M/s. RASHTRIYA CHEMICALS & FERTILIZERS LTD., MUMBAI v. ADDL. CIT 7(2), MUMBAI

ITA 3195/MUM/2003 | 1991-1992
Pronouncement Date: 15-07-2011 | Result: Allowed

Appeal Details

RSA Number 319519914 RSA 2003
Assessee PAN AAACR2831H
Bench Mumbai
Appeal Number ITA 3195/MUM/2003
Duration Of Justice 8 year(s) 2 month(s) 22 day(s)
Appellant M/s. RASHTRIYA CHEMICALS & FERTILIZERS LTD., MUMBAI
Respondent ADDL. CIT 7(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 15-07-2011
Date Of Final Hearing 09-11-2010
Next Hearing Date 09-11-2010
Assessment Year 1991-1992
Appeal Filed On 23-04-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH MUMBAI BEFORE SHRI R.V. EASWAR EASWAR AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 3195/MUM/2003 (ASSESSMENT YEAR: 1991-92) M/S. RASHTRIYA CHEMICALS & ACIT RANGE 7-2 FERTILIZERS LTD. PRIYADARSHINI AAYAKAR BHAVAN M. K. ROAD EASTERN EXPRESS HIGHWAY VS. MUMBAI 400020 SION MUMBAI 400022 PAN - AAACR 2831 H APPELLANT RESPONDENT APPELLANT BY: SHRI NISHANT THAKKAR/ SHRI K.K. VED RESPONDENT BY: SHRI SANJIV DUTT O R D E R PER B. RAMAKOTAIAH A.M. ASSESSEE IS A PUBLIC SECTOR UNDERTAKING AND HAS OBT AINED COD PERMISSION TO APPEAL BEFORE THE ITAT AGAINST THE OR DER OF THE CIT(A) VII MUMBAI DATED 31.01.2003. ASSESSEE HAS RAISED TWO GR OUNDS GROUND NO. 1 BEING THE VALIDITY OF REASSESSMENT PROCEEDINGS AND WITH OUT PREJUDICE TO GROUND NO. 1 GROUND 2 PERTAIN TO DISALLOWANCE OF L OSS CLAIMED TOWARDS EXCHANGE RATE VARIATION IN RESPECT OF INTEREST ON T HE KUWAITI DINAR LOAN. 2. ASSESSEE HAD OBTAINED A LOAN OF 30 MILLION KUWAITI DINAR (K.D.) FROM THE NATIONAL BANK OF KUWAIT IN TERMS OF AN AGREEMEN T DATED 13.12.1988 AT THE INSTANCE OF GOVERNMENT OF INDIA VIDE LETTER NO. F6(44)/88-ECB DATED 19.11.1993. THE SAID LOAN WAS REPAYABLE IN ONE LUMP SUM ON 19 TH DECEMBER 1993 WHEREAS THE INTEREST THEREON AT THE RATE OF 8.75% WAS PAYABLE ON 19 TH DECEMBER EVERY YEAR. BOTH PRINCIPLE AND INTEREST A MOUNTS WERE TO BE PAID IN KUWAITI DINARS ONLY. ASSESSEE WA S ACCORDINGLY MAKING A YEARLY PAYMENT OF INTEREST TO THIS LOAN IN THE MONT H OF DECEMBER EACH YEAR. THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE IN R ELATION TO THE INTEREST PAYABLE ON THIS LOAN WAS AS UNDER: - ITA NO. 3195/MUM/2003 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. 