TMI Blog2016 (4) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons for reopening an assessment need to be based on tangible material which has a live-link with the formation of the belief that there was an escapement of income. Therefore, we do not find any infirmity in the order of CIT(A) in quashing the reopening of assessment made by the AO u/s 147 of the Act. Two instalments had to be paid in AY 2007-08. Even though, the assessee was following mercantile system, it cannot recognize the waiver of loan as income u/s 41 of the Act, since, as per the pre-condition for OTS, all the balance amount had to be settled, then only, the assessee can enjoy the benefit of loan waiver. In this case, it was clear that the assessee can only recognize the waiver of loan as income only when it pays the final instalment of waiver as per OTS conditions. Hence, the assessee was not in a position to recognize the above waiver as income u/s 41, on the contrary, the AO had not brought anything on record that the waiver of loan was relating to trading liability or any revenue expenditure was allowed against the above waiver. Hence, in our considered view, the above waiver of loan cannot be brought into tax net considering the fact that the waiver conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s letter dt.20.0B.2005 (on OTS dues) filed by the assessee during scrutiny proceedings, that IDBI has waived principal loan amount of ₹ 523,36,000/-. However, the same was not brought to tax u/s.41(1) of the IT Act . The assessee followed accrual system of accounting and as such, the income was to be taxed in assessment year 2006-07. The underassessment of income worked out to ₹ 5,23,36,000/- with consequential tax effect of ₹ 1,76,16,298/- 02. The object ion raised by the audit is not acceptable as the amount is not liable to tax in the A. Y. 2006-07. This is because as per the terms of OTS vide IDBI letter dt.20.08.05, the company has to pay the balance amount of ₹ 4.25 crore as under : Rs.106.50 lakh before 30.09.2005 ₹ 106. 17 lakh before 31.03.2006 ₹ 106. 17 lakh before 30.06.2006 ₹ 106. 16 lakh before 30.09.2006 As per clause 3 of IDBI letter which is extracted below the waiver depends payment of full amount as per above schedule: in the event of default in payment of the OTS amount as envisaged, the amounts paid, if any, shall stand forfeited and IDBI shall have the right to reverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following grounds of appeal: 1) The CIT(A) erred on facts and in law in granting relief to the assessee. 2) In the case laws relied upon by Ld CIT(A)-2, Hyderabad the decisions are with regard to opinion of audit party regarding application or interpretation of law did not amount to information, therefore, reassessment based on opinion of audit party was held as not valid. In the instant case, the situation is different. The audit party has pointed out a fact that waiver of principle was not treated as income. The audit party has merely pointed out a fact which was overlooked by the Assessing Officer. Reopening of the assessment is permissible on the basis of a factual error pointed out by the audit party as held by Hon bls Supreme Court in the case of CIT Vs PVS Beedies Pvt Ltd [237 ITR 13] (SC). 5. Ld. DR submitted that the audit party has pointed out a fact that the waiver of principal amount was not treated as income. The audit party has merely pointed out a fact which was overlooked by the AO. Moreover, the assessee had not brought on record the nature of the loan taken from IDBI. This was not properly assessed by the AO. Hence, reopening of the assessment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayathullah, J (as his Lordship then was) in his dissenting judgment. He observed that the mere production of evidence before the Assessing Officer was not enough. This, in fact, is explicitly so stated by Explanation I to the section, the scope of which is elucidated later. There might be an omission or failure to make a full and true disclosure if some material for the assessment lay embedded in that evidence which the assessee could uncover but did not. If there was such a fact it was the duty of the assessee to disclose that too. (Indo-Aden Salt Mfg Trading Co Pvt Ltd(1986); 159 ITR 624(SC); Raymond Woollen Mills Ltd Vs ITO 207 ITR 929(Bom); Pala Marketing Cooperative Society Ltd Vs State of Kerala 236 ITR 604 (Ker). 6.3 The ld. DR submitted that the reopening of assessment is not bad in law because, the material information relating to the waiver of bank loan has not been furnished in the original proceedings of assessment or even prior to the issue of notice u/s 148. 6.4 It is submitted though, the Audit's objection has not been accepted by the Assessing Officer, after receipt of communication by Audit that the reply is not acceptable, it is perfectly proper on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6.9 It is submitted that since the Assessing Officer independently examined the material collected by Audit Party in its report and came to an independent conclusion that there was escapement of income, reopening of assessment U/s 147(b) was to be upheld- New Light Trading Co. Vs. CIT(H.C Delhi) (04-01-2001). 6.10 It is submitted that where assessing officer was convinced that depreciation was wrongly claimed at full rate, reassessment notice could not be quashed merely on the ground that she formed opinion on the basis of audit objection- (49 taxman.com) (H.C Delhi) (N K Industries Vs. ITO) (11-03-2014). 6.11 It is submitted that, in fact, the decision cited by CIT (A) in the case of Usha International Ltd Vs. DClT Circle-18(1) New Delhi (56 Taxmann.com 157)(Del-Trib) is in favour of the Department. In that case, it was held that, if the AO fails to examine an issue during assessment proceedings and later developments warrant its examination, it would not be a case of Change of Opinion at the time of initiation of reassessment. Where the AO has given cogent reasons, in his speaking order while rejecting objections raised by the assesse against reopening of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 SC 2. Jagat Jayantilal Parikh Vs. DCIT, 355 ITR 400 (Guj.) 3. Vodafone West Ltd. Vs. ACIT, 37 Taxmann.com 158 (Guj.) 4. CIT Vs. T.V. Sundaram Iyengar Sons Ltd., 222 ITR 344 SC 5. Iskraemeco Regent Ld Vs. CIT, 355 ITR 317 (Mad.) 8. Considering the submissions of both the counsels and material facts on record, we find that the AO had reopened the assessment on the ground that the waiver of loan by the bank has escaped assessment. The same was pointed out in the audit objection. We have perused the audit objection and the reasons recorded by the AO for reopening the assessment. No doubt, on record the reasons recorded by the AO are based on his own reasons of view, but, the same was indulged on findings of the audit objection raised by the audit party as it can be considered as it will fall in the similar situation as held in the case of CIT Vs. PVS Beedies (supra). But as the findings recorded by CIT, the timings of the correspondence of Addl. CIT, which is dated 13/03/2013 and timings of the notice u/s 148, which was issued on 26/03/2013 clearly shows that the reopening was done on the behest of the Addl. CIT. It clearly shows that the AO had not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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