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The dispute is regarding allowability of claim of bad debt not made in the return of income. The claim had been made before AO only during assessment proceedings which had not been allowed following the judgment of Hon’ble Supreme Court in the case of Goetz India Ltd. (supra) in which it has been held that any claim before the AO has to be made by way of filing revised return if not made in the original return. CIT(A) has therefore, upheld the order of AO. It may however be noted that the judgment of the Hon’ble Supreme Court in the case of Goetz (I) Ltd. was regarding claim to be made before the AO.
In our considered opinion, the notice issued under section 148 of the Act is nothing but mere change of opinion. The issues which have already been considered in the original assessment cannot be reappreciated in reassessment proceedings under the garb of income escaping assessment. If the Assessing Officer has not given any finding after considering the evidence on record, it cannot be said that the income had escaped assessment on account of concealment of income of the assessee.
Observations of the assessing officer to the effect that no one makes a loss in real estate business and that the market perceptions indicate that the prices of the immoveable properties are always on the upward trend. These observations have, inter alia, formed the basis of the additions made by the assessing officer. It was even suggested before us on behalf of the revenue that it is a “notorious practice” prevailing in real estate circles that in all property transactions there is non-disclosure of the full consideration. As pointed out earlier, this cannot per se constitute the basis of the addition, though we must hasten to add that it can very well be a starting point for further investigation. In Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288, the Supreme Court disapproved the practice of making additions in the assessment on mere suspicion and surmises or by taking note of the “notorious practice” prevailing in trade circles.
If income arises out of the transfer of a long term capital asset being an equity share in a listed company, the said income would be exempt under section 10(38) of the said Act. There is no doubt that the shares of Goodyear India Limited are listed shares and therefore even if a consideration had been charged for the transfer of the 74% share, the income arising therefrom would be exempt by virtue of the provisions of section 10(38) of the said Act.
As far as the assessee’s claim on payment of additional interest is concerned, while confirming the Assessing Officer’s view that the payments were contrary to the RBI guidelines, the First Appellate Authority as well as the Income Tax Appellate Tribunal held that all that the assessee could pay as per the RBI guidelines was 8% interest only and any amount paid over and above the permissible limit was against the public policy, hence, hit by Explanation 237 of the Income Tax Act, 1961. As far as this line of reasoning is concerned, we find from the Circular issued by the RBI that there is ceiling on interest payable in current account/saving bank account and discretion is available on interest to be paid on term deposits. The circular reads as under:-
The assessee disclosed capital gain and claimed exemption under section 54F on the ground that entire sale proceeds were invested in construction of house property. In the original assessment proceedings, the Assessing Officer, denied exemption on ground that construction of house property was complete before the date of transfer of shares.
The primary condition for rejecting the book results as laid down under section 145 of the Income-tax Act, 1961 (the Act) is that the Assessing Officer should be satisfied that the books of account maintained by the assessee are not complete and correct. As can be seen from the findings given by the Assessing Officer in the order of assessment, the Assessing Officer has merely proceeded on a surmise that the profits of the assessee are sought to be reduced by selling its products to M/s. Pragathi Automation P. Ltd., the assessee’s sister-concern at a lesser price.
The assessee AOP in the present case has been assessed as AOP and found to have fulfilled the condition laid down in section 80 IB(10) and has been held to be eligible for such deduction. The quantum of deduction under section 80 IB (10) will depend on the income earned from eligible project. The quantum of deduction will not depend upon the mode of distribution of shares amongst the members of AOP as income of AOP is taxable at maximum marginal rate.
In a case where assessee voluntarily deducted tax and claimed refund directly, grant of interest under section 244A may not arise and the Board Circulars on this issue are applicable, whereas in a case where AO demand the tax / interest consequent to an order under section 195/201 or 201A, and the refund arose consequent to the orders of the CIT (A)/ITAT, then interest under section 244A has to be granted. In the present case, the assessee has been found entitled to refund in accordance with the provisions of the Act and section 244A provides for payment of interest on the amount of refund which becomes due to assessee under the Act. We have no doubt in our mind to hold that the assessee is entitled to interest u/s 244A.
Hon’ble Jurisdictional High Court of Bombay in the case of John D’Souza (supra) has also held that any payment for not carrying out any activity or for refraining from carrying out activity in relation to business which otherwise was being allowed to be carried out by the assessee, by the erstwhile owner was assessable u/s. 28(va), squarely applies. The Hon’ble Jurisdictional High Court further held that question of capital gains did not arise as the assessee was not owner of any asset in the first place and there is no transfer of such alleged capital asset during the previous year.
