2016 (2) TMI 462

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....ed in holding that the reassessment was valid for the reasons for reopening given by the ld. AO were untenable as in the original assessment u/s.143(3) completed on 12.11.2001, the entire disallowance u/s.43B as per the Special Audit Report was made. 2.3. The ld. CIT(A) had grossly mistaken in concluding that the observation of the Hon'ble ITAT in their order in ITA No.70/Mds/2004 in respect of the Block Assessment can be taken as directions in respect of disallowance u/s.43B, thus extending the jurisdiction u/s.150 of the ITACT, 1961. 3.1 The ld. CIT(A) grossly erred in confirming the disallowance of Rs. 7,02,87,355/- u/s.43B in respect of interest. 3.2. The ld. CIT(A) failed to appreciate that the addition of Rs. 7,02,87,355/- could not be made in the impugned reassessment after having rightly observed in Para8, Page 9 of his order that in the original assessment u/s.143(3) made on 12.11.2001, the then AO had full audited details of the interest unpaid from the Special Audit Report u/s.142(2A) dated 20.09.2001 resulting therein the disallowance of Rs. 13,29,74,324/- u/s.43B. 4. The ld. CIT(A) further grossly erred in stating that the legal cont....

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....e ground that such additions cannot be made in the block assessment. 4.1 The assessee preferred a rectification petition u/s 154 on 29.12.2011 after receiving from the AO the copy of the original assessment order dt 12.11.2001 passed u/s 143(3) requesting that the issue of disallowance of interest u/s 43B cannot be considered again in the impugned assessment reopened u/s 148 as in the original assessment the issue was considered and that the said assessment has reached finality. Therefore there is mistake in again considering the issue u/s 43B for addition in the impugned assessment. In his communication dated *06.01.2012 (which is also in appeal) the AO has refused to consider the plea for rectification stating that, "in the normal assessment order though the AO arrived at a loss after taking into account the disallowance u/s. 43B, he concluded and estimated the income at Rs. 3,00,000, i.e., the loss arrived was ignored. Therefore, the question on disallowance u/s 43B which is already been considered in the normal assessment order is not correct". 5. On appeal, the CIT(Appeals) observed that it is not in dispute that the regular assessment u/s 143(3) was earlier made in this....

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.... the CIT(Appeals), the AO has correctly reopened the assessment by issuing a notice u/s 148 and, therefore, he dismissed this ground of appeal. Further, keeping in view of the findings of the Special Audit Report as well as the assessee could not distinguish the addition made u/s 43B at Rs. 7.02 crores being unpaid interest has already been taken care in the interest disallowed u/s 43B in the original assessment order passed u/s 143(3) on 12.11.2001, the CIT(Appeals) that the Assessing Officer has correctly reopened the assessment proceedings u/s.148 following the observations of the Tribunal and accordingly made the addition at Rs. 7.02 crores in the reopening assessment u/s 43B. Thus the contention of the AR of the assessee cannot be accepted in toto for reopening the assessment as well as addition made on account of unpaid interest u/s 43B at Rs. 7.02 crores. In this regard, the CIT(Appeals) observed that since the Assessing Officer has already rejected the rectification application filed before him, the same cannot be adjudicated again afresh keeping in view of the observation made regarding the reopening of the assessment as well as confirming the addition made u/s 43B at Rs. ....

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....ime even at the point of time when the order which became subject matter of the appeal, revision etc., was passed, resort cannot be made to sub-sec.(1) of sec.150. 7. An example may make the position clear. Supposing for the assessment year 1999-2000 the AO includes an item of income which on appeal is held to relate to the assessment year 1998-99. This finding on appeal can be utilized to reopen the assessment for the assessment year 1998-99 without any time limit by virtue of the provisions of sec.150(1), the reason being that had the AO been aware even when he completed the assessment for the assessment year 1999-2000 that the income was assessable in the assessment year 1998-99, he would and could have included the income in that assessment year itself. This in turn postulates that an assessment or reassessment for the assessment year 1998-99 would have been permissible at the point of time when the assessment order for the assessment year 1999-2000 was passed. That is the reason why sub-sec.(2) of sec.150 provides that the enlargement of time provided in subsec.(1) will not be available where, even on the date when the assessment was completed, an assessment or reassessment....

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....t matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the recomputation may be taken. In the very nature of things, such other provision limiting the time for issue of notice u/s.149 has to be reckoned with only on the date on which the assessment order for the block assessment was passed, which was on 30.5.2001 respectively. The AO could have issued notice u/s.148 within the time limit as provided by sec.149(1)(b)(iii) of the Act as stood on 30.5.2001. Therefore, this contention of the ld. AR cannot be accepted. The AO is very well within the time limit to issue notice u/s.148 of the Act for the AY 1998-99 as on the date of block assessment order dated 30.5.2001. Since there is a decision of the Tribunal in the block assessment that the addition u/s.43B cannot be made in the block assessment, in view of the provisions of sec.150(2) of the Act, the extended time is available to issue notice u/s.148 for the AY 1998-99. Thus, notice for reopening of assessment issued on 31.3.2011 for the assessment year 1998-99 as the block assessment passed on 28.12.2006 was justified. Reading of sec.150(2) shows that such reopening of ....

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....2) in justification of the order of the single Judge is misplaced for the reason that the above provision is not applicable to the case on hand." Thus, in our opinion, when by an order of the Tribunal, the income is excluded from the total income of the assessee for the block assessment, then the assessment of such income for the assessment year 1998-99 shall be deemed to be one made in consequence of, or to give effect to any finding or direction in that order (in appeal) for the purpose of lifting the ban of limitation under Explanation 2 to sec.153(3). Reliance is placed on the following judgments : (i) Kamlapath Motilal vs. CIT (SC) 193 ITR 338 (ii) Mahadeo Prasad Rais (Decd. By LRs.) vs. ITO (SC) 192 ITR 402 (iii) Ashwani Dhingra v. CCIT (All.) 141 Taxman 651). In view of the above, in our opinion, the provisions of sec.150(1) are applicable. Thus, ground of the assessee in its appeal is dismissed. 11. Regarding the merit of addition, the contention of the assessee is that the assessee's income has been computed at Rs. 3 lakhs and there was no disallowance u/s.43B at Rs. 7,02,87,355/- and as such, this amount cannot be considered for additio....