M/s L.K. Power Corproation Limited, Bangalore V. ITO, Bangalore

ITA 1210/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8561 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 18-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: S SUKUMAR
• Keywords: Rectification of order; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 234B; 148; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH SMC B BEFORE SHRI K.K. GUPTA, ACCOUNTANT MEMBER ITA NO.1210(BNG)/09 (ASSESSMENT YEAR : 2003-04) M/S. L.K. POWER CORPORATION LIMITED, BREWERY HOUSE, 7 TH MILE, KANAKAPURA ROAD, BANGALORE. .... APPELLANT. VS. INCOME TAX OFFICER, WARD 11(2), BANGALORE. ... .. RESPONDENT. APPELLANT BY : SHRI S. SUKUMAR. RESPONDENT BY : SMT. V.S. SREELEKHA. O R D E R THE ASSESSEE IS IN APPEAL AGITATING T HE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE VIDE ORDER DT.15. 10.2009 CONFIRMING THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 1 47 DT. 28.12.2006 FOR THE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS BEING LE NGTHY AND NARRATIVE MAINLY ON THE ACTION OF THE ASSESSING OFFICER HAVING TAKEN RE COURSE EARLIER UNDER THE PROVISIONS OF SECTION 154 AND REMAINING UNSUCCESSFUL TAKEN REC OURSE UNDER SECTION 147/148 WITHOUT ADHERING TO COMPLIANCE OF THE JUDICIAL PRON OUNCEMENTS ON THE ISSUE TO BRING TO TAX A SUM OF RS.3,73,918 AS INTEREST EARNED ON FIXE D DEPOSITS HELD AS MARGIN BY THE BANK ON A TERM LOAN AMOUNTING TO RS.1.75 CRORES TO THE APPELLANT. ITA NO.1210(BNG)/09 - 2 - 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS SUBMISSIONS REITERATED THE BRIEF FACTS DULY SUPPORTED IN A PAPER BOOK. A RETU RN OF INCOME DECLARING INCOME OF RS.6540 WAS FILED ON 27.11.2003. THE RETURN WAS PR OCESSED UNDER SECTION 143(1) ON 25.2.2004 ACCEPTING THE INCOME RETURNED. A NOTICE FOR RECTIFICATION WAS RECEIVED ONLY ON 3.9.2004 I.E. ON THE SAME DATE AS OF HEARING. R EASONABLE OPPORTUNITY WAS NOT AFFORDED AS REQUIRED UNDER SUB-SECTION 3 OF SECTION 154, EVEN THOUGH THE PROPOSAL WAS TO ENHANCE THE INCOME AND TO WITHDRAW THE CREDIT GI VEN FOR RS.39,761 BEING THE TAX DEDUCTED AT SOURCE ON INTEREST INCOME. THE ASSESSI NG OFFICER PASSED ORDER UNDER SECTION 154 ON 12.10.2004 MAKING AN ADDITION OF RS. 387060 AS AGAINST RS.373918 PROPOSED TO BE ADDED IN THE NOTICE UNDER SECTION 15 4 AND ALSO WITHDRAWING CREDIT OF TDS OF RS.39,261. ON APPEAL, CIT(A) IN HIS ORDER I N ITA NO.110/W -11(2)/CIT(A)-1/04- 05 DT.8.3.2005 HELD THAT BASED ON THE PROVISION OF SECTION 143(1) W.E.F. 1.6.1999 THE ASSESSING OFFICER CANNOT ALTER THE RETURNED INCOME WHILE PROCESSING THE RETURN UNDER SECTION 143(1) AND THAT THE PROPER COURSE WAS TO IS SUE NOTICE UNDER SECTION 143(2) AND IN THE ABSENCE OF SUCH AN ACTION BY THE ASSESSING