2 (A) IN RESPECT OF THE PERIOD APRIL 1 TO DECEMBER 18 THE AMOUNT OF INTEREST WAS ACCOUNTED ON ACTUAL BASIS AS THE PAYMENT WAS MA DE ON 19 TH DECEMBER EACH YEAR. (B) IN RESPECT OF THE PERIOD DECEMBER 19 TO MARCH 31 A PROVISION WAS MADE IN THE ACCOUNTS ON THE BASIS OF THE EXCHANGE RATE P REVAILING AS ON MARCH 31 ST AS CERTIFIED BY STATE BANK OF INDIA. IN THE YEAR ENDED MARCH 31 1990 FOR THE PERIOD APR IL 1 1998 TO DECEMBER 18 1989 THE INTEREST PAYABLE ON THIS LOAN WAS ACCOUNTED ON THE BASIS OF THE PAYMENT MADE ON DECEMBER 19 1989 PLUS A PROVISION WAS MADE IN THE BOOKS IN RESPECT OF THE INTEREST FOR TH E PERIOD 19 DECEMBER 1989 TO 31 ST MARCH 1990 ON THE BASIS OF THE EXCHANGE RATE EXIS TING AS ON 31 ST MARCH 1990. 2.2 ON 2 ND APRIL 1990 KUWAIT WAS INVADED BY IRAQ. CONSEQUENT LY ALL FINANCIAL TRANSACTIONS WITH KUWAIT WERE SUSPENDED B Y THE UNITED NATIONS SECURITY COUNCIL PER ITS RESOLUTION NO. 661 DATED A UGUST 6 1990. AS SUCH NO EXCHANGE RATE WAS AVAILABLE TO THE ASSESSEE IN R ESPECT OF KUWAIT DINAR ON MARCH 31 1991 AND HENCE THE ASSESSEE DID NOT PROVI DE FOR INTEREST ON THE K.D. LOAN FOR THE PERIOD 1 ST APRIL 1990 TO 31 ST MARCH 1991. IN VIEW OF THESE UNFORESEEN CIRCUMSTANCES THE ASSESSEE WAS NEITHER I N A POSITION TO PAY THE YEARLY INTEREST WHICH WAS DUE ON 19 TH DECEMBER 1990 NOR WAS IT IN A POSITION TO MAKE A PROVISION AS ON 31 ST MARCH 1991 AS THE EXCHANGE RATE FOR KUWAITI DINAR WAS NOT IN EXISTENCE IN THE INTERNATI ONAL MARKET ON 31 ST MARCH 1991. AS PER THE DIRECTIVE OF THE DEPARTMENT OF FERTILIZERS VIDE THEIR LETTER NO.51/2/90-FDA/II DATED JANUARY 21 1991 TH E ASSESSEE HAD OPENED A PUBLIC ACCOUNT WITH STATE BANK OF INDIA AND DEPOS ITED A SUM OF ` 6 56 37 500/- EQUIVALENT TO ITS INTEREST LIABILITY WHICH WAS DUE ON 19 TH DECEMBER 1990. THIS AMOUNT WAS TO BE TRANSFERRED T O RBI AS AND WHEN THE SAME COULD BE REMITTED TO NATIONAL BANK OF KUWAIT. ON 3 RD AUGUST 1991 THE KUWAIT DINAR OFFICIAL RATE WAS FIXED BY THE RBI AT ` 88.27 PER K.D. HOWEVER THIS RATE WAS NOT EFFECTIVE AS THE GOVERNMENT OF IN DIA HAD INSUFFICIENT FUNDS OF KUWAITI DINARS. THE GOVERNMENT OF INDIA WAS TO U TILIZE THE LIMITED RESOURCES OF KUWAITI DINARS AVAILABLE WITH IT FOR I TS OWN PAYMENTS AND AS A ITA NO. 3195/MUM/2003 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. 