2012 (8) TMI 115 - AT - Income Tax

Validity of notice issued u/s 148 by the Assessing Officer Held that - Original assessment u/s 143(3) was completed on 05.12.2006. Thereafter, the AO noted reasons which according to him led to under-assessment of income - it was recorded that the aforesaid income has escaped assessment - notice u/s 148 was issued on 24.10.2007 - notice has been issued and served within a period of four years from the end of relevant assessment year. Therefore, proviso to section 147 is not applicable - details in respect of all these points were not on the record of the AO - it has to be seen in this case whether the disclosure was made properly in the course of assessment so that AO could compute the income correctly - This will necessitate the examination of various grounds for reopening. Regarding provision for milk can repairs - excess allowance of brought forward loss shows that income has escaped assessment - this amount was not offered for taxation. No reason was adduced before the AO in support thereof - evidence pertains to provision in respect of milk can repair, advance to staff and the subsidy of Rs.5.00 lakh received by the assessee - evidence was in possession of the assessee even at the time of assessment - matter restored to the file of the AO as these require examination of additional evidence - appeal is treated as partly allowed for statistical purposes.

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act.
2. Addition of Rs. 18,08,312/- as provision for milk can repair.
3. Addition of Rs. 62,614/- as provision for bad and doubtful debts.
4. Non-allowance of set off of carried forward loss of Rs. 11,97,120/-.
5. Addition of Rs. 5,00,000/- as grant-in-aid received by Bhiwani branch.

Detailed Analysis:

1. Validity of Notice Issued Under Section 148:
The assessee contended that the CIT(A) erred in confirming the issuance of notice under Section 148. The CIT(A) dismissed this ground as not pressed since no submission was made by the assessee. The AO issued the notice after recording reasons that included provision for milk can repairs, provision for bad and doubtful debts, incorrect set off of brought forward loss, and grant-in-aid. The Tribunal considered the case of CIT Vs. Kelvinator of India Ltd., which held that reassessment must be based on "reason to believe" and not a mere change of opinion. However, the Tribunal also considered the decision in Honda Siel Power Products Ltd., which stated that mere production of books does not preclude the AO from reopening the assessment. The Tribunal concluded that the AO was justified in reopening the assessment as the facts were not available on record, and the decision in Honda Siel Power Products Ltd. was applicable.

2. Addition of Rs. 18,08,312/- as Provision for Milk Can Repair:
The assessee argued that the provision for milk can repair was already shown as income in the financial year 2004-05. The Tribunal noted that the corresponding ledger account was filed as additional evidence and was not available before the AO. The Tribunal admitted the additional evidence and restored the issue to the file of the AO for fresh examination.

3. Addition of Rs. 62,614/- as Provision for Bad and Doubtful Debts:
The assessee contended that the provision for bad and doubtful debts was an old outstanding balance for more than ten years. The Tribunal observed that the ledger account for administrative expenses was also additional evidence. The Tribunal admitted this additional evidence and restored the issue to the AO for fresh examination.

4. Non-Allowance of Set Off of Carried Forward Loss of Rs. 11,97,120/-:
The assessee argued that the CIT(A) erred in not allowing the set off of carried forward loss. The Tribunal noted that the excess allowance of brought forward loss constituted escapement of income as per Explanation 2 to Section 147. The Tribunal directed the AO to allow the set off of the carry forward loss as determined in the assessments of earlier years and as per law, thus dismissing this ground.

5. Addition of Rs. 5,00,000/- as Grant-in-Aid Received by Bhiwani Branch:
The assessee claimed that the grant-in-aid was already shown as income in the financial year 2005-06. The Tribunal noted that the evidence regarding the grant-in-aid was also additional evidence. The Tribunal admitted this additional evidence and restored the issue to the AO for fresh examination.

Conclusion:
The Tribunal condoned the delay in filing the appeal due to the illness of the assessee's counsel. It admitted additional evidence for issues related to provision for milk can repair, provision for bad and doubtful debts, and grant-in-aid. These issues were restored to the AO for fresh examination. The Tribunal directed the AO to allow the set off of the carry forward loss as per law, thus dismissing this ground. The appeal was partly allowed for statistical purposes.

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