O FFICER, THE CIT(A) HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TAKING RECOU RSE TO SECTION 154 FOR ENHANCING THE RETURNED INCOME AND THE ORDER UNDER SECTION 143(1) READ WITH SECTION 154 WAS ANNULLED AND THE ASSESSING OFFICER WAS DIRECTED TO CONSIDER THE CLAIM FOR GIVING CREDIT FOR TDS AMOUNTING TO RS.36,858 WHILE GIVING EFFECT TO THE A PPELLATE ORDER. THE ASSESSING OFFICER PASSED ORDER GIVING EFFECT TO CIT(A)S ORDE R ON 29.3.2005. AFTER CIT(A) PASSED THE ORDER, THE ASSESSING OFFICER ISSUED A NO TICE UNDER SECTION 148 ON 11.4.2005 WHICH WAS RECEIVED ON 16.4.2005. A LETTER DT.20.4. 2005 WAS FILED ON 2.5.2005 BEFORE ITA NO.1210(BNG)/09 - 3 - THE ASSESSING OFFICER TO TREAT THE RETURN FILED ON 27.11.2003 AS ONE FILED IN RESPONSE TO NOTICE UNDER SECTION 148 AND ALSO REQUESTED THE ASSESSING OFFICER TO FURNISH THE REASONS FOR REOPENING THE ASSESSMENT. NO REASONS F OR REOPENING WERE FURNISHED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER PASSED AN ORDER UNDER SECTION 143(3) EVEN WITHOUT ISSUING A NOTICE UNDER SECTION 143(2) WITHI N THE STIPULATED PERIOD OF 12 MONTHS FROM 2.5.2005. IN THE MEANTIME AN APPEAL WAS FILED BY THE DEPARTMENT BEFORE ITAT AGAINST THE ORDER OF CIT(A) DT.8.3.2005 WHERE THE O RDER OF THE LEARNED CIT(A) WAS UPHELD. ON APPEAL FILED BY THE DEPARTMENT, THE ITA T IN ITA NO.781/B/2005 DT.15.9.2005 HELD THAT A DEBATABLE ISSUE CANNOT BE RECTIFIED BY RESORTING TO SECTION 154 AND RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF T.S. ;BALARAM, ITO VOLKART BROS (82 ITR 50) DISMISSED THE APPEAL. IT WAS OBSERVED THAT THE ORDER PASSED WAS INVALID AS HELD BY HON'BLE BOMBAY HIGH C OURT IN THE CASE OF METRO AUTO CORPORATION VS. CIT (286 ITR 618); ITO VS. LAKSHMAN I MEWALDAS (SC); GANGA SARAN & SONS (P) LTD. (130 ITR1) (SC) & WESTERN OUTDOOR INT ERACTIVE (P) LTD. VS. ITO (286 ITR 620) (BOM); KLM ROYAL DUTCH AIRLINES VS. ADI (292 I TR 49) (DEL). 4. THE LEARNED COUNSEL SUBMITTED THAT IT IS PERTINENT THAT A NOTE STATING THAT INTEREST OF RS.393918 RECEIVED FROM BANK AS DEPOSIT MARGIN MONEY FOR OPENING LC LIMIT OF RS.1.75 CRORES FOR PURCHASE OF MACHINERY WAS SET OF AGAINST PROJECT EXPENDITURE INCOME IN VIEW OF THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF CIT VS. BOKARO STEEL LTD. (236 ITR 315) HAD BEEN INSCRIBED ON THE RETURN. NEITHER THERE WAS AN APPARENT MISTAKE NOR WAS THERE ANY SUPPRESSION O F MATERIAL FACT ATTRACTING THE PROVISIONS OF SECTION 147. THE CIT(A) ALSO ERRED I N NOT ACCEPTING THE DECISION OF ITA NO.1210(BNG)/09 - 4 - HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT S (INDIA) LTD. VS. ITO (259 ITR 19)(SC) FOR WHICH INHIS ORDER AT PARA 6.1 HAS HELD THAT THE DECISION OF THE HON'BLE SUPREME COURT WAS NOT APPLICABLE FOR THE FOLLOWING