Asstt. Commissioner of Income Tax vs Jagdishbhai Nanubhai Tekrawala

K.A. Puj, J.—The revenue has filed this tax appeal u/s 260A of the Income Tax Act for assessment year 1991-92 proposing to formulate the following substantial question of law for consideration and determination of this Court:

(i) Whether, on the facts and in the circumstances of the case and in law, the Tribunal is right in coming to the conclusion that reopening of assessment u/s 147 read with Section 148 of the Income Tax Act is illegal and unlawful?

The brief facts giving rise to the present appeal are that the assessee filed his return of income for the assessment year 1991-92 on 31-8-1991 declaring total loss of Rs. 11,88,198. The assessee thereafter filed revised return on 10-11-1993 declaring total loss of Rs. 20,67,782. The assessing officer completed assessment u/s 143(3) on 7-1-1994 and determined total loss of Rs. 1,52,950. Thereafter, during verification of the case record it was revealed that the assessee paid interest of Rs. 8,86,669 whereas the assessee has advanced interest-free loan of Rs. 113.27 lacs. Thus, the assessee has not utilised loan for business purpose and, therefore, the payment of interest amounting to Rs. 8,86,669 was required to be disallowed. The assessing officer, thereafter, after recording reasons u/s 147 of the Act issued notice u/s 148 of the Act calling upon the assessee to file return of income on 1-10-1999. The reassessment was completed on 26-2-2002 and the assessing officer determined total income of the assessee at Rs. 5,44,804.

Being aggrieved by the said order of the assessing officer the assessee filed an appeal before the Commissioner (Appeals), Surat challenging the reassessment order on legality as well as on merit. The Commissioner (Appeals) has confirmed the order passed by the Commissioner (Appeals) (sic-assessing officer). Being further aggrieved by the said order the assessee preferred appeal before the Tribunal and the Tribunal reversed the order of the assessing officer as well as Commissioner (Appeals) and quashed the reassessment order on the ground that reopening of assessment was not legal and it was based on change of opinion.

It is this order, which is under challenge in the present appeal. Mr. B. B. Naik, learned standing counsel appearing for the revenue has submitted that there is no whisper in the original assessment order that the details relating to the interest were placed on record. He has further submitted that even furnishing of details is not enough. It is not reflected from the order that the assessing officer had applied his mind and hence the provision of Section 147 of the Act is attracted. Any expenditure which is wrongly allowed in the regular assessment is subjected to reopening. He has, therefore, submitted that the substantial question of law arises out of the order of the Tribunal.

We have heard Mr. Naik, learned standing counsel appearing for the revenue. We have also perused the orders passed by the authorities below. The Tribunal in its order dated 31-5-2007 at para 4 has clearly held that the material details having unsecured loans of Rs. 82,63,952 and having advanced interest-free loans of Rs. 1,13,27,388 are already there on record. No new material has been noticed subsequently on the basis of which it could be said that the interest paid by the assessee on the said unsecured loan of Rs. 82,63,952 was not for the purpose of business and the assessment has been made by the assessing officer u/s 143(3), after taking into consideration the relevant details of loans and advances filed by the assessee in the form of a chart giving particulars and purpose of advances made by the assessee. These details were filed pursuant to the notice of the assessing officer vide letter dated 3-1-1994 in sub-clauses (d) and (e) of Clause 1, which read as under:

(a) Details of loans and advances.

(b) Details of unsecured loan and interest.

On the basis of these details and findings the Tribunal had come to the conclusion that it cannot be said that there was a failure on the part of the assessee and/or there was no disclosure which could be the basis of reopening of the assessment after four years.

Even in the assessment order passed by the assessing officer u/s 143(3) it is observed that after discussion and examination of the details filed, the income of the assessee is computed.

In the above view of the matter and in view of the categorical finding given by the Tribunal and even Commissioner (Appeals) has observed in the order that the details are on record, we are of the view that all necessary materials for the purpose of assessment were on record and the assessing officer has duly considered at the time of framing regular assessment and since the notice of reopening was issued after the period of four years from the end of the assessment year, no question of law, much less any substantial question of law arises out of the order by the Tribunal.

We, therefore, dismiss this appeal.