Ltd v. B.n. Panda, Deputy Commissioner1. The Same Reads As

Digitallysigned byPURTIPURTIPRASADPRASADPARABPARABDate:2022.02.2515:53:11+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 3456 OF 2021 Parinee Realty Pvt. Ltd. V/s.Assistant Commissioner of IncomeTax Central Circle-2(3) and Ors. ….Petitioner …Respondents ---- Mr. Nishant Thakkar a/w Mr. Hiten Chande i/b Lumiere Law Partners for Petitioner.Mr. Suresh Kumar for Respondents. ---- CORAM : K.R. SHRIRAM & N. J. JAMADAR, JJ. DATED : 23[rd] FEBRUARY, 2022 P.C. : 1.Petitioner is impugning the notice dated 10[th] March, 2021 forA.Y. 2014-15 issued under Section 148 of the Income Tax Act, 1961 (theAct) and the order dated 22[nd] June, 2021 rejecting petitioner’s objections tore-opening. 2.As per the notice issued under Section 148 of the Act, re-opening is proposed after the expiry of four years from the end of therelevant assessment year and assessment having been completed underSection 143(3) of the Act on 30[th] March, 2016, the proviso to Section 147 ofthe Act applies. Respondent has to show that there was failure of petitionerto truly and fully disclose all material facts necessary for assessment. 3. 3.We have perused the reasons for re-opening as contained in acommunication dated 7[th] April, 2021 and the said reasons does not disclosethat there was non disclosure on the part of petitioner. 4.The re-opening is proposed on the basis that certaininformation received on 20[th] January, 2019 after the assessment wascompleted indicated that petitioner has taken interest bearing loan fromvarious institutions in the market and advanced a part of loan so taken togroup companies either at low interest rate or at NIL interest rate.According to the Jurisdictional Assessing Officer (JAO) during the yearinterest has been received @ 12% per annum from Parinee Developers Pvt.Ltd. and Parinee Contour Construction Pvt. Ltd., two group companies butno interest has been charged to Parinee Shelters Pvt. Ltd. and ParineeRealtors Pvt. Ltd. Therefore, interest @ 12% per annum should have beencharged on Parinee Shelters Pvt. Ltd. and Parinee Realtors Pvt. Ltd., and thecharged amount would have been Rs.1,03,18,959/- which has escapedassessment. For the assessment year 2017-18 also notice under Section 148of the Act had been issued and the reasons recorded are almost identical.Petitioner had challenged that notice by Writ Petition No.3638 of 2021 andthis court by order and judgment dated 19[th] January, 2021 had quashed andset aside the said notice. Paragraph no.6, 7 and 8 of the said judgmentreads as under : 6.There can be no doubt in the facts of the present case thatthe issue of loan being given to group companies either at lowinterest rate or no interest rate was a subject matter ofconsideration by the Assessing Officer during the originalassessment proceedings. It would therefore, follow that the re-opening of the assessment is merely on the basis of change ofopinion of JAO from that held during the course of assessmentproceedings leading to the assessment order dated 21[st]December, 2019. This change of opinion does not constitutejustification and/or reason to believe that income chargeable totax has escaped assessment. 6.There can be no doubt in the facts of the present case thatthe issue of loan being given to group companies either at lowinterest rate or no interest rate was a subject matter ofconsideration by the Assessing Officer during the originalassessment proceedings. It would therefore, follow that the re-opening of the assessment is merely on the basis of change ofopinion of JAO from that held during the course of assessmentproceedings leading to the assessment order dated 21[st]December, 2019. This change of opinion does not constitutejustification and/or reason to believe that income chargeable totax has escaped assessment. 