REASON : ..LAW POINTS ARE YET TO GET SETTLED INTHIS ISSUE AND SUB-ISSUES. HOWEVER, THE ISSUE BEFORE ME IS THAT THERE IS NO CO MMUNICATION OF THE REASONS RECORDED AND THEREFORE THE PRAYER THAT ASSE SSMENT BE ANNULLED. UNDER SUCH CIRCUMSTANCES, I HOLD THAT THE REMEDY LI ES IN FILING A WRIT PETITION BEFORE THE HIGH COURT ONLY. THE CIT(A) WAS NOT CORRECT IN DISTINGUISHING THE HO N'BLE SUPREME COURTS DECISION AND HELD IT WAS NOT APPLICABLE TO ASSESSEES CASE. IN RESPECT OF JUDICIAL DISCIPLINE, THE HON'BLE SUPREME COURT IN THEIR JUDGMENT IN UNION OF INDIA VS. KAMLAKSHI FINANCE CORPORATION REPORTED IN AIR 1992 SC 711 HELD AS UND ER : PARA 6 : IT CANNOT BE TOO VEHEMENTLY EMPHASIZED THAT IT IS OF UTMOST IMPORTANCE THAT, IN DISPOSING OF THE QUASI-JUDICIAL ISSUES BEFORE THEM, REVENUE OFFICERS ARE BOUND BY THE DECISIONS OF THE APPELLATE AUTHORITIES THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THA T THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLOWED UNR ESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE COURT HELD THAT THE PRINCIPLE OF JUDICIAL DISCI PLINE DEMANDS THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES ARE TO BE FOLLOWED UNR ESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE MERE FACT THAT THE ORDER OF THE A PPELLATE AUTHORITY WAS NOT ACCEPTABLE TO THE DEPARTMENT IN ITSELF AND OBJECTIO NABLE PHRASE AND WAS THE SUBJECT MATTER OF APPEAL, CAN FURNISH NO GROUND FOR NOT FOL LOWING IT UNLESS ITS OPERATION IS SUSPENDED BY A COMPETENT COURT. HENCE THE REASONIN G OF THE CIT(A) THAT THE DECISION OF GKN DRIVE SHAFTS WAS NOT APPLICABLE TO THE ASSES SEES CASE WAS NOT CORRECT. ITA NO.1210(BNG)/09 - 5 - 5. HE FURTHER SUBMITTED THAT THE CIT( A) ERRED IN HOLDING THAT HE SAW NO INFIRMITY IN REOPENING THE ASSESSMENT UNDER SECTION 147 EVEN THOUGH HE CONCEDED THAT THERE WAS NO ADDITIONAL MATERIAL AVAILABLE TO THE A SSESSING OFFICER FOR ISSUE OF NOTICE UNDER SECTION 147. ATTENTION WAS INVITED TO THE DE CISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. WHE REIN THE HON'BLE SUPREME COURT HELD THAT ASSESSING OFFICER DEEMED TO HAVE APPLIED HIS M IND IF FACTS ARE ON RECORD AND REOPENING UNDER SECTION 147 ON THE CHANGE OF OPINIO N IS NOT PERMISSIBLE EVEN WITHIN FOUR YEARS. THE HON'BLE SUPREME COURT IN THE CASE OF CI T VS. CORPORATION BANK LIMITED (254 ITR 791) HELD THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE IN FURNISHING THE PARTICULARS PERTAINING TO THE ABOVE NOTED SUM A S NOT RECOVERABLE FOR THE RELEVANT ACCOUNTING YEAR AND THE STATEMENTS FILED ALONG WITH THE ORIGINAL RETURN DISCLOSED THE FULL DETAILS OF THE AFORESAID ACCOUNT. HE FURNISHE D THE COPY OF BALANCE SHEET WITH SCHEDULES IN THE PAPER BOOK. THE CIT(A) HELD THAT SINCE THE TIME FOR