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TMI Blog2014 (2) TMI 1123X X X X Extracts X X X X X X X X Extracts X X X X ..... eopening u/s 147 of the act was within the parameters – thus, the order of the ITAT set aside – Decided in favour of Assessee. Levy of additional tax u/s 143(1A) – Held that:- The levy of additional tax in respect of computation under Section 115J of the Income Tax Act is already a subject matter in an appeal filed by the assessee and that the present assessment is not concerned about computation under Section 115J of the Income Tax Act, but under the regular procedure, the question of thus adding additional tax in the regular assessment proceedings does not arise – thus, the demand of additional tax under Section 143(1A) of the Income Tax Act on the regular assessment proceedings does not arise – Decided in favour of Assessee. - Tax Case (Appeal) No. 416 of 2008 - - - Dated:- 11-2-2014 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Petitioner : Dr. Anita Sumanth For the Respondent : Mr. T. Ravikumar Standing Counsel for Income Tax Department ORDER (The Order of the Court was made by Chitra Venkataraman, J.) The following substantial questions of law are raised in the Tax Case (Appeal) filed by the assessee relating to the assessment year 1990-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 187 ITR 541, that the expenses by way of broken period interest at the time of purchase should not be allowed as an expenditure but should be brought to tax, were sought to be relied on for the purposes of reopening of the assessment for the assessment year 1990-91. Thus, notice under Section 148 of the Income Tax Act was issued to the assessee proposing to assess the income on the interest payment made through M/s.Chandrakala Co., to the various PSUs as well as for disallowing the expenses on the broken period interest relating to the purchase of securities. 4. The assessee resisted the reopening as totally without any jurisdiction by contending that except for the assessment orders for the assessment years 1991-92 to 1993-94, there were no fresh materials available with the Revenue to invoke the larger limitation period under Section 147 of the Income Tax Act. Further, the assessment for the assessment years for 1991-92 to 1993-94 were on the very same materials, which were considered by the Assessing Officer for the year under consideration. 5. As far as the disallowance on the interest payment of broken period interest is concerned, the decision of the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same issues were common in nature in respect of all those assessment years starting from 1987-88 to 2002-03. 8. As far as the issue raised under re-opening of the assessment for the assessment year 1990-91 is concerned, the Income Tax Appellate Tribunal pointed out that the reassessment notice was issued within four years; in determining whether commencement of re-assessment proceedings was valid or not, all that had to be seen was whether there was prima facie materials on the basis which the department could reopen the assessment; that the sufficiency of correctness of the materials was not a thing to be considered at this stage. Thus, referring to the decision in the case of Raymond Woolen Mills Ltd., vs. ITO reported in 236 ITR 34, the Income Tax Appellate Tribunal rejected the assessee's appeal and upheld the assessment. 9. As far as the claim of expenditure by way of additional interest paid through M/s.Chandrakala Co., is concerned, which is a common issue for the subsequent years too, the Income Tax Appellate Tribunal held that since the payment of interest over and above the RBI guidelines was a contravention of the RBI Rules and the assessee had inflated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the questions of law that arise for consideration are as follows:- 1. Whether on the facts and circumstances of the case, the Tribunal is right in law in confirming the reassessment which was completed beyond 4 years from the end of the relevant assessment year? 2. Whether on the facts and circumstances of the case, the Tribunal is right in law in restoring the claim relating to the broken period interest to the assessing authority? 3. Whether on the facts and circumstances of the case, the Tribunal is right in law in directing the assessing authority to classify the securities into permanent and current since the appellant is holding the securities as stock-in-trade? 4. Whether on the facts and circumstances of the case, the Tribunal is right in law in confirming the assessment of the sum of Rs.10,60,63,910/- as undisclosed income? 5. Whether on the facts and circumstances of the case, the Tribunal is right in law in not considering the contention raised by the appellant that the Commissioner of Income tax (Appeals) erred in coming to the conclusion that the expenditure incurred by the appellant is bad in law, since the appellant had not claimed any expenditure? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entitled to claim deduction on the expenditure incurred by way of payment of broken period interest. Thus, applying the decision of the Bombay High Court in the case of American Express Bank vs. Commissioner of Income Tax reported in 177 CTR 442 (Bom) and our own judgment dated 30.12.2012 in T.C.(A).No.455 of 2008, in this assessee's case on merits of reassessment, we have no hesitation in holding that the assessee is entitled to succeed that the reassessment on the above said issue is liable to be set aside. 