TMI Blog2014 (11) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the Act – thus, the reopening was bad in law in that case also where reopening was made in the absence of tangible material or fresh information – Decided in favour of assessee. - ITA No. 5216/Del/2012, CO No. 437/Del/2012, (ITA No. 5216/Del/2012) - - - Dated:- 28-3-2014 - SHRI G.D. AGRAWAL AND SHRI I. C. SUDHIR, JJ. For The Appellant : Smt. Renuka Jain Gupta, Sr. DR For The Respondent : Shri Salil Aggarwal, Advocate ORDER PER I.C. SUDHIR, JUDICIAL MEMBER The revenue has questioned first appellate order on the issues of (i) deletion of disallowance of ₹ 998580/- claimed on account of expenses of trading nature against the income from the bank interest ; and (2) setting of business loss of ₹ 998580/- against the interest income u/s 71 of the Act. 2. The assessee on the other hand has objected the first appellate order on legal issue regarding validity of initiation of proceedings u/s 147 of the Act and on merits regarding sustenance of disallowance of expenditure, disallowance of the claimed exemption u/s 10B in respect of interest on FDR and disallowance of setting of loss against the interest income. 3. Since the objection No. 1 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also filed profit and loss account under the name and style of Mrs. Sushma Gupta and has declared software sale of ₹ 18,000/- interest on FDR at ₹ 15,46,523/- and interest. On SB account at ₹ 8,467/-. On the same profit has been shown at ₹ 4,86,250/- after debiting various expenditure like salary, bank charges, professional charges, conveyance, courier charges, business promotion, traveling, telephone, vehicle maintenance, depreciation etc. Interest on FDR shown at ₹ 15,46,523/- and intt. On SB A/c show at ₹ 8,467/- is chargeable to tax u/s 56 of I.T. Act under the head Income from Other Sources as claimed by the assessee in the profit and loss account under the name and style of Mrs. Sushma Gupta are not allowable because the assessee has not engaged in any sort of trading or business activity as Software Sale has been separately shown under M/s. Stardata and M/s. Mindmill. Moreover, On Software Sale, deduction u/s 10/b has separately been claimed. 5. The AO in the assessment framed u/s 147 read with section 143(3) of the Act made addition, which was questioned before the Ld. CIT(A) besides questioning the validity of proceedings initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even assuming that there was no business than too it could not have been observed even prima facie that such expenses are not allowable as deduction. It is thus a case where proceedings have been initiated on the basis of no material and therefore the same are misconceived, misplaced , arbitrary, erroneous and not based on factual consequences and hence it is without jurisdiction. He also placed reliance on the decisions of Hon ble Delhi High Court in the case of Ashok Kumar Sing vs. ITO 132 ITR 707 (Deli), United Electrical Company Pvt. Ltd. vs. CIT 258 ITR 317 (Del.) and Bawa Abhay Singh vs. DCIT 253 ITR 83 (Delhi). The Ld. AR also placed reliance on the following decisions of the Hon ble Supreme Court CIT vs. Indian Oil Corporation 159 ITR 956 (SC), ITO vs. Lakhmani Mewal Das 103 ITR 437 (SC) 8. Ld. AR contended further that proceedings to reopen assessment u/s 148 cannot be attempted to make an investigation. In support he placed reliance on the decisions including decision of Hon ble Supreme Court in the case of Chuggamal Rajpal vs. S.P. Chaliha and others 79 ITR 603 (SC) and the decisions of Hon ble Delhi High Court in the cases of Sarthak Securities Co. (P) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On perusal of reasons reproduced hereinabove, recorded by the AO to initiate proceedings u/s 147 by issuing notice u/s 148, we find that on the basis of information already available with the return of income filed by the assessee, the AO came to the conclusion that he has reason to believe that income chargeable to tax to the tune of ₹ 149283/- has escaped assessment and that there was no evidence on record to hold the claim of the assessee for exemption u/s 10B of the Act was eligible for the same. Again on the basis of information available with the return of income only the AO has reason to believe that interest on FDR shown as ₹ 1546523/- and interest on SB account shown as ₹ 8467/- is chargeable to tax u/s 56 of the Act under the head income from other sources as claimed by the assessee in the profit and loss account under the name and style of Mrs. Sushma Gupta are not allowable because the assessee has not engaged in any sort of trading and business activity as software sale has been separately shown under M/s. Stardata and M/s. Mindmill. Moreover on software sale deduction u/s 10B has separately been claimed. Thus it can be arrived at an admitted positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome on going through the return of income filed by the assessee after he accepted the return under section 143(!) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in CIT v. Kelvinator (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words reason to believe vis- -vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147. For the above reasons, we answer the substantial question of law framed by us in the affirmative, in favour of the assessee and against the Revenue. The appeal of the Revenue is accordingly dismissed. There shall be no order as to costs. 11. Respectfully following the ratio laid down in the above cited decision of Hon ble Jurisdictional Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be set off against interest income u/s 71. Against the assessment order passed in compliance of the order of the Tribunal the assessee went in first appeal and she raised the issue of validity of notice u/s 148 of the Act. She could not succeed there and questioned the same before the Tribunal. We thus find no reason to deny the adjudication of the said legal issue before the Tribunal in the second round in view of the above cited decision of third member Bench. Under above facts and circumstances we conclude that the AO was not justified in invoking jurisdiction u/s 147 of the Act or initiation of proceedings thereunder by issuing notice u/s 148 of the Act in absence of fresh material surfaced after furnishing of return of income and relevant material. The issue is thus decided in favour of the assessee. In result objection Nos. 1 1.1 of the cross objection are allowed. Since the notice issued u/s 148 of the Act has been held invalid, the assessment framed in furtherance to the said invalid notice is also held invalid and is quashed. The other grounds and objections raised by the parties on the validity of additions / disallowance made by the authorities below have become inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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