ISSUE OF NOTICE UNDER SECTION 143(2) HAD EXPIRED, THE ASSESSING OFF ICER RESORTED TO NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT TO COMPLETE THE A SSESSMENT UNDER SECTION 147 OF THE ACT. IN THIS CONNECTION, HE DREW ATTENTION TO THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN BAPALAL & CO EXPORTS VS. JCIT (289 IT R 37) AT PAGE 38 WHEREIN IT WAS HELD AS UNDER WHICH IS ON ALL FOURS APPLICABLE TO T HE PRESENT CASE. (II) THAT ONCE AN OPINION IS GIVEN IN AN ASSESSM ENT, IT CANNOT BE REOPENED BY ANY OTHER AUTHORITY EXCEPT ON FRESH MAT ERIAL. THAT APART, A NOTICE ISSUED UNDER SECTION 148 OF THE ACT SHOULD B E A REASONED ONE WHEREAS THE ORDER IN QUESTIONHAD BEEN ISSUED WITHOU T ASSIGNING ANY REASON JUSTIFYING ITS ISSUANCE. ALSO, IN THE ABSEN CE OF ANY NEW MATERIAL, THE ASSESSING OFFICER IS NOT EMPOWERED TO REOPEN AN ASSESSMENT ITA NO.1210(BNG)/09 - 6 - IRRESPECTIVE OF WHETHER IT IS MADE UNDER SECTION 14 3(1) OR 143(3). THE ORDER OF REASSESSMENT WAS NOT VALID. IN VIEW OF THE ABOVE THERE WAS NO FAILURE ON THE PA RT OF THE ASSESSEE TO DECLARE FULLY AND FINALLY MATERIAL FACTS NECESSARY FOR THE ASSESS MENT. HENCE THE NOTICE ISSUED UNDER SECTION 148 WAS BAD IN LAW. HENCE AN ORDER PASSED UNDER SECTIN 143(3) READ WITH SECTION 147 WAS INVALID WHEN (1) NO REASONS FOR RE OPENING WERE FURNISHED, EVEN AFTER REQUEST, FOR REOPENING OF THE ASSESSMENT WAS MADE A S HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LIMIT ED (SUPRA) AND ALLANA COLD STORAGE LIMITED VS. ITO (287 ITR 1) (BOM) (2) NO FRESH MATE RIAL WAS ALSO AVAILABLE WITH ASSESSING OFFICER THAT COULD ENABLE HIM TO ISSUE NO TICE UNDER SECTION 148. THE ISSUE WHICH CANNOT COME UNDER THE PURVIEW OF SECTION 154 CANNOT BE REASON FOR REOPENING THE ASSESSMENT UNDER SECTION 148. HON'BLE SUPREME COUR T IN THE CASE OF CIT VS. FORAMER FRANCE (264 ITR 566) WHEREIN IT WAS HELD THAT REASS ESSMENT CANNOT BE MADE ON THE BASIS OF CHANGE OF OPINION. UNDER THE ABOVE CIRCUM STANCES, ASSESSMENT MADE UNDER SECTION 143(3) R.W.S. 147 WAS INVALID. 6. HE FURTHER SUBMITTED ON MERITS THAT THE ASSESSING OFFICER IGNORED THE CLAIM OF THE ASSESSEE THAT A NOTE ON RECEIVING INTEREST F ROM BANK AS DEPOSIT MARGIN MONEY FOR OPENING LETTER OF CREDIT LIMIT OF RS.1.75 CRORE S WAS INCORPORATED IN THE STATEMENT OF INCOME ENCLOSED TO THE RETURN OF INCOME. THE FI XED DEPOSIT WAS MADE AS MARGIN MONEY FOR OPENING LETTER OF CREDIT LIMIT OF RS.1.75 CRORES FOR PURCHASE OF MACHINERY FOR SETTING UP THE PROJECT AND FORMED PART OF THE PROJE CT COST. RELEVANT DETAILS AND PAPERS WERE FILED WITH THE ASSESSING OFFICER. LIEN WAS ALSO MARKED ON FIXED DEPOSIT AS ITA NO.1210(BNG)/09 - 7 - DETAILED ABOVE. THE ASSESSING OFFICER OVERLOOKED T HE FACT THAT INTEREST WAS NOT RECEIVED