Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Illustrations/Non-disclosure of primary facts - Assessment years 1995-96 and 1996-97 - Where in original assessment, Assessing Officer had allowed interest expenditure from dividend income under section 57 on basis of disclosures made by assessee, he could not reopen assessment on ground that in original assessment, assessee did not submit information as to how interest expenditure was incurred to earn dividend income [In faviur of assessee] The assessee claimed interest expenditure from dividend income earned from company 'M' under section 57(iii). During the assessment, the Assessing Officer had raised certain queries to which assessee replied that he had founded a company, viz., 'M' and was currently the director of the said company; and that interest was paid on various loans which were raised for investment in shares of company 'M'. The Assessing Officer allowed the assessee's claim. However, after lapse of four years from end of relevant assessment years, he sought to reopen assessment on the ground that against the claim of interest expenditure under section 57(iii), the assessee did not submit any information how such expenditure was laid out or expended wholly and exclusively for the purposes of earning dividend. The Assessing Officer was of the opinion that the increase of the assessee's holding of shares of 'M' was not for the purpose of earning dividend, but for acquiring the controlling stake of the company. Held that in both the assessments, the assessee had disclosed primary facts in the returns filed. Further, the Assessing Officer had raised certain queries about borrowings and the interest paid thereon and the dividend earned. The assessee, on both the occasions, supplied necessary material through letters and documents produced on record. Thus, during the scrutiny assessment proceedings, the Assessing Officer was actually aware about the claim of the assessee under section 57(iii). If on the basis of such disclosures, the Assessing Officer was curious to verify the percentage shift in the holding of the assessee in the company in question, it was well within his powers to…

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