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2020 (1) TMI 860 - AT - Income TaxReopening of assessment u/s 147 - Non-accounting of interest income on loan even though the management of the company considered it good and recoverable - HELD THAT:- Re-assessment has to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the AO. Hence, after 1.4.1989, the AO has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. In reassessment proceedings, the AO took the stand that “the assessee company has not accrued interest on the loan of ₹ 228.38 lakhs”, therefore income has escaped assessment. We note that the issue relating to “accrued interest on the loan of ₹ 228.38 lakhs” has already been examined by AO during the original assessment proceedings u/s 143(3) of the Act, hence it is not a new tangible material therefore reassessment proceedings is bad in law and not valid in the eye of law. We note that in the case of Indian and Eastern Newspaper Society Vs. CIT [1979 (8) TMI 1 - SUPREME COURT] wherein it was held that an error discovered on a reconsideration of the same material (and no more) does not give AO power to assume jurisdiction to make reassessment. The aforesaid view on the above proportion has been reiterated by the Apex Court in A.L.A.Firm vs. CIT 1991 (2) TMI 1 - SUPREME COURT CIT(A) failed to appreciate that the A.O. has already made the scrutiny assessment u/s.143(3) in the assessee`s case and looked into all details and documents including audited balance sheet and Tax Audit Report submitted to him and has made several additions on the basis of said Balance sheet and Tax Audit Report. From the reasons recorded (Page-3 of Paper Book) it is clear that the assessment has been reopened on the basis of Clause-18 of Schedule-22(B) of Notes on Accounts given in the Balance sheet. The said balance sheet and clause-18 alleged by the A.O. was already before the A.O. during the original assessment proceedings and has been examined by him. There was no new material so as to believe that the income chargeable to tax has escaped assessment. Therefore, it is abundantly clear that in the assessee`s case under consideration there is no any tangible material to reopen the concluded proceedings, as the issue relating to “accrued interest on the loan of ₹ 228.38 lakhs” had already been examined by AO during the original assessment u/s 143(3) of the Act, which was completed on 31.03.2006, hence we quash the reassessment proceedings. - Decided in favour of assessee. Accrual of income - Addition as notional interest on loan - Whether no interest was accrued or receivable by the assessee on the said loans - HELD THAT:- We note that Hon`ble Supreme Court in the case of UCO Bank [1999 (5) TMI 3 - SUPREME COURT] has held that tax should be imposed on the real income. We note that ld Counsel placed before the Bench the resolution of Board of Directors of the assessee company which clearly states that recovery of the interest is doubtful therefore interest had not been accrued by the assessee company. We note that there is no real accrual of interest to the assessee-company in respect of the loan advanced by it. Considering the bad financial position of the debtor companies, the management of the Company decided not to charge interest on the loans w.e.f. 01.04.2000 as mutually agreed with the loan debtor ( vide Board Resolution noted above). Therefore, we find force in the argument of the ld. Counsel and addition made by the A.O. for notional interest on loan given is hereby directed to be deleted. - Decided in favour of assessee.
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