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2012 (12) TMI 4 - AT - Income TaxReopening of assessment u/s 147/148 - period of limitation - effect of block assessment - unexplained cash credit - addition u/s 68 - held that - In the reasons AO has made a reference to the order of the ITAT wherein it has been observed that such type of income is to be assessed in the regular assessment and not in the block assessment. This observation is in the nature of finding comes within the meaning of section 150 (i) and there was no time limit for issuing a notice u/s 148 in order to give effect to the finding of the ITAT. - If the addition could not be made under the block assessment and the same had to be made in the regular assessment, then it would be unreasonable to say that this income could not be taxed either in the block assessment or in the regular assessment of the assessee. - Decided against the assessee. Claim of depreciation - commencement of business - held that - the AO s observations that the machinery was not put to use before 31.3.1995 is not correct. - The independent evidence of several government departments indicating the use of machinery before 31.3.1995 justifies the assessee s stand that the plant and machinery was put to use before 31.3.1995. Therefore, the AO was not justified in disallowing the depreciation on the plant and machinery. Accordingly, the disallowance made by the AO is deleted. - Decided in favor of assessee.
Issues Involved:
1. Reopening of assessment under section 147/148 of the Income Tax Act. 2. Additions on account of purported unexplained cash credits and share application money. 3. Charging of interest under sections 234A and 234B of the Income Tax Act. 4. Validity of treating the original return as filed in response to notice under section 148. 5. Granting of depreciation amounting to Rs. 67,92,680/-. Issue-wise Detailed Analysis: 1. Reopening of Assessment under Section 147/148: The assessee contested the reopening of the assessment under sections 147/148, arguing that the notice was served after the expiry of four years and that there was no failure on their part to disclose all material facts fully and truly. The Tribunal had earlier allowed the assessee's appeal on the ground that the block assessment order was passed after the expiry of the limitation period. The Tribunal also noted that undisclosed income for block assessment must be based on seized material and any item already disclosed should be assessed in regular assessment. The AO issued a notice under section 148 after the Tribunal's order, which the assessee argued was not justified. However, the appellate authority upheld the reopening, stating that the AO's action was justified under explanations 2 and 3 of section 153(3), which allow for reassessment in consequence of any finding or direction in an appellate order. The Tribunal concluded that the AO did not reopen the assessment on any authority's direction but used the Tribunal's findings as information to tax the escaped income. 2. Additions on Account of Unexplained Cash Credits and Share Application Money: During the search, it was found that the share applications and stock invests were made by persons connected to the assessee company, and many applications were filled by the directors or employees of the company. The AO added amounts of Rs. 19.90 lakhs, Rs. 21.60 lakhs, and Rs. 27.40 lakhs as unexplained cash credits under section 68. The appellate authority confirmed these additions, noting that the transactions were not genuine, as the share applicants were not found at the given addresses, and the share certificates were found at the assessee's premises. The Tribunal upheld this finding, stating that the assessee failed to discharge the onus under section 68. 3. Charging of Interest under Sections 234A and 234B: The assessee's grievance regarding the charging of interest under sections 234A and 234B was considered consequential and was thus rejected by the Tribunal. 4. Validity of Treating the Original Return as Filed in Response to Notice under Section 148: The assessee argued that their request to treat the original return as filed in response to the notice under section 148 was not validly rejected. The appellate authority found that the assessee did not make such a request until 27.1.2003, and the AO rightly considered the return filed on that date. The Tribunal upheld this finding, rejecting the assessee's ground of appeal. 5. Granting of Depreciation Amounting to Rs. 67,92,680/-: The revenue contested the granting of depreciation, arguing that the company had not started commercial production before 31st March 1995. The AO disallowed the depreciation based on a statement from the Works Manager and the power load issue. However, the appellate authority found that the assessee provided sufficient evidence, including certificates from government authorities, indicating that production started before 31st March 1995. The Tribunal upheld the appellate authority's decision, noting that the AO was given an opportunity to counter the evidence, and there was no violation of Rule 46A. Conclusion: Both the appeals of the assessee and the revenue were dismissed, with the Tribunal upholding the findings of the appellate authority on all issues.
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