECTION CH ARGES OF RS.9, 60,00,000/ - PAID BY THE APPELLANT TO IRB WITHOUT DEDUCTION OF TDS THEREON U/S.40(A)(IA) OF THE ACT. THE BRIEF FACTS PERTAINING TO THIS ISSUE ARE THAT IRB BEING ENGAGED IN THE BUSINES S OF ROAD CONSTRUCTION HAD VIDE AGREEMENT DATED 20.03.2005 A PPOINTED VB AS ITS AGENT FOR ITS BUSINESS OF TOLL COLLECTION. VB AGREED TO PAY A SUM OF RS.9.60 CRORES TO IRB FOR THE PERIOD 01.04.2005 TO 31.03.2006 UNDER THE TERMS OF THE SAID AGREEMENT AND TO EMPLOY NECESSARY STAFF AT ITS OWN COST TOR COLLECTING THE TOL L FROM THE USERS OF THE ROAD. THE A.O. DISALLOWED THE TOLL COLLECTION CHARGES PAID TO IRB ON THE GROUND THAT THESE WERE IN THE NATURE OF CONTRACT PAYMENT COVERED U/S.L94C OF THE ACT AND AS THE APPELLANT HAD NOT DEDUCTED TAX AT SOURCE THEREON, THE SAID CHAR GES WERE NOT ALLOWABLE U/S.40(A)(IA) OF THE ACT. THE SHORT QUESTION WHICH FALLS FOR CONSIDERATION IS WHETHER THE IMPUGNED PAYMENT M ADE TO IRB IS COVERED WITHIN THE AMBIT AND SCOPE OF DEFINITION OF WORK' AS GIVEN IN SECTION 194 C OF THE ACT, BECAUSE SECTIO N 40 (A)(IA) MAKES IT CLEAR THAT 'WORK' CARRIED OUT BY A CONTRACTOR OR SUB CONTRACTOR HIT BY US MISCHIEF SHALL HAVE THE SAME MEANING AS IN EXPLANATION III T O SECTION 194C. 5.3.2 FROM PERUSAL OF EXPLANATION III TO SECTION 194 C AS REPRODUCED IN PARA 5.2.3 AB OVE, IT IS CLEAR THAT THE WORK OF TOLL COLLECTION CHARGES ASSIG NED BY IRB TO THE APPELLANT DOE S NOT FALL IN ANY OF THE STATED CATEGORIES OF WORK. IN THIS CONNECTION, THE APP EL LANT HAS INVITED ATTENTION TO THE APPELLATE ORDER DATED 11.03.2013 PASSED BY THE CIT(A) - 29, MUMBAI IN THE RELATED CASE OF JAYANT D. MHAISK A R HUF FOR A.Y. 2009 - 10 WHEREIN ON IDENTICAL FACTS, THE APPEAL FILED BY THE ASSESSEE HAS BEEN ALLOWED BY DELETING THE DISALLOWANCE OF T O LL COLLECTION CHARGES - U/S.40(A)(IA) ON ACCOUNT O F NON - DEDUCTION OF TAX AL SOURCE U/S.194C/194J. IT IS SUBMITTED THAT THE DEPARTMENT HAS NOT FILED ANY APPEAL BEFORE THE HON'BLE TR IBUNAL AGAINST THE SAID ORDER OF THE CIT(A). IN THAT CASE, THE CIT( A) AFTE R ANALYSIS OF PROVISIONS OF SECTION 40(A)(IA) OBSERVED THAT IN ORD ER TO MAKE A DISALLOWANCE UNDER THIS SECTION, THERE HAS T O BE A V IOLATION OR NON - PAYMENT OF TDS IN TERMS OF PROVISIONS OF CHAPTER XVII - B OF THE ACT . AFTER CONSIDERING T HE PROVISIONS I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 7 OF EXPLANATION III TO SECTION 194C , IT WAS HELD IN THAT CASE THAT PAYMENT OF TOLL COLLECTION CHARGES MADE BY THE ASSESSEE COULD NOT BE SAID TO BE COVERED U/S. 19 4 C AS IT DID NOT FALL IN ANY OF THE SPECIFIED CATEGORIES OF WORK. HAVIN G PERUSED THE AFORESAID ORDER OF THE CIT(A) IN THAT CASE, I AM IN AGREEMENT WI TH THE FINDINGS AS WELL AS REASONING CONTAINED THEREIN IN REGARD TO NON - APPLICABILITY OF SECTION 194C TO THE IMPUGNED PAYMENT OF TOLL COLLECTION CHARGES MADE BY THE APPELLANT TO IRB 5.3.3 THE ACTIVITY OF TOLL COLLECTION UNDERTAKEN BY THE APPEL LANT ACTUALLY FALLS U/S. 206C THE ACT. SECTION 206C(1C) DEALS E XCLUSIVELY WITH PERSONS WHO GAVE A LEASE OR LICENCE OR ENTER INT O CONTRACT OR OTHERWISE TRANSFER ANY RIGHTS AND INTEREST IN ANY PARKING LO T OR TOLL PLAZA. THE APPELLANT H AS ENGAGED IRB AS AN AGENT FOR COLLE CTION OF TOLL FROM THE USERS OF BRIDGE ACROSS PATALGANGA RIVER ON PANVEL - MAHAD - PANJI ROAD (NH - 7) IN RAIGAD DISTRICT AT THE RATES FIXED BY THE GOVERNMENT OF MAHARASHTRA. IT DESERVES TO BE NOTED THAT SECTION 206C FALLS UNDER CHAPTER XVII - BB AND NOT CHAPTER X VII - B. THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IN RESPECT OF PAYMENTS COVERED UNDER CHAPTER XVII - B AND THEREFORE, NO DISALLOWANCE U/S. 40(A)(IA) CAN BE MADE IN RESPECT OF TOLL COLLECTION CHARGES PAID BY THE APPELLANT TO IRB WHICH ARE COVERE D U/S. 206C OF THE ACT. I N VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THE A.O. WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF TOLL COLLECTION CHARGES OF RS. 9,60,00,000/ - PAID BY THE APPELLANT TO IRB WITHOUT DEDUCTION OF TDS U/S. 40(A)(IA) WHICH WAS NOT AT ALL ATTRACTED WITH REGARD TO THE IMPUGNED PAYMENT. THE DISALLOWANCE SO MADE BY THE AO IS THUS DIRECTED TO BE DELETED. GROUND NO. 3 RAISED BY THE APPELLANT IS ACCORDINGLY ALLOWED. THE SECOND ISSUE AS TO DISALLOWANCE OF INTEREST EXPENSES TO THE TUNE OF RS . 5,33,605/ - WAS , HOWEVER, DECIDED AGAINST THE ASSESSEE BY LD . CIT(A) ON MERITS BY HOLDING AS UNDER: 6.3.