TaxTMI 
TaxTMI 
2018 (7) TMI 362
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....nst the returned loss of Rs. 2,83,67,849/-. Subsequently reassessment proceedings were initiated u/s 148 of the Act on the ground that as per the 3CD Report annexed to the tax audit report, the assessee had prior period income of Rs. 6,11,69,969/-. The AO was of the opinion that as the assessee company was following mercantile system of accounting, this prior period income should have been added back to the income of the assessee. Accordingly, notice for reopening was issued and, thereafter, after taking into account the submissions of the assessee, the re-assessment was completed at an income of Rs. 5,97,81,407/- after making addition of the prior period income of Rs. 6,11,69,969/-. 2.1 Aggrieved, the assessee approached to Ld. CIT (A) and challenged the re-assessment proceedings by challenging the validity of the re-assessment proceedings and also by challenging the addition on merits. The Ld. CIT (A) dismissed the assessee legal ground challenging the validity of reassessment proceedings but deleted the addition on merits. Now, the department is before the ITAT and is challenging the deletion of addition by the Ld. CIT (A) whereas the assessee, through the CO, is challenging ....
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....ould be taken up first. It was further submitted that if the assessee succeeds in its CO then the appeal of the department will become in fructuous. The Ld. Sr. DR had no objection to the request of the Ld. Authorized Representative. 4. The Ld. Authorised Representative submitted that the details of the prior period income of Rs. 6,11,69,969/- as well as related expenses of Rs. 57,70,528/- were dully reflected in the tax audit report attached with the return of income and, therefore, this information was already before the AO at the time of the original assessment proceedings. It was also submitted that the prior period income of Rs. 6,11,69,969/- included an amount of Rs. 5,69,80,980/- pertaining to deferred sales tax loan written back on the Net Present Value (NPV) and this fact was duly disclosed in the audited balance sheet for the year under consideration vide Note no. 20 under Schedule 19. Further, our attention was drawn to pages 31 and 32 of the paper book wherein this note had been reproduced. It was further submitted that this prior period income of Rs. 5,69,80,980/- pertaining to deferred sales tax loan was credited to the Profit & Loss A/c under the head 'Prior Perio....
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....val submission and have also perused the material on record. We have gone through the reasons recorded for the initiation of re-assessment proceedings and the same are reproduced below for a ready reference :- "Assessment in this case was completed under section 143(3) at loss of Rs. 13,88,560/-. The scrutiny of assessment records revealed that as per 3CD report assessee had prior period income of Rs. 6,11,69,969/-. As the assessee company was following mercantile system of accounting, prior period income of Rs. 6,11,69,969/- should have been added back to the income fo th assessee. The mistake resulted in under assessment income of Rs. 5,97,81,409/- and incorrect carry forward loss of Rs. 13,88,560/- involving tax effect of Rs. 2,72,30,210/-. In view of the above, I have reasons to believe that the income of Rs. 6,11,69,969/- chargeable to tax has escaped assessment within the meaning of section 147/148 of the Income Tax Act, 1961." 6.1 A perusal of the reasons, as reproduced in the preceding paragraph, shows that the only reason for initiating the reassessment proceedings was the opinion of the AO that the prior period income of Rs. 6,11,69,969/- should have been adde....
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....ior period income so as to warrant initiation of reassessment proceedings in the case of the assessee. We hold that the reassessment was based on a mere change of opinion by the AO which, under law, he was not entitled to do. Admittedly, the reopening is within 4 years, however, the issue is squarely covered in favour of the assessee by the judgment of the Hon'ble Apex Court in the case of CIT vs. Kelvinator of India Ltd. reported in 320 ITR 561 (SC). The relevant observations of the Hon'ble Apex Court are as under:- "On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1 st April, 1989, power to re-open is much wider. However, one needs to....