FROM SURPLUS MONEY INVESTED IN FIXED DEPOS IT TO ATTRACT TAX AND THE SAME WAS SET OFF AGAINST THE PROJECT COST INCURRED AND THE C LAIM WAS BASED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BOKARO STEEL L IMITED (SUPRA). THE ASSESSING OFFICERS RELIANCE ON THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF TUTICORIN ALKALINES CHEMICALS AND FERTILISERS LTD. (227 ITR 172) IGNORING VARIOUS DECISIONS CITED BY THE ASSESSEE WAS MISPLACED AS IN THAT CASE THE QUESTION WAS WITH REGARD TO TAXATION OF INTEREST INCOME FROM SHORT TE RM DEPOSITS EARNED BEFORE COMMENCEMENT OF BUSINESS AND NOT ON HAVING COMMENCE D BUSINESS AS IN THIS CASE. THE ADDITION MADE BY THE ASSESSING OFFICER WAS WITHOUT SANCTION OF LAW AND THE ADDITION MADE WAS ERRONEOUS AND THE TDS CLAIMED WAS TO BE RE FUNDED AND COULD NOT BE DENIED. FAILURE OF THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRIES AND DRAW PROPER CONCLUSION WILL NOT ENABLE THE ASSESSING OFFICER TO REASSESS THE SAME (CIT VS. KALAPPA 167 ITR 22) (KAR) AND GEMINI LEATHER STORES VS. ITO (100 ITR 1) (SC). HE ARGUED THAT BOTH CITATIONS OF THE HON'BLE APEX COURT WERE SUBJE CTED TO DISTINCTION BY THE LEARNED CIT(A) WHEN IN PRINCIPLE ON FACTS HE AGREED TO THE ASSESSEES CONTENTION OF HAVING FOLLOWED BOKARO STEEL LTD. (SUPRA). 7. HE CHALLENGED ON THE LEVY OF IN TEREST UNDER SECTION 234D AS THE ASSESSING OFFICER HAD LEVIED INTEREST UNDER SECTION 234D AMOU NTING TO RS.6,860 IN HIS ORDER UNDER SECTION 143(3) R.W.S. 147 DT.28.12.2006. THE PROVISION TO LEVY INTEREST UNDER SECTION 234D WAS BROUGHT ON STATUTE FROM 1.6.2003 B Y FINANCE ACT, 2003. LEVY OF INTEREST UNDER SECTION 234D WAS A SUBSTANTIVE PROVI SION AND CANNOT BE APPLIED ON ITA NO.1210(BNG)/09 - 8 - RETROSPECTIVE BASIS. IT WAS THEREFORE APPLICABLE O NLY FROM A.Y. 2004-05 AND INTEREST UNDER SECTION 234D CANNOT BE CHARGED IN RESPECT OF ASSESSMENT YEARS PRECEDING ASSESSMENT YEAR 2004-05 EVEN WHERE THE ASSESSMENTS ARE FRAMED AFTER 1.6.2003 ON THE REFUND GRANTED EARLIER. RELIANCE WAS PLACED ON THE DECISIONS OF GLAXO SMITHKLINE ASIA (P) LTD. VS. ACIT (6 SOT 113 DELHI) AND ITO VS. EKTA PROMOTERS (P) LTD. (113 ITD 719) (DELHI SB). THE LEVY OF INTEREST UNDER SE CTION 234B IS TO BE CONSEQUENTIALLY DELETED. 8. CONCLUDING HIS ARGUMENTS, HE SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A) THEREFORE DOES NOT HAVE ANY LEGS TO STAND ON EITHER ON LAW OR ON FACTS WHICH HAVE BEEN INCORPORATED IN ACCORDANCE WITH THE PROVISIONS OF I NCOME TAX ACT, 1961 NAMELY THE ACCOUNTING STANDARDS TO BE FOLLOWED WHEREFROM THE A PPLICATION OF LAW IS ON THE TRANSACTIONS TO MEET REQUIREMENTS OF LAWS FRAMED BY THE HON'BLE APEX COURT AND HAVE TO BE ADOPTED BY THE TAXING AUTHORITIES. