2019 (1) TMI 1626 - AT - Income Tax

Validity of re-opening of assessment u/s. 147 - assessment for the impugned assessment year has been completed u/s. 143(3) - HELD THAT - AO has re-opened the assessment without making an allegation on the part of assessee to disclose fully and truly all the material facts necessary for completion of assessment. This legal proposition is supported by the decision of CIT Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT wherein it was categorically held that AO has power to reopen provided there is a tangible material to come to a conclusion that there is escapement of income from assessment. This legal proposition further supported in the case of CIT Vs. Usha International Ltd. 2012 (9) TMI 767 - DELHI HIGH COURT . Therefore no failure on the part of assessee to furnish fully and truly all the material facts necessary for completion of assessment. Since the assessment has been re- opened after a period of four years from the end of relevant assessment year and there is no allegation by the AO on the part of the assessee regarding furnishing of all the material facts necessary for assessment reopening of assessment u/s. 147 of the Act is bad in law and liable to be quashed. Applicability of provisions of Section 115JB of the Act to the banking companies - HELD THAT - As relying own case 2018 (11) TMI 1171 - ITAT MUMBAI Provisions of Section 115JB shall not be applicable to assessee. Adjustment made towards disallowance of Broken Period Interest to book profits computed u/s. 115JB - We are of the considered view that there is no error in the findings recorded by the Ld. CIT(A) in directing the AO to delete the adjustment made towards disallowance of Broken Period Interest to book profits computed u/s. 115JB of the Act. Hence we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds raised by Revenue. Computation of interest payable u/s. 244A of the Act on refund arising out of the order - HELD THAT - . We find that this issue is also covered in favour of assessee by the decision of ITAT Mumbai in assessee s own case for the AYs. 2007-08 2009-10 where the Co-ordinate Bench by following its earlier order for the AY. 2005-06 restored the issue to the file of AO with similar directions as were given for the AY. 2005-06

Summary

Issues Involved:
1. Validity of reopening assessment under Section 147 of the Income Tax Act, 1961.
2. Disallowance of Broken Period Interest.
3. Applicability of Section 115JB to banking companies.
4. Computation of interest payable under Section 244A on refund.

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessment under Section 147:
The assessee challenged the reopening of the assessment on the grounds that it was based on a mere change of opinion without any fresh material. The Tribunal observed that the assessment was reopened after four years, necessitating a failure on the part of the assessee to disclose fully and truly all material facts. The Tribunal found no such failure or new material, and thus, deemed the reopening invalid. The Tribunal quashed the reassessment order, citing the Supreme Court's decision in CIT Vs. Kelvinator of India Ltd., which requires tangible material for reopening assessments.

2. Disallowance of Broken Period Interest:
The assessee argued that the Broken Period Interest paid on securities held as stock-in-trade should be allowed as a deduction, referencing the Bombay High Court's decision in America Express International Banking Corporation Vs. CIT. The AO disallowed the deduction, treating the interest as part of the capital outlay. The CIT(A) upheld the AO's decision. However, since the reassessment was quashed, the Tribunal dismissed this ground as academic.

3. Applicability of Section 115JB to Banking Companies:
The Revenue contended that Section 115JB, concerning Minimum Alternate Tax (MAT), applies to the assessee. The Tribunal, following its earlier decisions and the Delhi High Court's ruling in CIT(LTU) v. Oriental Insurance Company Limited, held that Section 115JB does not apply to banking companies, which prepare accounts as per IRDA regulations, not Schedule VI of the Companies Act. The Tribunal upheld the CIT(A)'s decision to delete the adjustment made towards book profits under Section 115JB.

4. Computation of Interest Payable under Section 244A:
The Revenue challenged the computation of interest payable on refunds. The Tribunal, referencing its earlier decisions, restored the issue to the AO for fresh consideration, directing the AO to follow the Delhi High Court's decision in India Trade Promotion Organisation Vs. CIT. The Tribunal instructed the AO to recompute the interest payable, ensuring compliance with the legal precedent.

Conclusion:
The Tribunal allowed the assessee's appeal, quashing the reassessment proceedings and dismissing the grounds related to Broken Period Interest as academic. The Tribunal dismissed the Revenue's appeal, upholding that Section 115JB does not apply to the assessee and restoring the issue of interest computation under Section 244A to the AO for fresh consideration.