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2010 (5) TMI 836 - AT - Income TaxValidity of reopening of assessment u/s 147 - Interest income on FDR - “Income from other sources” - Facts of the case, The assessee filed its return of income along with the audit report u/s 44AB.The return of income was processed u/s 143(1). Thereafter the AO recorded reasons for reopening and issued a notice u/s 148 reopening the assessment. the AO considered the interest income received by the firm on bank FDRs, as income from other sources. Thus he reduced amount from the book profits declared by the assessee and thereafter recomputed the allowance of remuneration to partners u/s 40(b) and completed the assessment. Aggrieved, the assessee carried the matter in appeal, inter alia, challenging the reopening of the assessment, assessing the interest income on FDR under the head “Income from other sources” and not under the head” “Income from profession” as well as the computation of book profits by the AO and addition made on share income relating to an ex partner. On appeal, the first appellate authority held hat reopening was bad in law, as, as per him, he did not see any case for escapement of income. Aggrieved, the Revenue had filed this appeal HELD THAT:- In any event, the reopening, if taken to its logical conclusion, would not be revenue-neutral in the hands of this assessee. At the stage of reopening, the AO cannot be expected to verify all the files of the recipients of remuneration and then estimate the escapement of income. This is not contemplated under the Act. Hence in our considered opinion, the order of the CIT(Appeals) is erroneous, on all three counts, on which he held that the reopening is bad in law. In our considered opinion, the decision in the case of Rajesh Jhaveri Stock Brokers P. Ltd. [2007 (5) TMI 197 - SUPREME COURT] applies on all fours to the facts of this case. Respectfully following the same, we uphold the validity of reopening of assessment u/s 147 and set aside the order of the CIT(Appeals) on this aspect. In the result, this ground of the Revenue is allowed. As the first appellate authority had not adjudicated the issue on merits, we set aside the matter to the file of the CIT(A) for fresh adjudication of the merits of the case. In the result, the appeal of the Revenue is allowed.
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