TMI Blog1993 (8) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... and sustaining the disallowance of interest of Rs. 81,653 made under sections 139(8) and 215, that he ought to have hold that the reopening of the assessment was bad in law, that the reassessment was nothing but a change of opinion, and that the reopening of the assessment under section 147(b) on the basis of audit objection was without jurisdiction as held by the Supreme Court in the case of Indian Eastern Newspaper Society v. CIT [ 1979] 119 ITR 996. Even on merits the interest payment was claimed to be admissible as a deduction. 2. The assessee is a limited company and the assessment year involved is 1981-82 for which the accounting year ended on 31-3-1981. In the course of the original assessment proceedings, the assessee furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption of jurisdiction under section 147(b). On merits, it was argued that the admissibility of interest payment tinder sections 139(8) and 217(1a) as deductions was not free from doubt. Reliance was placed on the decision of the Supreme Court in the case of Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 wherein it has been held by the Supreme Court that interest paid under section 3(3) of the U.P. Sugarcane Cess Act, 1956, was not a penalty paid for infringement of law and was allowable as deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922. The interest payable on arrear of cess under section 3(3) of the said Cess Act was in reality held to be a part and parcel of the liability to pay cess and it was an accretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the law or given an opinion as to what the law is in regard to this issue. According to him, the Audit has merely provided instruction or knowledge concerning the fact that the assessee had paid interest under sections 139(8) and 215 (sic), which is verifiable from the past records and that these payments have not been added back in the computation of income. In other words, he held that the Audit had merely drawn the attention of the Assessing Officer to these facts and brought to his notice the fact that income had been underassessed as a consequence. Therefore, he was of the opinion that the ratio of the decision of the Supreme Court in the case of Indian Eastern Newspaper Society could not be applied. Further, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n he has relied on the portion of the audit objection extracted in para 3 of the order of the CIT (A). Inasmuch as the Special Audit Party has interpreted the law and it is not competent to do so, the assumption of jurisdiction under section 147(b) was not justified and, therefore, the reassessment should be set aside. His point was that the audit has not merely indicated the provision of law but it has interpreted the law which is contrary to the findings given by the CIT (A). 8. The learned departmental representative has vehemently supported the reasons and the findings and the conclusion of the CIT (A), and supported the validity of the reassessment proceedings. According to him, what the audit party has pointed out was statement of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w or interpreted the law. The case of the assessing and the appellate authorities is that it had merely pointed out the factual position and the state of law and not interpreted the same. The stand taken by the assessee is exactly the opposite, viz., the audit objection contained interpretation of law and the reassessment was based on such interpretation of law. A perusal of the audit objection shows that the sum of Rs. 81,653 obviously represents interest paid under sections 139(8), 215, etc., for the earlier years. This factual position would be corroborated by the earlier years' assessment orders. To this extent we would be with the Revenue that the audit party had pointed out the factual position regarding interest payments. However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or issuing notice under section 148 show that there was information on record to indicate that disallowance of interest paid to the Income-tax Department was not made. We have indicated earlier that though the Assessing Officer proposed to disallow interest under section 40A(8), in the reasons recorded, he has not disallowed same in the reassessment. Therefore it was mere pretence only. The reasons recorded by the Assessing Officer contained in para 1 of the CIT (A)'s order clearly show that there is information on record that disallowances of interest paid to the Income-tax Department were not made. Therefore, the contentions of the revenue and the reasons given by the CIT (A) that information furnished by the assessee did not specify the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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