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TMI Blog2007 (7) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... may kindly be directed that proceeding initiated under section 148 and the assessment so passed under section 147/143(3) being bad in law and absolutely illegal be quashed in toto. 3. That the learned CIT(A) has erred in law and on the facts of the case in upholding the disallowance of Rs. 75,96,534 on account of previous year expenses even though the details/explanations along with copy of vouchers were filed at the time of regular assessment under section 143(3)/147 and before the CIT(A) against the assessment order passed under section 147/143(3). On the facts and circumstances of the case, the learned Assessing Officer may kindly be directed to allow Rs. 75,96,534 in respect of previous year expenses as the liability was crystallized during the year." 2. Shri Pradeep Dinodia, CA appeared for the assessee whereas Shri L.M. Pandey, Sr. DR represented the revenue. 3. In this case, the assessment was completed under section 143(3) vide order dated 29-2-2000 at an income of Rs. 13,69,75,960. Thereafter, the Assessing Officer issued notice under section 148 on 7-2-2003. In response to that notice the assessee filed letter dated 28-2-2003 submitting that the return originally file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re claimed accordingly. In support of this version the assessee filed copies of bills showing date of bills in the year under consideration. It was argued that during the last 10 years the Assessing Officer did not make any disallowance on account of prior period expenses and whenever it was made, the same was struck down by the CIT(A)/ITAT. 6. The learned CIT(A) considered these pleas of the assessee. So far as ground relating to validity of reassessment proceedings is concerned, the learned CIT(A) made reference to the note dated 6-9-1999 filed by the assessee before the Assessing Officer which is as under:- "Note on previous year expenses.-Some of the expenses were received after the closure of the books of the relevant accounting year and could not be accounted in that year. They were, therefore, accounted for in the subsequent year. We confirm that these expenses have not been claimed by us/allowed to us in any earlier year." After reproducing the above note, the learned CIT(A) proceeded to observe that from this note it is not clear as to whether the assessee had fully disclosed that the expenses had crystallized in the earlier year or not and, therefore, it is difficult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Assessing Officer. As per this document the following details have been given:- "B. Particulars of expenditure/income of any earlier year debited/credited to profit & loss account of the relevant previous year. Expenses : a. Personnel expenses 338,180 b. Sales and administration 4,748,916 c. Operating expenses 2,509,438 d. Interest 1,258,392 e. Depreciation 2,298,991 Note: Provisions no longer required written back and Unclaimed Balances written back not considered for the purpose of this clause." Then he invited our attention to page 47 of the paper book which contains list of documents/statements attached which were filed and attached with the return. 9. The learned counsel further submitted that during the assessment proceedings the Assessing Officer made queries from the assessee on this issue and in reply to the query the assessee had made the following submissions:- "Some of the expenses were received after the closure of books of the relevant accounting year and could not be accounted in that year. They were, therefore, accounted for in the subsequent year. We confirm that these expenses have not been claimed by us/allowed to us in any earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; canteen, the bills are dated 31-1-2000 to 21-3-2000 and the said bills were received by the appellant in the month of April, 2000. Since the bills were received subsequent to the finalization of the appellant's preceding year's accounts, the said expenses have been booked under prior period expenses. 5.2 The appellant has relied on the decisions in the case of CIT v. Neo Polypack (Delhi), Western India Oil Distributing Company Ltd. v. ACIT 77 ITD 548 (Mumbai) and its own case for assessment year 2000-01, where a similar issue was examined by the CIT under section 263 of the Act and upon such examination it was held that prior period expenses are allowable. In view of the decisions mentioned above and submissions of the appellant, there is no justification for disallowing the claim of prior period expenses. The ground is allowed." 10. It was also pointed out by him that in assessment year 1985-86 also the issue was decided by the Tribunal in favour of the assessee. For supporting this submission, he made reference to pages 262 to 264 of the paper book. It was thus submitted by him that time and again the issue has been decided in favour of the assessee. Therefore, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial placed on record by the parties. 14.1 The assessment in this case was completed on 29-2-2000. Notice under section 148 was issued on 7-2-2003. The assessment pertains to the assessment year 1997-98. Notice issued on 7-2-2003 was, therefore, after the expiry of four years from the end of the assessment year as the fourth year expired on 31-3-2002. Proviso to section 147 runs as under: "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year." In view of the above proviso to section 147 of the Income- tax Act, no action can be taken for reassessment after the expiry of four years from the end of the relevant assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction and as such the notices, the speaking orders and the assessment orders made in pursuance of the notices were quashed." 14.3 The ratio of the decision is fully applicable to the facts of the present case and, therefore, on the facts and circumstances of this case, it cannot be said that there was any failure on the part of the assessee in disclosing material facts. On the other hand, as pointed out above, the assessee had disclosed all material facts relating to prior period expenses and after making complete and detailed inquiry, the Assessing Officer in the original assessment proceedings, preferred not to make any addition on account of prior period expenses. 14.4 The Hon'ble Supreme Court of India in a very recent decision in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 has considered about the scope and effect of section 147 as substituted with effect from 1-4-1989. The Hon'ble Court has observed as under: "The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that the details were furnished by the assessee in the context of hearing, which took place on 24-1-2000 in respect of the assessment proceedings. Hence, information/details regarding the previous year's expenses were again furnished by the assessee before the Assessing Officer on the demand of the Assessing Officer. It is clear that the assessee filed details along with vouchers which fact also establishes that it was only after examination of these details and after application of mind, the Assessing Officer did not make further queries. Had he not applied the mind, then he would not have called for further details. On the direction of the Assessing Officer, the assessee filed plant-wise and year-wise details. Details of prior year's expenses are available at pages 103 to 111 of the paper book. It was only after these details the Assessing Officer felt fully satisfied and did not make any query nor made any disallowance in the assessment order. 15.1 Under the above narrated circumstances, firstly the application of the mind by the Assessing Officer is fully proved and secondly, it is also proved that the assessee had furnished full details and entire relevant materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f change of opinion. Thus if this observation of the Hon'ble Delhi High Court is taken into account, then it will be found that the reassessment in this case is based purely on change of opinion. To the same effect is the decision of Hon'ble Delhi High Court in the case of Kelvinator of India Ltd. and the decision of Hon'ble Supreme Court in the case of Foramer France. 18. On the controversy relating to failure on the part of the assessee to make disclosure of facts, application of mind by the Assessing Officer and non-expression of opinion on the relevant point by the Assessing Officer as well as on the issue relating to change of opinion, we may make reference to a latest decision of Hon'ble Delhi High Court in the case of CIT v. Eicher Ltd. [2007] 163 Taxman 259. In that case the assessment was completed under section 143(3) on 7-12-1995 and subsequently the Assessing Officer reopened the assessment by issuing the notice dated 30-3-2000 under section 148. The reason for reopening the assessment was to tax the waiver of interest allegedly not offered to tax by the assessee. On receipt of the notice, it was contended by the assessee that the reopening was based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also considered the decision of its Full Bench in the case of Kelvinator of India Ltd. as also the decision in the case of KLM Royal Dutch Airlines v. Asstt. DIT [2007] 159 Taxman 191 and also the decision in the case of Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (Punj. & Har.). 20. After considering all these decisions, the Hon'ble Court did not follow the decision in the case of Consolidated Photo & Finvest Ltd. but has followed the decision of the Full Bench of the Delhi High Court in the case of Kelvinator of India Ltd. and the principles which were applied while deciding the case, the relevant observation of the Hon'ble Court in this regard is as under:- "16. Applying the principles laid down by the Full Bench of this Court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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