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2016 (9) TMI 200 - AT - Income TaxReopening of assessment - addition u/s 41 - Held that:- From the copy of notice u/s 154 of the Act available it is amply clear that the A.O on 31.3.2010, issued notice to the assessee showing his intention to convert head of income from business income to income from other sources pertaining to impugned amount of ₹ 15 lakhs comprising loans written off of Pearl Global Limited and the assessee had also filed reply on 20.4.2010 explaining that the loan was given for business consideration and the amount written off was treated as profit u/s 41(1) of the Act. Therefore, in the original assessment order, the A.O rightly treated the same as business income and consequently it was adjusted against brought forward business losses. In view of the above, we are satisfied that the A.O initiated reassessment proceedings beyond four years passed on erroneous facts that the impugned amount had already been offered for tax by the assessee as business income whereas the A.O noted that income to the tune of ₹ 50 lakhs has escaped assessment. We may also point out that the main dispute was regarding charging of the said amount as in the original assessment proceedings the A.O taxed the same as business income whereas in the reassessment proceedings the A.O has shown his intention to tax the same as income from other sources and we may also point out that the rectification proceedings u/s 154 of the Act initiated by the A.O earlier were dropped after considering the reply of the assessee. Therefore, we decline to accept the allegation of the A.O that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, initiation of reassessment proceedings and issuance of notice u/s 147/148 of the Act cannot be held as sustainable and valid and we have not hesitation to hold that the same was not a valid assessment of jurisdiction and it was bad in law and not sustainable and consequently, legal Ground is allowed in favour of assessee.
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