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TMI Blog2012 (12) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... d after the original assessment nor in the reassessment proceedings disallowance made by the AO which was not made by his predecessor in the original assessment order, was based on suppression of primary information on the part of the assessee. - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... l asstt. Order hence the Ld. CIT(A) is not justified in saying that there was change of opinion on the issue due to which reopening was initiated. 4. The Ld. AR on the contrary tried to justify the first appellate order on the issue. He reiterated the submissions made before the authorities below. He pointed out that the assessee filed its return of income declaring a total income of Rs. 1,98,64,250/-. Alongwith the return of income it had filed auditors report as well as its annual financial statement, which showed that as per the 3CD report a provision for gratuity had been made on an accrual basis amounting to Rs. 1,45,42,573/-. However while computing its total income it added back and made disallowance of Rs. 94,01.147/- out of the aforesaid sum representing provision for gratuity out of the gratuity debited in profit and loss account. In this regard he referred page No. 18 of the paper book filed on behalf of the assessee (in short PB(A)). The assessee company had thus claimed a deduction only of Rs. 51,41,426/-. The Ld. AR referred page Nos. 1 to 57 of the PB (A). These are copies of return of income, financial statement and tax auditor reports. He also referred page No. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the aforesaid submissions and evidences placed on record, had accepted the submissions of the assessee in the orders of the assessment and as such he had not made any disallowance, as none was warranted in law in respect of aforesaid sum and computed the total income of the assessee at Rs. 4,87,28,530/- and made an adjustment of Rs. 2,88,64,284/- as per the order of the TPO. On 4.3.2010 the AO however issued a notice u/s 148 of the Act which is beyond a period of four years from the end of the assessment year. The assessee had filed its objection against the initiation of proceedings u/s 147 of the Act, inter alia contending that since assessment has been opened without any fresh material and liability of the sum of Rs. 51,41,426/- has dully been considered in the original assessment proceedings, as such reassessment proceedings are unsustainable in law. The assessee also has furnished the proof of payment of the gratuity actually paid and bonus paid before due date of filing of the return. The AO did not agree with the objections raised by the assessee and framed assessment u/s 147 on 29.12.2010 disallowing the provision for gratuity allegedly amounting to Rs. 51,41,426/- on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, we find that for initiation of reopening proceedings u/s 147 of the Act especially where the original assessment has been framed u/s 143 (3) of the Act, some time limit has been prescribed if there is no failure on the part of the assessee to make a return u/s 139 or in response to a notice issued u/s 142(1) or section 148 or to disclose fully and truly all material facts necessary for his assessment for that asstt. Year. This time limit is 4 years from the end of the relevant assessment year. We thus find that under this proviso to section 147 for computing the time limit three more conditions are required to be fulfilled. Firstly the original assessment has been framed u/s 143 (3) of the Act. Secondly that an income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assesee to make return u/s 139 or in response to a notice issued u/s 142(1) or section 148. And thirdly the assessee has disclosed fully and truly all material facts necessary for these assessments for that assessment year. In the case of the present assessee before us, admittedly the original assessment was framed u/s 143 (3) of the Act. There is also no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provision for bonus (paid before due date of filing of return u/s 139(1) 5,84,045/- Provision for gratuity as on 31.03.2003 1,45,42,573/- The evidence in support of payment of bonus of Rs. 5,84,045/- and gratuity of Rs. 45,57,381/- is enclosed as Annexure - 11." 7. Again vide its reply dated 5.1.2006 the assessee also furnished the proof of payment of gratuity to the employees. Alongwith reply dated 4.10.2005 the assessee had also provided the evidence to substantiate that the payment has been made and thereafter on 5.1.2006 it furnished the proof of payment of gratuity. Considering all these submissions and material available on record the AO vide his order dated 28.3.2006 framed the assessment u/s 143(3) of the Act and accepted the submissions of the assessee since he did not make any disallowance. He computed total income of the assessee at Rs. 4,87,28,530/- and made an adjustment of Rs. 2,88,64,284/- as per the order of the TPO. 8. Subsequently the AO recorded the following reasons and issued notice u/s 148 of the Act on 4.3.2010 :- "Reasons for issue of notice u/s 148 in the case of M/s Sumitomo Corporation (India) Pvt. Ltd. A.Y. 2003-2004 Assessment in this case was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinabove suggest that the AO formed his belief on the basis of para No. 17 (1) of the 3CD report (page No. 51 of the Paper Book (A) ), wherein it has been mentioned that provision for gratuity made on accrual basis amounting to Rs. 1,45,42,573/- should not be allowed by invoking the provisions of section 40A(7) of the Act. We also find substance in the contention of the assessee that the AO completely overlooked the record of the assessment before initiating the proceedings which inter alia reflected that the assessee had claimed only deduction of Rs. 45,57,381/- towards gratuity and Rs. 5,84,045/- represented the liability towards bonus which too had been paid ( page 178-320 of PB(A)) before the due date of filing of the return of income. Under these circumstances we do not find any infirmity in the conclusion of the Ld. CIT(A) that all material facts necessary for the assessment had been truly and fully disclosed during the course of original assessment u/s 143(3) of the Act, hence initiation of reassessment proceedings u/s 147 / 148 was illegal in view of the specific proviso to section 147 of the Act. As per this proviso as discussed above specific restrictions have been pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the first appellate order :- 1) That without prejudice to the finding of the learned Commissioner of Income Tax (Appeals), that the proceedings under section 147 of the Act have not been validly initiated, she ought to have further disposed off the grounds no. 3,4 & 5 raised before her in accordance with law, which reads as under : "3 That on the facts and circumstances of the case and in law, the AO has erred in disallowing gratuity and bonus amounting to Rs. 51,41,426/- disregarding the facts of the case and complete evidence furnished in this regard by the appellant 4. Without prejudice to our application u/s 154 of the Act, the AO has on the facts and circumstances of the case and in law erred in not giving the credit of the taxes appropriately withheld and those paid by way of advance tax and / or self-assessment tax. 5. That on the facts and circumstances of the case and in Law, the AO erred in initiating penalty proceedings under Section 271 read with 274 of the Act." 2) That the learned Commissioner of Income Tax (Appeals) ought to have held that the disallowance made on account of provision for Gratuity of Rs. 51,41,426/- was not tenable in law as the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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