2016 (7) TMI 668 - AT - Income Tax

Reopening of assessment - Undisclosed investment made in purchase of colour and chemical - Held that - The information has been gathered from the record held with the department which were submitted by assessee only during regular course of assessment proceedings u/s 143(3) r.w.s. 153A of the Act and they were very much available before the ld. Assessing Officer who has thereafter framed the assessment order. Certainly there was no failure on the part of the assessee company to disclose fully and truly all the material facts necessary for assessment and as there being no new or fresh material before the Assessing Officer, mere change of opinion cannot form the basis of reopening the assessment. Therefore, appeal of the department can be dismissed on this ground. With the help of rule 27 of ITAT Rules, respondent can raise an argument qua an issue which has been decided against him in the impugned order. The respondent may not get further positive relief. For example the ld. CIT(A) has decided certain additions against the assessee and assessee did not file appeal against confirmation of those additions, meaning thereby that those issues have become final. They cannot be deleted by quashing the assessment order on the ground of reopening. In other words revenue cannot be put in more disadvantageous situation except dismissal of its appeal. In the appeal of revenue, respondent assessee can not get positive relief. He can only get the appeal dismissed on the ground that CIT(A) has erred in appreciating the issue of re-opening. On merits also we are of the view that ld. CIT(A) has rightly observed that the difference between purchase figures as per audited financial statements and as per consolidated monthly details furnished by assessee during assessment proceedings, pertained only to the adjustment of cenvat credit, discount on purchases, adjustment on account of octroi and paid on purchases and all these adjustments were duly given effect in the books of account maintained by assessee and there is no other evidence brought on record by the ld. Assessing Officer to prove that there was any unaccounted purchases. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of notice issued under Section 148 of the IT Act and reassessment proceedings under Section 143(3) r.w.s. 147.
2. Addition of ?47,59,796/- towards unaccounted purchases of color chemicals.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued Under Section 148 and Reassessment Proceedings:

The assessee challenged the issuance of notice under Section 148 of the IT Act and the validity of the reassessment proceedings under Section 143(3) r.w.s. 147. The original assessment was completed on 29.12.2006, and the reassessment notice was issued on 28.8.2009, after the expiry of four years from the end of the relevant assessment year. The assessee argued that the reopening was based on an erroneous understanding of the data submitted during the original assessment and that there was no new material evidence indicating concealed income. The Tribunal observed that the information for reopening was derived from the records already available with the department during the original assessment proceedings. There was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Hence, mere change of opinion cannot form the basis for reopening the assessment. Accordingly, the Tribunal held that the reassessment proceedings were invalid and dismissed the appeal of the department on this ground.

2. Addition of ?47,59,796/- Towards Unaccounted Purchases:

The Assessing Officer (AO) observed a discrepancy between the month-wise details of purchases of color chemicals (?3,34,33,991/-) and the audited accounts (?2,86,74,195/-), resulting in a difference of ?47,59,796/-, which was considered unaccounted purchases. The assessee provided a reconciliation statement explaining that the difference was due to adjustments for CENVAT credit, discounts, octroi, and freight, all accounted for in the regular books. The CIT(A) deleted the addition, noting that the reconciliation statement contained all details passed through the regular books of account, and there were no unaccounted purchases. The Tribunal upheld the CIT(A)'s decision, agreeing that the difference pertained to legitimate adjustments and that there was no evidence of unaccounted purchases. The Tribunal supported the CIT(A)'s observation that both the purchase figures and the adjustments were duly accounted for in the books, and the AO failed to provide evidence to the contrary.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the addition of ?47,59,796/- towards unaccounted purchases and ruling that the reassessment proceedings were invalid due to the absence of new material evidence and the mere change of opinion by the AO. The reassessment notice issued under Section 148 was deemed invalid, and the addition based on the alleged unaccounted purchases was not justified.