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TMI Blog2019 (7) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... 147/148 of the Act on the same reasons, particularly when there is no failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment, are not sustainable in the eyes of law and as such consequent assessment framed u/s 143 (3)/148 of the Act is liable to be quashed. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... . and thereby reopened the assessment after recording reasons and issued the notice u/s 148 of the Act. Declining the contentions raised by the assessee that there was no failure on his part to disclose fully and truly all necessary facts for computation of income and as such, reopening is legally not sustainable, AO made addition of ₹ 44,14,162/- and thereby assessed the total income of the assessee at ₹ 57,93,430/-. 4. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has partly allowed the appeal. Feeling aggrieved, both the Revenue as well as the assessee have come up before the Tribunal by way of filing the present appeal as well as cross objections respectively. However, appeal filed by the Revenue has been dismissed on account of low tax effect. 5. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 6. Ld. AR for the assessee/cross objector challenging the impugned order on legal ground contended inter alia that the proceedings initiated by the AO u/s 147/148 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd salary payable to working partners be also specified in deed, otherwise no salary is allowable. In this case, partnership deed was executed on 01.04.2004 and amount of salary of ₹ 1,92,000/- payable to partners during the assessment year 2005-06 and 2006-07 was not mentioned in partnership deed. The Salary of ₹ 1,92,000/- paid to partners during assessment year 2005-06 and 2006-07 was not allowable and needs to be disallowed. Hence the same is proposed to be disallowed and added back in the total income of the assessee for the assessment year 2005-06 and 2006-07. (2) Depreciation on furniture @ 7.5% was allowable but depreciation @ 12.5% was allowed. Hence, it is proposed to make addition of ₹ 1840/- (4430-2590). (3) Interest u/s 234B was chargeable at ₹ 62,256/- as against ₹ 59,315/- charged. Therefore, interest u/s 234B is to be charged at ₹ 2,914/-. (4) In column 27(a) of the audit report, the auditor has remarked that "details enclosed as per Arinexure-7" but Annexure-7 has not been found enclosed. In the absence of this it can not be ascertained that TDS has been deducted on the payments of ₹ 6,00,000/-, ₹ 6,92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est has been debited in the profit and loss account. As the asset purchased from borrowed funds was not put to use by the assessee, the interest relating to above investment being ₹ 2,85,360/- (@ 12% P.A) was not allowable and it was required to be capitalized. The assessee has not done so and hence income chargeable to tax amounting to ₹ 2,85,360/- has escaped assessment. 3 The assessee has claimed depreciation on furniture @ 12.50% on amount of ₹ 35,447/- at ₹ 4,430/-, though it was allowable @ 7.5% at ₹ 2,658/-. In this way, excess depreciation of ₹ 1,772/- (4,430 - 2,658) has been claimed and hence, equal income has escaped assessment. In addition to above, it is also noticed that: In column 27(a) of the audit report, the .auditor has remarked that "details enclosed as per Annexure-7" but Annexure-7 was not enclosed. Given this fact, it is assumed that TDS has not been deducted on the following payments:- Rent ₹ 6,00,000/- Job work ₹ 6,92,407/- Freight &. Cartage ₹ 2,81,033/- Cartage Outward ₹ 2,12,751/- Interest ₹ 33,39,187/- Processing charges ₹ 1,02,059/- Professional c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mistake u/s 154; and two, power of reopening of assessment u/s 147 are different one and the AO could take recourse to either. 13. Coordinate Bench of the Tribunal in case cited as Jethalal K. Morbia vs. ACIT (2007) 109 TTJ 0001 also held that initiation of reopening proceedings during pendency of rectification proceedings on the same issues are invalid. 14. So, in view of what has been discussed above and following the aforesaid decisions rendered by the Hon'ble Calcutta and Gujarat High Courts and coordinate Bench of the Tribunal, we are of the considered view that initiation of rectification proceedings u/s 154 of the Act by the AO and simultaneously initiating the reopening of assessment proceedings u/s 147/148 of the Act on the same reasons, particularly when there is no failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment, are not sustainable in the eyes of law and as such consequent assessment framed u/s 143 (3)/148 of the Act is liable to be quashed. 15. Since the assessee has succeeded on the legal ground as proceedings u/s 147/148 are held to be without jurisdiction and bad in law, without going into the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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