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDERS OF THE AUTHORITIES BELOW BY INDICATING THAT THE FACT OF RE CTIFICATION CARRIED OUT UNDER SECTION 154 WHICH WAS DISMISSED AS A DEBATABLE ISSUE BY TH E TRIBUNAL, CANNOT BE SAID TO BE AN OPINION FORMED BY THE ASSESSING OFFICER TO FALL BAC K UPON TO TAKE RECOURSE UNDER THE PROVISIONS OF SECTION 147/148. THE LEARNED CIT(A) THEREFORE HAD RIGHTLY CONSIDERED THE NON-ISSUANCE OF NOTICE UNDER SECTION 143(2) WIT HIN THE STIPULATED ONE YEAR TIME AS THE ASSESSEE HAD RESPONDED AND CO-OPERATED WITH THE ASSESSING OFFICER BUT ONLY TO AGITATE THE ACTION BY THE ASSESSING OFFICER IN NOT HAVING REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. SHE POINTED OUT THAT THE A SSESSEE HIMSELF HAD CREDITED ITA NO.1210(BNG)/09 - 9 - INTEREST FROM THE FIXED DEPOSITS HELD AS MARGIN BY THE BANKS IN THE PROFIT AND LOSS ACCOUNT THEREFORE WAS TO BE REASSESSED AS INCOME HA VING ESCAPED ASSESSMENT IN ACCORDANCE WITH THE GUIDELINES OF THE HON'BLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILISERS LTD. (SUPRA). IT WAS INCOME FROM A NON-BUSINESS SOURCE AND WAS TO BE TAXED AS INCOME HAVING ESCAPED ASSESS MENT. THE FACTS OF THE ASSESSEE THEREFORE FIT INTO THE FACTS OF THE CASE LAW RELIED UPON BY THE LEARNED CIT(A) AS WELL IS TO BE UPHELD. 10. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND ON MY CAREFUL PERUSAL OF THE FACTS AND CIRCUMST ANCES, I FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT HAVING TAKEN RECOURSE TO THE PROVISIONS OF SECTION 154, THE ASSESSING OFFICER H AD ABSOLVED HIMSELF ON THE BASIS OF THE VERY FACTS AVAILABLE AND APPARENT ON RECORD TO CREATE A DEMAND AGAINST THE ASSESSEE WHICH WAS ADJUDICATED BY THE LEARNED CIT(A ) AND THE TRIBUNAL HOLDING IT AS A DEBATABLE ISSUE NOT TO BE CONSIDERED UNDER THE PROV ISIONS OF SECTION 154. THE REASONS TO BELIEVE THEREFORE WAS RECTIFICATION OF ORDER UND ER SECTION 143(1) FOR THE TIME BEING AND THE REASSESSMENT PROCEEDINGS UNDER SECTION 147/ 148 HAD TO BE CONSIDERED IN ACCORDANCE WITH THE GUIDELINES AS WERE CONSIDERED B Y THE HON'BLE APEX COURT IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LIMITED (SUPRA) EV EN WHEN THE MANDATORY REQUIREMENT OF ISSUE NOTICE UNDER SECTION 143(2) WAS DONE AWAY WITH. THE ORDER OF LEARNED CIT(A) DEALT THIS AGITATION BEFORE HIM BY HOLDING THAT THE ASSESSEE WAS IN CONSTRUCTIVE NOTICE ITA NO.1210(BNG)/09 - 10 - OF REASSESSMENT ALL ALONG WHEN HE HAD FILED AN APPE AL BEFORE THE LEARNED CIT(A) EARLIER AND THE LEARNED CIT(A) HAD DIRECTED THE ASSESSING O FFICER TO CONSIDER THE ISSUE UNDER SECTION 143(2). HE ALSO NOTICED THAT THE TIME HAD EXPIRED THEREFORE ISSUE OF NOTICE UNDER SECTION 148 DID NOT ABSOLVE THE DEPARTMENT OF THIS LACUNA IN HOLDING THE ORDER AS INVALID. THE LEARNED COUNSEL BEFORE