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TMI Blog2011 (4) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... r complied with the requisition by a letter dated 18th September, 2006. The Assessing Officer, thereafter, framed assessment under section 143(3) of the Act on 10th October, 2007 computing the business income at Rs. 22,59,221/- and specifically gave deduction of interest of Rs. 2,74,905/- and salary to partners of Rs. 5,50,000/- and thus computed the total income at Rs. 14,34,316/- which came to be rounded off at Rs. 14,34,320/-. 3. Thereafter, the petitioner received the impugned notice dated 5th February, 2010 for assessment year 2005-06 stating that income had escaped assessment and asking the petitioner to file the return of income. Reasons for reopening also came to be furnished to the petitioner whereupon, the petitioner filed objections to the proposed reassessment by a letter dated 6th April, 2010. The respondent rejected the said objections by an order dated 12th October, 2010. After passing the objections disposal order, even before the petitioner received the same, the respondent issued notices dated 14th October, 2010 under 133(6) of the Act to various parties who had deposits with the petitioner and also reminded them of the provisions of section 272A(2)(c) in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of both application of mind and opinion, and exactly for the same reason, that now according to the Assessing Officer less is allowable because interest though shown and taxed as business income is wrongly taxed as such, is nothing but a change of opinion. Placing reliance upon the decision of the Bombay High Court in the case of CIT v. Paramount Premises (P.) Ltd. [1991] 190 ITR 259 it was submitted that interest from deposit of business receipt is a business income, more particularly, when the money is deposited in FDRs and waiting to be very soon used in the business and, therefore, the contrary opinion of the present Assessing Officer that it is not a business income is factually and in law incorrect. Reliance was also placed upon the decision of the Punjab & Haryana High Court in the case of CIT v. Supreme Builders [2008] 303 ITR 1/174 Taxman 228. 4.2 In conclusion, it was urged by the learned advocate for the petitioner that in any case, the view taken by the Assessing Officer is a plausible view in the light of the above referred decisions, assuming that it is capable of two views. It was submitted that whether interest income is a business income is a debatable issue w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer, it was pointed out that it is clearly stated therein that the interest accrued on Rs. 57 lakhs is provided as interest accrued on bank deposit of Rs. 2,43,927/- during the year. It was submitted that in the circumstances, the petitioner had disclosed all material facts before the Assessing Officer and the Assessing Officer after approving the same and applying his mind to the issue involved, had framed the assessment under section 143(3) of the Act. The reopening of assessment is, therefore, based upon a mere change of opinion and as such, is not valid in law. 7. In the light of the rival contentions raised by the learned advocates for the respective parties, it may be germane to refer to the reasons recorded for reopening of the assessment under section 147 of the Act, which read thus: "REASONS FOR REOPENING OF THE ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961 The assessee had filed return of income for the assessment year 2005-06 on 29/10/2005 declaring income of Rs. 7,26,980/-. The assessee is engaged in construction business. The assessment proceedings were completed u/s.143(3) of the Income Tax Act, 1961 on 10/10/2007 determining total income at Rs. 14,34,320/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/- received from interest is to be excluded while working out the book profit under section 40(b) of the Act and that if the income of the petitioner is computed after excluding the interest income from the book profit under section 40(b) of the Act, the total income chargeable to tax which has escaped assessment would come to Rs. 97,570/-. 8. A perusal of the assessment order as originally framed under section 143 of the Act indicates that while computing the profit as per the profit and loss account, the Assessing Officer has added interest to partners and remuneration to partners and thereafter, allowed deduction thereof, which clearly exhibits due application of mind on the part of the Assessing Officer. The Assessing Officer has also disallowed Rs. 7,01,119/- under section 40(a)(ia) of the Act which resulted in considerable increase in the total income. The Assessing Officer while recording the reasons has lost sight of this fact, namely that the total income has increased from Rs. 7,26,980/- as declared in the return to Rs. 14,34,320/- in view of the aforesaid disallowance and therefore, the remuneration to partners of Rs. 5,50,000/- as claimed by the petitioner would still ..... X X X X Extracts X X X X X X X X Extracts X X X X
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