3 CONSEQUENCE THE SAME WAS NOT TO BE MADE AVAILABLE T O THE ASSESSEE AS PER LETTER DATED 9 TH SEPTEMBER 1991 WRITTEN BY THE RBI TO THE ASSESSEE. AS PER THIS LETTER IT WAS ALSO COMMUNICATED THAT THE ASSES SEE WILL HAVE TO PURCHASE KUWAITI DINARS FROM THE OPEN MARKET FOR DISCHARGING ITS INTEREST OBLIGATIONS AT MARKET RATE ABOUT ` 90.8144 AGAINST THE EARLIER RATE OF ONE KUWAITI DIN AR EQUAL TO ` 25/- DEPOSITED WITH STATE BANK OF INDIA. CONSEQUENT TO ABOVE DECISION OF THE GOVERNMENT OF INDIA THE ASSESSEE HA D TO PURCHASE KUWAITI DINARS FROM THE OPEN MARKET. THE ACTUAL REMITTANCE OF INTEREST DUE ON 19 TH DECEMBER 1991 ALONGWITH THE INTEREST FOR THE PERIOD INCLUDING 19 TH DECEMBER 1990 TO 31 ST MARCH 1991 WAS MADE ONLY ON 19 TH DECEMBER 1991 AT THE RATE OF ` 90.89 PER KUWAITI DINAR. IN SO FAR AS THE FINANCIAL STATEMENT I.E. THE BALANCE SHEET FOR THE YEAR ENDED 31 ST MARCH 1991 WERE CONCERNED THE ASSESSEE HAD ADOPTED THE EXCHANGE RATE OF ` 59 69 I.E. THE RATE OF KUWAITI DINAR AS ON 1 ST APRIL 1990 BECAUSE NO EXCHANGE RATE WAS AVAILABLE FOR 31 ST MARCH 1991. HOWEVER AT THE TIME OF COMPUTATION OF TOTAL INCOME OF THE ASSESSEE FOR A.Y. 1991-92 FOR INCOME TAX PURPOSES WHICH WAS DONE AFTER THE SAID AMOUNTS WERE REMITTED ON 16 TH OCTOBER 1991 AND 19 TH OCTOBER 1991 THE ADDITIONAL CHARGE IN RESPECT OF THE YEAR ENDED 31 ST MARCH 1991 I.E. THE CHARGE ON ACTUAL PAYMENT VIS--VIS WHAT HA D BEEN ACCOUNTED FOR IN THE FINAL STATEMENT FOR THE YEAR ENDED 31 ST MARCH 1991 WAS CLAIMED. THIS CHARGE AMOUNTED TO ` 805.59 LAKHS AND THE SAME WAS ALLOWED IN COMPUTING THE TOTAL INCOME FOR A.Y. 1991-92 AS PER THE ORIGIN AL ASSESSMENT ORDER DATED 16 TH DECEMBER 1993 PASSED UNDER SECTION 143(3). 2.3 DURING THE YEAR ENDED 31 ST MARCH 1992 WHEN THE KUWAITI DINAR TRANSACTION WAS ONCE AGAIN PERMITTED THE RATES IF K UWAITI DINARS WENT UP AND HENCE BY FOLLOWING ACCOUNTING STANDARD II THE A SSESSEE CLAIMED FOR A.Y. 1992-93 A SUM OF ` 14269.75 LAKHS BEING THE ADDITIONAL BURDEN OF EXCHA NGE LOSS IN RESPECT OF THE PRINCIPLE AMOUNT OF LOAN. TH E A.O. DISALLOWED THE CLAIM WITH THE OBSERVATIONS THAT THE LOSS IS ALLOWABLE TO THE ASSESSEE ONLY ON ACTUAL PAYMENT BASIS I.E. IN THE YEAR IN WHICH THE REMITTANCE IS MADE BY THE ASSESSEE AND THAT DURING THE YEAR THE ASSESSEE HAS NOT REMITTED THE AMOUNT AND THE LOSS IS NOTIONAL ONLY. IN A.Y. 1992-93 THE ASSESSEE HAS ALSO CLAIMED EXCHANGE LOSS OF ` 1029.24 LAKHS WITH RESPECT TO INTEREST LIABILITY. O UT OF THIS ITA NO. 3195/MUM/2003 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. 