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Reopening of assessment under section 147 for deduction claim made in reassessment stage, Commissioner (Appeals) dismissal of appeal, claim not made in original assessment proceedings, contention on claim consideration in reassessment stage, distinction between statutory and contractual liability for deduction claim. Analysis: The judgment pertains to the reopening of assessment proceedings under section 147 for a deduction claim made by the assessee in the reassessment stage, which was not considered in the original assessment for the year 1975-76. The Commissioner (Appeals) dismissed the appeal, noting that the claimed expenses were not raised earlier and no provision was made in the accounts. The assessee argued that a claim not made initially can be raised in reassessment, citing relevant case laws. The department contended that a claim not raised initially cannot be entertained in reassessment, supported by a judgment from the Allahabad High Court. The tribunal analyzed various precedents, including the Hon'ble Supreme Court's decision in Kedarnath Jute Mfg. Co. Ltd., emphasizing that the allowability of a deduction does not depend on entries in account books. The tribunal highlighted that the assessing authority, once reassessment proceedings are initiated, must redetermine the total income and tax liability. It was held that the ITO erred in disallowing the claim without examining it on merit, as if it were preferred in the original assessment. Regarding the distinction between statutory and contractual liability for deductions, the tribunal referred to the Supreme Court's observations in Kedarnath Jute Mfg. Co. Ltd. and CIT v. C. Parakh & Co. (India) Ltd., stating that the merit of a deduction claim should be assessed based on legal provisions, not on entries in account books. Consequently, the tribunal directed the case to be remanded to the ITO for reconsideration of the claim on merit according to the law, allowing the appeal for statistical purposes.
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