Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2022 (5) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (5) TMI 1284 - HC - Income TaxReopening of assessment u/s 147 - Transfer Pricing Reference u/s 92CA - Non disclosure of loan extended to its Associated Enterprise [MMG] and there is difference in the petitioner's investment in purchasing MMG's shares as per the respective financials of the petitioner and MMG - HELD THAT:- The first respondent has initiated proceedings for reopening of the assessment for the Assessment Year 2012-13 insofar as the petitioner's loan transaction with MMG on twin grounds; The first respondent has reasoned that the petitioner has not disclosed advance to the Associated Enterprise (MMG) in the Auditors Certificate in Form No.3CEB and because the advance amount is not specifically mentioned in this certificate, the AO could not refer the petitioner's loan transaction with MMG to the TPO. The first respondent has also opined that if there is a TPO reference and re- adjudication, the disallowance towards interest will have to be reassessed. As undisputed that the petitioner has enclosed Auditor's Certificate in Form No. 3CEB in the prescribed format furnishing the details of the transaction as required i.e., the nature of transaction, the rate of interest, interest computed and the method adopted in determining Arm's Length Price. There is no allegation that the petitioner has omitted or not disclosed any particular detail as required in this Form. As undisputed that the petitioner's loan transaction with MMG was examined in the proceedings under Section 143(2) of the I-T Act. The petitioner with the issuance of the notice under Section 143(2) is called upon to justify the advance to MMG, and after considering the petitioner's justification with reference to the disallowance of notional interest during the previous assessment years, the AO has disallowed interest in the premise that the petitioner has utilized loan bearing advances to lend loan to its associated enterprise, MMG. This circumstance clearly demonstrates that the value of the petitioner's advance to MMG was available with the AO and has received consideration. It cannot be opined that the petitioner had either omitted or failed to disclose the advance/loan transaction with MMG. As such, it must be concluded that the Revenue has failed to establish one of the necessary conditions viz., that the petitioner has either omitted or failed to disclose fully or truly material circumstances. In that event the first respondent could not have assumed jurisdiction for reassessment and issued the impugned notice dated 29.01.2018 (Annexure-E). Revenue does not dispute that both the source of income and the subject investment are mentioned in the books of accounts, and the Revenue also does not contend that the petitioner did not have the necessary resources to make such investment. Importantly, the Revenue does not contend that the payment of premium by the petitioner to MMG's shareholders for purchase of the shares will not be reflected in the MMG's financials. The petitioner's objections in this regard are rejected only on the ground that the explanation could be considered at the time of reassessment. This Court must opine that the question framed for consideration must be answered in favour of the petitioner concluding that the Revenue has failed to establish that the petitioner has either omitted or failed to disclose material circumstances or that there is reason even for a subjective belief that any income has escaped tax - WP allowed.
|