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        <h1>Tribunal quashes reassessment order under Income Tax Act, citing impermissible change of opinion</h1> <h3>EPC Industries Ltd. Versus ACIT OSD 10 (1), Mumbai</h3> EPC Industries Ltd. Versus ACIT OSD 10 (1), Mumbai - TMI Issues Involved:1. Legality of the reassessment proceedings initiated under Section 147 read with Section 148 of the Income Tax Act.2. Taxability of the loan amount waived by the bank under Section 41(1) read with Section 28(iv) of the Income Tax Act.Detailed Analysis:1. Legality of the Reassessment Proceedings:The assessee challenged the order of the CIT (Appeals) confirming the action of the assessing officer in initiating reassessment proceedings and framing assessment by invoking the provisions of Section 147 read with Section 148 of the Income Tax Act. The assessee argued that the reopening of assessment under Section 147 was bad in law as all necessary details were furnished during the original assessment proceedings, and there were no new tangible materials suggesting escapement of income. The reassessment was claimed to be a mere change of opinion by the assessing officer.The Tribunal noted that the original assessment was completed under Section 143(3) after considering the assessee's detailed submissions regarding the waiver of the principal loan amount by the bank. The reassessment was initiated based on the same set of facts already available on record, without any new information or tangible material. The Tribunal referred to several judicial precedents, including the Supreme Court's decision in CIT Vs. Kelvinator of India Ltd. [(2010) 320 ITR 561 (SC)], which held that reassessment based on a mere change of opinion is not permissible.The Tribunal concluded that the reassessment proceedings were initiated merely due to a change of opinion by the assessing officer, which is not allowed under the law. Therefore, the reassessment made under Section 143(3) read with Section 147 was held to be bad in law, and the reassessment order was quashed.2. Taxability of the Loan Amount Waived by the Bank:On merits, the assessee challenged the addition made by the assessing officer in treating the loan amount of Rs. 30,07,71,569/- waived by the bank as income under Section 41(1) read with Section 28(iv) of the Income Tax Act. The assessee argued that the principal amount waived by the bank on a one-time settlement was not taxable under these provisions.The Tribunal noted that the assessee, engaged in the business of manufacturing HDPE pipes, fittings, and sprinkler systems, had incurred significant losses and was declared a sick company by the BIFR. The revival scheme approved by the BIFR included a one-time settlement with banks and debenture holders, where the principal amount was settled at a reduced value. The assessee offered the waived interest for tax under Section 41(1) but claimed that the principal amount waiver was not taxable.The Tribunal observed that the loans were utilized for acquiring fixed assets, and courts have held that such amounts do not result in revenue receipts. The Tribunal referred to various judicial precedents supporting this view, including CIT v/s Tosha International Ltd. [176 taxman 187 (Del)] and Mahindra and Mahindra Ltd. v/s CIT [261 ITR 501 (Bom)].However, since the Tribunal had already quashed the reassessment proceedings on the grounds of illegality, it did not delve into the merits of the case further, stating that it would be academic at this stage. The grounds on merit were kept open.Conclusion:The appeal of the assessee was partly allowed, with the reassessment order being quashed on the grounds of being bad in law due to a mere change of opinion by the assessing officer. The Tribunal did not address the merits of the case, leaving those grounds open for future consideration.

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