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TMI Blog2023 (9) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... No.03/2018 dt.11.07.2018. She accordingly submitted that the order of the Tribunal dismissing the appeal filed by the Revenue on account of low tax effect should be recalled. 3. The learned counsel for the assessee, on the other hand, has no objection for the same. 4. Since admittedly, the reopening of the assessment was made on the basis of audit objections, therefore, the case is covered under the exceptional category under section 10(C) of the CBDT Circular 03/2018 dt.11.07.2018. Therefore, a mistake has crept in the order of the Tribunal which requires rectification. We, therefore, recall the order of the Tribunal and the appeal is fixed for hearing today itself. The M.A. field by the Revenue is accordingly allowed. 5. These are cross appeals. The first appeal is filed by the Revenue and the second one filed by the assessee and are directed against the order dt.27.11.2012 of the Commissioner of Income Tax (Appeals) - V, Hyderabad relating to A.Y. 2007-08. For the sake of convenience, these appeals were heard together and are being disposed of by this common order. 6. The facts of the case, in brief, are that the assessee is a company engaged in the business of land develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 147 of the IT Act 1961. " 7. Notice u/s 148 of the Act was issued on 25.02.2011 which was served on assessee on 04.03.2011. Although no return in response to the said notice was filed, however, in response to the statutory notice issued under section 142(1) of the Act, the ld. AR of the assessee appeared before the Assessing Officer from time to time and furnished the information as called for. So far as the question regarding advancing of loan to the sister concern i.e., M/s. Pragathi Kamadhenu Pvt. Limited without charging any interest is concerned, the assessee furnished the following reply which has been reproduced by the Assessing Officer in the body of the assessment order, which reads as under " "We hereby submit that, the company has availed loans from Andhra Bank, Ameerpet branch of Rs.11 crores in the financial year 2005-06 towards resorts project/development situated at Proddutur village, Shankaerpally Mandal, accordingly but of the Project loans we had given Land advances to various parties including M's. Pràgati Kamadhenu Finance Pvt. Ltd. (presently known as Pragati Kamadhenu Estates Pvt. Ltd) and the balance as at 31/3/2007 is of Rs.5,25,14,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee was purely on commercial expediency and there is no diversion of funds. 5.6. In light of the above judgments and relevant explanations, the addition made is deleted. 6. The next issue relates to the initiation of penalty. The grounds raised by the appellant regarding the additions (supra) were adjudicated in favour of the appellant, therefore there cannot be any concealment of income. Further, there is no *concealment or furnishing of any inaccurate information by the appellant and hence the penalty proceedings u/s. 271(l) (c) are not to be initiated. 7. In this result, this appeal is allowed. 10. Aggrieved with such order of the learned CIT(A), the Revenue is in appeal before us by raising the following ground : "The learned CIT(A) erred in deleting the disallowance of interest on borrowed funds of Rs.66,95,640/- in view of interest free advances given to assessee's sister concerns." 11. The assessee has also taken the following grounds : "1. The Ld. CIT(A) has erred both in law and on facts of the case in upholding the order of Ld. A.O in the order passed u/s 143(3) r.w.s 147 of the I.T 4ot 1961. 2. The Ld. CIT(A) has erred in upholding the reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the office of the CITIV, Hyderabad to the Principal Director of Audit (Central), Saifabad, Hyderabad, the learned counsel for the assessee drew the attention of the Bench to the same and submitted that the Department has accepted the objections raised by the Revenue Audit Party and has stated that the Assessing Officer has taken necessary remedial action by passing order u/s 143(3) r.w.s. 147 of the Act on 07.12.2011. 16. Referring to the decision of Hon'ble Supreme Court in the case of Indian Eastern Newspaper Society Vs. CIT reported in (1979) 2 Taxman 197 (SC), he submitted that Hon'ble Supreme Court in the said decision has held that the view expressed by internal audit party on a point of law cannot be regarded as "information" for the purposes of initiating proceedings under section 147(b) of the Act. Referring to the decision of Hon'ble Karnataka High Court in the case of CIT Vs. GMR Holdings Pvt. Limited reported in 407 ITR 439, he submitted that the Hon'ble High Court has held that re-assessment proceedings under section 147/148 of the Act could not be undertaken on a mere change of opinion or audit objection raised by the internal auditors of the Department. Referri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Andhra Bank (Term loan) - Rs.11,35,19,647/- and Rs.83,67,666/- being vehicle finance. "Interest and Bank Charges" being an amount of Rs.1,85,54,522/- was debited (expenditure) in the profit and loss account for the year ended 31.03.2007. (Approximate @ 15.22%). During Audit Scrutiny, it was noted that the assessee had given an amount of Rs.525,14,827/- to M/s. Pragati Kamadhenu Finance (Pvt) Limited towards unsecured loans on 31.03.2006. (sister concern with same Directors). (File verified of confirmation letter issued by assessee). However, interest was required to be offered on the above unsecured loans which was not offered as other income. (minimum @ 12%) u/s 56 of I.T. Act. Loans cannot be advanced to sister concerns without charging interest, when the company itself was paying interest on borrowed loan. The income escaped assessment for not offering interest income worked out to Rs.63,01,779/- with a consequential tax effect of Rs.21,21,178/- excluding interest notice u/s 143(2)/148/154 was not issued. Yours faithfully, RAO / ITRAP XVI. 21. We further find in compliance to the objections raised by the audit party, the CIT-IV, Hyderabad has addressed a letter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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