2019 (10) TMI 1058 - AT - Income Tax

Validity of assessment proceedings u/s 147 - reopening undertaken on a mere change of opinion or audit objection raised by the internal auditors of the Department - not allowing the deduction claimed in respect of provision for EDM and advances written off - HELD THAT - Letter of the AO to the Director of Audit shows that the AO has not mechanically accepted the objection of the audited party and he has applied his mind and as per this letter, he was of the opinion that there is no escapement of income on this account. But this does not mean that any opinion framed at any point of time and intimated to the audit party is final and is binding on the AO. But notice u/s. 148 was issued by the AO on 28.02.2013 which is after more than one month from the date of this letter and in his period, the AO can come to a different conclusion after understanding the facts and therefore, because of this letter, it cannot be said that the reopening is not valid. Hence, we find no merit in this objection of the assessee and ground no. 2 of assessee s appeal regarding validity of reassessment is rejected. Deduction claimed in respect of provision for EDM and advances written off - The claim of the assessee is this that this amount of EMD has become bad in the present year and therefore, this write off should be allowed in the present year. Writing of bad debts is allowable on mere write off but in respect of write off of advances / deposits, the assessee has to establish that the same has become bad and it can be allowed in the year only in which it has become bad. In the present case it is stated by the AO that the assessee does not desire to be heard on the issue and the assessee has nothing to say and no evidence to furnish in connection with the amount of ₹ 3,50,76,954/- debited to P L account on account of provision for EMD deposits and advances. Hence it is seen that as per the assessment order, this is the case of the AO that the assessee has not furnished any detail. Regarding granting of opportunity to the assessee by the AO, it is seen that notice u/s. 142(1) was issued by the AO on 17.01.2014, date of hearing was fixed on 24.01.2014. It is noted by the AO that none appeared on that date and the assessment order was passed on 31.01.2014 without granting any further opportunity to the assessee and when some details were furnished before the CIT(A), it is noted by him that these are additional evidences and the same is not admissible under Rule 46A as the assessee has deliberately chosen to not comply with the notice u/s. 148 and did not file any details or submission before the AO. Under these facts we feel it proper to restore back this matter to the file of CIT(A) for fresh decision after admitting the evidences which the assessee may like to bring on record. We order accordingly. We set aside the order of CIT(A) on this issue on merit and restore the matter back to his file for fresh decision after allowing sufficient opportunity to both sides and if the AO or assessee brings any additional evidence on record, the same should be admitted and examined and thereafter, necessary order should be passed as per law by CIT(A). Grounds are allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of the order passed by the CIT(A) under section 250 of the Income-tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) under section 147 of the Act.
3. Disallowance of deduction claimed in respect of provision for EMD and advances written off.
4. Treatment of written submissions as 'additional evidence' by the CIT(A).

Issue-Wise Detailed Analysis:

1. Validity of the CIT(A) Order:
The assessee contended that the order passed by the CIT(A) under section 250 of the Income-tax Act, 1961, is "bad in law and is liable to be quashed." However, this ground was considered general and not specifically argued further by the assessee.

2. Jurisdiction of the AO under Section 147:
The CIT(A) upheld the AO's jurisdiction under section 147, referencing the Hon’ble Delhi High Court's judgment in Mega Corporation Ltd. This judgment states that an assessee cannot question the jurisdiction of an AO after one month from receiving a notice under sections 142(1) or 143(2) or after the completion of assessment, whichever is earlier. The assessee did not comply with the notice under section 148, nor did it seek reasons for reopening or file objections. The Tribunal found no infirmity in the CIT(A)'s decision, noting that the assessee failed to follow the prescribed procedure as per the Hon’ble Apex Court's judgment in GKN Driveshafts (India) Ltd. vs. ITO. The Tribunal also examined and dismissed the applicability of the judgments cited by the assessee, including Andhra Bank Ltd. Vs. CIT and GMR Holdings (P.) Ltd. Vs. DCIT, as the facts differed from the present case. Consequently, the assessee's objection regarding the validity of reassessment was rejected.

3. Disallowance of Deduction for Provision for EMD and Advances Written Off:
The CIT(A) did not admit the documents presented by the assessee as additional evidence under Rule 46A, stating that the assessee had deliberately chosen not to comply with the notice under section 148 and did not file any details or submissions before the AO. The Tribunal noted that the AO had issued a notice under section 142(1) on 17.01.2014, with a hearing date of 24.01.2014, but no further opportunity was granted before passing the assessment order on 31.01.2014. Given that the CIT(A) also did not admit the additional evidence, the Tribunal decided, in the interest of justice, to restore the matter to the CIT(A) for fresh decision after admitting the evidences. This issue was thus allowed for statistical purposes, and the Tribunal did not comment on the merit of the issue.

4. Treatment of Written Submissions as 'Additional Evidence':
The CIT(A) treated the written submissions made before the AO during appellate proceedings as 'additional evidence' and did not admit them under Rule 46A. The Tribunal found this treatment to be procedurally flawed, as the assessee was not given sufficient opportunity to present its case. The matter was restored to the CIT(A) for fresh consideration, allowing the assessee to submit additional evidence and for the CIT(A) to pass a new order after examining the evidence.

Conclusion:
The appeal filed by the assessee was partly allowed for statistical purposes. The Tribunal upheld the validity of the AO's jurisdiction under section 147 but restored the issues regarding the disallowance of deduction for provision for EMD and advances written off and the treatment of additional evidence to the CIT(A) for fresh decision.