4 ` 805.59 LAKHS WAS EARLIER CLAIMED IN A.Y. 19991-92. THIS AMOUNT OF ` 805.59 LAKHS WAS ADDED BACK IN THE COMPUTATION OF INCOME F OR A.Y. 1992-93. AS A RESULT THE NET EXCHANGE LOSS OF ONLY ` 223.65 LAKHS WAS ACTUALLY CLAIMED AS DEDUCTION FOR A.Y. 1992-93. THE A.O. DISALLOWED THE CLAIM WITH THE OBSERVATIONS THAT THE LIABILITY ON ACCOUNT OF FLUCT UATION IN RATE OF EXCHANGE IS NOT ALLOWABLE UNLESS THE SAME IS BACKED BY ACTUA L REMITTANCE. SINCE THE ASSESSEE HAS ALREADY ADDED BACK THE AMOUNT OF ` 805.59 LAKHS RELATING TO A.Y. 1991-92 IN THE COMPUTATION OF THE TOTAL INCOME FOR A.Y. 1992-93 THE BALANCE AMOUNT OF ` 223.65 LAKHS WAS ONLY DISALLOWED AND ADDED TO THE T OTAL INCOME. THE CIT(A) VIDE HIS ORDER DATED 20.12.1995 CONFIRMED THE DISALLOWANCE OF ` 14279.75 LAKHS WITH THE OBSERVATIONS THAT THE LIABI LITY WAS MERELY A CONTINGENT LIABILITY AND FINAL POSITION WO ULD EMERGE ONLY AT THE TIME OF PAYMENT OF THE LOSS I.E. DECEMBER 1993 AS THE A SSESSEE HAS AGREED TO PAY LOAN IN DECEMBER 1993 AND HENCE THE SAME WAS NOT AL LOWABLE IN THE ASSESSMENT YEAR I.E. A.Y. 1992-93. THE CIT(A) IN T HAT YEAR FURTHER OBSERVED THAT THE ASSESSEE CANNOT BE ALLOWED THE EXCHANGE LO SS AS IT IS THE LIABILITY OF THE GOVERNMENT OF INDIA AND NOT THE LIABILITY OF T HE ASSESSEE. THE CIT(A) HAS ALSO OBSERVED THAT THE LIABILITY WOULD ACCRUE ONLY IN THE A.Y. 1994-95 BECAUSE THE LOAN HAS TO BE REPAID IN DECEMBER 1993 AND ONLY AT THAT POINT OF TIME THE LOSS CAN BE DETERMINED. THE DISALLOWANC E OF ` 223.65 LAKHS ON ACCOUNT OF EXCHANGE LOSS IN RESPECT OF THE INTEREST LIABILITY WAS ALSO CONFIRMED BY THE CIT(A) IN VIEW OF HIS FINDINGS IN RESPECT OF EXCHANGE LOSS OF ` 14269.75 LAKHS. THE ASSESSEE PREFERRED SECOND APPEA L BEFORE THE ITAT AGAINST THE ORDER OF THE CIT(A) IN THAT YEAR. 2.4 IN THE MEAN TIME ASSESSMENT OF A.Y. 1991-9 2 WAS REOPENED UNDER SECTION 147 OF THE INCOME TAX ACT BY ISSUING A NOTI CE UNDER SECTION 148 ON 25.03.1996 AND THE REASSESSMENT WAS COMPLETED ON 23 .12.1997 BY THE DEPUTY COMMISSIONER OF INCOME TAX SPECIAL RANGE 39 . IN THIS ORDER THE A.O. DISALLOWED ASSESSEES CLAIM FOR EXCHANGE LOSS OF ` 805.59 CRORES IN RESPECT OF THE INTEREST LIABILITY ON THE GROUND THA T DEDUCTION CANNOT BE ALLOWED ON PROVISION BASIS. ASSESSEE PREFERRED APPE AL BEFORE THE CIT(A) WHO ON MERITS FOLLOWING ORDER OF HIS PREDECESSOR CONFIR MED THE ACTION OF AO IN REASSESSMENT ORDER WHICH IS IN APPEAL NOW. ITA NO. 3195/MUM/2003 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. 