TaxTMI 
TaxTMI 
2017 (3) TMI 1226
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....s taken by the A.O. due to failure on part of the assessee to disclose truly and fully all material facts for making the assessment? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in allowing the compensation of Rs. 6.50 crores holding that the same was an ascertained liability, without appreciating the fact that the same was only a provision and allowing a provision from the income of the assessee will give a distorted picture of the Profit & Loss account of the assessee? The appellant prays that the order of the Ld. CIT(A) be set aside on the grounds mentioned above and that of the A.O. be restored. The appellant craves leave to add, amend or alter all or any of the grounds of appeal". 2. During the course of hearing, it was argued by the Ld. DR that assessee had claimed in the profit & loss account an aggregate amount of Rs. 6.50 crore on account of compensation payable to various parties. Since, the amount of compensation payable was not at all crystalized, therefore, the reopening was done to examine the correctness of the claim and disallowance was made, since the claim was found to be not correct in the reassessment proceeding....
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....ovision made in the accounts is remained Lobe added back to the total income. In view of the above facts, I have reason to believe that income of Rs. 6,50,00,000/-chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961." 6. With the assistance of the parties, it was noted by us that assessee had placed before AO during the course of original proceedings, details about amount of compensation debited in the profit & loss account for aggregate amount of Rs. 6.50 crores. The assessee had submitted party wise details, giving justification for allowability of compensation with respect to each party which was shown in subsequent year. The amount of compensation was paid as and when settled by the Civil Courts and the amount not paid was written back as part of other income. It is noted that no fresh tangible material has come into possession of the Assessing Officer, before recording the aforesaid reasons for doubting the allowability of impugned amount of claim Ld. AO has made reference of the same documents which were held on record of the Assessing Officer, for example, para 15(A) of scheduled 13 to the notes forming part of the balanc....
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....seems to be to protect those cases where the proper information was not provided by the assessee during the course of original assessment proceedings or it was provided in such a manner which was not possible to be examined by the AO in the peculiar facts and circumstances of a particular case. It may also provide protection in those cases where the issue was not examined at all by the AO as there was no occasion with the AO to examine the issue under consideration. However, in the case before us, the impugned issue was examined by the AO in view of the query asked by him and the same was properly replied with proper details and thereafter only original assessment u/s 143(3) was passed accepting the impugned claim. Thus, in our considered opinion, the AO does not have the shield of Explanation 1 of section 147 to justify the reopening which has been done without there being any fresh tangible material in the possession of the AO. 9. We find that Ld. CIT(A) has rightly quashed the reopening done by the AO by observing as under:- "I have circumspected the entire spectrum of the facts and'- circumstances of the case and have also considered carefully the finding of the Assessing....
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.... Officer is not justified nor is maintainable in view of amended provision of law u/s.147 of the I.T. Act, 1961 and CBDT Circular No549 dt.31.10.2009. Thus the of the appellant is found acceptable. It is important to note that statement notice has been issued for virtually same reason for which rectification proceedings had been initiated but dropped. Assessing Officer has not received any new material thereafter, hence such notice cannot be held as valid vide decision of Hon'ble Kolkata High Court in the case Berger Paints India Ltd vs ACIT (2010) 322 ITR 369, 381 (Kolkata). Further, I find that there is no allegations recorded in the notice u/s.148 by the Assessing Officer that appellant had failed to make full and true disclosure of the relevant facts. Since, initiation of proceeding is based on change of opinion or by reviewing the original order, such notice cannot be held validly issued vide decision of Hon'ble Jurisdictional High Court in the case of Arthur Anderson & Company vs. ACIT (2010) 324 ITR 240, 246 (Bom). Also reference may be had of D.T. & T.D.C. Ltd. vs. ACIT (2010) 324 ITR 234, 239 (Delhi). Further, the Hon'ble Supreme Court has disapproved such ac....
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....certain on consideration of all relevant circumstances the amount of tax chargeable to a given taxpayer. The word 'assessment' would mean the ascertainment of the amount of taxable income and of the tax payable thereon In other words, where there is not of the amount of taxable income and the tax payable thereon, it can never be said that such income merely because during the assessment proceedings the relevant material was on record or could a diligence discerned by the AC for the purpose of assessing a particular item of income chargeable to tax, it cannot be inferred that the AO must necessarily have deliberated over it he had formed any opinion in respect thereof. If looking back it appears to the AO, (within (our years of the end of the relevant assessment year) that a particular item even though reflected on the record was not subjected to assessment and was left out while working out the taxable income and the tax payable thereon, i.e. while making the final assessment order, that would enable him to initiate the proceedings irrespective of the question of non-disclosure of material facts by the assessee. We are, with respect, unable to subscribe to the aforementio....
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....ount of wrong notion of contingent liability. It is very evident from the details submitted by the appellant by letter dt.27.10.2010 that such liabilities were not a general liability but were having specific background of dispute between assesse and the purchasing parties and service provider. With a view to make it more evident it seems necessary to briefly highlight the facts of the compensation so that there would not he any sort of ambiguity or lack of clarity. The amount of claim of compensation of Rs. 6,50,00,000/- comprises of Rs. 4 Crores related to dispute with Macedon Indo Austrian Ventures Pvt. Ltd., Rs. 2.02 crores related to Western Railway Mumbai and Rs. 49.50 lacs related to Shivangi Crafts Kashipur. It can be seen from Page No.41 of the paper book and from the complaint No.CA51/2000 of 1999-2000 that appellant has supplied machines which was having manufacturing defects, hence, production was not coming out properly and therefore thereafter dispute aroused with the assessee hence that Austrian Company had filed this complaint before Monopolies. Trade Practices Commission New Delhi. Considering the treatment appellant has made necessary provision. And thereafter has....