2012 (2) TMI 690 - AT - Income Tax

Summary

Issues Involved:
1. Validity of re-opening the assessment u/s 147 of the Income Tax Act.
2. Disallowance of loss on account of SWAP cost.

Summary:

1. Validity of Re-opening the Assessment u/s 147:
The assessee, a branch of a foreign bank, filed its original return for the assessment year 1997-98, which was later revised. The Assessing Officer (AO) initially completed the assessment u/s 143(3) but subsequently issued a notice u/s 148 to re-open the assessment u/s 147. The assessee objected, arguing that the re-opening was beyond the four-year period and lacked any allegation of failure to disclose material facts. The first appellate authority rejected the assessee's contentions, but the Tribunal found that the reasons recorded by the AO did not allege any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Citing precedents from the Hon'ble Jurisdictional High Court in Sir Warana Sahakari Dudh Utpadak Prakriya Sang and Bhavesh Developers, the Tribunal concluded that the re-opening was based on a change of opinion and thus invalid. Consequently, the re-opening of the assessment was held to be bad-in-law.

2. Disallowance of Loss on Account of SWAP Cost:
The AO disallowed the loss on account of SWAP cost, which was upheld by the Commissioner (Appeals). The assessee argued that the issue was covered in its favor by the judgment of the Hon'ble Delhi High Court in CIT v/s Industrial Finance Corp. of India Ltd. and the decision of the Mumbai Special Bench in DCIT (IT) v/s Bank of Behrain & Kuwait. The Tribunal, however, did not adjudicate this issue on merits, as it had already concluded that the re-opening of the assessment was invalid, rendering further examination academic.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the re-opening of the assessment was invalid due to the absence of any failure to disclose material facts and being based on a change of opinion. Consequently, the disallowance of the SWAP cost was not adjudicated on merits. The order was pronounced in the open Court on 10th February 2012.