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2015 (7) TMI 447 - AT - Income TaxValidity of reassessment proceedings - Disallowance u/s 36(1)(iii) of Income tax Act, 1961 - Charges of interest bearing funds advanced for non-business purposes - Reopening is not permissible on the basis of borrowed satisfaction rather there should be live link with the formation of belief and conclusion for escapement of income - Held that:- Validity of reassessment proceedings - We find that there was no new tangible material with the Assessing Officer to form a belief that income chargeable to tax had escaped assessment, thus, in view of the decision from Hon'ble Rajasthan High Court [2008 (5) TMI 276 - RAJASTHAN HIGH COURT] reopening is not permissible on the basis of borrowed satisfaction rather there should be live link with the formation of belief and conclusion for escapement of income. The ratio laid down by Hon'ble jurisdictional High Court in Aventis Pharma Ltd. vs ACIT [2010 (3) TMI 317 - BOMBAY HIGH COURT ] supports our view. Even after 01/04/1989, concept of 'change of opinion' was not removed. The totality of facts clearly indicates that no new material came to the possession of the Assessing Officer leading to conclude that the income has escaped assessment, thus, issuance of notice for reopening and reassessment order passed u/s 143(3) r.w.s.147 of the Act was rightly held to be unsustainable in law. The existence of tangible material is necessary to ensure against an arbitrary exercise of power, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income tax (Appeals). Disallowance u/s 36(1)(iii) of Income tax Act, 1961 - Considering the fact that the assessee had its own funds more than the loans given to its subsidiaries and also in the absence of any nexus establishing that the interest bearing 'borrowed funds were given us interest free to its subsidiaries, we hold that the disallowance of interest is not justified. Therefore, interest is allowable under section 36(1)(iii) of the Act. - Decided against the revenue.
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