2013 (9) TMI 405 - AT - Income Tax

Resassessment u/s 147 - Notice u/s 148 issued - Purchase advance or provisional purchase - Held that - In a situation when a notice u/s. 148 was admittedly issued within four years from the end of the relevant assessment year then in our opinion the scope of jurisdiction u/s. 148 is very wide. The Section 147 of IT Act prescribes that If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). The aforesaid provisions of Section 147 have been changed w.e.f. 1.4.1989 applicable from assessment year 1989-90. Majority of returns filed by the assessee are accepted as such. The assessment proceedings have, therefore, been simplified in such a situation if later on the AO has reason to believe that any income chargeable to tax has escaped assessment then he can re-compute the income by reopening the assessment. If the notice is within four years then under this new provision the power is much wider and can be exercised even if the assessee had disclosed fully and truly all material facts. However, in a case where four years, as prescribed, have expired then failure on the part of the assessee to disclose true facts is to be established by the Revenue - opinion has to be formed only by the AO, therefore, a re-assessment must be based upon the belief of the AO and not of the Commissioner. In the present case, there was a sufficient material in the knowledge of the AO and that material was based upon the accounts of the assessee already on record through which the AO had reason to believe that the impugned purchases expenditure had escaped the assessment. Facts of the case has also revealed that there was no opinion formed at the first round of assessment, therefore, there is no question of change of opinion - Decided against assessee. Business income - Inflated purchases - Held that - assessee s version was that the goods were received, however bills were not received till 31.03.2003. But contrary to this; vide an another reply dated December, 2008 vide paragraph 2.2 it was informed to the ITO, Ward 4(3), Ahmedabad that the goods were received after the year end and the entry was made on the strength of the purchase bills - Discrepancy should be removed and the correct facts should be brought on record. Hence, the assessee is hereby directed to place the evidence of actual dates of delivery of goods. The AO can demand for evidence such as transport bills etc. As far as the provisional booking of an expense is concerned the same is not admissible unless and until crystallized during the year. In that condition, the AO has to first ascertain that there should not be double deduction of such expenditure - AO has to examine the dates when the sales have been actually executed in respect of these purchases. Thus, in the result, this ground is hereby restored back to the AO for fresh adjudication - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act.
2. Legality of reassessment proceedings under Section 143(3) read with Section 147 of the Income Tax Act.
3. Addition of Rs. 16,48,348/- on account of alleged inflated purchases.
4. Deduction under Section 80IB on the enhanced income.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The assessee challenged the notice under Section 148 on several grounds, including the incorrect PAN and lack of prior sanction from the Joint Commissioner. The assessee also claimed that the reopening was due to a change of opinion, which was against the procedure laid down by the Hon'ble Supreme Court in the case of GKN Drivesheff India Ltd. The CIT(A) held that the assessee did not demonstrate that the issue of "Provisional Purchases" was examined during the original assessment. Therefore, there was no change of opinion, and the reopening was valid. The Tribunal agreed, noting that the notice was issued within four years, making the jurisdiction of the AO very wide. The Tribunal emphasized that the AO had "reason to believe" that income had escaped assessment, which justified the reopening.

2. Legality of Reassessment Proceedings:
The reassessment was challenged on the grounds that the original assessment under Section 143(3) was made after due application of mind by the AO. The Tribunal noted that the AO had sufficient material to believe that the impugned purchases expenditure had escaped assessment. The Tribunal also observed that the assessee did not provide evidence that the notice under Section 148 was issued without the sanction of the superior authority. The Tribunal concluded that the reopening of the assessment was valid and dismissed the grounds raised by the assessee.

3. Addition of Rs. 16,48,348/- on Account of Alleged Inflated Purchases:
The AO added Rs. 16,48,348/- to the income of the assessee, claiming that the purchases were inflated as the goods were not received by the assessee before the end of the financial year and were not included in the closing stock. The CIT(A) confirmed this addition, stating that the purchases should either be reflected in sales or in the closing stock inventory. The Tribunal found discrepancies in the assessee's statements regarding the receipt of goods and directed the AO to ascertain the actual dates of delivery of goods. The Tribunal restored this ground to the AO for fresh adjudication, emphasizing the need to ensure no double deduction of the expenditure.

4. Deduction Under Section 80IB on the Enhanced Income:
The assessee claimed that the deduction under Section 80IB should be allowed on the enhanced income. The Tribunal restored this ground to the AO to decide as per law after considering the nature of the addition and whether it qualifies for the said deduction. This ground was allowed for statistical purposes only.

Conclusion:
The appeal was partly allowed for statistical purposes, with the Tribunal directing the AO to re-examine the addition of Rs. 16,48,348/- and the deduction under Section 80IB. The validity of the notice under Section 148 and the legality of the reassessment proceedings were upheld.

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