BUSINESS INDIA Vs. JOINT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These two writ petitions challenge the two separate notices dated March 23, 2005, issued under section 148 of the Income-tax Act, 1961 ("the Act"), seeking to reopen the assessment for the assessment years 1998-99 and 1999-2000, respectively. The counsel are agreed that the facts and the issues arising for consideration in both the petitions are identical. Therefore, for the sake of convenience, we shall refer to the facts in Writ Petition No. 1360 of 2006 before considering the issues involved in this group of petitions.

(2.) The petitioner filed its return of income for the assessment years 1998-99 on November 2, 1998, disclosing a loss of Rs. 4.98 lakhs. On March 30, 2001, the Assessing Officer passed an order under section 143(3) of the Act determining the petitioner's income at Rs. 47.11 lakhs. In the course of the assessment, the Assessing Officer held that the interest paid on borrowings was a business expenditure to be allowed as a revenue expenditure. On the above basis, interest to the extent of Rs. 10.31 crores paid on borrowings was allowed as expenditure to determine the petitioner's income at Rs. 47.11 lakhs.

(3.) On March 23, 2005, the impugned notice seeking to reopen the assessment year for the year 1998-99 was issued. The reasons in support of the impugned notice as furnished to the petitioner read as under: