TMI Blog2010 (2) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent ORDER I.P. Bansal Judicial Member.- The appeal is filed by the Revenue and the cross-objection by the assessee. Both of them are directed against the order of the Commissioner of Income-tax (Appeals) dated November 12, 2008 for the assessment year 2002-03. The grounds of appeal read as under: 1. "On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition of Rs.1,67,20,315 made by the Assessing Officer under section 41(1) on the account of waiver of interest by the financial institution. 2. The appellant craves to be allowed to amend, delete or add any other grounds of appeal." The grounds of the cross-objection read as under: "1. That on the facts and the circumstances of the case, the Commissioner of Income-tax (Appeals) erred in law in not quashing the assessment order dated October 4, 2007 passed by the Assessing Officer under section 147 of the Income-tax Act, 1961 ('the Act') despite holding that the same was initiated on the basis of change of opinion, which is impermissible and beyond jurisdiction under the section. 1.1 That the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted on the merits, but at the same time he has recorded a finding that the reassessment is based on change of opinion. He submitted that according to the latest decision rendered by the hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (decision dated January 18, 2010) in Civil Appeal Nos. 2009 to 2011 of 2003, the reassessment could not be based on mere change of opinion. He has placed before us a copy of the said order. It was pleaded that even if the cross objections of the assessee are to be not admitted on the ground of sufficient reasons, even then the assessee can support the order of the Commissioner of Income-tax (Appeals) under rule 27 of the Income-tax Rules, 1962, therefore, also the ground regarding invalidity is required to be adjudicated. On the other hand, the learned Departmental representative opposed the submission of the assessee regarding condonation of delay. The facts relating to the ground raised by the Revenue briefly stated are as under: The return of income for the assessment year 2002-03 was filed by the assessee on October 31, 2002 at a net loss of Rs.12,85,38,352. Assessment under section 143(3) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) was as under: "In this regard, history of interest expense payable to financial institutions and disallowance made in the earlier year is summarised hereunder: It is the respectful submission of the appellant that there was no outstanding liability on account of interest payable to financial institution as on April 1, 1999 as is evident from annexure XIV to the tax audit report for that year 1999-2000 against which an amount of Rs.1,29,70,745 was paid during that year itself. The balance unpaid amount of Rs.3,86,35,825 was reflected under annexure XV of the tax audit report and was disallowed under section 43B of the Act in the return of income for that year. In the immediately succeeding previous year 2000-01, out of the aforesaid unpaid amount of Rs.3,86,35,825 the appellant paid an amount of Rs.3,16,10,140 for which deduction under section 43B was claimed in that year, while sustaining a balance disallowance of Rs.70,25,685. During the previous year 2000-01, the appellant incurred interest expense of Rs.3,77,58,506 an amount of Rs.15,02,770 was paid before the due date of the filing of return for that year. The balance amount of Rs.3,62,55,736 remained unp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of non-payment of interest. Pages 44 to 56 of paper book clearly shows that interest debited to the profit and loss account in earlier years has been disallowed under section 43B of the Act in the return of income of respective previous years on account of non-payment of interest. An amount of Rs.4,32,81,421 was reported by the auditor in annexure XI of the tax audit report for the previous year 2001-02 as interest liability pre existing on first day of the previous year. Out of the above pre-existed interest liability of Rs.4,32,81,421, the financial institutions has waived off interest amounting to Rs.1,67,20,315 under the debt restructuring proposal which was credited to the profit and loss account by reducing the interest expenses. Therefore, to set off credit of Rs.1,67,20,315, the assessee has rightly claimed Rs.1,67,20,315 as a deduction in the computation of income. In view of the above facts the addition of Rs.1,67,20,315 made by the learned Assessing Officer is hereby deleted." So as it relates to invalidity of reassessment proceedings it was the case of the assessee that during the original assessment proceedings, the Assessing Officer has examined all the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax (Appeals) for recording the findings as he has stated that it is academic. On the other hand, it was submitted by the learned authorised representative that the learned Commissioner of Income-tax (Appeals), after going through the details has clearly recorded a finding that reassessment proceedings are based on change of opinion. Despite recording such findings he did not adjudicate on the ground that the issue is academic as the addition has been deleted on the merits. He submitted that this issue is not academic. After having recorded a finding that assessment is based on change of opinion the learned Commissioner of Income-tax (Appeals) should have decided the issue regarding invalidity of reassessment as the same according to well established law, if reassessment proceedings are based on change of opinion then the reassessment proceedings cannot be held valid. On the merits relying on the contention raised before the Commissioner of Income-tax (Appeals) and the Assessing Officer and findings recorded by the Commissioner of Income-tax (Appeals), it was submitted by the learned authorised representative that addition has rightly been delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dd certain amount under section 41(1) were not fulfilled. Therefore, no such addition could be made. The figures have been described in the above part of this order, which clearly shows that in the earlier years the said amount was not allowed to the assessee as a deduction. Therefore, on the merits also the learned Commissioner of Income-tax (Appeals) is right in holding that no such addition could be made under section 41(1) of the Act. The Department has not brought any material on record to suggest that such findings of the learned Commissioner of Income-tax (Appeals), which are findings of fact, are contrary to the record. Therefore, we decline to interfere in the deletion made by the Commissioner of Income-tax (Appeals) on the merits. As on legal issue, we have held that reassessment proceedings were not valid and this ground could even be adjudicated, as contended by the learned authorised representative, under rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963. Therefore, it will not be proper to decline the condonation filed request of the assessee for filing the cross-objections. The request of the assessee for condonation of delay is accepted and the cross-ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
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