2008 (7) TMI 1008 - HC - Income Tax

Reopening of the assessment u/s 148 - time limitation - change of opinion - after the expiry of four years of the completion of the original assessment - beyond time-limit provided in the proviso to s. 147 - deduction on interest - Tribunal set aside the order of the CIT(A) and annulled the assessment proceedings without going into the merits of the case - HELD THAT - We are of the view that we cannot find fault with the reasoning given by the Tribunal in non-suiting the Revenue for reopening the assessment. After extracting the relevant provision, viz., s. 147 of the IT Act and the proviso thereto, the Tribunal has recorded a clear finding to the effect that the assessee has truly and fairly disclosed the facts regarding interest vide item No. 3 in the note forming part of the return. Having recorded the above findings, the Tribunal had also referred to the judgment of this Court in the case of Apollo Hospitals Enterprises Ltd. vs. Asstt. CIT 2006 (6) TMI 88 - MADRAS HIGH COURT to sustain their view point. Therefore, it is manifestly clear that particulars about the claim of interest amount are very much available before the AO while he was framing the original assessment, and after taking into consideration the claim on interest in respect of the abovesaid amount, the original assessment was framed. The subsequent reopening of the assessment is nothing but in our considered view also a mere change of opinion to follow the earlier year assessment order, which is not the reason for reopening of the assessment u/s. 147 of the IT Act. Further, the reopening of the assessment cannot also be brought within the exemption stated therein for reopening after the period of four years. Hence, the appeals are dismissed as no question of law, much less, a substantial question of law, has to be decided by this Court.

Summary

Issues involved:
1. Reopening of assessment under section 147 of the IT Act.
2. Disallowance of interest amount claimed by the assessee as a deduction on revenue account.
3. Interpretation of the proviso to section 147 of the IT Act regarding the time limit for reopening assessments.

Detailed analysis:
1. Reopening of assessment under section 147 of the IT Act:
The case involved an appeal by the Revenue against the Tribunal's order regarding the reopening of assessment for the assessment year 1997-98. The Tribunal found that the reopening was based on a change of opinion by the Assessing Officer (AO) and not on any new material. The Tribunal also noted that the facts regarding the interest claimed by the assessee were disclosed during the original assessment process. The High Court agreed with the Tribunal's findings, stating that the AO had already considered the facts disclosed by the assessee during the original assessment. The Court held that the reopening of the assessment was merely a change of opinion and did not meet the requirements for reopening under section 147 of the IT Act.

2. Disallowance of interest amount claimed by the assessee:
The AO disallowed the claim of the assessee for deduction of interest amount on revenue account, considering it as a capital expenditure during the reassessment process. The Tribunal found that the interest claim was originally accepted during the original assessment and that the AO's decision to disallow it was based on a change of opinion. The High Court concurred with the Tribunal's findings, emphasizing that the interest claim was known to the AO during the original assessment and was not a valid reason for disallowance during the reassessment. The Court held that the reassessment was not justified based on the disallowance of the interest amount.

3. Interpretation of the proviso to section 147 of the IT Act:
The Revenue raised questions of law regarding the time limit for reopening assessments under the proviso to section 147 of the IT Act. The Tribunal had set aside the order of the CIT(A) and annulled the assessment proceedings, questioning the validity of the reopening after the expiry of four years from the original assessment. The High Court examined the relevant provisions of the IT Act and found that the reopening after four years did not fall within the exceptions provided in the proviso to section 147. The Court upheld the Tribunal's decision to annul the assessment proceedings, as the reopening was deemed beyond the time limit specified in the IT Act.

In conclusion, the High Court dismissed the appeals by the Revenue, stating that no substantial question of law arose from the case. The Court upheld the Tribunal's findings regarding the reopening of the assessment, the disallowance of interest amount, and the interpretation of the proviso to section 147 of the IT Act.