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE POINT FOR DETERMINATION IS WHETHER THE A.O. WAS JUSTIFIED IN DISALLOWING PROPORTIONATE INTEREST OF RS.5,33,605/ - U/S. 3 6(1 )(III) OF THE ACT ON ACCOUNT OF DIVERSION OF BORROWED FUNDS TO SISTER CONCERNS FREE OF INTEREST. IN THIS CONNECTION, IT IS W ELL - SETTLED THAT THE ONUS U/S.36(1 )(III) LIES ON THE ASSESSEE TO SHOW THAT BORROWED FUNDS HAD BEEN U SED FOR THE PURPOSE OF BUSINESS [ 193 ITR 344 (ORI.)]. IN THE CASE OF CIT V. ABHISHEK INDUSTRIES LTD . I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 8 286 ITR 1 (P&H), IT HAS BEEN HELD THAT IN ORDER TO CLAIM DEDUCTION U/S. 36(1)(III) OF THE ACT, THE RE SHOULD BE NEXUS OF USE OF BORROWED FUNDS FOR THE PURPOSE OF BUSINESS AND THE SUBMISSION THAT REVENUE HAD NOT BEEN ABLE TO ESTABLISH NEXUS OF FUNDS ADVANCED TO SISTER CONCERNS ETC, WITH BORROWED FUNDS WAS NOT TENABLE . IT HAS ALSO BEEN HELD THAT IF IT IS FOUND THAT THE ASSESSEE HAS ADVANCED CERTAIN FUNDS TO SISTER CONCERNS OR ANY OTHER PERSON WITHOUT ANY INTEREST, HEAVY ONUS LIES ON HIM TO JUSTIFY DEDUCTION OF INTEREST PAID ON LOANS RAISED BY IT TO THAT EXTENT. IT IS ALSO WELL - ESTABLISHED THAT THE QUESTION WHETHER THE INTEREST - FREE ADVANCES TO SOME SISTER CONCERN ETC. WE RE EXTENDED FOR COMMERCIAL EXPEDIENCY OR NOT IS A QUESTION OF FACT . FOR THI S PURPOSE, AS HELD IN THE CASE OF S.A BUILDERS LTD. (SUPRA), WHAT NEEDS TO BE EXAMINED IS THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY TO ITS SISTER CONCERN AND WHAT THE SISTER CONCERN DID WITH THIS MONEY 6.3.2 LET US NOW EXAMINE WHETHER THE APPELL ANT HAS BEEN ABLE TO DISCHARGE THE ONUS PLACED ON HER IN TERMS OF THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. THE APPELLANT S CONTENTION IS THAT SINCE THE APPELLANT WAS WELL AS THE SISTER CONCERNS TO WHOM MONEY WAS ADVANCED FREE OF INTEREST ARE PAYING TAX AT THE MAXIMUM MARGINAL RATE, THERE IS NO LOSS OF REVENUE FOR NOT CHARGING INTEREST FROM THE SAID CONCERNS. IN THIS REGARD, IT DESERVES TO NOTED THAT WHAT I S VITAL IS WHETHER THE SUCH ADVANCES TO SISTER CONCERNS WERE MADE OUT OF COMMERCIAL EXPEDIENCY AND NOT WHETHER SUCH INTEREST FREE ADVANCES TO RELATED PARTIES RESULTED IN ANY LOSS OF REVENUE. THE APP ELLANT HAS NOT SPECIFIED THE PURPOSE FOR WHICH SHE ADVANCED INTEREST BEARING FUNDS TO THE SISTER CONCERNS AND WHAT THE SISTER CONCERNS DID WITH SUCH FUNDS FIND HOW IT HELPED IN FURTHERANCE OF BUSINESS INTERESTS OF THE APPELLANT. THE APPELLANT HAS NOT FURNI SHED ANY SUPPORTING EVIDENCE IN THIS REGARD. THUS THE APPE LLANT HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THAT T HE INTEREST - FREE LOANS WERE ADVANCED TO THE SISTER CONCERNS/ RELATED PARTIES FOR BUSINESS PURPOSE AND COMMERCIAL EXPEDIENCY. THE REVENU E NEUTRALITY OF CLAIM OF DEDUCTION OF INTEREST EXPENDITURE IS NOT A RELEVANT CONSIDERATION U/S 36(1 )(III) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, I DO NOT FIND ANY ERROR OR INFIRMITY IN THE ACTION OF THE AO IN MAKING THE AFORESAID DISALLOWANCE OF INT EREST OF RS. 5,33,605/ - ON ACCOUNT OF DIVERSION OF BURROWED FUNDS BY THE APPELLANT TO THE DISALLOW ANCE SO MADE IS UPHELD. GROUND NO . 4 OF THE PRESENT APPEAL IS ACCORDINGLY DISMISSED. I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 9 HOWEVER, WHILE DECIDING THE ISSUE ON REOPENING OF THE CONCLUDED ASSESSMENT BY THE AO WITHIN THE PROVISIONS OF SECTION 147/148 OF THE 1961 ACT, THE LD. CIT(A) DISMISS ED THE SAID GROUND BEING INFRUCTUOUS BY HOLDING THAT SINCE THE GROUNDS OF APPEAL ON MERITS ARE DECIDED IN FAVOUR OF THE ASSESSEE , THERE I S NO NEED TO ADJUDICATE THIS LEGAL GROUNDS OF APPEAL CHALLENGING REOPENING OF THE CONCLUDED ASSESSMENT WITHIN PROVISIONS OF SECTION 147/148 OF THE 1961 ACT. THE LEARNED CIT(A) WHILE DISMISSING CHALLENGE OF THE ASSESSEE TO REOPENING OF THE ASSESSMENT U/S 147 OF THE 1961 ACT, HELD AS UNDER VIDE APPELLATE ORDER DATED 23.03.2016: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING COPIES OF JUDICIAL DECISIONS RELIED UPON BY HER. THE ISSUE FOR ADJUDIC ATION PERTAINS TO THE VALIDITY OF THE IMPUGNED REASSESSMENT ORDER PASSED BY THE A.O. IT IS NOTICED FROM THE RECORD THAT THE A.O. HAD REOPENED THE ASSESSMENT OF THE APPELLANT SINCE HE HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T BY WAY OF OMISSION TO MAKE DISALLOWANCES OF RS. 9,60,00,000/ - (BEING PAYMENT FOR TOLL COVERED U/S. 194C MADE TO IRB WITHOUT DEDUCTION OF TAX AT