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Issues:
Reopening of assessments under section 147(a) of the Income-tax Act, 1961 based on interest accrued on loans in 'court account'; Interpretation of section 5(1) and section 5(5) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 in relation to the successor of an erstwhile bank; Validity of reopening of assessments; Inclusion of interest on sticky loans in the total income of the assessee. Analysis: The appeals before the Appellate Tribunal ITAT Bangalore pertained to reassessments for the assessment years 1962-63 and 1966-67 to 1968-69, where the Assessing Officer reopened the assessments to include interest accrued on loans in 'court account' in the total income of the assessee. The assessee had not disclosed this interest on advances in its return, citing uncertainty in realization. The main issue was whether the reopening under section 147(a) of the Income-tax Act, 1961 was valid. The Commissioner (Appeals) justified the reopening based on the belief that the interest on sticky loans should have been included in the income of the erstwhile Syndicate Bank Ltd., leading to concealment of income. However, on merits, the addition of interest was deleted following a Tribunal decision for a subsequent assessment year. The interpretation of section 5(1) and section 5(5) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 was crucial in determining the liability of the successor bank to pay taxes related to the erstwhile bank's income. The Tribunal held that while section 5(5) protected existing litigation, section 5(1) empowered the Income Tax Officer (ITO) to collect taxes evaded by the erstwhile banking company from the successor. The Tribunal relied on a Supreme Court decision to support the view that the successor could be held liable for the escaped income of the erstwhile bank. Regarding the validity of the reopening under section 147(a), the Tribunal found that the assessee had not failed to disclose primary materials necessary for assessment completion. The change in accounting method by the assessee, where interest on accrued loans was not included in the profit and loss account, did not constitute concealment. The Tribunal emphasized that it was not the assessee's duty to draw conclusions from disclosed materials, citing relevant Supreme Court precedents. Consequently, the Tribunal held that the reopening under section 147(a) was not valid and allowed the assessee's appeals. On the merits of the case, the Tribunal determined that interest on sticky loans could not be included in the total income of the assessee. The appeals filed by the revenue were dismissed, affirming the deletion of interest on sticky loans from the total income of the assessee.
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