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2014 (8) TMI 864 - AT - Income TaxReopening of assessment u/s 147 Held that - In the absence of any earlier assessment by assessing officer u/s 143(3) it cannot be held that assessing officer exercised any opinion on the facts of the case as the return of the assessee was simply processed u/s 143(1) - the belief of the AO for reopening of the assessment is on the basis of new and independent information i.e. return and record and scrutiny assessment verification for the next year i.e. A.Y. 2007-08 it could not be held that the reassessment is by way of change of opinion or there was no new material - the validity of reassessment proceedings is upheld Decided against Assessee. Entitlement to loss on revaluation of the closing stock Held that - As per the proper method of accounting the assessee will always prepare separate list of items in respect of obsolete, non moving shortages, damaged goods, unserviceable inventories and thereafter a consolidation will be prepared - This is minimum, which could have been done by the assessee to justify its claim, in the absence of even minimum details of reduction in the value of stock, the assessee s burden to justify the decrease, revaluation of the stock is not discharged - the claim of revaluation of stock was not subject to any accepted commercial accounting standard or practices but was left to the sole discretion of the management to claim it as and when it liked - a claim which is not substantiated by proper documentation cannot be allowed to the assessee Decided against Assessee. Entitlement for deduction on previous year s sale discount Salary and rent disallowed u/s 40(a)(ia) - Held that - The contention of the assessee is accepted that assessee has produced no evidence or convincing argument to come to a view that the liability for discount of earlier years sales crystallized in this year - In the absence of discharge of such a burden to prove crystallization of liability there was no infirmity in the order of CIT(A) - the law mandates the expenditure should be allowed in the year in which it is allowable in accordance with law subject to the prescribed payment Decided against assessee. Imposition of penalty u/s 271(1)(c) Held that - The books of accounts which were rejected by the AO have been upheld to be proper by CIT(A), a finding which is not challenged by the revenue - any inference drawn by AO on the basis of falsehood or unreliability of the books of A/Cs has no significance in the penalty proceedings - every confirmation of quantum addition cannot result in imposition of concealment penalty - upholding of books of A/Cs of the assessee C.A having certified the damage of the goods by flood though with a rider that the claim will be made depending on the management decision - the damage in the flood cannot be rejected out rightly or held to be a false claim. Claim of discount on earlier year sale Held that - The assessee failed to demonstrate that the factum of actual crystallization of liability in this year, the disallowance has been sustained as pertains to earlier year - had the assessee claimed the amount in preceding year in all fairness it would have been allowed - The year of allowability may be a relevant factor in deciding the quantum appeal, but it cannot be a decisive factor to impose concealment penalty - when the assessee disclosed all the particulars along with the return of income - the relevant particulars were filed with the return, further information was given in assessment proceedings, assessee s books of A/Cs have been upheld to be correct following the decision in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - assessee have filed all the relevant details along with the return of income, the penalty imposed on the assessee is deleted Decided in favour of Assessee.
Issues Involved:
1. Validity of proceedings under Section 147. 2. Entitlement to loss on revaluation of closing stock. 3. Entitlement to deduction as discount on sales. 4. Disallowance of salary and rent under Section 40(1)(ia). 5. Deduction of bad debts under Section 36(1)(vii) or as business loss under Section 28. 6. Imposition of penalty under Section 271(1)(c). Detailed Analysis: 1. Validity of Proceedings under Section 147: The assessee contested the reopening of the case under Section 147, arguing that the assessment was reopened based only on the figures of the return filed by the assessee, without any new information or material. The CIT(A) upheld the reopening, noting that the AO had recorded reasons for reopening based on the assessee's failure to add back a provision for bad and doubtful debts in its computation of income. The Tribunal upheld the validity of the reassessment proceedings, agreeing with the CIT(A) that the reopening was based on new information from the subsequent year's records and not merely a change of opinion. 2. Entitlement to Loss on Revaluation of Closing Stock: The assessee claimed a loss on revaluation of closing stock due to damage from floods. The AO rejected the books of account, citing insufficient evidence of the damage and discrepancies in the valuation of inventories. The CIT(A) partially upheld the AO's decision, disallowing the loss on revaluation of stock but allowing other claims. The Tribunal agreed with the CIT(A), noting that the assessee failed to provide detailed evidence of the damage and revaluation, and upheld the disallowance of the loss. 3. Entitlement to Deduction as Discount on Sales: The assessee claimed a deduction for discounts given on previous year's sales. The AO disallowed the deduction, and the CIT(A) upheld the disallowance, stating that the expense did not pertain to the relevant assessment year. The Tribunal agreed with the CIT(A), finding no evidence that the liability for the discount crystallized in the current year and upheld the disallowance. 4. Disallowance of Salary and Rent under Section 40(1)(ia): The AO disallowed salary and rent expenses under Section 40(1)(ia) due to non-deduction of TDS. The CIT(A) upheld the disallowance. The Tribunal dismissed the assessee's appeal on this issue but noted that the expenses should be allowed in the year the TDS is paid, as per the law. 5. Deduction of Bad Debts under Section 36(1)(vii) or as Business Loss under Section 28: The assessee withdrew this ground before the CIT(A), and the CIT(A) dismissed it as withdrawn. The Tribunal noted that the assessee conceded this ground and upheld the CIT(A)'s decision. 6. Imposition of Penalty under Section 271(1)(c): The AO imposed a penalty under Section 271(1)(c) based on the disallowances made in the assessment order. The CIT(A) upheld the penalty for the disallowance of the revaluation of stock and discount on previous year's sales but deleted the penalty for other disallowances. The Tribunal deleted the penalty, noting that the assessee had disclosed all relevant details in the return of income and during the assessment proceedings. The Tribunal relied on the Supreme Court's judgment in the case of Reliance Petroproducts, which held that disallowance of a claim does not automatically lead to concealment or furnishing of inaccurate particulars. Conclusion: The Tribunal upheld the validity of the reassessment proceedings and the disallowances made by the AO and CIT(A) for the revaluation of closing stock and discount on previous year's sales. However, it deleted the penalty imposed under Section 271(1)(c), finding that the assessee had disclosed all relevant details and there was no concealment or furnishing of inaccurate particulars.
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