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2015 (7) TMI 82 - AT - Income TaxReopening of assessment - Held that:- Assessing Officer in the assessment order has not discussed the issue of interest from investment to M/s. S.P. Apparels Limited Ltd. The Assessing Officer while recording the reasons has formed an opinion that excess interest claim was allowed to the assessee and on that reason assessment was re-opened. Further a perusal of the material on record does not indicate that the assessee had drawn the attention of the Assessing Officer to the fact that the reasons mentioned for re-assessment at the time of completion of original assessment. According to the ld. Authorised Representative for assessee it is not necessary for the assessee to point out the above set of facts to the Assessing Officer and that the assessee is entitled to the claim of interest. Merely because the Assessing Officer mentioned in the original assessment order that E2,46,065/- is under the head other expenses to be disallowed, it does not mean the Assessing Officer is examining the interest allowability also. Thus, the Assessing Officer while framing the original assessment u/s.143(3) of the Act does not appear to have formed an opinion with regard to allowability of interest and he has accepted the claim of the assessee, as the assessee wanted to be accepted by the Assessing Officer. The assessee having failed to draw the attention of the Assessing Officer regarding interest payment, it cannot be said that there is no violation of provisions of the Act. Further, when no opinion has been expressed in the assessment order and no details or explanation in relation to the claim of interest has been called for by the Assessing Officer, it is not possible to accept the contention of the assessee that the Assessing Officer has applied his mind to the said aspect of interest payment. In the light of the aforesaid discussion, we are of the view that in the light of the reasons recorded by the Assessing Officer, there was sufficient material for Assessing Officer to form the requisite belief that income has escaped assessment for the assessment year under consideration.- Decided against assessee. Disallowance of interest - Held that:- If the amount is advanced from a mixed account or share capital or sale proceeds or profits etc., the same would be termed as diversion of borrowed capital and that the revenue need not require to establish nexus of the funds advanced to the sister concerns with the borrowed funds. Once it is borne out from the record that the assessee had borrowed certain funds on which liability to pay tax is being incurred and on the other hand, certain amounts had been advanced to sister concerns or others without carrying any interest and without any business purpose, the interest to the extent the advance had been made without carrying any interest is to be disallowed under Section 36(1)(iii) of the Act. Such borrowings to that extent cannot possibly be held for the purpose of business but for supplementing the cash diverted without deriving any benefit out of it. Accordingly, the assessee will not be entitled to claim deduction of the interest on the borrowings to the extent those are diverted to sister concerns or other persons without interest. - Decided against assessee.
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