5 3. THE CIT(A) REJECTED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE TAKING LEGAL OBJECTION THAT NO NOTICE UNDER SECTIO N 143(2) WAS SERVED BEFORE MAKING THE ASSESSMENT. THIS GROUND WAS REJECTED BY THE CIT(A) NOTING THAT IN THE ORIGINAL ASSESSMENT NOTICES WERE ISSUED UNDE R SECTION 143(2) AND 142(1) AND THE PERSON ATTENDED FILED THE NECESSARY DETAILS. CONSIDERING THAT THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS H E HELD THAT IT CANNOT BE SAID THAT NOTICE UNDER SECTION 143(2) WAS NOT ISSUE D. HE REJECTED THE CONTENTIONS. ON MERITS HE HOWEVER SUSTAINED THE DI SALLOWANCE MADE IN THIS YEAR AS SIMILAR DISALLOWANCES MADE IN THE LATER YEA R WERE UPHELD BY THE CIT(A). THEREFORE CONSISTENT WITH THAT STAND THE C IT(A) CONFIRMED THE DISALLOWANCE MADE IN THIS YEAR. HOWEVER WHILE ADJU DICATING THE ADDITION IN A.Y. 1995-96 THE CIT(A) DIRECTED THE A.O. TO EXCLUD E THE AMOUNT OF ` 150.88 CRORES OFFERED AS INCOME IN THAT YEAR CONSEQUENT TO REIMBURSEMENT BY GOVERNMENT OF INDIA. 4. THE LEARNED COUNSEL RELIED ON VARIOUS CASE LAW ON T HE PROCEEDINGS UNDER SECTION 147 AND COMPLETION OF ASSESSMENT THER EON AS BAD IN LAW AS NO NOTICE UNDER SECTION 143(2) WAS ISSUED AND RELIE D ON VARIOUS JUDICIAL PRINCIPLES ESTABLISHED BY THE HIGH COURTS AND SUPRE ME COURT. ON MERITS IT WAS SUBMITTED THAT THE ITAT CONSIDERED THE ISSUE VI DE ORDER IN ITA NO. 1379 1380 AND 1381/MUM/1996 FOR ASSESSMENT YEARS 1 990-91 1991-92 AND 1992-93 WHEREIN THE AMOUNTS WERE DIRECTED TO BE ALLOWED IN THE RESPECTIVE YEARS. HE ALSO REFERRED TO THE ORDER U/S 254(2) PASSED IN ITA NO. 1381/MUM/1996 FOR A.Y. 1992-93 DATED 15.02.2007 WH ERE CONSEQUENT TO THAT ORDER THE AMOUNT WHICH WAS NOT ADJUDICATED WAS CONSIDERED AND THE LIABILITY OF ` 223.65 LAKHS FOR PAYMENT OF INTEREST WAS DIRECTED T O BE ALLOWED BY. IT IS THE SUBMISSION THAT ON MERITS THERE IS NO CASE FOR DISALLOWANCE. 5. DURING THE COURSE OF PROCEEDINGS THE LEARNED COUNSE L WAS ASKED TO FURNISH TOTAL CLAIMS DEBITED IN THE P & L ACCOUNT/C LAIM IN RESPECTIVE ASSESSMENT YEARS AND THE STATUS OF THE AMOUNT. THE DETAILS OF WHICH WERE FURNISHED AS UNDER: - ITA NO. 3195/MUM/2003 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. 6 6. HE ALSO FILED CONSEQUENTIAL ORDERS PASSED UNDER SEC TION 154 IN A.Y. 1995-96 WHEREIN CONSEQUENT TO ITAT DIRECTIONS AN AM OUNT OF ` 148.91 CRORES OUT OF THE TOTAL OF GROSS 150.88 CRORES BEIN G REIMBURSEMENT OF EXCHANGE LOSS WAS BROUGHT TO TAX. THIS ORDER WAS DA TED 07.05.2004. 