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2014 (11) TMI 1033 - ITAT MUMBAIReopening of assessment - Disallowance under section 43B being the amount of interest on loan converted into equity shares of the appellant pursuant to one time settlement with the lender bank - Held that:- Section 43B per se does not provide the manner in which the payment of interest is to be made, it only provides that the deduction is allowable on the sum payable mention in clauses (a) to (f), if such sum is actually paid by the assessee. The said section creates fiction that certain liabilities, irrespective of the method of accounting followed by the assessee, would be allowed as deduction only on actual payment. The clause (d) of the said section covers interest payment to the banks. The interest payment has to be made in cash or in actual terms of money has not been specified. The only rider given in Explanation 3C is that, interest payable is allowable when the interest is actually paid and it should not be converted into loan or borrowings. There is no prohibition or embargo that the sum actually paid will not cover payments through allotment of shares. The shares are tradable commodity and has a value which can be sold in the market as per the value of the share on the date of sale. It is easily convertible into money as and when required. Once there is no such prohibition u/s 43B for discharging the payment of interest liability and claiming of deduction thereof, by converting the payment through allotment of shares, then how the assessing officer sans any legal provision or any judicial authority could have entertained “reason to be believe” that such a deduction is not allowable. On these facts we are of the opinion that the “reasons” as recorded by the AO, do not clothe him with the jurisdiction u/s 147 to reopen the completed assessment. No legal provision or legal proposition has been brought to our notice in support the ground raised by the assessing officer in the “reasons recorded” for reopening the case. Thus on such “reasons”, we hold that the reopening u/s 147 cannot be validly initiated, as prima facie there is no ‘reason to believe’ that any income chargeable to tax has escaped assessment. The very initiation of proceeding u/s 147 by issuance of notice u/s 148 is thus bad- in- law and accordingly the same is held and null and void. - Decided in favour of assessee.
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