The Tax Publishers2021 TaxPub(DT) 0342 (Guj-HC)

INCOME TAX ACT, 1961

Section 148

Notice issued under section 148 on the reasoning that assessee failed to offer 'interest on capital' and 'remuneration' as income alleged to have been received from partnership firm could not be held as valid because there was no material on record to indicate that assessee had actually received any 'interest on capital' or 'remuneration' from partnership firm, whereas condition precedent for the purpose of resorting to re-opening of assessment is that the AO should be satisfied, based on some cogent or tangible material, that the case is one of escapement of income chargeable to tax.

Reassessment - Notice under section 148 - No income earned by assessee -

AO issued notice under section 148 on the reasoning that assessee failed to offer 'interest on capital' and 'remuneration' as income alleged to have been received from partnership firm. Assessee challenged the notice by of filing writ petition. Held: Condition precedent for the purpose of resorting to re-opening of assessment is that the AO should be satisfied based on some cogent or tangible material, that the case is one of escapement of income chargeable to tax. In the absence of escapement of any income chargeable to tax, it is not open for the department to re-open the case of assessee. In the instant case, mere incorporation of interest on partners' capital and remuneration did not necessarily mean or be construed as mandatory. There had to be some material on record to indicate that assessee had actually received any 'interest on capital' or 'remuneration' from partnership firm. As no such income was earned by assessee, the question of taxing the same did not arise at all. Accordingly, reassessment notice was set aside.

Applied:Pr. CIT v. Alidhara Taxspin Engineers [TA. No.265 of 2017, decided on 2-5-2017).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12



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