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2021 (10) TMI 826 - AT - Income TaxValidity of assessment initiated u/s.147/148 - interest on income tax refund received by the assessee cannot be taxed in the current year as the assessee follows mercantile system of accounting - HELD THAT:- On a perusal of the reasons for reopening, it emerges that the Assessing Officer has gathered the information from the financial statement of the assessee and undisputedly the financial statement of the assessee was very much before the AO at the time of original assessment and more so he had also inquired on this issue and assessee had replied to the same. Thus, no tangible material has come in position of the AO which can lead to the inference that there is escapement of income due to the fault of the assessee. The action of the AO, thus, clearly amounts to forming of new opinion on the very same set of facts which was already available on records, which is not permissible in law. The ‘change of opinion’ is not allowed. It is well settled law that the Assessing Officer cannot review his own order under the garb of reassessment. As date of grant of interest and non-receipt of interest is relevant to determine the year of taxability of the same. Undisputedly, the interest has been granted in Assessment Year 2007-08 and, therefore, the interest was not chargeable to tax in the current year, and thus, the Assessing Officer cannot have a reason to believe that in the current year, any income has escaped assessment. Qua the issue in assessee’s appeal following the ratio laid down by the Special Bench of this Tribunal in case of Avada Trading Co. (P) Ltd v ACIT [2006 (1) TMI 465 - ITAT MUMBAI] and followed in the case of Hindustan Unilever Ltd. [2012 (12) TMI 458 - ITAT MUMBAI], we find that interest on income tax cannot be said to be chargeable to tax in current year as the same was granted in Assessment Year 2007-08 and thus, the reopening initiated by the Assessing Officer was bad in law. Claim of demerger expenditure u/s 35DD - Demerger of the assessee company’s investment business to M/s. CHI Investments Ltd. does not fall under the definition of demerger specified in Section 2(19AA) - As assessee had claimed demerger expenditure u/s 35DD of the Act and the said fact was mentioned in the Tax Audit report that was available with the AO It was further submitted that during the course of original assessment proceedings, the assessee vide letter dated 15.12.2010 furnished details to the Assessing Officer regarding allowability of claim of expenses relating to demerger. Hence, the Assessing Officer was aware about the fact that demerger had taken place during the year at the time of original assessment proceedings. The decision of the Hon'ble Bombay High Court approving the scheme of demerger of investment undertaking of the assessee was available with the Assessing Officer. Thus, no new material came to the knowledge of the Assessing Officer subsequent to the order passed u/s 143(3) of the Act dated 28.12.2010. In the absence of any new tangible material, reopening on the same set of facts is not permissible. Assessing Officer cannot have reason to believe that income has escaped assessment, which in fact is amounting to challenge the finding of the Hon’ble Bombay High Court. The transaction of demerger cannot be said to be for the purpose of evasion of tax. The objection, if any, could have been raised by the Assessing Officer at the time when the Scheme was pending with the Hon’ble Bombay High Court. No such objection was raised by the Department, and nor the decision of Hon’ble Bombay High Court approving the Scheme of Demerger was challenged before the Hon’ble Supreme Court. The Assessing Officer cannot now form an opinion to the contrary and object to the scheme of demerger. Assessing Officer cannot have a reason to believe that the investment undertaking was not a separate undertaking of assessee, especially when no objection has been taken by the Assessing Officer before the Hon'ble High Court. Hence, reopening is invalid on this account also. Upon careful consideration we are of the opinion that we have already held that reopening in this case is not justified on several counts. Hence, this aspect of departmental claim of capital gain and the counter claim made by assessee that in fact assessee has suffered a loss are only of academic interest. Moreover, the claim of the assessee regarding loss would also need reference to various factual details which are not available on record. Adjudication of this aspect would call for a remand also from the Assessing Officer. When we have already held that reopening is invalid for a plethora of reasons, we are of the opinion that there is no need to initiate multiplicity of proceedings.
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