1993 (12) TMI 38 - HC - Income Tax

Summary

Issues involved: Assessment of subsidy as income, reopening of assessment under section 148, consideration of loss in reassessment proceedings.

Assessment of subsidy as income: The case involved the assessment of a subsidy received by the assessee-bank from the Central Government to cover the interest paid on loans. The Income-tax Officer held that the subsidy amount was to be considered as the assessee's income for the relevant assessment year, despite the assessee's revised return not including the subsidy as income. The Commissioner of Income-tax upheld this decision, and the Tribunal dismissed the appeal, leading to the question of whether the Tribunal was correct in directing the Income-tax Officer to consider the loss as per the assessee's account books in the reassessment proceedings.

Reopening of assessment under section 148: A notice under section 148 of the Income-tax Act was issued to reopen the assessment for the relevant year. In the reassessment proceedings, the Income-tax Officer determined that the subsidy received was indeed the assessee's income, disregarding the loss or expenditure shown in the original or revised return. The Tribunal's order raised the question of whether the Income-tax Officer should consider the loss in the reassessment despite it being disallowed in the original assessment.

Consideration of loss in reassessment proceedings: The Tribunal directed the Income-tax Officer to consider the loss as per the assessee's books of account in the reassessment proceedings, which was challenged based on the Supreme Court's decision in CIT v. Sun Engineering Works Pvt. Ltd. The Supreme Court's ruling clarified that in reassessment proceedings, the assessee can claim deductions for any expenditure related to the income being reassessed, but cannot reagitate claims already assessed. The Court held that while the assessee can put forward expenditure connected to the subsidy in reassessment, other claims already considered cannot be revisited.

In conclusion, the High Court held that the Tribunal's direction for considering the loss in reassessment proceedings was not sustainable based on the Supreme Court's decision. The question was answered in the negative and in favor of the Revenue. The assessee was allowed to present expenditure related to the subsidy in the reassessment proceedings, in line with the Court's observations.