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TMI Blog2012 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... e order dated 22.02.2011 passed by Ld. CIT (A)-IV, New Delhi, raise the following grounds:- 1. The Ld. CIT (A) has erred on the facts and in law in annulling the order u/s 143 (3)/147 of the IT Act while holding invalid the reopening u/s 147, ignoring that also as per decision of Hon ble Supreme Court in CIT (A) vs. P.V.S. Beadies Private Limited 237 ITR 13, the factual information provided by the internal auditor is to be treated as information for the purpose of reopening of assessment. Reliance is also placed on the following decisions: i) Bawa Abhai Singh vs. DCIT 253 ITR 83 (Del) ii) Phoolchand Bajrang Lal vs. CIT (1993) 203 ITR 456 (SC) iii) Ram Prasad vs. ITO (All) iv) Consolidated Photo Finvest Limited vs. ACIT (2006) 281 ITR 394 (Del) v) KLM Royal Dutch Airlines vs. ADIT (2007) 292 ITR 49 (Del) vi) ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) (SC) vii) Praful Chunilal Patel vs. Makwana ACIT (1999) 263 ITR 832 1.1. Grounds of Cross Objection read as under:- 1. That on the facts and circumstances of the case, the loss incurred on sale of vehicle amounting to Rs.6538841/- in the normal course of the business is an allowable deduction and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer as the return filed by the respondent stood accepted in a summary manner. It was, therefore, within the competence of the Assessing Officer to take action once he had bona fidely formed a prima facie opinion that income of the assessee has escaped assessment. 5. The Ld. CIT (A) also has misdirected himself in holding that the observation of the audit party did not constitute information for taking action u/s 147 of the Act. In fact, after the amendment of Section 147 there is no such requirement that there should be some information in possession of assessing authority forming opinion. The only requirement is that there should be tangible material to form prima facie belief which, in the present case, the Assessing Officer had on record itself and also stood revealed from the reasons recorded. The decision taken by Ld. CIT (A), therefore, needs to be set aside by allowing ground in appeal raised by the revenue. 6. On the other hand, the ld. counsel for the assessee, supporting the conclusion reached by the Ld. CIT (A), states that keeping in view the nature of business and the fact that in the earlier assessments it is discernible that loss on sale of repossessed veh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processed u/s 143 (1) of the IT Act on 21.3.2005 by accepting the returned income. The audit party raised the following audit objection during the course of audit:- Section 37(1) of the Income Tax Act, 1961, provides that any expenditure, not being expenditure of capital nature, laid out wholly or exclusively for the purpose of business is allowable as deduction in computation of the income chargeable under the head Profit and gains of business or profession. The expenditure which is not related to the business is not allowable as deduction. The assessment of M/s Cargo Motors Pvt. Ltd. for the assessment year 2005-06 was completed after summary manner in 2006 determining an income of Rs.40920360/-. Audit scrutiny revealed that the assessee had debited Rs.6538841 to the profit and loss account (in schedule 17) on account of Loss on sale of Repossessed Assets. This loss being capital in nature, should have been disallowed and added back to the income of the assessee. The omission resulted in underassessment of income of Rs.6538841/- involving short levy of tax of Rs.2392725.00. Ongoing through the audit objection, it is found that there is substance in the issue raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court (Delhi) in 142 CTE (Delhi) 271, 225 ITR 496. In view of above facts of the case and the provisions of the act in this regard and the case law cited above, I have reasons to believe that the income to the tune of Rs.6538841/- has escaped assessment. Therefore, notice u/s 148 is hereby issued for reopening u/s 147 of the IT Act. Sd/- (Dr. Prashant Khambra) Asstt. Commissioner of Income Tax Circle 3 (1), New Delhi. 8. The correspondence resting between the Assessing Officer and his territorial Commissioner as well as replies to audit objections have also been perused. Firstly, the reasons recorded do not reveal that the action has been taken on the direction of his superior authority. The judgement rendered by the Hon ble Delhi High Court in the case of CIT vs. SPL s Siddhartha Ltd. (supra), therefore, cannot be applied to peculiar facts of this case. We, therefore, do not agree with the Ld. CIT (A) that the assessment has been reopened on the instructions of ld. CIT. 9. As regards the assessee s belief that the Assessing Officer has disputed the objections and, as such, he cannot use the audit report for initiating action u/s 147 of the Act, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Hence, this was allowed as a revenue loss and cannot be treated as capital loss. Hence, there was no omission on part of the A.O. during the asstt. Proceedings for allowing this deduction. Still your kind directions are solicited on the above mention issue raised by the revenue audits for the possible remedial action. 11. It maybe pertinent to state here that the aforesaid letter dated 08.11.2007 was written by the same Assessing Officer who has recorded the reasons for the year under consideration and issued the impugned notice u/s 148 of the Act. Likewise, the aforesaid facts were reiterated in another letter dated 28.11.2007 which was also before initiating the action u/s 148 of the Act in the impugned year. Thus, the fact which emerges from the aforesaid letters is that the Assessing Officer himself has entertained a belief that the loss on sale of repossessed assets in the case of the assessee is a business loss and not a capital loss. Moreover, it is pertinent to state here that despite above replies, action u/s 148 was initiated for Assessment Year 2001- 02 and an order dated 16.12.2008 was made. The aforesaid order was annulled by the Ld. CIT (A) and the Appellate Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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