SOURCE) U/S. 40(A)(IA) AND OF INTEREST OF RS.5,33,605/ - U./S. 36(1)(III) ON DIVERSION OF BORROWED FUNDS FO R ADVANCING INTEREST FREE LOANS TO RELATED PERSONS. THE APPELLANT IN THIS REGARD STRONGLY CONTENDS THAT THE NOTICE U/S. 148 ISSUED BY THE AO BEYOND THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AO IS BARRED BY LIMITATION IN VIEW OF THE FIRST PROVIS O TO SECTION 147 SINCE THE APPELLANT HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HER ASSESSMENT AND THE AO HAD NOWHERE BROUGHT OUT THAT THERE WAS ANY FAILURE ON PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HER ASSESSMENT FOR THE AY UNDER CONSIDERATION. HOWEVER, SINCE THAT MAIN GROUNDS TAKEN UP BY THE APPELLANT ARE BEING ALLOWED ON MERITS IN THE SUCCEEDING PART OF THIS ORDER, THE PRELIMINARY ISSUE CONCERNING VALIDITY OF IMPUGNED REASSESSMENT IS RENDERE D OF MERE ACADEMIC INTEREST OR SIGNIFICANCE. HENCE, GROUNDS BEARING NOS. 1 AND 2 OF THE PRESENT APPEAL ARE DISMISSED AS HAVING BECOME INFRUCTUOUS. HOWEVER, ON PERUSAL OF THE LEARNED CIT(A) ORDERS, IT IS CLEAR THAT ONE OF THE GROUNDS RELATING TO DISALLOW ANCE OF INTEREST OF RS.5,33,605/ - ON ACCOUNT OF DIVERSION OF BORROWED FUNDS TO SISTER CONCERN WAS DECIDED AGAINST THE ASSESSEE , VIDE APPELLATE ORDER DATED 23.03.2016 PASSED BY LEARNED CIT(A ) WHILE THE LEARNED CIT(A) HAD RECORDED THAT BOTH THE ISSUES WERE DECIDED IN FAVOUR OF THE ASSESSEE ON MERITS WHICH LED THE LEARNED CIT(A) TO DISMISS THE LEGAL GROUNDS CHALLENGING REOPENING OF I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 10 THE ASSESSMENT ORDER U/S 147 ON THE GROUNDS THAT THE SAME HAS BECOME INFRUCTUOUS WHEREIN THE SAID GROUND CHALLENGING REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 ON LEGAL JURISDICTIONAL GROUNDS WAS NEVER ADJUDICATED BY LEARNED CIT(A). 6 . THE MATTER HAS NOW REACHED BEFORE THE TRIBUNAL WHEREIN BOTH THE ASSESSEE AS WELL AS REVENUE ARE AGGRIEVED BY THE APPELLATE ORDER DATED 23.03.2016 PASSED BY THE LD. CIT(A) AND HENCE CROSS APPEALS ARE FILED BY BOTH ASSESSEE AS WELL BY REVENUE BEFORE THE TRIBUNAL. THE ASSESSEE BEING AGGRIEVED BY THE DISMISSAL OF THE LEGAL GROUND CHALLENGING REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT AND ALSO ASSESSEE IS CHALLENGING THE DISALLOWABILITY OF INTEREST OF RS. 5,33,605/ - PAID TO THE BANK U/S. 36(1)(III) OF THE 1961 ACT , WHILE THE REVENUE IS AGGRIEVED BY THE DELETION OF ADDITION OF RS. 9,60,00,000/ - ON ACCOUNT OF PAYMENT MADE TO IRB ON ACCOU NT OF TOLL CHARGES COLLECTED BY THE ASSESSEE WITHOUT DEDUCTION OF INCOME - TAX AT SOURCE WITHIN PROVISIONS OF SECTION 194C OF THE 1961 ACT. 7. T HE LD. COUNSEL FOR THE ASSESSEE OPENED THE ARGUMENTS AND SUBMITTED THAT ORIGINALLY ASSESSMENT WAS FRAMED BY THE A O U/S. 143(3) OF THE ACT. IT WAS SUBMITTED THAT THE REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE BY REVENUE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR BUT BEFORE THE END OF SIX YEARS FROM THE END OF THE ASSESSMENT YEAR. IT IS SUB MITTED THAT THE ASSESSEE IS CHALLENGING THE REOPENING OF THE CONCLUDED ASSESSM ENT U/S. 147 AND 148 OF THE ACT AS THE REOPENING OF THE ASSESSMENT WAS DONE AFTER THE END OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR BUT BEFORE SIX YEARS FROM THE END OF T HE ASSESSMENT YEAR . IT WAS SUBMITTED THAT ORIGINALLY THE ASSESSMENT WAS FRAMED BY THE AO U/S 143(3) OF THE 1961 ACT VIDE ASSESSMENT ORDERS DATED 25.03.2008. OUR ATTENTION WAS DRAWN TO PAGE NO. 1 AND 2 OF THE PAPER BOOK FILED BY THE ASSESSEE WITH THE TRIBUN AL , WHEREIN ASSESSMENT ORDER DATED 25TH MARCH, 2008 PASS ED BY THE AO U/S. 143(3) OF THE 1961 ACT IS PLACED . IN THE SAID ASSESSMENT ORDER FRAMED BY THE AO U/S 143(3) , AN AGGREGATE ADDITION I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 11 OF RS. 85,000/ - WAS MADE BY THE AO ON ACCOUNT OF FUEL AND OTHER EXP ENSES, MISCELLANEOUS E XPENSES , REPAIR AND M AINTENANCE EXPENSES AS WELL STAFF WELFARE EXPENSES TO THE DECLARED INCOME OF THE ASSESSEE . O UR ATTENTION WAS ALSO DRAWN TO PAGE NO. 31 TO 34 OF THE PAPER BOOK FILED WITH THE TRIBUNAL, WHEREIN THE ASSES SEE SUBMITTED DETAILED REPLIES BEFORE THE ASSESSING O FFICER VIDE LETTER DATED 20 TH MARCH 2014 DURING REASSESSMENT PROCEEDINGS . O UR ATTENTION WAS ALSO DRAWN TO PAGE NO. 94 TO 109 OF THE PAPER BOOK FILED BY THE ASSESSEE WITH THE TRIBUNAL, WHEREIN DETAIL ED REPLY WAS SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) . O