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2014 (10) TMI 654 - AT - Income TaxReopening of assessment Computation of profits - Assessee submitted that the only reason recorded is that agricultural income reduced from the net profit is ₹ 81,47,859/- in place of ₹ 5,229 in normal computation Held that - The assessment was reopened on the reason that while computing business loss under the normal provisions of the Act, the assessee added back to the income as per P&L A/c., agricultural expenses amounting to ₹ 10,943/- and subtracted agricultural income of ₹ 5,228 - While making adjustments from the net profit, in order to arrive at book profit for the purpose of MAT, only those sums can be deducted which are credited to the P&L A/c - Since the assessee had credited only ₹ 5,228 under other income, this alone can be subtracted. The procedure for income that has escaped assessment under section 147 is contained in section 148 whereunder sub-section (2) makes it mandatory for the Assessing officer to record reasons before proceeding to issue notice - once assessment is reopened after recording reasons, the AO has to complete the income escaping assessment by following the provisions of the Act as if the return furnished against notice u/s. 148 as one filed u/s. 139 of the Act - as procedure to be followed is concerned, there is no difference between income escaping assessment and regular assessment because the provisions generally provide for issue of notice, hearing of the assessee and taking of evidence, etc., which are the same for regular assessment and income escaping assessment - Therefore, in the course of income escaping assessment, if it comes to the notice of the AO that any other item or items of income other than the item of escaped income for the assessment of which, assessment originally completed was reopened, also have escaped from original assessment, he is bound to assess such item or items of income also in the course of reassessment u/s. 147 - In view of the specific provision providing for assessment of other items of income that have escaped assessment, and that comes to the notice of the AO in the course of income escaping assessment, the reassessments made are valid Relying upon Commissioner of Income-tax Versus TBS Publishers and Distributors 2009 (11) TMI 406 - KERALA HIGH COURT - there is no infirmity in the order of the CIT(A) on this issue Decided against assessee. Computation of MAT - Provision of sales tax disallowed Whether the AO was entitled to disturb the net profit shown by the assessee in the profit and loss account prepared as per the Companies Act, 1956 - Held that - The assessee had contended that the AO was not entitled to make adjustments to book profit shown in the audited accounts - there is an option for the companies not to follow the accounting standards, if it feels so for any reason - Such deviation may have impact to the profit disclosed in the profit and loss account prepared in accordance with Part II and part III of Schedule VI of the Companies Act - Hence in order to enable anybody to understand the implication of such deviation, it was made mandatory for the companies to disclose the financial implications of such deviation - Such kind of deviations are acceptable under the Companies Act, however, they are not always acceptable to the income-tax authorities - Under the income-tax, the AO is entitled to examine the deviations, particularly when it has an impact on the book profit - There cannot be any dispute that it is the responsibility of the assessee to substantiate the legality of any item of expenditure/income found debited/credited in the profit and loss account by drawing support from any document or business practices or accounting requirements. Prior period charges/credits in P&L A/c Held that - The assessee had passed the entry for prior period credits/charges in the AY only to ensure that the final book profit (surplus) was to be reduced the intention of the assessee was very much apparent and glaring - the assessee also could not substantiate the claim with a legally tenable explanation - It was also not shown that the booking of such kind of entries are permitted under the accounting principles - the Assessing officer was entitled to adopt the net profit after suitable adjustment for the purpose of computing the book profit u/s. 115JB Decided against assessee. The assessee had continuously appeared before the assessing authority as well as before the CIT(A) and participated in all the re-assessment proceedings, answered all queries raised by the AO - even if there is any discrepancy in the format of the notice u/s. 143(2), i.e., non- adherence to some prescribed rule or mode of proceedings, it does not make the assessment orders null and void - Nullity is where there is a void act or an act having no legal force or validity the AO have followed the rule prescribed, has given adequate opportunity of hearing to the assessee and there is no failure to consider the various objections raised by the assessee in its letters, does not amount to nullity in law Decided against assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Re-opening of assessment under Section 148. 3. Disallowance of provision for sales tax under Section 115JB. 4. Validity of assessment passed under Section 147. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appellant (assessee) filed the appeal with a delay of 160 days. The assessee submitted a petition for condonation of delay, supported by an affidavit explaining the reasons for the delay. The delay was attributed to the late receipt of a relevant Supreme Court judgment. The Tribunal found the reasons for the delay to be bona fide and condoned the delay, admitting the appeal for adjudication. The respondent (Revenue) did not raise any serious objection to the condonation. 2. Re-opening of Assessment under Section 148: The first issue was the re-opening of the assessment. The assessee argued that the re-opening was based on the incorrect assumption that agricultural income was not credited to the Profit & Loss (P&L) account. The assessee contended that the correct computation of book profit should have included Rs. 81,47,859 as agricultural income, which was indeed credited to the P&L account. The Tribunal considered various judgments, including those from the Rajasthan High Court and the Calcutta High Court, which supported the assessee's stance that re-opening based on incorrect facts is invalid. However, the Tribunal concluded that under Section 147, once an assessment is reopened, the Assessing Officer (AO) can assess any other income that has escaped assessment, not just the income that led to the re-opening. Therefore, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the assessee's ground. 3. Disallowance of Provision for Sales Tax under Section 115JB: The next issue was the disallowance of the provision for sales tax amounting to Rs. 2,36,99,806. The AO disallowed this provision under normal computation as the liability had not been paid and was under appeal. The assessee argued that the provision was an ascertained liability and should be allowed under Section 115JB. The Tribunal analyzed the provisions of the Companies Act and relevant accounting standards, concluding that the provision made by the assessee was not an ascertained liability for the assessment year in question. The Tribunal upheld the AO's adjustment to the net profit for computing book profit under Section 115JB, dismissing the assessee's ground. 4. Validity of Assessment Passed under Section 147: The final issue was the validity of the assessment passed under Section 147. The assessee argued that the assessment was invalid due to the non-issuance of a notice under Section 143(2) after the return was filed on re-opening. The Tribunal noted that the assessee had participated in the re-assessment proceedings and responded to various queries from the AO. The Tribunal held that any discrepancy in the format of the notice under Section 143(2) does not render the assessment order null and void, as the assessee was given adequate opportunity to present its case. Consequently, the Tribunal dismissed this ground as well. Conclusion: The Tribunal dismissed the appeal filed by the assessee, upholding the CIT(A)'s order on all grounds. The judgment emphasized the importance of proper adherence to procedural requirements and the AO's authority to assess any escaped income once the assessment is reopened under Section 147.
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