TMI Blog1997 (11) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... s', 'House property', 'Capital gains' and 'Other sources'. The assessee during the previous year relevant to the asst. yr. 1972-73 borrowed a sum of ₹ 11.5 lakhs on 16th Oct., 1971, from the Canara Bank repayable with interest at 11.5 per cent p.a. on the said sum. The said sum was utilised by the assessee as under : 1. Advance to Madurai South India Corporation (P) Ltd. 5,00,000 2. Advances to Dubarry Group Estates 2,35,000 3. Repayment of old loans from Canara Banking Corpn. Ltd. 4,15,000 The assessee claimed deduction of the entire interest on the ground that the moneys were borrowed for payment of the wealth-tax. The assessee also stated at the time of original assessment that she had received interest from M/s Madurai South India Corporation (P) Ltd. on the sum of ₹ 5,00,000 at the rate of 6 per cent p.a. The ITO disallowed the interest of 5-1/2 per cent on the sum of ₹ 5 lakhs advanced to Madurai South India Corporation Ltd. and held that the entire interest cannot be allowed and he disallowed the differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the interest of a sum of ₹ 34,347 and allowed only the balance amount of interest. 6. The assessee preferred an appeal to the AAC challenging the order of the ITO both on the question of jurisdiction and on merits of the case. The AAC found that the information received by the ITO, namely, 'the amount received from Sigappi Achi' was an information of fact and there was no question of change of opinion on the part of the ITO in making the reassessment. The AAC also held that the information received did not relate to the interpretation of the provision of law and the ITO became aware of the fact only after the completion of the assessment as the withdrawal of the sum from M/s Madurai South India Corporation (P) Ltd. was not shown before the ITO at the time of completion of assessment. He also noticed the letter of the assessee dt. 17th Sept., 1974, and found that the original assessment was completed without the full knowledge of the fact. He, therefore, held that the ITO had jurisdiction in reopening the assessment under s. 147(b) of the Act. The AAC also decided the matter on merits and sustained the order of the ITO. 7. The assessee carried the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before the Tribunal have no application. Learned counsel submitted that the decision of the Supreme Court in Indian and Eastern Newspaper Society's case (supra) really supports the case of the Department. 10. We have carefully considered the submission of the learned counsel for the Revenue and we have also perused the records in entirety. The facts of the case has already been stated in detail. The Tribunal has decided the case and held that the reassessment was not justified on certain reasons. The first reason that was given by the Tribunal to hold that the reassessment was not justified is that the case of disallowance of a part of interest on borrowings of 11.5 lakhs from Canara Banking Corporation Ltd. was a subject-matter before the Tribunal earlier and the Tribunal found that the interest was allowable. The Tribunal, therefore, held that the earlier decision should not likely be disturbed unless there were now facts which would unsettle the earlier decision. 11. There can be no quarrel over the proposition laid down by the Tribunal that a decision given by the Tribunal should not likely be disturbed by the ITO and there must be positive materials befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed should be allowed as deduction in the computation of income. Therefore, when the information was brought by the audit party to the attention of the ITO, it cannot be said that the subsequent user of the moneys is not a relevant circumstance. The second reason given by the Tribunal also is not justified. 13. The other reason given by the Tribunal is that there was a mixing up of the fund between the assessee's own money and the money held in investment and, therefore, no disallowance is called for. This finding, in our view, is not based on any material and there were no materials placed either before the ITO or even before the CIT(A) by the assessee to show that there was mixing up of funds. On the other hand, there was a clear finding of the CIT(A) that the assessee had withdrawn the deposits to pay the taxes and after perusing the accounts of the assessee with Madurai South India Corporation (P) Ltd., he has found that a sum of ₹ 5 lakhs deposited on 16th Oct., 1971, was in the deposit for a period of three days and the deposit was withdrawn on 19th Oct., 1971, the date on which the money was utilised for the payment of taxes. The CIT(A) has rendered the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Indian IT Act, 1922. The facts of the case are entirely different. In the case on hand, the assessee is not a trustee, but she advanced money for the payment of estate duty liability of her husband and therefore, it cannot be said that it is a case of preservation of estate and for the preservation of estate, certain moneys were borrowed and on the said amount interest is claimed. Since the Tribunal has rendered findings on merits of the case, we are not expressing any final opinion on the question whether the interest paid is allowable. 15. These are the four reasons on the basis of which the Tribunal came to the conclusion that there was a disputable proposition of law involved on the report of audit party and therefore, the ITO was not justified in reopening the assessment. We are of the view that the final conclusion of the Tribunal is not warranted on the basis of the reasoning given by it. The Tribunal has clearly misdirected itself in law in holding that there was no information before the ITO to reopen the assessment. The only question that was in issue before the Tribunal was whether the reopening was justified on the basis of the report of the audit party an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the decisions of the Supreme Court in Indian and Eastern Newspaper Society vs. CIT (supra) and A.L.A. Firm vs. CIT (1991) 93 CTR (SC) 133: (1991) 189 ITR 285(SC), has held that if the audit party brings to the notice of the ITO certain facts overlooked by him, he could change his opinion on the basis of the new facts and reassessment proceedings in such a case would be justified. In the case on hand, the ITO had no occasion to apply his mind on the question of disallowance of interest with reference to the material fact of withdrawal of deposit amount and utilisation of the same for the discharge of estate duty liability of her husband and her tax liability and the information was brought to the attention of the ITO only by the audit party and it cannot be held that the audit party has interpreted the law by furnishing the information to the ITO. In our opinion, the audit party brought to the notice of the ITO only certain new material facts necessary for the assessment of assessee's case and hence, the ITO was justified in reopening the assessment in the assessee's case. 18. No doubt, Mr. C.V. Rajan, learned counsel appearing for the Revenue relied on the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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