UR ATTENTION WAS ALSO DRAWN TO THE APPELLATE ORDER DATED 23.03.2016 PASSED BY LD. CIT(A) . O UR ATTENTION WAS ALSO DRAWN BY LD. COUNSEL FOR THE ASSES SEE TO PAGE NO. 20 OF THE PAPER BOOK FILED BY THE ASSE SSEE WITH THE TRIBUNAL, WHEREIN THE BALANCE S HEET OF THE ASSESSEE IS PLACED. OUR ATTENTION WAS ALSO DRAWN TO PAGE NO. 82 TO 84 OF THE PAPER BOOK WHEREIN THE LEDGER ACCOUNT OF THE SAID OD BANK ACCOUNT WITH DOMBIVALI NAGAR SAHKARI BANK LIMITED IS PLACED FROM WHERE THE BANK OD WAS AVAILED. I T WAS SUBMITTED THAT NO DISALLOWANCE WAS MADE IN THE EARLIER YEARS . I T WAS SUBMITTED THAT THESE ARE CROSS APPEAL S AND WHILE FRAMING ORIGINAL ASSESSMENT U/S 143(3) DATED 25.03.2008 , NO ADDITIONS WERE MADE WITH RESPECT TO NON COLLECTION OF TAX ES ON TOLL COLLECTION WERE MADE. IT WAS SUBMITTED THAT THE REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE WITHIN SIX YEARS BUT BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR A ND FIRST PROVISO TO S ECTION 147 OF THE ACT IS A PPLICABLE. OUR ATTENTION WAS DRAWN TO REASONS RECORDED FOR REOPENING OF THE CONCLUDED ASSESSMENT W HICH IS PLACED I N PAPER BOOK AT PAGE NO. 112 .O UR ATTENTION WAS ALSO DRAWN TO PAGE NO. 6 TO 8 OF THE PAPER BOOK WHERE IN THE AO NOTICE DATED 13TH MARCH, 2014 IS PLACED INTIMATING REASONS FOR REOPENING OF THE ASSESSMENT. T HE LD. DR RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ELEGANZA JEWELLERY LTD. V. CIT (2014) 364 ITR 232 (BOM . ) TO SUPPORT ITS CONTENTIONS . THE LEARNED DR PRAYED THAT THE REOPENING OF THE CONCLUDED ASSESSMENT U/S 147/148 I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 12 BE UPHELD AND ALSO ON MERITS BOTH THE ISSUES BE DECIDED IN FAVOUR OF REVENUE. 8 . WE HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD INCLUDED CITED CASE LAW S . THE ASSESSEE IS PROPRIETOR OF M/S. VIRENDRA BUILDERS ENGAGED IN THE BUSINESS OF TOLL COLLECTION AND ROAD REPAIRING WORK . THE ASSESSEE FILED ITS RETURN OF INCOME ON 31ST OCTOBER , 2006 DECLARING TOTAL INCOME OF RS.23,10,280/ - . THE ASSESSMENT WAS ORIGINALLY COMPLETED BY THE AO U/S. 14 3(3) OF THE ACT ON 25TH MARCH 2008 , DETERMINING INCOME OF RS. 23,95,278/ - , WHEREI N ADDITION S OF RS. 85,000/ - WERE MADE TOWARDS FUEL AND OTHER EXPENSES, MISCELLANEOUS E XPENSES , REPAIR AND M AINTENANCE EXPENSES AS WELL STAFF WELFARE EXPENSES . DURING THE OR IGINAL ASSESSMENT PROCEEDINGS CONDUCTED U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT, T HE ASSESSEE HAD DULY FILED AUDITED ACCOUNTS ALONG WITH COMPUTATION OF INCOME, TAX - AUDIT REPORT U/S. 44A B IN F ORM NO . 3CB AND 3CD , BALANCE SHEET , PROFIT AND LOSS ACCOUNT AND SCHEDULES FORMING PART OF THE ACCOUNTS . THE SAID AUDIT REPORT ALONG WITH AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE ARE PLACED IN PAPER BOOK AT PAGE NO. 9 TO 27. THE BOOKS OF ACCOUNTS AND BANK ACCOUNTS WERE ALSO PRODUCED BY THE ASSESSEE BEF ORE THE AO CONDUCTED U/S 143(3) OF THE 1961 ACT . THE AO REOPENED THE CONCLUDED ASSESSMENT BY INVOKING PROVISION S OF SECTION 147 OF THE 1961 ACT, WHEREIN NOTICE U/S 148 OF THE 1961 WAS ISSUE D ON 22ND MARCH, 2013 WHICH IS ADMITTEDLY AFTER FOUR YEARS FROM TH E END OF THE ASSESSMENT YEAR BUT BEFORE SIX YEARS FROM THE END OF THE ASSESSMENT YEAR AND HENCE PROVISO 1 SECTION 147 OF THE 1961 ACT IS CLEARLY APPLICABLE AND THE ASSESSMENT CAN BE REOPENED ONLY IF THERE IS ANY FAILURE ON THE PART OF THE ASSESS EE TO TRULY AND FULLY DISCLOSE THE RELEVANT AND MATERIAL FACTS IN THE RETURN OF INCOME FILED WITH THE REVENUE . THE ASSESSEE HAD ADMITTEDLY CO - OPERATED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AS PER THE FACTS EMANATING FROM THE ASSESSMENT ORDER DATED 25.03.2008 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT AS THE ASSESSEE DULY ENTERED I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 13 APPEARANCE AND FILED ALL RELEVANT DOCUMENTS/INFORMATION SOUGHT BY THE AO DURING ASSESSMENT PROCEEDINGS . THE ASSESSEE HAD ALSO UNDISPUTEDLY FILED ITS RETURN OF INCOME ORIGINALLY U/S 139 OF T HE 1961 ACT AS THE RETURN OF INCOME WAS FILED ON 31.10.2006. IT IS ALSO NOT THE CASE WHERE FRESH TANGIBLE INCRIMINATING MATERIAL WAS RECEIVED BY THE REVENUE AND IT IS ONLY FROM THE SAME MATERIAL WHICH WAS EARLIER BEFORE THE AO , A FRESH VIEW IS NOW BEING TAKEN TO REOPEN THE CONCLUDED ASSESSMENT. THE AUDITED FINANCIAL STATEME NTS AS WELL TAX AUDIT REPORT WERE ORIGINALLY FILED BEFORE THE