A. Reassessment is justified in the following circumstances -
- When there is no discussion worth in the assessment order and did not form opinion in the original assessment proceedings
- When the assessee was promptly supplied the reasons recorded for initiation of reassessment proceedings
- If the audit objection constituted an ‘information’ about escapement of income
B. Deduction u/s 43B can not be allowed if interest is not actually been paid by the assessee
- Assessment was completed u/s 143(3)
- On the basis of an audit query regarding deduction u/s 43B reassessment proceedings have been started and notice u/s 148 issued
- CIT(A) confirmed the additions
- Assessee moved to the Tribunal
- Tribunal dismissed the appeal and rejected all grounds raised by the assessee.
- Validity of Reassessment Proceedings u/s 148 –
1. On Change of opinion : the facts of the instant case, w find that there is no discussion worth the name in the original assessment order about the deduct bility of interest of Rs.2.45 crore out of unpaid interest which was transferred to a wholly owned subsidiary company u/s 43B of the Act. In our considered opinion, it is farfetched to argue that the AO formed opinion on this issue during the course of original assessment proceedings and, hence, his hands are tied for initiating re-assessment proceedings. Since the AO did not form any opinion on the deductibility of such interest in the original assessment proceedings, the contention of the ld. AR about the change of opinion falls flat on the ground. The same is ergo repelled.
2. On Reasons not supplied : The sequence of events amply demonstrates that the assessee attempted to distort the actual reasons with the ulterior motive of playing foul with the CIT(A). This completely belies the contention of the ld. AR that the assessee was not supplied with the reasons. Leaving this issue at this stage only, it suffices to say that the assessee was promptly supplied the reasons leading to the initiation of reassessment proceedings. This contention is, therefore, rejected.
3. On Audit objection : It is, therefore, held that the audit objection in the instant case constituted an `information’ about the escapement of income to the AO, thereby justifying the initiation of reassessment.
B. On Section 43B : The interest payable to banks and other financial institutions can be allowed as deduction only ‘if such interest has been actually paid’ and second is that where such interest ‘has been converted into loan or borrowing/advance, (it) shall not be deemed to have been actually paid.’ In the light of the main provisions of section 43B read with Explanations 3C and 3D, it is crystal clear that deduction of interest u/s 43B cannot be allowed in the present case because such interest has not been actually paid by the assessee to the banks/financial institutions.
Cases Referred to
DCIT vs. Zuari Asset Development and Investment Company Ltd., (2015) 373 ITR 661 (SC).
CIT vs. Usha International Ltd., (2012) 348 ITR 485 (Del)
GKN Driveshafts (India) Ltd. Vs. ITO and Ors. (2003) 259 ITR 90 (SC)
CIT vs. PVS Beedis Pvt. Ltd. (1999) 237 ITR 13 (SC)
CIT vs. Lucas T.V.S. Ltd. (1998) 249 ITR 306 (SC)
CIT vs. First Leasing Co. of India Ltd. (2000) 241 ITR 248 (Mad)
W.T. Suren & Company Ltd. vs. CIT (1998) 230 ITR 643 (SC)