7.According to the JAO, survey report submitted by DDITinvestigation indicate that interest should be charged at 12%per annum on loan given to sister concern totaling toRs.4,17,04,380/- and therefore income chargeable to tax hasbeen under assessed by the said amount. According to the JAOthis interest income of Rs.4,17,04,380/- has escapedassessment. We find it rather strange that such an opinion isformed by the JAO. It is an accepted position that petitioner hasin fact not received any interest in respect of the loans/advancesgiven to seven of its group companies in the assessment order2017-18. When no income is received there is no question ofpaying any tax on income which respondent think should havebeen received but was in fact not received. Income whichaccrues to a person is taxable in his hands but we have not seenany provision of law which says that income which he couldhave earned but he has not earned is taxable as income accruedto him. It will be useful to reproduce paragraph no.7 of thejudgment of this court in India Finance & Construction Co. (P.)Ltd. vs. B.N. Panda, Deputy Commissioner1. The same reads asunder : 7. The second transaction on the basis of whichnotice under section 148 is issued relates to atransaction entered into in May, 1982, under whichthe assessee-company advanced to M/s. C. R.Developers (P) Ltd. a sum of Rs.15 lakhs purporting tobe an advance for the purpose of construction of ahotel. The advance is in the nature of a loan and nointerest is being charged on this account. Therespondents contend that the assessee-companyshould have received an interest income worthapproximately income worth approximately Rs. 3lakhs if interest had been charged on this advance.Hence, this interest income of approximately Rs. 3lakhs has escaped assessment. Once again the reasonwhich is recorded is beyond the scope of section 147.It is an accepted position that the assessee-company 1 [1993] 200 ITR 710 (Bombay) has in fact not received any interest in respect of thisadvance from M/s. C. R. Developers (P) Ltd. in theassessment year 1988-89. When no income is receivedthere is no question of paying any tax on incomewhich the respondents think, should have beenreceived but was in fact not received. In the case ofCIT v. A. Raman and Co. [1968] 67 ITR 11, theSupreme Court said that the law does not oblige atrader to make the maximum profit that he can out ofhis trading transactions. Income which accrues to atrader is taxable in his hands. Income which he couldhave but has not earned, is not made taxable asincome accrued to him. The Court also said that theHigh Court exercising Jurisdiction under article 226 ofthe Constitution has power to set aside a notice issuedunder section 147(b) if the condition precedent forthe exercise of jurisdiction does not exist. It is open tothe court to ascertain whether the ITO had in hispossession any information and whether from theinformation the ITO have reason to believe that theincome chargeable to tax has escaped assessment. Inthe present case, the reasons which are recordedclearly show that there is no material at all on thebasis of which the Assessing Officer could have reasonto believe that any interest income had escapedassessment. No such income had accrued during theassessment year in question. 8.It will also be useful to reproduce paragraph nos.5, 6 and7 of the judgment of the High Court of Delhi in Shivnandan2Buildcon (P.) Ltd. vs. Commissioner of Income-tax. 5. On going through the said decision, it can bediscerned that the Guwahati High Court held thatthere was nothing to show that the assessee had, infact, received interest or that the company to whomthe loan was given had, in fact, paid interest to theassessee. There was also nothing on record to showthat the alleged interest was not reflected in theaccounts. The only finding recorded was that theassessee "ought to" have charged interest. Referring toan earlier decision of the Guwahati High Court, inHighways Construction Co. (P.) Ltd. v. CIT [1993] 199ITR 702, the Court observed that their attention hadnot been invited to any provision of the Income-TaxAct empowering the income-tax authorities to includein the income, interest which was not due or not 2 [2015] 60 taxmann.com 347 (Delhi) collected. 6. In similar vein, when we asked Mr Sahni, who isappearing for the respondent to point out someprovision of the Income Tax Act, whereunder such‘notional’ interest could be made the subject matter oftax, the only reference he made was to Section 144 ofthe said Act. However, we are clear that Section 144does not at all apply to the present proceedingsbecause the present proceedings originate from anassessment under Section 143(3) of the said Act. 7. In the absence of any specific provision underwhich the so called notional income on advances,could be brought to tax, we do not see as to how theimpugned orders passed by the Commissioner ofIncome Tax can be sustained. 5.In the circumstances, petition is allowed and the impugned noticed dated 10[th] March, 2021 and order on objections dated 22[nd] June,2021 are quashed and set aside. 6.Petition disposed. (N. J. JAMADAR, J.) (K.R. SHRIRAM, J.)