Ganpati Associates v. Commissioner Income-tax, Meerut
[Citation -2017-LL-0404-55]

Citation 2017-LL-0404-55
Appellant Name Ganpati Associates
Respondent Name Commissioner Income-tax, Meerut
Court HIGH COURT OF ALLAHABAD
Relevant Act Income-tax
Date of Order 04/04/2017
Assessment Year 1996-97
Judgment View Judgment
Keyword Tags reassessment proceedings • depreciation allowance • reason to believe • business purpose
Bot Summary: Whether the ITAT was right in confirming the dis-allowance of interest of Rs.5,93,644/- when the loan was used for business purpose and all the conditions of Section 36(1)(iii) of the Act was fulfilled as held in case CIT Vs. Radico Khaitan Ltd. 274 ITR 354 In respect of the first question aforesaid the submission is that the Income Tax Officer while directing for reassessment under Section 148 of the Income Tax Act, 1961 had only assigned two reasons for formulating the opinion for reassessment. The aforesaid provision gives the Assessing Officer ample authority not only to assess or reassess the income for which he has reason to believe that it has escaped assessment but also any other income chargeable to tax but has escaped assessment if it comes to its notice during the reassessment proceedings and for which there may not be any reason assigned. The Supreme Court in Commissioner of Income Tax Vs. M/s Sun Engnierring Works Ltd. 198 ITR 297 that the assessing officer could assess and reassess the income that has escaped not only on the limited grounds but also on additional grounds that comes to the knowledge of the assessing officer subsequently during the course of the proceedings. In view of the clear language of the aforesaid provision and the above decisions, the argument that the Assessing Officer was not competent to pass an order of reassessment in respect of any other income which may have escaped assessment other than on which reasoned to believe have been recorded is not tenable and is turned down. In order to get the benefit under Section 36(1)(iii) of the Act it is settled in law that only three factors are relevant namely that the assessee had borrowed money for business purpose; it has utilised it for the business; and that it had paid interest on it. In the case at hand there is no dispute that the borrowing was for business purposes, it was utilised in the business and the assessee had paid interest on it therefore, the interest so paid was deductable under Section 36(1)(iii) of the Act. The sum of Rs.5,93,664/- of the interest amount as paid by the assessee is liable to be deducted under Section 36(1)(iii) of the Act.


Court No. - 9 Case :- INCOME TAX APPEAL No. - 48 of 2009 Appellant :- M/S Ganpati Associates Respondent :- Commissioner Income Tax Meerut Counsel for Appellant :- Rakesh Ranjan Agarwal,S. Agarwal Counsel for Respondent :- Gaurav Mahajan Hon'ble Pankaj Mithal,J. Hon'ble Vinod Kumar Misra,J. Heard Sri Suyash Agarwal and Sri Gaurav Mahajan learned counsel for parties. assessee has preferred this appeal against order of Income Tax Appellate Tribunal (hereinafter referred to as Tribunal) dated 14.11.2008 in respect of assessment year 1996-97. Sri Suyash Agarwal, learned counsel appearing for appellant has pressed following two substantial questions of law:- "(i) Whether ITAT was justified in adjudicating claim of loss of Rs.4,50,675/- purchase and sale of cotton which was not issue in reason recorded for initiation of 148 proceedings ignoring decision of Vipin Khanna Vs. CIT (2002) 255 ITR 220 P & H and Prashant S. Joshi Vs. ITO (Bom.) (2010) 324 ITR 154 (Bom.). (ii) Whether ITAT was right in confirming dis-allowance of interest of Rs.5,93,644/- when loan was used for business purpose and all conditions of Section 36(1)(iii) of Act was fulfilled as held in case CIT Vs. Radico Khaitan Ltd. (2005) 274 ITR 354 (Alld.)?" In respect of first question aforesaid submission is that Income Tax Officer while directing for reassessment under Section 148 of Income Tax Act, 1961 (hereinafter referred to as Act) had only assigned two reasons for formulating opinion for reassessment.The aforesaid reasons to believe does not include claim in respect of purchase and sale of cotton and as such assessing authority was not competent to make reassessment on basis of purchase and sale of cotton. In this regard Section 147 of Act is relevant and material. It reads as under:- "If Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings under this section, or recompute loss or depreciation allowance or any other allowance, as case may be, for assessment year concerned" (Emphasis supplied) plain reading of aforesaid provision reveals that where Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in course of proceedings. aforesaid provision gives Assessing Officer ample authority not only to assess or reassess income for which he has reason to believe that it has escaped assessment but also any other income chargeable to tax but has escaped assessment if it comes to its notice during reassessment proceedings and for which there may not be any reason assigned. It is not case of assessee that during course of proceedings there was no material before assessing authority to establish escapement of income chargeable to tax in addition of reasons to believe recorded. Sri Suyash Agarwal, learned counsel in this connection has placed reliance upon Division Bench decision of this court dated 18.02.2015 passed Income Tax Appeal No.270 of 2006. We have perused aforesaid decision and find that it does not specifically deals with issue in question regarding reassessment on all counts including that which may be in addition to reason to believe recorded and may have come to notice of Assessing Authority subsequently during pendency of reassessment proceedings. It does not even take into consideration specific language as used in Section 147 of Act. Thus, aforesaid decision is of no help to appellant. In ITO & another Vs. K.L.Srihari & others 250 ITR 193, Supreme Court held that once assignment is reopened whole proceedings starts afresh. Supreme Court in Commissioner of Income Tax Vs. M/s Sun Engnierring Works (P) Ltd. 198 ITR 297 that assessing officer could assess and reassess income that has escaped not only on limited grounds but also on additional grounds that comes to knowledge of assessing officer subsequently during course of proceedings. In view of clear language of aforesaid provision and above decisions, argument that Assessing Officer was not competent to pass order of reassessment in respect of any other income which may have escaped assessment other than on which reasoned to believe have been recorded is not tenable and is turned down. Now coming to second question referred to above, assessee appellant has taken loan for business purposes from various sources including U.P.F.C. and Bank of Baroda and had paid interest thereon amounting to Rs.5,93,644/-. It claimed deduction of said amount under Section 36(1)(iii) of Act but authorities denied said deduction on ground that assessee has given interest free advances to its partners which means that it had surplus money which could have been utilised to clear off loan so as to reduce interest liability. In order to get benefit under Section 36(1)(iii) of Act it is settled in law that only three factors are relevant namely that assessee had borrowed money for business purpose; it has utilised it for business; and that it had paid interest on it. In case at hand there is no dispute that borrowing was for business purposes, it was utilised in business and assessee had paid interest on it therefore, interest so paid was deductable under Section 36(1)(iii) of Act. Accordingly, denial of deduction on any other ground is not tenable in law. Therefore, sum of Rs.5,93,664/- of interest amount as paid by assessee is liable to be deducted under Section 36(1)(iii) of Act. In view of above, first question is answered against assessee whereas second question as referred to above in favour of assessee and against revenue. appeal is allowed in part, as aforesaid. Order Date :- 4.4.2017 piyush Ganpati Associates v. Commissioner Income-tax, Meerut
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