7. WITH REFERENCE TO THE MERITS THE LEARNED D.R. ALSO FILED A LETTER DATED 24.06.2011 ADDRESSED BY THE A.O. WITH REFERENCE TO THE STATE OF ALLOWANCE OF VARIOUS CLAIMS IN RESPECTIVE ASSESSMENT YEARS. AS S EEN FROM THE ORDERS IN RESPECTIVE ASSESSMENT YEARS AND AS PER THE DIRECTIO NS OF THE ITAT IN THESE YEARS IT IS NOTICED THAT ASSESSEES CLAIMS WERE AL LOWED ON ACCRUAL BASIS IN THE RESPECTIVE ASSESSMENT YEARS AND WHEN THE ENTIRE EXCHANGE LOSS WAS REIMBURSED BY THE GOVERNMENT OF INDIA IN A.Y. 1995- 96 THE SAME WAS BROUGHT TO TAX IN THAT YEAR. THE RECONCILIATION FIL ED IS AS UNDER ASSESSMENT YEAR AMOUNT ( ` ) REMARKS EXCHANGE LOSS ON PRINCIPLE PORTION 1992-93 51 89 00 000 AS PER ORDER GIVING EFFECT 1993-94 90 80 75 000 AS PER ORDER GIVING EFFECT 1994-95 (4 07 92 000) AS PER ORDER GIVING EFFECT AMOUNT DEBITED TO P&L A/C. AMOUNT PAID INTEREST F.Y A.Y. FROM 1.4. TO 18.12 FROM 19.12 TO 31.3 TOTAL INTEREST EXCHANGE RATE TOTAL AMOUNT DATE OF PAYMENT AMOUNT CLAIMED AMOUNT ALLOWED AMOUNT DISALLOWED BY A.O. 1988-89 1989-90 407.24 407.10 407.10 407.10 19.12.89 407.10 470.1 0 1989-90 1990-91 1112 09 (1.4.89 TO 18.12.89) 442.24 (19.12. 89 TO 31.3.90) 1554.33 1554.33 1112.28 19.12.89 1554.33 1554.33 1990-91 1991-92 1124.92 (1.4.90 TO 18.12.90) 442.24 (19.12. 90 TO 31.3.91) 1657.16 1567.16 1124.92 442.60 805.59 16.10.91 19.12.91 16.10.91 & 19.12.91 2372.75 1567.16 805.59 1991-92 1992-93 1712.59 (1.4.91 TO 18.12.91) 807.72 (19.12. 91 TO 31.3.92) 2520.31 1029.24 3549.55 1712.59 807.72 223.65 19.12.91 19.12.92 19.12.91 2743.96 2520.31 223.65 1992-93 1993-94 1887.37 (1.4.92 TO 18.12.92 773.63 2661.00 2661.00 1895.63 773.63 19.12.92 16 12.93 2661.00 2661.00 1993-94 1994-95 1994.00 (1.4.93 TO 18.12.93 1994.00 1994.00 1994.96 16.12.93 1994.00 1994.00 TOTAL 10730.90 1029.24 11733.14 11733.14 10703.90 10 29.24 ITA NO. 3195/MUM/2003 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. 7 EXCHANGE LOSS ON INTEREST PORTION 1991-92 8 05 58 882 IN APPEAL ORIGINALLY ALLOWED 1992-93 2 23 64 954 ALLOWED BY ITAT TOTAL 148 91 06 836 TAXED IN AY 1995-96 8. ON THESE FACTS THERE IS NO CASE TO DISALLOW THE AMO UNT OF RS 805.59 LAKHS WHICH WAS ORIGINALLY ALLOWED IN ASSESSMENT PR OCEEDINGS AFTER DUE VERIFICATION. THE ISSUE WAS ALSO DECIDED IN FAVOUR OF ASSESSEE WHEN SIMILAR CLAIMS WERE DISALLOWED IN LATER YEARS AND WERE ALLO WED BY THE ITAT IN A.Y. 1992-93 