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2011 (10) TMI 601 - AT - Income TaxReopening of assessment - reasons to believe - Held that:- Assessing Officer has rightly reopened the assessment in assessment years 2002-03 and 2003-04 and re-opening of assessment in assessment years 2004-05 and 2005-06 are not sustainable Allowability of interest expenses under sec. 24(b) - Held that:- he utilization of funds or investment in the construction of the building by the assessee needs not to be explained through the deductive details available in the different balance sheet rather it should produce direct evidence exhibiting the source of fund and its utilization. Learned CIT(Appeals) has observed that assessee has adopted deductive reasoning for explaining its stand. In our opinion, it does not make any difference as to how one explain its position i.e. by deductive reasoning on inductive reasoning. One method enables the adjudication to arrive at fair conclusion by drawing inference from the maternal available on record. The other methods provide the external aid for the above object. The idea under both the methods to arrive at just conclusion, which is admissible in law. On due consideration of this logic, we are of the view that had these details were available then that would be an ideal situation and there may not be any controversy but can the department put the assessee under tax liability on the ground that why it used the funds borrowed by the partners for the construction purposes or whether the partners as well as the assessee must have used this amount for some other activities. The revenue is unable to collect any evidence demonstrating the other activities. As far as other aspects are concerned, there is no dispute between the department and the assessee. The interest expenses incurred by the assessee on the borrowed funds if used for the purpose of construction then deduction of such expenses will be admissible to the assessee under sec. 24(b) of the Income-tax Act, 1961. The only dispute between the parties relates to the quantification of amounts used for the purpose of construction. On an analysis of the balance sheet, we are of the view that the assessee is able to demonstrate, utilization of funds for the purpose of the construction. Revenue authorities without specifying any reason refused to take cognizance of the balance sheet of the partners. In view of the above discussion, we allow this ground of appeal raised by the assessee in all the assessment years and direct the Assessing Officer to grant deduction of interest expenses with regard to current interest charges also. Addition to the taxable income of the assessee on the ground that on retirement of partner, a capital gain has arisen to the assessee - Held that:- We allow this ground of appeal raised by the assessee and held that no capital gain tax would be imposeable upon it on account of alleged allegation of distribution of assets.
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