AO . O N PERUSAL OF THE AUDITED ACCOUNTS WHICH ARE PLACED IN PAPER BOOK FILED WITH TRIBUNAL, WILL CLEARLY REVEA L THAT THE ASS ESSEE HAS MADE TRUE AND FULL DISCLOSURE IN ITS FINANCIAL STATEMENTS AND IN THE TAX - AUDIT REPORT FILED WITH THE AO. PERUSAL OF THE ORIGINAL ASSESSMENT ORDER DATED 25.03.2008 FRAMED BY THE AO U/S 143(3) ALSO REVEALS THAT THE ASSESSEE DULY CO - OPERATED IN THE ORIGINAL ASSESSMENT PROCEEDINGS CONDUCTED BY THE AO WHEREIN ALL DETAILS AS DESIRED BY THE AO WERE DULY FILED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS . THE ASSESSEE ALSO PRODUCED BOOKS OF ACCOUNTS AND ALSO PRODUCED BANK STATEMENTS BEFORE THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. IT IS CLEARLY RECORDED IN THE ASSESSMENT ORDER DATED 25.03.2008 FRAMED BY THE AO U/S 143(3) THAT THE ASSESSEE APPEARED FROM TIME TO TIME DURING THE ASSESSMENT PROCEEDINGS AND PRODUCED ALL THE PARTICULAR S AS WERE REQUISITIONED BY THE AO AND ALSO PRODUCED BOOKS OF ACCOUNTS AND BANK ACCOUNT S BEFORE THE AO. IT IS RECORDED BY THE AO IN HIS ASSESSMENT ORDER DATED 25.03.2008 PASSED U/S 143(3) THAT ALONG WITH RETURN OF INCOME FILED BY THE ASSESSEE ORIGINALLY ON 31.10.2006 , THE ASSESSEE FILED COMPUTATION OF INCOME, AUDIT REPORT IN FORM NO. 3CD, BALANCE SHEET , P& L ACCOUNT, SCHEDULES FORMING PART OF THE BALANCE SHEET . N OTHING FRESH TANGIBLE INCRIMINATING MATERIAL HAS COME IN THE POSSESSION OF THE AO WHICH COULD HAVE TRIGGERED THE FORMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT WHICH COULD HAVE LED TO REOPENING OF THE CONCLUDED ASSESSMENT WITHIN PARAMETERS OF PROVISIONS OF SECTION 147 OF THE 1961 ACT AND RATHER IT APPEARS THAT IT I S RE - APPRECIATION OF THE I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 14 FACTS AVAILABLE ON THE FILE WHICH LED TO THE R EOPENING OF THE CONCLUDED ASSESSMENT WHICH IS IMPERMISSIBLE KEEPING IN VIEW THAT REOPENING WAS DONE AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND ORIGINALLY ASSESSEES ASSESSMENT HAS BEEN FRAMED U/S 143(3) OF THE 1961 ACT . IT IS ALSO EQUALLY TRUE THAT NOTHING IS BROUGHT ON RECORD BY AUTHORITIES BELOW THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE IN TRULY AND FULLY DISCLOSING ALL THE MATERIAL PARTICULARS WHILE FILING OF RETURN OF INCOME WITH REVENUE . REASONS AS WERE RECORDED BY REVENUE WHICH WERE COMMUNICATED TO THE ASSESSEE VIDE COMMUNICATION DATED 13.03.2014 ALSO DOES NOT REVEAL THAT ANY FRESH INCRIMINATING MATERIAL COMING INTO POSSESSION BY REVENUE WHICH COULD TRIGGER A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT . THE SAID LETTER DATED 13.03.2014 (PB/PAGE 6 - 8) INTIMATING REASONS RECORDED FOR REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 AS WAS FORWARDED BY THE AO TO THE ASSESSEE IS REPRODUCED HEREUNDER: I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 15 I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 16 IN OUR CONSIDERED VIEW KEEPIN G IN VIEW FACTUAL MATRIX OF THE CASE , REOPENING OF THE CONCLUDED ASSESSMENT IN THE INSTANT CASE WITHIN PROVISIONS OF SECTION 147 OF THE 1961 ACT IS NO T PERMISSIBLE AS ALL THE DISCLOSURE OF THE MATERIAL FACTS W ERE MADE BY THE ASSESSEE AND WERE AVAILABLE ON THE ASSESSMENT FILE WHEN AO FRAMED ORIGINAL ASSESSMENT U/S 143(3) OF THE 1961 ACT . THE RE - APPRECIAT ION OF THE SAME MATERIAL AVAILABLE ON RECORD IS NOT PERMISSIBLE MORE - SO NO INCRIMINATING TANGIBLE MATERIAL HAS COME INTO POSSESSION OF THE AO WHICH COULD HA VE LED TO FORMATION OF BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. R EFERENCE IS DRAWN TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. 320 ITR 561(SC) , WHEREIN HONBLE SUPREME COURT HAS HELD THAT REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT IS NOT PERMISSIBLE BASED ON CHANGE OF OPINION, WHEREIN HONBLE SUPREME COURT HELD AS UNDER: I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 17 2. A SHORT QUESTION WHICH ARISES FOR DETERMINATION IN THIS BATCH OF CIVIL APPEALS IS, WHETHER THE C ONCEPT OF 'CHANGE OF OPINION' STANDS OBLITERATED WITH EFFECT FROM 1 - 4 - 1989, I.E., AFTER SUBSTITUTION OF SECTION 147 OF THE INCOME - TAX ACT, 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987 ? 