WHEREIN IT WAS HELD THAT THE LIABILITY ACC RUED IN RESPECTIVE YEARS EVEN THOUGH THE QUANTIFICATION WAS MADE SUBSEQUENTL Y. WE DO NOT SEE ANY REASON TO DISALLOW THE CLAIM OF ` 805.59 LAKHS TOWARD EXCHANGE LOSS CLAIMED IN A.Y. 1991-92 ORIGINALLY AND WAS ALLOWED BY THE A .O. IN THE ORDER UNDER SECTION 143(3). SINCE THE BASIS FOR REOPENING WAS D ISALLOWANCE MADE IN SUBSEQUENT YEAR WHICH WAS NOT SUSTAINED BY THE APP ELLATE AUTHORITIES WE ARE OF THE OPINION THAT ON MERITS THERE IS NO CASE FOR DISALLOWANCE OF THE CLAIM ORIGINALLY ALLOWED. THEREFORE THE REASSESSMEN T ORDER PASSED BY THE A.O. DISALLOWING THE AMOUNT IS NOT CORRECT BOTH ON FACTS AND IN LAW. 9. ASSESSEES COUNSEL IN THE COURSE OF ARGUMENT RELIED ON VARIOUS JUDICIAL PRINCIPLES THAT THE REASSESSMENT WAS BAD I N LAW AS NOTICE UNDER SECTION 143(2) WAS NOT SERVED. IT WAS ALSO POINTED OUT THAT REFERENCE TO NOTICE SERVED UNDER SECTION 143(2) BY THE CIT(A) WA S WITH REFERENCE TO THE FIRST ASSESSMENT ORDER AND NOT IN THE PROCEEDINGS O F REASSESSMENT. THE VARIOUS CASE LAWS AND PRINCIPLES ESTABLISHED BY VAR IOUS JUDICIAL FORUMS WERE REITERATED TO SUPPORT THE CONTENTION THAT THE REASS ESSMENT ORDER PASSED IS BAD IN LAW. WE ARE OF THE OPINION THAT THERE IS NO NEED TO CONSIDER THESE LEGAL PRINCIPLES WHEN THE ISSUE IS VERY CLEAR ON FA CTS. SINCE THE CLAIM WAS AN ACCRUED LIABILITY TO THE ASSESSEE WHICH WAS EXAMIN ED AND ALLOWED BY THE A.O. IN THE ASSESSMENT UNDER SECTION 143(3) AND SUB SEQUENTLY THE ACTION OF THE A.O. IN THE LATER YEARS WAS NOT SUSTAINED AND A MOUNTS WERE ALLOWED WE ARE OF THE OPINION THAT THERE IS NO NEED TO CONSIDE R THE ISSUE ON LEGAL PRINCIPLES AS THE ORDER CANNOT BE SUSTAINED ON MERI TS ITSELF. THEREFORE WE DO ITA NO. 3195/MUM/2003 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. 8 NOT INTEND TO ADJUDICATE VARIOUS CASE LAW RELIED BY THE COUNSEL ON THE ISSUE OF JURISDICTION. SUFFICE TO SAY THAT THERE IS NO NE ED TO REOPEN THE ASSESSMENT UNDER SECTION 147 WHEN THE CLAIM OF INTEREST WAS MA DE IN THE ASSESSMENT PROCEEDINGS AND WAS ALLOWED AS PER THE FACTS AND LA W. CONSEQUENTLY THE ORDER PASSED UNDER SECTION 147 DATED 23.12.1997 IS HELD BAD IN LAW AND CONSEQUENTLY SET ASIDE. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 15 TH JULY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VII MUMBAI 4. THE CIT VII MUMBAI CITY 5. THE DR I BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.