TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 681
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....7 and restricting deduction u/s 80HHC to Rs. 40,19,504 in place of Rs. 53,73,917 as claimed by assessee. Subsequently, assessment in case of assessee was reopened by issuance of notice u/s 148 dated 31/03/2009. In pursuance to the notice issued u/s 148, assessee though filed return of income declaring income as disclosed in the original return, but, at the same time, assessee raised objection for reopening of assessment. AO, however, noted that assessee has claimed deduction of Rs. 973.80 lakhs in the P&L account for the year ended 31/03/06 under the head 'prior period and exceptional items. AO was of the view that as the expenditure so claimed, do not relate to the current AY, they are not deductible from the income of the assessment year under dispute. Accordingly, AO completed assessment u/s 143(3) read with section 147 vide order dated 30/12/2010 by disallowing prior period expenditure of Rs. 20,03,39,000, as a result of which total income was determined at Rs. 6,38,77,991. Being aggrieved of the assessment order so passed, assessee preferred appeal before ld. CIT(A). 3. In course of hearing of appeal before ld. CIT(A), assessee relying upon various judicial precedents, submit....
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....e grounds because the assessment itself stands annulled. 5.8 Since the reopening of the assessment itself is bad in law, therefore, the reopened proceedings are held ab initio void. The reassessment is legally invalid. The other grounds of appeal are therefore not being adjudicated upon." 4. The learned DR submitted before us that ld. CIT(A) was not justified in holding the assessment order to be invalid on the ground that AO has reopened assessment on the basis of audit objection. He submitted that reasons recorded clearly show that AO after applying his mind has formed an opinion that income assessable has escaped assessment. Accordingly, reopening was made. He further submitted that the objection raised by audit party constitutes information and AO can reopen the assessment on the basis of such information provided. He applies his mind independently while forming belief that there is escapement of income. In support of such contention, learned DR relied upon the following decisions: 1. Consolidated Photo & Finvest Lgd. Vs. ACIT, [2006] 281 ITR 394 (Del.) 2. Som Datt Builders P. Ltd. Vs. DCIT, [2006]280 ITR 229 (AT). 5. The learned DR on the other hand strongly supporting th....
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....ught forward losses of Rs. 2,91,96,5711- and after allowing deduction u/s 80HHC of Rs. 40, 19,5041- income has been determined at NIL. During review, it is noted that the assessee has claimed a deduction of Rs. 973.80 Lakhs in the Profit & Loss A/c for the year ended on 31.03.2006 under the head 'Prior Period & Exceptional items' (Net of tax). The deduction of Rs. 973.80 Lakhs has been worked out as follows as given in Notes NO.8 at page 55 of Annual Report. (A) Prior Period Items: (Rs. in Lakhs) a)Reduction of income from advance licenses 1078.85 b)Restatement of opening finished goods, raw materials &WIP 518.29 c) Excise duty in valuation of raw material inventory, consequent to (a) above 94.2 7 d) Restatement of opening stock of finished goods and WIP due to refinement in absorption and allocation of certain overheads cost (34.46) e)Provision for Sales Commission 94.75 f)Provision for Doubtful Debts 277.52 Total 2029.22 B. Exceptional Items - Income from out of court settlement (669.42) C.Deferred tax credit thereon (386.00) Total (973.80)" 6.1 As can be seen from the reasons recorded, assessment has been reopened on the allegation that assessee h....
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....x Laws (Amendment) Acts, 1987 and 1989. After the amendment, the AO has to have reason to believe that income has escaped assessment, but this does not imply that the AO can reopen an assessment on mere change of opinion. The concept of 'change of opinion' must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the AO has power to reopen an assessment, provided there is 'tangible material' to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief." 6.2 The full bench of the Hon'ble Delhi High Court in case of Usha International Ltd., after taking note of a number of decisions of the Hon'ble Supreme Court as well as different High Courts including decision of CIT Vs. Kelvinator India (supra) held as under: "39. In view of the above observations we must add one caveat. There may be cases where the Assessing Officer does not and may not raise any written query but still the Assessing Officer in the first round/ original proceedings may have examined the subject matter, claim etc, because the aspect or question may be too apparent and obvious. To hold that the assessing o....