3. TO ANSWER THE ABOVE QUESTION, WE NEED TO NOTE THE CHANGES UNDERGON E BY SECTION 147 OF THE INCOME - TAX ACT, 1961 [ FOR SHORT, 'THE ACT'] . PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , SECTION 147 READS AS UNDER : '147. INCOME ESCAPING ASSESSMENT. IF ( A ) THE INCOME - TAX OFFICER HAS REASON TO BELIEVE THAT, BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY ASSESSMENT YEAR TO THE INCOME - TAX OFFICER OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR, OR ( B ) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE ( A ) ON THE PART OF THE ASSESSEE, THE INCOME - TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR).' [EMPHASIS SUPPLIED] 3.1 AFTER ENACTMENT OF DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , I.E., PRIOR TO 1 - 4 - 1989, SECTION 147 OF TH E ACT, READS AS UNDER : '147. INCOME ESCAPING ASSESSMENT. IF THE ASSESSING OFFICER, FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIO NS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR).' [EMPHASIS SUPPLIED] 3.2 AFTER THE AMENDING ACT, 1989 , SECTION 147 READS AS UNDER : '147. INCOME ESCAPING ASSESSMENT. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTL Y IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 18 FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS TH E RELEVANT ASSESSMENT YEAR).' [ EMPHASIS SUPPLIED] 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , RE - OPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFIL MENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT [WITH EFFECT FROM 1 - 4 - 1989], THEY ARE GIVEN A GO - BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESSI NG OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO RE - OPEN THE ASSESSMENT. THEREFORE, POST 1 - 4 - 1989 , POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BEL IEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE - OPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFEREN CE BETWEEN POWER TO REVIEW AND POWER TO RE - ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRE - CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE - OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1 - 4 - 1989 , ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGE S MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPR ESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE - INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREINBELOW T HE RELEVANT PORTION OF CIRCULAR NO. 549 , DATED 31 - 10 - 1989, WHICH READS AS FOLLOWS : '7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 147. A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMI SSION OF THE WORDS 'REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE 'OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, 'REASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989 , HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE T HE EXPRESSION 'HAS REASON TO BELIEVE' IN PLACE OF THE WORDS 'FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION'. OTHER PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME.' [EMPHASIS SUPPLIED] I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 19 THUS, IN OUR CONSIDERED VIEW REVIEW OF THE DECISION TAKEN EARLIER BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED U/S 143(3) OF THE 1961 IS NOT PERMISSIBLE WITHIN THE PARAMETER S OF S ECTION 147 OF THE 1961 ACT MORE SO WHEN FOUR YEARS HAVE ELAPSED FROM THE END OF THE A SSESSMENT YEAR AND CLEARLY PROVISO 1 TO S ECTION 147 IS APPLICABLE , AS IT IS ONLY WHEN THE ASSESSEE FAIL ED TO TRULY AND FULLY DECLARE MATERIAL FACTS IN THE RETURN OF INCOME FILED WITH THE REVENUE, REOPENING U/S 147 OF THE 1961 ACT CAN BE DONE AFTER THE EN D OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR WHICH IS NOT THE CASE IN THE INSTANT YEAR . THE ASSESSEE HAD FILED ITS RETURN OF INCOME U/S 139 OF THE 1961 ACT AND UNDISPUTEDLY PARTICIPATED IN THE ASSESSMENT PROCEEDINGS ORIGINALLY CONDUCTED U/S 143(3) OF THE 1961 ACT. THE REVENUE HAS RELIED ON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ELEGANZA JEWELLERY LIMITED(SUPRA) WHICH IN OUR CONSIDERED VIEW HAS NO APPLICABILITY TO FACTUAL MATRIX OF THE CASE. IN THE SAID CASE OF ELEGANZA JEWELLERY LIMITE D(SUPRA) , THE REOPENING WAS DONE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR WHILE IN THE INSTANT CASE BEFORE US, THE REOPENING IS SOUGHT TO BE DONE AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND CLEARLY FIRST PROVISO TO SE CTION 147 OF THE 1961 ACT IS APPLICABLE. THUS, AT THRESHOLD WE HOLD REOPENING OF THE CONCLUDED ASSESSMENT IN THE INSTANT CASE WAS NOT DONE PROPERLY WITHIN PARAMETERS