Reopening of Assessment for Bad Debts Deduction – SLP Dismissed for Delay and Lack of Merit

Reopening of Assessment for Bad Debts Deduction – SLP Dismissed for Delay and Lack of Merit

Summary in Key Points:

• Issue: Whether the Supreme Court should entertain a Special Leave Petition (SLP) filed by the revenue department challenging the High Court’s decision to quash the reopening of an assessment related to the deduction for bad debts claimed by a bank under Section 36(1)(viia) of the Income-tax Act, 1961.
• Facts: The assessee-bank claimed a deduction for bad debts. The AO reopened the assessment based on a Supreme Court ruling in another case (Catholic Syrian Bank Ltd.). However, the High Court quashed the reopening, noting that the AO had already examined the issue during the original assessment and was satisfied with the assessee’s explanation. The revenue department filed an SLP against the High Court’s order with a delay of 162 days.
• Decision: The Supreme Court dismissed the SLP, both on the grounds of delay and lack of merit.

Analysis:

The Supreme Court dismissed the SLP filed by the revenue department. The court highlighted the following:

• Delay in Filing SLP: The SLP was filed with a significant delay of 162 days, which was not satisfactorily explained by the revenue department.
• No Merit in SLP: Even if the delay was condoned, the SLP lacked merit. The High Court’s decision was based on the fact that the AO had already examined the issue during the original assessment and was satisfied with the assessee’s explanation. Therefore, the reopening was considered a mere change of opinion, which is not a valid ground for reassessment.

Important Note: This case demonstrates that the Supreme Court will not interfere with High Court decisions unless there are compelling reasons to do so. The court’s dismissal of the SLP due to delay and lack of merit underscores the importance of timely action and the need for strong grounds to challenge a High Court’s decision. This case also reiterates the principle that reopening an assessment merely based on a change of opinion is not permissible under the Income-tax Act, 1961.