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2016 (5) TMI 465 - AT - Income TaxReopening of assessment - diversion of interest bearing to non-interest bearing funds - Held that:- As regards the reasons for which reassessment proceedings have been initiated, assessee could not placed on record any communication referring to discussion about the diversion of interest bearing to non-interest bearing funds which means that there was no discussion at all on this point and, therefore, there cannot be any change of opinion because there was no opinion framed on this aspect during assessing proceedings u/s 143(3) of the Act and the period of four years given in the Act specifically pertains to those aspects which may have escaped assessment during the proceedings u/s 143(3) of the Act and four years being sufficient period within which department can go ahead with re-assessment proceedings for any such escaped income arising out of the assessment records held in the possession of the department which have been gathered during the proceedings u/s 143(3) of the Act. Thus Assessing Officer has rightly initiated proceedings u/s 147 of the Act before the end of four years from the relevant assessment year. - Decided against assessee Disallowance of interest - diversion of interest bearing funds to non-interest bearing loans and advances - Held that:- On perusal of list of loans and advances as given as on the close of the financial year 2007-08 we observe that most of the loans and advances are in the nature of trade and commerce which the assessee might have given during the course of normal business. However, one cannot ignore the possibility that list of loans and advances may also include sister concern of the assessee from whom interest might not have been charged. However, in the given circumstances wherein we have examined that assessee was having sufficient interest free funds in the form of partners’ capital at the year end of ₹ 36,65,742/- as well as interest free secured loans of ₹ 36,85,604/-, disallowance of interest at ₹ 5,56,268/- on the loans and advances given of ₹ 41,02,373/- is uncalled for as the assessee had sufficient interest free funds available to apply to the loans and advances given. We are of the view that no addition for disallowance of interest expenses is to be sustained. We delete the same. - Decided in favour of assessee
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