2020 (6) TMI 400 - AT - Income Tax

Reopening of assessment u/s 148 - interest paid on the service tax by considering the revised return of income - HELD THAT - After 1st April, 1989, the AO has power to re-open, provided there is tangible material to come to the conclusion that there is an escapement of income from assessment. Reasons must have a live link with the formation of the belief. In the present case, the assessee has claimed interest on service tax paid as allowable deduction relates to the present A.Y. 2011-13, for that purpose he filed revised return, the same is examined by the AO and completed the assessment u/sec. 143(3), therefore the AO has already firmed opinion that the deduction claimed by the assessee is allowable deduction and accordingly allowed. Subsequently, on the basis of very same revised return and on the very same claim the Assessing Officer came to a conclusion that the expenses claimed by the assessee relates to the earlier year i.e. A.Y. 2011-12 and not relating to the assessment year under consideration, in our opinion is merely a change of opinion and is not permissible in the case of M/s.Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT . We, are of the opinion that reopening of assessment is not valid, therefore notice issued by the Assessing Officer has to be quashed. No infirmity in the order passed by the ld. CIT(A). So far as merits of the case is concerned, CIT(A) gave a finding by following the judgment of Andhra Sugars Ltd. 2015 (2) TMI 810 - ANDHRA PRADESH HIGH COURT that whether service tax paid has to be allowed in the year of payment or irrespective of the year allowablility incurred. CIT(A) by following the decision of the Hon'ble Jurisdictional High Court in the case of Andhra Sugars Ltd. (supra) deleted the addition made by the Assessing Officer. We find no reason to interfere with the order passed by the ld. CIT(A). Thus, this appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Validity of reopening the assessment
2. Disallowance of interest on service tax

Issue 1: Validity of reopening the assessment

The appeal and cross objection were against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2013-14. The Revenue raised grounds challenging the order of the CIT(A) on various points, including the reopening of the assessment. The Assessing Officer had reopened the assessment based on the claim of interest on service tax paid by the assessee. The CIT(A) quashed the notice issued by the Assessing Officer, citing it as a change of opinion and relying on the judgment of the Hon'ble Supreme Court in the case of M/s. Kelvinator of India Ltd. The Tribunal upheld the CIT(A)'s decision, emphasizing that the Assessing Officer had already allowed the interest paid on service tax in the original assessment, and reopening the assessment based on the same claim was considered a change of opinion, not permissible under the law. The Tribunal referred to the requirement of "tangible material" for reopening assessments after the amendment to the Income Tax Act in 1989, emphasizing the need for a live link between the reasons and the belief of income escapement. Therefore, the Tribunal found the reopening of the assessment invalid and upheld the decision of the CIT(A).

Issue 2: Disallowance of interest on service tax

The Assessing Officer disallowed an amount claimed towards interest on service tax in the revised return filed by the assessee. The CIT(A), following the judgment of the Hon'ble Jurisdictional High Court in the case of Andhra Sugars Ltd., held that the payment of service tax qualifies as an allowable deduction under section 43B of the Act, irrespective of the accounting method used. The CIT(A) deleted the addition made by the Assessing Officer, stating that once the payment is made during the relevant previous year, the year to which the expenditure relates becomes irrelevant. The Tribunal found no reason to interfere with the CIT(A)'s decision and dismissed the appeal filed by the Revenue. The cross objection filed by the assessee, being supportive of the CIT(A)'s order, was also dismissed as infructuous. Therefore, the Tribunal upheld the decision to allow the deduction for interest on service tax and dismissed both the appeal and cross objection.

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