OF SECTION 147 OF THE 1961 ACT AND THE SAME IS NOT SUSTAINABLE IN THE EYES OF LAW . WE ORDE R ACCORDINGLY. NOW COMING TO MERIT S OF THE CASE. THE ASSESSEE HAS MADE PAYMENTS OF RS. 9,60, 00, 000/ - TO M/S. IRB INFRASTRUCTURE L TD. TOWARDS CONTRACT GRANTED TO THE ASSESSEE BY IRB TOWARDS USAGE OF TOLL STATION FACILITIES LIKE BOOTHS, TABLES, CHAIRS, COMM UNICATION FACILITIES AND SO ALONG WITH RIGHT TO COLLECT TOLL FROM THE BRIDGE ACROSS PATALGANGA RIVER AND ROB NEAR KHARPADA VILLAGE ON PANVEL MAHAD PANJI ROAD, NH - 17 IN RAIGAD DISTRICT. T HE AO HAD INVOKED PROVISIONS OF S ECTION 194C AS IT STOOD PRIOR TO ITS AMENDMENT WITH EFFECT FROM 1ST JUNE, 2007 WHICH NEVER CONTEMPLATE D ASSESSEE BEING INDIVIDUAL AND HUF TO DEDUCT TDS I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 20 U/S. 194C OF THE ACT FOR THE ASSESSMENT YEAR 2006 - 07 . THE S AID AMENDMENT BY INSERTION OF CLAUSE (K) TO SECTION 194C(1) BY FINANCE ACT 2 007 AS WILL BE APPLICABLE TO INDIVIDUAL AND HUF WEF 01 - 06 - 2007 SHALL BE PROSPECTIVE IN NATURE APPLICABLE FROM 1ST JUNE, 2007. THUS, WE DONOT FIND THAT THE ASSESSEE WAS HIT BY PROVISIONS OF SECTION 40(A)(IA) READ WITH SECTION 194C (1) OF THE 1961 ACT AS THE ASSESSEE WAS AN INDIVIDUAL AND THERE WAS NO PROVISION IN THE STATUTE WITHIN SECTION 194C OF THE 1961 ACT AT THE RELEVANT TIME TO FASTEN LIABILITY OF DEDUCTION OF INCOME TAX AT SOURCE ON THE ASSESSEE ON ACCOUNT OF BEING CONTRACTUAL PAYMENTS MADE BY IT FOR T HE SAID PERIOD . THE PAYMENTS ARE MADE BY THE ASSESSEE TO IRB AFTER COLLECTING TOLL FROM PASSENGERS COMMUTING ON TOLL ROAD ON BEHALF OF IRB WHO WAS GRANTED RIGHTS TO COLLECT TOLL BY GOVERNMENT OF MAHARASHTRA. THE WORK OF COLLECTION IS BEEN PERFORMED BY THE ASSESSEE AS AGENT OF IRB AND LIEU OF THEREOF LUMPSUM PAYMENT OF RS. 9.60 CRORES FOR YEAR STARTING FROM 1 ST APRIL 2005 TO 31 ST MARCH 2006. THE WORK AS CONTEMPLATED IN SECTION 194C TO BRING IT WITHIN PROVISIONS OF SECTION 194C WAS PERFORMED BY THE ASSESSEE A ND NOT BY IRB IN GIVEN FACTUAL MATRIX OF THE CASE AND SECTION 194C(1) OF THE 1961 ACT UNDER THESE CIRCUMSTANCES SHALL HAVE NO APPLICABILITY. WE HAVE ALSO OBSERVED THAT THIS IS NOT A CASE WHERE THE PAYMENTS WERE MADE TO SUB - CONTRACTOR S BY THE CONTRACTOR AN D THE AGREEMENT BETWEEN THE ASSES SEE AND IRB INFRASTRUCTURE LTD. IS PLACED ON RECORD AT PAGE NO. 28 TO 30 IN PAPER BOOK FILED WITH THE TRIBUNAL WHEREIN IRB INFRASTRUCTURE LTD. IS STATED TO BE THE MAIN CONTRACTOR WHO WAS AWARDED CONTRACT BY MAHARASHTRA GOV ERNMENT TO COLLECT TOLL FROM THE BRIDGE ACROSS PATALGANGA RIVER AND ROB NEAR KHARPADA VILLAGE ON PANVEL MAHAD PANJI ROAD NH - 17 IN RAIGAD DISTRICT AT THE RATES FIXED BY AGREEMENT BETWEEN IRB AND GOVERNMENT OF MAHARASHTRA . THUS , IRB IS THE MAIN CONTRACT OR WHO WAS ASSIGNED RIGHT TO COLLECT TOLL BY GOVERNMENT OF MAHARASHTRA AND THE SAID IRB IN FACT GAVE CONTRACT TO THE ASSESSEE TO COLLECT TOLL ON THE SAID BRIDGE FOR A FIXED LUMPSUM YEARLY CONSIDERATION OF RS. 9,60,00,000/ - PAYABLE IN INSTALMENT . THUS BY NO STRETCH OF IMAGINATION, IT COULD BE SAID THAT I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 21 THE ASSESSEE HAD MADE PAYMENTS TO ITS SUB - CONTRACTOR RATHER IRB IS THE MAIN CONTRACTOR WHO WAS GRANTED RIGHT TO COLLECT TOLL BY GOVERNMENT OF MAHARASHTRA AND WHO FURTHER GRANTED SAID RIGHTS TO THE ASSSESSEE ALONG WITH BUNDLE OF RIGHTS TO USE FACILITIES ATTACHED TO TOLL STATION . THUS , THE ASSESSEE HAS NOT MADE PAYMENT TO SUB - C ONTRACTOR AND PROVISIONS OF SECTION 40( A)(IA) READ WITH SECTION 194C (2) AS IT STOOD AT THAT TIME HAS NO APPLICABILITY TO THE ASSESSEE DESPITE THE FACT THAT IN PRECEDING YEAR, THE ASSESSEE WAS SUBJECT TO APPLICABILITY OF TAX AUDIT PROVISIONS. THE ASSESSEE HAS RIGHTLY RE LIED ON FOLLOWING DECISIO NS WHEREIN THE TRIBUNAL HAS CONSISTENTLY HELD THAT THE SAID AMENDMENT TO SECTION 194C(1) BY INSERTION OF CLAUSE(K) SHALL BE APPLICABLE FROM 01.06.2007(PB/PAGE 43 - 81) 1 . RAJIV KISHORILAL PATODIA V. ACIT IN ITA NO. 8967/MUM/2010 2 . BARUN ROY CHOUDHARY V. ITO IN IT A NO. 2102/KOL./2009 3 . ACIT V. KAYA SHETH IN ITA NO. 842 & 843/KOL/2010 4 . DCIT V. PRADIP SHAH IN ITA NO. 1765/KOL/2011 5 . ITO V. HARISH ANUPCHAND MEHTA IN ITA NO. 4460/MUM/2011 6 . SARWANI BANO V. ITO IN ITA NO.188/KOL/2011 7 . ITO V. M. BHAGYALAKSHMI IN ITA NO. 857/HYD/ 2011 O N THE OTHER ISSUE OF DISALLOWANCE OF PROPORTIONATE INTEREST OF RS. 5,33,605/ - PAID ON OD AVAILED FROM DOMBIVALI NAGAR SAHAKARI BANK LTD. WITHIN PROVISIONS OF SECTION 36(1)(III) OF THE 1961 ACT. T HE AO HAS ALLEGED THAT THE FUNDS WERE DIVERTED TO SISTE R CONCERNS NAMELY M/S D S ENTERPRISES AND M/S JAN TRANSPORT, AS DETAILED HEREUNDER : - SR. NO. NAME OF THE PERSON LOAN GIVEN DURING THE PERIOD LOAN OUTSTANDING AS ON 31. 