16. We may point out herein that the Special Leave Petition filed as against the decision of the Bombay High Court in I.T.R.No.500 of 1997, dated 09.01.2002, was also dismissed by the Apex Court in the case of CIT vs. Deutsche Bank A.G., in SLP.(C) No.3710 of 2004, dated 27.01.2004, wherein the decision of the Bombay High Court in the case of American Express Bank vs. Commissioner of Income Tax reported in 177 CTR 442 (Bom), was referred to vide Sri Hanuman Sugar and Industries Ltd. v. Commissioner of Income-tax reported in [2004] 266 ITR 106. 17. This leaves us with the one and only question namely, on the validity of the reopening of the assessment under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year, 1990-91, the assessee's claim was considered favourably in the original assessment, yet in respect of the assessment years 1991-92 to 1993-94, the Income Tax Officer, however, took a different view and brought the entire amount to tax. The fact situation in respect of all these assessment years was one and the same, the materials considered for 1991-92 to 1993-94 were no different from one considered in 1990-1991, the only difference was that for the assessment year 1990-1991, the Income Tax Officer accepted the assessee's case for deduction and for the assessment years 1991-92 to 1993-94, the Income Tax Officer, however, rejected the assessss's contention and added the same to income tax assessment as income from undisclosed sources and brought to tax under the provisions of the Act. These assessment orders passed for 1991-92 to 1993-94 were taken as the basis for reopening the assessment for 1990-1991. Evidently, while rejecting the assessee's claim for 1991-92 to 1993-94, there were no fresh materials at the disposal of Revenue to take a different decision. We are pointing out this only for the purposes of showing that when the facts remained one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer at the time the original assessment was made under Section 143(3) of the Income Tax Act, while he considered the claim of deduction on the broken period interest. The assessee thus took the right plea that when the Officer had considered the claim of the assessee in the background of law declared by the Apex Court and granted the relief, the question of reopening the assessment based on the very same decision which was very much available as on the date of the original assessment, does not arise. 22. The Income Tax Appellate Tribunal, in its order made a reference to investment in Government securities, which would be of two nature, one permanent and other current investment. In the decision rendered in the case of American Express Bank vs. Commissioner of Income Tax reported in [2002] 258 ITR 601 (Bom), at page 604, the Bombay High Court referred to the investment by banking companies in Government securities, the issue therein also related to claim on broken period interest. The Bombay High Court pointed out that the bank subscribing to Government securities are at liberty to deal with securities like any other trader and to maintain Statutory Liquidity Rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Securities paid at the time of acquisition and also complying with the Accounting Standards prescribed by the institute of Chartered Accountants of India, it has been decided that banks should not capitalise, the Broken Period Interest paid to seller as part of cost, but treat it as an item of expenditure under Profit and Loss Account as per AS 13. It may please be noted that the accounting treatment explained above does not take into account taxation implications and hence banks will have to comply with the requirements of Income Tax Authorities in the manner prescribed by them. Please acknowledge receipt. 25. In the background of this circular, dated 04.08.1998, she submitted that the claim of the assessee merits to be considered even on merits. We have already pointed out that the issue on broken period interest payment was considered favourably to the assessee's advantage in T.C.(A).No.455 of 2008, dated 30.10.2012. Leaving aside the merits considered in favour of the assessee, we thought it fit to consider this issue once again only for the purposes of considering the jurisdiction aspect raised by the assessee that the entire proceedings was devoid of any meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not arising from the order of the Assessing Officer under Section 143(3) read with 147 of the Act. Consequently, the Appeal was dismissed and this view was confirmed by the Income Tax Appellate Tribunal once again. When we look into the assessment order passed under 143(3) of the Act read with 147 proceedings, we find that the assessment order considered the levy of additional tax at 20% to the tune Rs.3,17,61,714/-, the computation made under the regular assessment procedure and not under Section 115J of the Income Tax Act. 29. Considering the fact that the levy of additional tax in respect of computation under Section 115J of the Income Tax Act is already a subject matter in an appeal filed by the assessee and that the present assessment is not concerned about computation under Section 115J of the Income Tax Act, but under the regular procedure, the question of thus adding additional tax in the regular assessment proceedings does not arise. However, the correctness or otherwise of the levy on the computation under Section 115J of the Income Tax Act is a matter, which has to be subjectively canvassed by the assessee in the manner known to law and recording the statement of as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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