TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 690
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.... well as the audited balance-sheet. The case was selected for scrutiny assessment, and notice under section 142 (2) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for sake of brevity) was issued on 19.06.2006 calling for various details. The details were supplied by the petitioner by letter dated 7.7.2006. Assessment order was passed under section 143(3) of the Act on 21.12.2006 . After passage of five years, the respondent Assessing Officer exercised his powers under section 147 read with section 148 and issued the impugned notice. The petitioner filed its objections on 24.06.2011. The respondent rejected the same on 24.11.2011. 2.1 While issuing notice in the petition, this Court by an interim order directed the Assessing Officer not to pass final assessment order without permission of the Court, however, allowed the Assessing Officer to proceed with the assessment. It appeared that before the said interim order could be served, the respondent passed order of assessment under section 147 read with section 143(3) on 23.12.2011. By way of amendment, the petitioner incorporated those facts in the memorandum of petition. 3. The power to reopen the assessment may ....
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....sion did not result in underassessment of income, because even if the alternative method of accounting was followed, it would not have resulted into any change of the total income. In support of that learned advocate relied on decisions in CIT Vs. Mahavir Aluminum Ltd. [297 ITR 77 (Delhi HC)] and in CIT Vs. Mahalaxmi Glass Works Pvt. Ltd. [318 ITR 116 (Bombay HC)] submitting further that Mahavir Aluminum (supra) was confirmed by the Apex Court and the SLP was dismissed. Learned advocate submitted that when all the facts were made available and there was no failure on part of the assessee to disclose fully the material facts, the conditions of the First Proviso to section 147 were not satisfied and assumption of jurisdiction under section 148 by the officer was not permissible in law. 4.2 On behalf of the respondent, learned advocate Mr. Manav Mehta submitted that the Assessing Officer during verification of the records found that the assessee was following mercantile system of accounting. On examination of the break-up of loans and advances given in the balance sheet, it was noticed that the assessee at the end of previous year ended on 31.03.2004 had to his credit unutilized CENV....
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.... the prescribed from. They were certified by the Chartered Accountant. 5.2 Secondly, in the statement of particulars furnished under section 44AB of the Act in Form No. 3CD, it was inter-alia mentioned in Part-B as under. 12. (a) Method of valuation of closing stock employed in the previous year. (b) Details of deviation, if any, from the method of valuation prescribed under section 145A, and the effect thereof on the profit and loss. Closing stock of Yarn has been valued at cost, Stock of Grey & Dyed has been valued at cost. As per Annexure "A" memorandum A/c 5.3 In the next, the memorandum of adjustment to be made under section 145A, which was also a part of the audit report, reflected the details of the CENVAT credit availed and utilized on raw material consumed, as under. CENVAT Credit Availed end Utilised on Raw Material consumed Excise Duty on Opening Stock 13,41,103 Excise Duty on Purchase Cost of Raw Material 49,18,667 Total : 62,59,770 Less : Excise Duty on Closing Stock 9,29,875 Total : 53,29,895 5.4 Furthermore, before passing the....
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....e necessary for his assessment. Therefore, on this count alone the action would fail to sustain. The ultimate yardstick to judge whether the reopening of assessment is on germane grounds permissible in law, is the reasons recorded by the Assessing Officer. 6.2 As already seen, only aspect mentioned in the reasons recorded is about the requirement of inclusion or non-inclusion of cenvet /modvat credit in closing stock. . The Assessing Officer stated in his reasons inter alia that on perusal of break up the loans and advances in the balance-sheet, it was found that the assessee had at the end of previous year a particular amount of cenvet credit not utilised and that the assessee had not credited the said amount to the profit & loss account. In this regard, the issue could be judged and the inferences could be drawn by the Assessing Officer from the details of the closing stock valuation. As noted above, such details about the closing stock, purchase and sales were disclosed by the assessee not only in the audited accounts, but also in response to a specific query subsequently raised by the assessing officer in his letter dated 19.06.2006 seeking details on the methods of accounts, ....
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....h the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income-tax Officer must on information at his disposal believe that income has been underassessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief may not be based on mere suspicion : it must be founded upon information." 7. The above reasons render the impugned action on part of the respondent to be bad in law. However, the crux of the matter may now be seen. What is reasoned by the Assessing Officer is that since the assessee followed the exclusive method of accounting, the amount of unutilised cenvet credit ought to have been credited in the profit & loss account and the non crediting thereof resulted into uderassessment of income. He referred to sec. 5(1) and sec. 145A of the Act. It could be successfully demonstrated by learned advocate for the petitioner that even if the petitioner had followed alternative method of accounting, namely the mercantile system, it would not have entailed any change in the profit amount. The assessee explained the same in his objections to the reopening thus &....