Reassessment on same record, bad debt write-off, and consequential interest recomputation in a bank tax dispute.

Reassessment under section 147(b) is said to require fresh and legally relevant information, a belief based on that information, and a nexus with escapement of income; a mere reappraisal of the same record amounts to change of opinion and is invalid. The note also states that a bank's bad debt deduction is allowable when advances are identified as irrecoverable, written off through the accounting process, and supported by the bank's commercial review and records. It further explains that interest under section 139(8) must be recomputed consequentially when the principal additions are deleted or substantially reduced, so the original interest charge cannot stand unchanged.

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Issues: (i) Whether the reassessment could validly be reopened under section 147(b) on the basis of the same material already on record without fresh information; (ii) Whether the assessee-bank was entitled to deduction for bad debts claimed as written off in the accounts; (iii) Whether the levy of interest under section 139(8) survived after the allowance of the major substantive claims.

Issue (i): Whether the reassessment could validly be reopened under section 147(b) on the basis of the same material already on record without fresh information.

Analysis: Reopening required information in possession of the Income-tax Officer, formation of belief, and a nexus between that information and escapement of income. On the facts, no fresh external information was shown and the reasons recorded did not disclose any real new material. The reopening was founded on a reappraisal of the same record and amounted to a change of opinion. The recorded reasons also failed to demonstrate compliance with the statutory requirement of reasons preceding notice.

Conclusion: The reassessment was invalid and the reopening was held to be bad in law, in favour of the assessee.

Issue (ii): Whether the assessee-bank was entitled to deduction for bad debts claimed as written off in the accounts.

Analysis: The bank followed a structured system of annual review, scrutiny by management and auditors, and identification of irrecoverable advances. The amounts were written off through the bank's accounting process and the claim was supported by the business practice of banking institutions and the materials filed with the assessment return. A mere provision cannot be equated with a disallowable claim where the debts are quantified as bad and irrecoverable and are written off in the manner adopted by the bank. The authorities below had not pointed to clear and cogent material showing that the decision to write off was erroneous.

Conclusion: The bad debt deduction was allowable and the disallowance was set aside, in favour of the assessee.

Issue (iii): Whether the levy of interest under section 139(8) survived after the allowance of the major substantive claims.

Analysis: The dispute on interest depended on the returned income and the additions sustained. Once the principal additions were deleted or materially reduced, the interest computation required consequential recomputation in accordance with law.

Conclusion: The interest charge did not survive in its original form and required fresh consequential action, in favour of the assessee.

Final Conclusion: The reassessment was annulled, the bad debt claim was allowed, and the matter concerning interest was left only for consequential recomputation, resulting in a partial allowance of the appeals.

Ratio Decidendi: Reassessment cannot be sustained under the provision for escaped assessment unless it is founded on fresh information or a legally relevant material change, and a bank's bad debt claim is allowable when the debt is identified as irrecoverable, written off in the accounts, and supported by the commercial and accounting process adopted in the banking business.

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