COMMISSIONER OF INCOME TAX Vs. DCM LTD.

JUDGEMENT

(1.) THIS appeal at the instance of the Revenue pertains to the asst. yr. 1996 -97. The issue involved in this appeal centres around the question of reopening of the assessment proceedings of the assessee in respect of the said assessment year.

(2.) THE original assessment was completed under s. 143(3) of the IT Act, 1961 and after an expiry of four years from the end of the assessment year in question, the AO reopened the assessment by invoking the provisions of s. 147. The reasons indicated by the AO for reopening the assessment had a reference to allotment and sale and purchase of certain shares of DCM Estate & Infrastructure Ltd. But, in the reasons recorded, there is no allegation with regard to the purchase and sale of shares of DCM Estate & Infrastructure Ltd. (DEIL) by the assessee company. The allegation only pertains to some of the promoters of the assessee company and subsidiary companies/trusts. The AO upon reassessment did not make any addition in pursuance of these reasons recorded by him. Instead, he made an addition on account of interest notionally calculated by him on the amount of advances given to subsidiary companies/trusts.

(3.) BEING aggrieved by the reassessment order that was framed by the AO, the assessee preferred an appeal before the CIT(A) who allowed the said appeal. The CIT(A) recorded a finding that the initiation of proceedings under s. 147 was itself invalid. He also recorded a finding that in any event the addition on account of notional interest was also not made out on merits, inasmuch as the assessee company had more interest -free funds than the amount of the loans/advances said to have been given to the subsidiary companies/trusts.