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2018 (9) TMI 1754 - AT - Income TaxValidity of reopening of assessment - sufficiency of reasons to believe - Held that:- The assessment is reopened within 4 years from the relevant assessment year and in the instant case, the AO has given a finding that the assessee had diverted the funds for non-business purposes by giving the loans and paying huge interest on borrowed funds and viewed that the proportionate interest required to be disallowed, hence, the AO held that there was escapement of income. Since the assessment is reopened within 4 years and the AO has given a clear reasoning for his belief, we uphold the validity of issue of notice u/s 148 and the order of the Ld.CIT(A) on this issue. The reasons recorded by the AO are sufficient to reopen the assessment. Accordingly, the appeal of the assessee on this ground is dismissed. Disallowance of interest u/s 36(i)(iii) @12% on amounts advanced to Lotus Associates for purchase of land - Held that:- AO has not given any finding with regard to the diversion of funds from the borrowed funds, whereas the Ld.CIT(A) has given a finding that the borrowed funds have been diverted. Disallowance u/s 14A, there was no finding given in the assessment order or in the appellate order with regard to the earning of income. Therefore, both the issues require detailed verification of the facts with regard to the diversion of borrowed funds and earning of dividend income - The facts regarding diversion of interest bearing funds to non-business purposes and non-earning of the dividend income are not emerging out of the orders of the lower authorities. Therefore, we are of the considered opinion that the issue needs detailed verification at the level of the AO. - Decided in favour of assessee for statistical purposes.
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