2017 (7) TMI 693 - AT - Income Tax

Tribunal upholds deletion of customer advances addition & validity of Section 148 notice for income reassessment.

The Tribunal upheld the deletion of an addition on advances received from customers transmitted to the supplier, emphasizing that the tax levy was under ... Real income - Addition on account of advances received from customers which have been transmitted to the supplier - final judgement from the courts were pending - Held that:- It is seen that the amount received from customers is because of recovery made as tax by Coal companies from the assessee, which is shown as advance in the books of accounts, as the matter is under dispute by the assessee against coal suppliers. The assessee has also paid this amount to coal companies, who in turn showing it as advances in their books of accounts. If revenue wants to tax this amount in the hands of the assessee, then, the assessee be allowed deduction on account taxes paid to coal companies. If the Courts decides the issue in favour of the assessee, then the assessee would have to return this amount to customers. This being so, there is no real income in the hands of the assessee. In view of this matter, we find that the finding of Ld. CIT (A) as correct , therefore, no interference is called for. Accordingly, this grounds of appeal of revenue is dismissed. Reopening of assessment - reasons to believe - Held that:- The assessee has recovered an amount of ₹ 78,82,705/- from SSI units and paid to WCL on account of GSTV and same has been shown under the head advance received from customers , hence, there was prima-facie case of reason to believe that income chargeable to tax has escaped assessment. Further reliance placed in the case of Raymond Woolen Mills Ltd. vs. ITO [1997 (12) TMI 12 - SUPREME Court] wherein it was observed that in determining whether commencement of proceedings u/s 147(a) was valid, what was to be seen was only the prima facie material; the sufficiency or correctness of the material was not a thing to be considered at that stage. Reopening of the assessment of the preceding year on the basis of information obtained in the subsequent year's proceedings regarding undervaluation of inventories resulting in under- statement of profits was held valid under section 147(a). In the case of Kalaynji Mabji & Cop. V. CIT (1975 (12) TMI 2 - SUPREME Court) it was held that reassessment can be initiated even if information may be obtained from record of original assessment. - Decided against revenue Issues:Appeal against deletion of addition on advances received from customers transmitted to supplier, Challenge to notice under section 148 for reopening assessment.Analysis:1. Deletion of Addition on Advances Received:The case involved an appeal by the Revenue and a cross objection by the assessee against the order of the CIT(A) regarding the deletion of an addition of Rs. 78,82,705 on advances received from customers transmitted to the supplier. The assessee, a government undertaking, had recovered this amount from SSI units and paid it to a coal company on account of GSTV. The tax levied by the coal companies was under dispute and pending in court. The AO added this amount to the total income, but the CIT(A) deleted the addition. The CIT(A) noted that the tax levy was unconstitutional and pending in court, and the assessee had not claimed it as expenditure in the Profit & Loss Account. The Tribunal upheld the CIT(A)'s decision, emphasizing that if the revenue wanted to tax this amount, corresponding deduction should be allowed against the payments made, resulting in no real income for the assessee.2. Challenge to Notice under Section 148 for Reopening Assessment:The assessee challenged the notice under section 148 for reopening the assessment, arguing that all material was disclosed in the audited balance sheet and accounts, making the reopening unjustified. The Tribunal considered this issue even though the revenue's appeal was dismissed. The notice was issued within four years from the end of the relevant assessment year, meeting the conditions for issuance under section 148. The Tribunal cited legal precedents to support the validity of the notice, emphasizing that the reason to believe income had escaped assessment was sufficient justification for the reopening. The Tribunal rejected the assessee's challenge to the notice, upholding the reopening of the assessment as per the law.In conclusion, the Tribunal dismissed the appeal of the Revenue and the cross-objection of the assessee, affirming the deletion of the addition on advances received and upholding the validity of the notice for reopening the assessment.