TaxTMI 
TaxTMI 
2008 (1) TMI 525
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....additional ground is as regards to purely legal issue and the facts are clearly emerging from within the assessment records. He argued that, no new facts are necessary for adjudication of this issue and this additional ground goes to the very root of the matter. He briefly stated the facts, that the original return of income was filed by the assessee on 31st Oct., 1991 and the assessment was completed under s. 143(3) by the AO vide his order dt. 7th Feb., 1994. The assessment was subsequently reopened by issuance of notice under s. 148 of the Act dt. 9th March, 1998. The assessee vide its letter dt. 31st March, 1998 objected to the reopening of the assessment. He argued that this reopening was done only to add the export price variation reserve on the following counts: Value of difference of import to be done for Export already performed (profit) Rs. 2,32,412 Value of imported material used in local manufacture for which export is to be made (loss) Rs. 9,66,000  ....
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....ly argued for admission of additional ground in the given facts and circumstances. 6. On the other hand, learned Departmental Representative Shri H. Patidar argued, that this issue was never raised before the AO or before the CIT(A). Hence, the assessee is not entitled to raise this additional ground as regards to jurisdiction. He argued that the assessment was correctly reopened by the AO, in view of the audit objection raised by the audit party of AG. He argued that major revenue audit objection was raised and accordingly CIT, Baroda directed the AO to take remedial action under s. 147, which has been approved by CIT, Baroda. He argued that assessee's case falls under Expln. 1 to s. 147 of the Act, which says that merely production of books of accounts or other evidences before the AO from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of proviso to s. 147 of the Act. He argued against the admission of additional ground. 7. We have heard the rival contentions, gone through the relevant documents. facts and circumstances of the case. As regards to the admissibility of additional gro....
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....pportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under s. 254 only to decide the grounds which arise from the order of the CIT(A). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. Answering this question the Hon'ble apex Court held as under: "The view that the Tr....
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....n (1967) 66 ITR 722 (SC) has held that the additions were made to the income disclosed in the accounts and, further, two cash credits of Rs. 19,796 and Rs. 32,700 were added as income from other sources. In appeals, the assessee contested only the additions to book profits and not those from other sources. On the case being remanded by the High Court to the Tribunal, the assessee raised the plea that the cash credits should be held to be redundant in view of additions to the book profits because the book profit additions exceeded the amount of the cash credits. It was held that the Tribunal was correct in permitting the assessee to raise the new ground in having deleted the cash credits. And finally the Hon'ble apex Court has given the finding at p. 724 last para which reads as under: "In hearing an appeal the Tribunal may give leave to the assessee to urge grounds not set forth in the memorandum of appeal, and in deciding the appeal the Tribunal is not restricted to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal. The Tribunal was, therefore, competent to allow the assessees to raise the contention relating to the cash credits which was not m....
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.... of the AO in the course of the proceedings may be reopened for the purpose of reassessment. In this case, the issue has been considered and dealt with at length by the then AO and it is submitted that no new facts have come to light after finalising the assessment to justify the reopening of the assessment. In this connection, we have to draw your attention to our letter dt. 9th Dec., 1993 to the then AO (a copy of which is enclosed), where the issue regarding the allowance or otherwise of the reserve has been discussed. Vide our letter dt. 6th Jan., 1994, copies of all the bills for the purchases made for the subsequent year have been furnished to the then AO, after giving a careful thought to the submissions made and also the evidences placed before him, he considered the various issues and has accepted the submissions. In light of these facts, withdrawal of the deduction of Rs. 7,33,388 already allowed would be a change of opinion and it is submitted that any disallowance would be without foundation and bad in law." 12. Further, it is seen that during the course of original assessment proceedings, assessee vide letter dt. 9th Dec., 1993, has filed complete details before ....
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....----------------------------------------------------------- P.N.C.B 4,0610 39.50 28.28 11.22 51,724 ----------------------------------------------------------------- A/Anhy 2,892 38.00 26.28 11.72 33,894 ----------------------------------------------------------------- Aerosil 880 300.00 152.62 147.38 1,29,694 ----------------------------------------------------------------- The prices of the imports have been taken on the basis of actual imports as under: P.N.C.B. May, 1991 A/Anhy July, 1991 Aerosil Sept., 1991 Sod. Nitrate June, 1991 (B) Value ....
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....AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso." 14. The proviso to s. 147 very clearly states that where assessment under s. 143(3) has been completed then no action shall be taken under s. 147 after the expiry of four years from the end of the relevant assessment year, unless income chargeable to tax has escaped assessment for the reason of the failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. Hon'ble apex Court in CIT vs. Foramer France (2003) 185 CTR (SC) 512 : (2003) 264 ITR 566 (SC) affirmed the decision of Hon'ble Allahabad High Court in Foramer vs. CIT (2001) 166 CTR (All) 129 : (2001) 247 ITR 436 (All), where the Hon'ble Allahabad High Court has held as under: "In our opinion, we have to see the law prevailing on the date of issue of the notice under s. 148, i.e., 20th Nov., 1998. Admittedly, by that date, the new s. 147 has come into force and, hence, in our opinion, it is the new s. 147 which will apply to the facts of the ....
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....r of the first appellate authority while recording reasons under s. 147 he could have said even in the original order of assessment because such appellate order was before him at that time. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the AO to initiate proceedings under s. 147. 16. In the present case also, the AO has enquired about value of price variation of liability of medicines to be exported and the export particulars adopted or not, on actual basis. The assessee vide letter dt. 9th Dec., 1993 has already replied exhaustively and relevant reply as reproduced in para 12 at pp. 10 and 11 of this order. Even the AO while issuing show-cause notice has very clearly mentioned in the show-cause notice dt. 16th March, 1998. The AO has allowed deduction on account of provision for price variation in raw material for export. In show-cause notice, it was stated that working out this liability the export market price adopted was not on actual basis but was adopted on estimated basis. Accordingly, it was an undisputed loss of price variation and therefore liability was contingent in nature and not allowable in the asst. yr. 1991-92. The assessee ....