2015 (9) TMI 1166 - AT - Income Tax

Validity of Re-opening of assessment u/s. 147 - after the end of four years from the assessment year when scrutiny assessment has been completed on the addition u/s. 41(1) of interest waived by the banks - Held that - There is no merit in Revenue s appeal. First of all as rightly pointed out by the Ld.CIT(A), the AO has examined this issue of interest waiver by the bank and show caused assessee, why it shall not be taxed u/s. 41/28/56 vide letter dt. 07-03-2007. Therefore, the waiver of interest by IDBI/ICICI Bank is very much within the knowledge of the AO who has enquired the same in the course of original assessment. Not only that the entire transaction was disclosed in the notes to the accounts of the annual report. The AO s reasoning in reopening can only be considered as change of opinion. Moreover, all the facts were disclosed by assessee and therefore, there is no failure on the part of assessee in disclosing fully and truly all material facts. Therefore, we are of the opinion that reopening of the assessment after four years from the end of the assessment year cannot be justified. - Decided against revenue.

Summary

Issues:
Reopening of assessment u/s. 147 of the Income Tax Act after more than four years from the assessment year; Addition u/s. 41(1) of interest waived by banks.

Analysis:

Issue 1: Reopening of assessment u/s. 147 after four years:
The appeal was against the Commissioner of Income Tax (Appeals)'s order regarding the reopening of assessment u/s. 147 of the Income Tax Act after the end of four years from the assessment year. The Assessing Officer (AO) added an amount credited by the assessee, leading to a re-assessment. The Ld.CIT(A) found that there was no failure on the part of the assessee to disclose all material facts necessary for assessment. The Ld.CIT(A) held that the reopening was a mere 'change of opinion' without tangible material, making the assessment unsustainable in law. The tribunal concurred, stating that the AO had already examined the issue during the original assessment, and there was no failure on the part of the assessee to disclose material facts. The tribunal found the reopening unjustified.

Issue 2: Addition u/s. 41(1) of interest waived by banks:
Regarding the addition u/s. 41(1) of interest waived by banks, the Ld.CIT(A) and the tribunal analyzed the situation. It was observed that the assessee had not claimed any interest in earlier years, and the waiver of interest did not constitute a 'cessation of liability' under Section 41(1) due to the provisions of Section 43B. The tribunal also referred to similar cases and decisions, concluding that the interest waived could not be taxed under the provisions of Section 115JB. The tribunal upheld the deletion of the addition made by the AO. The tribunal emphasized that there was no scope for addition in the assessments and criticized the unnecessary appeal by the Revenue, highlighting the non-application of mind by the authorities. The tribunal dismissed the appeal, emphasizing the need for a more considered approach to appeals to avoid unnecessary litigation.

In conclusion, the tribunal dismissed the appeal, emphasizing the lack of merit in the Revenue's case and the need for a more thoughtful approach to appeals to prevent unnecessary litigation.