2008 (1) TMI 284 - HC - Income Tax

Court rules against reopening assessment for scrap revenue, citing lack of valid reasons.

The court ruled in favor of the petitioners, holding that there were no valid reasons to justify the reopening of the assessment for the years 1977-78 and ... Reopening of assessment on ground that assessee not disclosed profits from scrap –all material facts disclosed truly– tribunal has accepted the manner in which the scrap generated was disposed of & accepted the material of accounts when the scrap was finally sold – when AO made assessment u/s 143(3), it was already in knowledge of him that stock register of scrap was not maintained – hence there is no reason warranting the reopening of concluded assessment Issues:Challenging notices for reopening assessment for 1977-78 and 1978-79 based on scrap generation and non-disclosure of profits.Analysis:1. Reopening of Assessment: The petitioners challenged the notices issued under Section 148 for reopening the assessment for the years 1977-78 and 1978-79. The reasons for reassessment included the significant quantity and value of brass and plastic scrap generated in the manufacturing process, leading to the suspicion of profit suppression through non-disclosure of scrap sales. The petitioners argued that their accounting method for scrap revenue, i.e., showing it when finally sold, was accepted by the ITAT. They also cited previous judgments where similar issues did not warrant reopening of assessments. The court noted that the Assessing Officer had all relevant material during the original assessment, and the mere presence of scrap was not sufficient reason for reassessment.2. Respondent's Contentions: The respondents relied on a statement indicating attempts to sell scrap and show bogus purchases, but the court emphasized that the issue of scrap generation was known to the Assessing Officer during the initial assessment. The court referenced previous judgments where the ITAT accepted the disposal of scrap and highlighted that the stock register for scrap was not maintained, although this information was available during the original assessment under Section 143(3) of the Income Tax Act.3. Conclusion: The court concluded that there were no valid reasons to warrant the reopening of the concluded assessment. Citing previous judgments and the availability of information to the Assessing Officer during the original assessment, the court allowed the petition and quashed the notice served under Section 148. The interim relief granted since 1990 was also noted. The ruling made the petition absolute in favor of the petitioners, with no order as to costs.