HIM HAD SUBMIT TED WHETHER A RECTIFICATION THAT CANNOT BE CARRIED OUT UNDER THE PROVISIONS OF SECTI ON 154 WHETHER CAN BE CARRIED OUT UNDER THE PROVISIONS OF SECTION 148 THEREFORE ONLY INDICATES THAT THE REVENUE DEFAULTED BEING ONCE BITTEN TWICE SHY. THE ASSESSI NG OFFICER REASSESSED THE VERY AMOUNT WHICH HE HAD BEEN ASKED NOT TO BY THE APPELL ATE AUTHORITIES WAS ON THE BASIS OF FACTS AS WERE BROUGHT TO HIS NOTICE IN THE STATEMEN T OF RETURN COMPUTING THE TAXABLE INCOME FILED BY THE ASSESSEE ON 27.11.2003 AS HAS BEEN PLACED IN PAPER BOOK PAGE 2. THUS NO REASONS, EVEN FOR A CHANGE OF OPINION, WERE AVAILABLE TO THE A.O. IT WAS THE ENDEAVOUR OF THE LEARNED CIT(A) TO DISTINGUISH THE FACTS OF THE ASSESSEES CASE IN APPLYING THE HON'BLE APEX COURT DECISION OF TUTICOR IN ALKALI CHEMICALS AND FERTILISERS LTD. (SUPRA) VIS--VIS BOKARO STEEL LTD. (SUPRA) A S HAS BEEN SUBMITTED ABOVE. ON PERUSAL OF THE FINANCIAL STATEMENTS OF THE ASSESSEE SUBMITTED IN THE PAPER BOOK, I FIND THAT THE ASSESSEE HAD PAID THE INTEREST TO THE BANK FOR ITS BUSINESS OF CONSTRUCTION OF TURN KEY PROJECTS AMOUNTING TO RS.10688327 FROM WHE REIN IT REDUCED THE AMOUNT OF INTEREST ON FIXED DEPOSIT HELD AS MARGIN AMOUNTING TO RS.373918 BY CARRYING OVER TO INCIDENTAL EXPENDITURE DURING THE CONSTRUCTION AMOU NTING TO RS.4.44 CRORES. THIS SQUARELY COVERED THE CASE OF THE ASSESSEE THAT THE AMOUNT EARNED WAS INCIDENTAL TO ITS BUSINESS AND WAS NOT FROM A SURPLUS LYING WITH IT T O BE RENDERED AS INCOME FROM OTHER ITA NO.1210(BNG)/09 - 11 - SOURCES AS INTEREST ON INVESTING BORROWED FUNDS PR IOR TO COMMENCEMENT OF BUSINESS. THE LEARNED COUNSEL BEFORE ME HAS INDICATED THAT TH E LEARNED CIT(A) RELYING ON THE HON'BLE APEX COURT DECISION IN THE CASE OF TUTICORI N ALKALI CHEMICALS AND FERTILISERS LTD. (SUPRA) IGNORED TO FOLLOW THE BASIC CONTENTION IN THE DECISION THAT THE EXPENDITURE WOULD HAVE BEEN DEDUCTIBLE AS INCURRED FOR THE PURP OSE OF BUSINESS IF THE ASSESSEES BUSINESS HAD COMMENCED. THE ASSESSEES BUSINESS HA D COMMENCED WHICH THE BANK HONOURED AND IT WAS THE INTEREST RECEIVED ON THE MA RGIN HELD AS FIXED DEPOSITS BY THE BANK WHO HAD ADVANCED A TERM LOAN OF RS.1.75 CRORES THEREFORE COULD NOT BE SAID TO HAVE BEEN ADJUSTED AGAINST A NON-BUSINESS SOURCE. THE DECISION OF THE BOKARO STEEL LTD. (SUPRA) WAS TO BE FOLLOWED WITHOUT ENTERING IN TO CONTROVERSY OF LAW VERSES ITS ACCOUNTING WHICH THE LEARNED CIT(A) UNNECESSARILY D RAGGED HIMSELF INTO TO OBSERVE THAT ACCOUNTING IS ONLY DEPICTION OF TRANSACTIONS RECORD ED IN A PARTICULAR MANNER TO WHICH LAW HAS TO BE APPLIED WITHOUT DEVIATING FROM THE INTENT ION OF SUCH BUSINESS TRANSACTION TO COMPLY IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT BEEN ABLE TO DE MONSTRATE AS TO HOW