Law:

Section:

Section 147(a) of the Income-tax Act, 1961 - Reassessment - Non-disclosure of primary facts - Assessment year 1972-73 - Acting under section 263 Commissioner disallowed assessee's claim for deduction of interest on borrowed capital on ground that said money had been advanced to certain firms for non-business purposes - However, on appeal Tribunal set aside Commissioner's order holding that capital had been borrowed for business purposes and interest payment was allowable - ITO, however, subsequently issued reassessment notice on ground that assessee had not disclosed certain interest accrued on advances made to firms which had escaped assessment -Whether in view of finding recorded by Tribunal in appeal against order of Commissioner under section 263. ITO was justified in holding that assessee had omitted to disclose income by way of interest accrued - Held, no FACTS The assessee filed income-tax return for the assessment year 1972-73 and the ITO made an assessment under section 143(3). Aggrieved by the ITO's order, the petitioner filed an appeal but the Commissioner (Appeals) dismissed the same. Thereafter the Commissioner issued a notice calling upon the petitioner to show cause why the order of the ITO, insofar as he failed to disallow the interest payment attributable to the capital borrowed but advanced to certain firms D and S for non-business purposes, should not be set. aside. The Commissioner, therefore, enchanced the assessment by withdrawing the allowance of interest on borrowed capital proportionate to the advances for non-business purposes. However, the appeal of the petitioner was allowed by the Tribunal. Subsequently, the ITO issued a notice under section 148 on the ground that the assessee had not disclosed the interest accrued for the assessment year 1972-73 on the advances of Rs. 2,22,469 made to D, and that the said income had escaped assessment though it was chargeable to tax. It was urged by the assessee (i) that the question whether the interest which was received was chargeable to tax was in a way considered by the Commissioner while exercising his powers under section 263 and against this order, the assessee had filed an appeal to the…

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