1989 (4) TMI 110

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....in the foreign exchange rates, the assessee incurred a bigger liability to the extent of Rs. 17,87,993. In the original assessment in view of the assessee's past record this amount was allowed as a deduction on revenue account. After the completion of the original assessment, the Madras High Court decision in CIT v. South India Viscose Ltd. [1979] 120 ITR 451 came to the Income-tax Officer's notice. In that case the Madras High Court held that further liability arising on account of payment of instalments towards the cost of plant and machinery was on capital account and not fit for deduction on revenue account. The Income-tax Officer treated it as fresh information and reopened the case under section 147(b). He ultimately completed the rea....

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....of income on the basis of that information. He submitted that what was required was just a nexus between the information and the belief to be formed. He cited also the Supreme Court decision in A.N. Lakshman Shenoy v. ITO [1958] 34 ITR 275 and ultimately relied on the observations of the Calcutta High Court decision in Bharati (P.) Ltd. v. ITO [1977] 106 ITR 992. He ultimately submitted that the sufficiency of the reasons is not justifiable and what is required is that the view taken by the Income-tax Officer in regard to the escapement of income should be one of the possible reasonable views. On merits, he submitted that the Special Bench decision of the Tribunal in Poysha Industrial Co. Ltd. v. ITO [1983] 4 ITD 41 (Bom.) was in favour of ....

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....ctuation in the foreign exchange rates would be on capital account if the instalments are payable in foreign exchange in respect of acquisition of plant and machinery. The Commissioner of Income-tax (Appeals) has distinguished that case by holding that in the assessee's case plant and machinery was not acquired on instalment basis but loan was taken in foreign exchange from other sources and the instalments were payable towards repayment of that loan. May be, the Commissioner (Appeals) was right in pointing out that distinction but the issue before us is whether in spite of that distinction, the Income-tax Officer was justified in holding a belief that in assessee's case also the additional liability on account of fluctuation in the foreign....

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....e account. The point is that once the Madras High Court decision is available which constitutes information, it is not necessary that that information should be absolutely foolproof or absolutely perfect. What we have to decide is whether it was information and whether it could have led to the existence of belief of the escapement of income. Our reply is in affirmative on this point and we reverse the order of the Commissioner (Appeals). We hold that the re-opening under section 147(b) was valid and justified. 6. In para 9 of the order of the Commissioner (Appeals) has recorded as follows : "9. It may be noted that since the assessment is being cancelled for the reasons stated above, I am not dealing with the other grounds of appeal raise....