THE ACCOUNTING OF SUCH INTEREST WAS DIFFERENT FROM THE INTENTION OF THE LAW FOR TAXING INTEREST FROM SURPLUS FUNDS AVAILABLE TO AN ASSESSE E BEFORE BUSINESS HAD COMMENCED IN THE CASE OF THE ASSESSEE. THEREFORE IN MY CONSIDER ED VIEW, THE CASE OF THE ASSESSEE IS STRONG ON MERITS ITSELF THEREFORE REQUIRES NO ACADE MIC DELIBERATION ON THE ISSUE OF FRAMING REASSESSMENT UNDER SECTION 147/148, WHICH A PPEARS TO HAVE BEEN CARRIED OUT WITHOUT HAVING VALID REASONS FOR BRINGING TO TAX AN INCOME HAVING ESCAPED ASSESSMENT. THIS HAD ALREADY BEEN DELIBERATED UPON BY THE APPEL LATE AUTHORITIES AS NOT TAXABLE ITA NO.1210(BNG)/09 - 12 - THEREFORE REQUIRED NO FURTHER JUSTIFIABLE REASONS. I FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF 286 ITR 618 HAD RIGHTLY OBSERVED THAT FURTHER PROCEEDINGS OUGHT NOT TO BE UNDERTAKEN WHEN THE ASSESSMENT HAD NOT BECOME FINAL AND THE ISSUE OF NO TICE UNDER SECTION 148 WAS FOR BRINGING TO TAX THE SAME INCOME AS INCOME HAVING ESCAPED ASSESSMENT WAS THE INCOME ALREADY DECIDED BY THE APPELLATE AUTHORITIES AS NOT TAXABLE WOULD HAVE BEEN ALLOWED TO BE SETTLED BY THE HIGHER APPELLATE AUTHORITIES. OB VIOUSLY WITHOUT A REASON, WHICH IS NOT THERE, THE ASSESSING OFFICER WOULD NOT HAVE PROCEED ED TO FRAME AN ORDER WITHOUT ISSUE OF A MANDATORY NOTICE UNDER SECTION 143(2) WITHIN T HE STIPULATED PERIOD [ 259 ITR 19 (SC) ] AND APPLY THE FACTS OF THE CASE TO ANOTHER D ECISION TO MISINTERPRET THEM OVERLOOKING EARLIER INDICATIONS OF THE APPELLATE AU THORITIES TO REFRAIN FROM. 11. TO SUM UP, I HAVE TO STATE THAT THE PROCEDURE A DOPTED BY THE AUTHORITIES TO BRING TO TAX THE AMOUNT WHICH THE ASSESSING OFFICER HAD ALREADY CONSIDERED AND ADOPTED AS NOT TAXABLE BUT UNDER THE GARB OF REOPEN ING OF ASSESSMENT, HURRIEDLY PROCEEDED TO MEET THE LIMITATION OF TIME COULD NOT BE JUSTIFIED BY THE FIRST APPELLATE AUTHORITY BUT ONLY BY DISTINGUISHING LAW TO BE APP LIED ON A PARTICULAR ACCOUNTING WHEN THE FACTS CLEARLY INDICATE THAT THE ASSESSEE HAD CO MPLIED WITH THE HON'BLE APEX COURT DECISION ON SIMILAR FACTS, NOT INDICATING AS TO HOW IT WAS APPLICABLE WHEN HIS PREDECESSOR CIT(A) HAD ALREADY DEALT WITH THE ISSUE ON MERITS I NDICATING NON-TAXABILITY OF THE SAME IN ACCORDANCE WITH LAW BEING DEBATABLE. THIS AMOU NT CANNOT BE TAXED IN ISOLATION. IN THE RESULT THE APPEAL OF THE ASSESSEE IS BOUND TO S UCCEED. ITA NO.1210(BNG)/09 - 13 - 12. CONSEQUENTIAL LEVY OF INTEREST UNDER SECTION 23 4B & 234D THEREFORE CANNOT BE LEVIED THEREUPON. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 11 TH FEB., 2010. SD/- (K.K.GUPTA) A CCOUNTANT MEMBER BANGALORE, DT.11-02-2010. COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. 7. GUARD FILE, ITAT, NEW DELHI. GPR* BY ORDER ASSISTANT REGISTRAR, ITAT