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TMI Blog2012 (8) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... see was reworked by reducing from the cost of acquisition amounts treated by the Govt of Andhra Pradesh as Grants to the Assessee. The AO reworked the total income vide his order u/s 147 read with 143(3) dated 25.5.2010 at ₹ 13,46,31,752/-. 3. On appeal before the CIT(A), the Assessee objected to the reopening of assessment as well as reference to special audit u/s 142(2A). The CIT(A) rejected the submissions of the assessee by observing that initiation of proceedings u/s 147 was after considering the observations of IAP. The CIT(A) relied upon the decision of the Hon ble Supreme Court in the case of CIT Vs. PVS Beedies P. Ltd., 237 ITR 13 and pointed out that the report of Internal Audit Party is valid for reopening the assessment. As regards the contention of the AR of the assessee that there was a violation of the provisions of the IT Act in directing the Special Audit to arrive at the WDV right from 01/04/89, the CIT(A) held that in the absence of correct WDV of various assets, the AO had to recalculate the WDV of various block of assets since inception of the Board. 4. Aggrieved the Assessee is on appeal against the reopening of the Assessment, before us as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is letter dt 14.8.2009 (page 118 of paper Book-1). The AO wanted to re-determine the WDV of the assets for computing the depreciation. In the return of income the Assessee has given particulars of grants from the AP Government and has furnished the method of computation of depreciation. In his letter dated 15.11.2006 (page 110 of paper Book-1) , the AO had asked for expenses met out of Government grant. This was also explained by the Assessee in his reply (page 111 of paper Book-1). Clause 5(b) of the Notes on accounts (Page 8 of Paper Book-1) states clearly the method of accounting the grants received from the Government. After having received clarifications from the Assessee, the Assessing officer has completed the Assessment u/s 143(3). But thereafter the AO suddenly finds the accounts complex and requires an external audit to be carried out u/s 142(2A) (AO s letter dated 10.11.2009). The special Audit was carried out. On the basis of the special audit the WDV the assets were reworked. It is the contention of the Assessee that they were not subject to tax till the AY 2002-03 and have filed their return for the first time for AY 2003-04. In the circumstances no depreciation can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Hyd/06 for AY 1999-00 to 2002-03 held that Clause (b) to Explanation 2 to proviso 2 of section 147 clearly authorises the AO to reopen the assessment. The DR also relied on the decision of Hon ble Supreme Court in the case of CIT Vs. PVS Beedies P. Ltd., 237 ITR 13 pointing out that the objection by internal audit party is a valid basis for reopening the assessment. 10. In the case of ACIT Vs. Rajesh Jhaveri Stockbrokers Pvt. Ltd., the Hon ble Apex Court held that the AO is having jurisdiction to issue notice u/s 148 for bringing to tax income escaping assessment on the ground that the assessee claimed excessive relief or deduction. Therefore, the ground relating to reopening of assessment is decided against the assessee and we confirm the order of the CIT(A) on this issue. 11. Coming to the merits of the case, the assessee had objected to the AO s direction for special audit in terms of provisions of section 142(2A) of the Act. In order to arrive the correct position the account of the assessee for the AY 2004-05 was referred to special audit u/s 142(2A) of the Act, on the following terms: 1) WDV of the Reservoirs to be recalculated in the correct way since the inceptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect and the WDV of various assets have not been correctly taken in the books whereas the WDV was calculated by the special audit considering the facts right from 01/04/1989 and also considering the allowable depreciation. The CIT(A) confirmed the order of the AO. 16. We have heard the arguments of both the parties and perused the record. The learned counsel for the assessee Shri K. Vasant Kumar submitted that the AO had referred the case to Special Audit on the ground that the grants received by the assessee from the Government were to be reduced from the cost of the asset to arrive at the WDV, however, the AO nowhere demonstrated that grants received had gone into acquisition of assets. The learned counsel for the assessee contended that merely because the assessee is in receipt of grants, the AO came to such a conclusion and directed a special audit to arrive at the WDV after excluding the grants. The learned counsel argued that as per the provisions of law, only when the cost of the asset is met directly or indirectly by others that the same is to be reduced, and not otherwise. He contended that none of the grants were given in such a manner as to hold that they had gone into ..... X X X X Extracts X X X X X X X X Extracts X X X X
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