Reassessment proceedings liable to be quashed if no fresh tangible material or information found: ITAT

The assessee bank has been maintaining its books of accounts under mercantile basis. While admitting the interest on securities for Income Tax purposes, the assessee bank reduced the interest of Rs. 12,66,24,544 from the total income for the asst year 1991-92, due to profit & loss account and offers the same on receipt basis and escaped assessment under Sec.147 of the Income Tax Act.

Appeal before CIT(A): During appellate proceedings, the assessee, stated that AO initiated an inquiry to re-examine the facts of the case already on record which were already verified by AO at assessment u/s 143(3). However, Ld. CIT(A) rejected the same saying the assessment had been under-assessed and therefore, AO was justified in reopening the assessment. On merits, the disallowance of notional loss on investment was confirmed whereas on the issue of interest on securities, Ld. AO was directed to follow earlier appellate order. The quantum additions made by Ld. AO were partly allowed.

Appeal before ITAT: Aggrieved assessee filed further appeal, Tribunal, by a common order, rejected the legal grounds by observing that appeal of the assessee for both the years does not arise out of reasons recorded by Ld. AO. Therefore, the ground was dismissed. The issue, on merits, was partly allowed. The issue of interest on securities as well as loss on revaluation of investments was allowed whereas the issue of 80M was held to be not arising out of reassessment order

Appeal before ITAT: This order was challenged by the assessee before the High Court of Madras wherein the above two issues have been remanded back to the Tribunal for re-adjudication. The tribunal observed that there was no new tangible material before Ld. AO to reopen the case of the assessee and the reopening was based on existing material already available on record. Thus, the reopening would become a mere review of the order which is impermissible as per the decision of the Supreme Court in CIT V/s Kelvinator of India Ltd. As there is no fresh tangible material or new information the reassessment proceedings were liable to be quashed on legal grounds.

So, the appeal was allowed. The Ld. AR submitted that in such an eventuality, the issue of computation of deduction u/s 80M would not arise. Concurring with the same, the ground thus raised stands dismissed as infructuous.

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