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2023 (10) TMI 127 - AT - Income TaxReopening of assessment u/s 147 - Reasons to believe - Additions u/s 41(1) towards written back of liabilities - capital or revenue in nature - assessee submitted that there is no whisper in the reasons recorded by the AO about failure on the part of the assessee to disclose truly and fully, all material facts necessary for the assessment rendering reassessment proceedings invalid - HELD THAT - From the perusal of the records, it is evident that no where assessee has made a request before the Ld. AO for the supply of reasons to believe. We note that the same are recorded on the order sheet of the assessment proceedings and on the same order sheets, the authorised representative of the assessee is a signatory to various entries made therein. AO in the impugned assessment order has recorded the fact of intimation about the reason of reopening to assessee in the course of assessment. Even in the written submission placed before us, what the assessee is challenging that reasons were not provided before the commencement of reopening proceeding though they were furnished in the course of reassessment proceeding because of which assessee was denied the opportunity to raise objection for reopening. We find that claim of the assessee is not in accordance with the procedural mandate given in the case of GKN. Driveshaft 2002 (11) TMI 7 - SUPREME COURT and, therefore, has no legs to stand. It is a fact that original return was processed u/s. 143(1) of the Act. There was no scrutiny assessment u/s. 143(3) of the Act. In respect of claim of the assessee that there is no allegation recorded by the Ld. AO of failure on the part of the assessee about the full and true disclosure of all material facts necessary for assessment, we find that this condition is stipulated in first proviso to section 147 wherein requirement of assessment u/s. 143(3) is a pre-condition to record such an allegation by the Ld. AO, if an action is sought to be taken up under this section after the expiry of four years from the end of the relevant assessment year. Thus, even this contention of the ld. Counsel of the assessee fails. Additions u/s 41(1) towards written back of liabilities - capital or revenue in nature - Keeping the above judgment of MAHINDRA AND MAHINDRA LTD. THRG. M.D. 2018 (5) TMI 358 - SUPREME COURT in the context of facts of the present case before us, it is not discernible from the records and details furnished by the assessee that the liabilities written back were receipts in the nature of cash or money or are towards trading liability for which deduction has been claimed in earlier years as well as status of deduction towards interest thereon. What the assessee has placed on record are the ledger accounts which is not adequate to ascertain their nature so as to bring them within the ambit of the judgment of Hon ble Supreme Court referred above. CIT(A) had also called for the details but assessee did not respond to the same. However, in the interest of justice and fair play, we find it proper to afford an opportunity to the assessee to substantiate its claim of exemption in respect of write back of its liabilities by adducing all the relevant documentary evidence and explanation, for which we remit the matter back to the file of ld. AO in this respect. Ld. AO is directed to verify the evidence and explanation furnished by the assessee, keeping in perspective, the aforesaid judgment of the Hon ble Supreme Court and allow the claim in accordance with the provisions of law. Assessee be given reasonable opportunity of being heard who is also directed to be diligent in complying with the requirements before the ld. AO for its effective disposal. Appeal of the assessee is partly allowed for statistical purposes.
Issues Involved:
1. Legality of notice issued under Section 148 of the Income Tax Act, 1961. 2. Jurisdiction of the Assessing Officer in reopening proceedings under Section 147 of the Income Tax Act, 1961. 3. Addition made for cessation of liability amounting to Rs. 35,73,027/-. 4. Findings regarding interest paid. Summary: 1. Legality of Notice Issued Under Section 148: The assessee challenged the legality of the notice issued under Section 148, arguing that the Assessing Officer (AO) failed to provide the "reasons to believe" before the commencement of the reopening proceedings. The Tribunal referred to the Supreme Court decision in GKN Driveshaft (India) Ltd Vs. ITO, which mandates that the AO must furnish reasons within a reasonable time upon request. However, the Tribunal found no evidence that the assessee requested these reasons before the AO. The Tribunal concluded that the assessee's claim did not align with the procedural mandate and thus dismissed this ground. 2. Jurisdiction of the Assessing Officer in Reopening Proceedings: The assessee contended that the AO did not record any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, which is a requirement under the first proviso to Section 147. The Tribunal noted that the original return was processed under Section 143(1) and no scrutiny assessment under Section 143(3) had been undertaken. Therefore, the Tribunal dismissed this ground as well. 3. Addition for Cessation of Liability: The AO made an addition of Rs. 35,73,027/- for cessation of liability, which the assessee claimed was a clerical error and a capital receipt not liable to tax. The Tribunal noted that the assessee failed to provide details about the transaction with Axion International Projects Ltd. (AIPL) when requested by the CIT(A). The Tribunal referred to the Supreme Court judgment in CIT vs. Mahindra & Mahindra, which clarified that waiver of loan does not amount to cessation of trading liability if it does not represent income under Section 28(iv) or Section 41(1). The Tribunal remitted the matter back to the AO to verify the nature of the liabilities and allow the claim in accordance with the law. 4. Findings Regarding Interest Paid: The Tribunal did not provide specific details on this issue but included it in the remand to the AO for further verification. Conclusion: The Tribunal dismissed the grounds challenging the legality and jurisdiction of the reassessment proceedings. However, it remanded the matter back to the AO for further verification regarding the addition for cessation of liability and findings about interest paid, directing the AO to allow the claim based on the evidence provided by the assessee in accordance with the law. The appeal was partly allowed for statistical purposes.
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