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TMI Blog2022 (10) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer before recording the reasons for reopening has made reference to the same documents/material which were also on the record of the Assessing Officer in the original assessment proceedings under Section 143(3). We, therefore, observe that there does not appear to be any fresh tangible material that has come into the possession of the Assessing Officer before recording the reasons for re-opening the assessment. Even in the recorded reasons, the Assessing Officer clearly states that his observations are based on a perusal of records but no fresh or new tangible material has been referred to or brought on record. The re-opening is within a period of four years from the end of the relevant assessment year. Therefore, it is important that the officer reopening a assessment has reason to believe based on tangible material that income has escaped assessment. What we observe from the aforesaid facts is that the dis-allowance of the claim of Rs. 6,50,00,000/- on account of compensation is based on record that was already with the AO at the time of the proceedings under Section 143 (3) of the Act. There is no new or fresh tangible material that has been brought on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was Rs. 131000000/-(including the PY 31.03.2008). However, the provision made in the accounts is remained to be added back to the total income. In view of the above facts, I have reason to believe that income of Rs. 6,50,00,000/- chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961." 5. Response came to be filed by the assessee and after receiving the reasons the assessee objected to the re-opening of the assessment which was disposed by an order dated 18th November, 2013. 6. Thereafter, the Assessing Officer acting under the provisions of Section 143(3) read with Section 147 of the Act passed an assessment order making dis-allowance of Rs. 6,50,00,000/- on account of the claim of compensation provided for by the Respondent-Company in its books. The Assessing Officer observed that the assessee/Respondent-Company had debited an amount of Rs. 6,50,00,000/- towards the claim for compensation paid/provided to the profit and loss account (P&L Account). He noted that on perusal of notes to account, it was seen that the provision for compensation pending settlement as on the closing date of the financial year was at Rs. 13,10,00,000/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed the order of the CIT(A) holding that since there was no fresh tangible material in the possession of the Assessing Officer on the basis of which a belief could be formed for escapement of income, the re-opening notice was bad in law. It was also observed by the ITAT that since the impugned issue was examined by the A.O., in view of the query asked by him, which was properly replied with proper details after which the original assessment order under Section 143(3) came to be passed accepting the impugned claim, the Assessing Officer did not have the shield of Explanation-1 to Section 147 to justify the re-opening which was done without there being any fresh tangible material in the possession of the Assessing Officer. The above findings of fact have not been controverted by the Revenue. 10. With respect to the issue on merits, the ITAT has upheld the validity of claim made by the assessee with respect to the compensation of Rs. 6,50,00,000/- confirming the order of the CIT(A). 11. Aggrieved by the order of the Tribunal upholding the order of the CIT(A) on re-opening as well as on merits, the Revenue has filed this Appeal proposing the following questions of law:- "A. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the name of Western Railway, Mumbai. A provision for compensation of Rs.49.50 lacs (with interest) was shown in the name of Shivangi Crafts Ltd. on the ground that the assessee had not manufactured and supplied textile machinery inspite of accepting the order dated 19th October, 1997 and receipt of advance of Rs. 20 lacs. Pursuant to a litigation filed in the High Court of Bombay, the assessee was under a obligation to make the provision of actual liability. 14. It is recorded that the actual working has been given by Senior Legal Manager vide his letter dated 30th March, 2008 and that the entire amount of Rs. 6,50,00,000/- has been found to be based on actual occurrence of financial incidence purely related to business activities, which remains uncontroverted by the Revenue. 15. When the assessee's case was taken up for scrutiny, during the assessment proceedings under Section 143(3) of the Act, the aforesaid facts were considered and have been relied upon in the order of the CIT(A) and the Tribunal. It is recorded that the details about the amount of compensation debited in the P & L Account for the aggregate amount of Rs.6,50,00,000/- is found to be reflected in the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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