03 . 2006 29 - 03 - 05 M/S D S ENTERPRISES 78,00,000/ - 78,00,000 / - 20 - 11 - 05 M/S JAN TRANSP ORT 91,00,000 / - I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 22 23 - 11 - 05 M/S JAN TRANSP ORT 9,00,000 1,60,00,000 / - IT IS ALLEG ED BY THE AO THAT THE ASSESSEE HAS AVAILED LOAN FROM DOMBIVALI NAGAR SAHAKARI BANK LTD. AND DIVERTED THESE FUNDS FOR NON COMMERCIAL PURPOSES . WE HAVE OBSERVED THAT ASSESSEE HAS ITS OWN FUNDS TO THE TUNE OF RS. 2,23,99,457/ - AS ON 31.03.2005 AND RS. 65,16,911/ - AS ON 31.03.2006 . THE AVERAGE OWN ED FUNDS AVAILABLE WITH THE ASSESSEE WERE TO THE TUNE OF RS.144.58 LACS WHILE THE LOAN RAISED FROM DOMBIVALI NAGAR SAHAKAR I BANK LTD. AS ON 31.03.2006 WERE TO THE TUNE OF RS. 81,11,527/ - . THE ASSESSEE HAS ADVANCED AN AMOUNT OF RS.238 LACS AS ON 31.03.2006 TO THESE TWO PARTIES NAMELY D S ENTERPRISES AND JAN TRANSPORT . THE ASSESSEE HAS ALSO PAYABLES TO THE TUNE OF RS. 274.03 LACS AS ON 31.03.2006 TO IRB INFRASTRUCTURE LIMITED . NO INTEREST IS DEBITED TOWARDS THIS CREDIT AMOUNT OF RS. 274.03 LACS PAYABLE TO IRB AND THE AGREEMENT OF THE ASSESSEE WITH IRB DOES NOT STIPULATE CHARGEABILITY OF ANY INTEREST PAYABLE TO THE SAID CONCERN IRB . THE ASSESSEE HAS CLAIMED COMMERCIAL EXPEDIENCY IN ADVANCING SAID AMOUNTS TO THESE SISTER CONCERNS . IT IS CLAIMED THAT THE ENTIRE TRANSACTION OF ADVANCEMENT OF LOANS TO JAN TRANSPORT AND M/S D S ENTERPRISES, WHO ARE SISTER CONCERNS OF THE ASSESSEE WERE ENQUIRED BY THE AO DURING ORIGINAL ASSESSMENT PROCEEDINGS CONDUCTED U/S 143(3) AND A CONSCIOUS DECISION WAS TAKEN BY THE AO IN ALLOWING THE ENTIRE INTEREST EXPENDITURE , WHICH FACT AUTHORITIES BELOW AS WELL LEARNED DR COULD NOT CONTROVERT. THE FUNDS AVAILABLE ARE MIXED USE FUNDS AND PRESUMPTION WILL APPLY THAT THE ASSESSEE INVESTED INTEREST FREE FUNDS AVAILABLE WITH IT FOR ADVANCING INTEREST FREE LOANS UNLESS BORROWINGS ARE SHOW N TO BE SPECIFIC AND EXCLUSIVE FOR ADVANCING THESE LOANS . THERE IS NO SUCH FINDING RECORDED BY AUTHORITIES BELOW THAT INTEREST BEARING BORROWINGS WERE SPECIFICALLY DIRECTED TOWARDS GRANT OF INTEREST FREE LOANS TO THESE SISTER CONCERNS . THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. RELIANCE UTILITIES AND POWER LIMITED (2009) 313 ITR 340 (BOM.) AND HDFC BANK LIMITED V. DCIT ( I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 23 2016) 383 ITR 529(BOM.) SHALL BE APPLICABLE AND PRESUMPTION WILL APPLY THAT THE ASSESSEE ADVANCED INTEREST FREE FUNDS FOR GRANT OF INTEREST FREE LOANS TO THESE SISTER CONCERNS . THE ASSESSMENT ORIGINALLY WAS FRAMED BY THE AO U/S 143(3) OF THE 1 961 ACT AND ALL THE MATERIAL WERE BEFORE THE AO AND A VIEW WAS TAKEN THAT NO INTEREST NEED TO BE DISALLOWED AFTER CALLING FOR ALL THE INFORMATION BY THE AO DURING ORIGINAL ASSESSMENT PROCEEDINGS CONDUCTED U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT . IT COULD NOT BE SAID THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE IN TRULY AND FULLY DECLARING AND DISCLOSING THE REL EVANT MATERIAL IN THE RETURN FILED WITH THE REVENUE AS WELL DURING THE ASSESSMENT PROCEEDINGS CONDUCTED BY THE AO U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT. . THUS , KEEPING IN VIEW OUR DETAILED DISCUSSIONS AS ABOVE , WE ARE OF THE CONSIDERED VIE W THAT REOPENING WAS NOT VALIDLY DONE IN THE INSTANT CASE AND REVENUE FAILS ON THE JURISDICTIONAL ISSUE CHALLENGING REOPENING U/S 147 OF THE 1961 ACT AS WELL ON MERITS , WE ARE OF THE CONSIDERED VIEW THAT BOTH THE ADDITIONS ARE NOT SUSTAINABLE IN THE EYES OF LAW. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED WHILE REVENUE FAILS IN ITS APPEAL. WE ORDER ACCORDINGLY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 4859/MUM/2016 IS ALLOWED WHILE THE APPEAL OF THE REVENUE IN ITA NO. 5121/MUM/2016. ORDER PRONOUNCED IN THE OPEN COURT ON 1 2 .1 2 .2018. 1 2 .12 .2018 S D / - S D / - ( MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 2 .1 2 .2018 NISHANT VERMA SR. PRIVATE SECRETARY I.T.A. NO. 4859/MUM/2016 I.T.A. NO.5121/MUM/2016 24 COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI