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TMI Blog2024 (7) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... n that there is cessation of liability which can be taxed. In such a case where is the failure on the part of the assessee to disclose the facts. Simply because, ld. AO has presumed in the reasons that, since more than 6 years have been lapsed therefore, it is a deemed cessation of liability which is incorrect in law and on facts, because till assessee recognizes such debt it cannot be treated as cessation of liability. Secondly, in so far as recording of the sales, assessee has given the details before the ld. AO, as how the sales have been recorded in the books and also has given specific explanation during the course of original assessment proceedings. Thus there was a full disclosure made by the assessee and explanation which has been accepted by the ld. AO. Once that is so, then how the presumption can be drawn to draw another inference by the ld. AO without any material information contrary to the explanation given by the assessee. Thus on this point also there is no failure on the part of the assessee to disclose fully and truly material facts. Loss on cancellation of sales - explanation was there on the record and also explained before the ld. AO and ld. CIT(A), then we fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 34 units to Shri Narendra D Patel (HUF), proprietor of M/s ABC Corporation and had recorded sales during the year at Rs. 16,95,00,000/- against the stamp duty valuation at Rs. 21,17,90,000/-. As per record, the booking was made in the FY 2004-05 and the amount of Rs. 16,95,00,000/- was received as a advance However, perusal of the balance sheet of FY 2008-09 did not reveal the said amount against advance received. Thus, the difference of sale consideration and stamp duty value is required to be brought to tax. 4. Thirdly, the perusal of profit loss account reveals that the assessee had debited an amount of Rs. 14,43,33,583/- on account of 'loss on cancellation of sale. The detalls of loss reveal that the total sale consideration was made at Rs. 17,72,70,000/- for an area of 10364 sq mtrs. However, the total income as shown in the profit and loss account from the project(sale of shop) is shown at Rs. 4,91,02,350/ only. Hence, the sales of Rs. 17,72,70,700/ has not been reflected in the books of accounts during the year 2008-09. This has resulted in incorrect deduction/debit of Rs. 14,43,33,583/ on account of loss on cancellation of sale'. Therefore, the loss allowed of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- and accordingly, he added back the claim of loss and cancellation of sales of Rs. 3,54,46,840/-. 5. The ld. CIT(A) before whom the validity of reopening was challenged has dismissed the said ground. However, on merits he has allowed addition of Rs. 1,93,90,770/- made on account of cessation of liability and in so far as disallowance of Rs. 3,54,46,840/-, the same has been dismissed. Now again against the said order assessee and Revenue are in appeal. 5. The grounds raised by assessee as well as by Revenue are as under:- Assessee s Grounds of Appeal:- 1. The Hon'ble Commissioner of Income Tax (Appeals), NFAC [CIT(A)] has erred in law and on facts in upholding the disallowance made by the Assessing Officer (AO) in the Assessment Order in connection with the loss claimed of amount of Rs. 3,54,46,840/- 2. The CIT(A) has erred in law and on facts in upholding the disallowance made by the AO of amount of Rs. 3,54,46,840/- without appreciating the facts and the relevant documents submitted by the Assessee during the course of re-assessment proceedings. 3. The CIT(A) has erred in law and on facts in upholding the disallowance made by the AO of Rs. 3,54,46,840/- without appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet and profit and loss account to record his reasons to belive without ascribing any failure on the part of the assessee. Simply mentioning that there is failure to disclose fully all material facts does not tantamount to actual failure on the part of the assessee, but ld. AO has to establish the fact in the reasons recorded itself and therefore, the reopening is invalid. 7. Before us, ld. DR referred to the observation and the finding of the ld. CIT(A) while dismissing the ground raised by the assessee. The relevant observation of the ld.CIT(A) on this issue as referred by him reads as under:- 5.2.4 With respect to the first issue it is noted that the matter was not scrutinized by the AO at the time of regular assessment. The appellant had submitted the list of creditors amongst other details during the course of assessment proceedings u/s 143(3). Section 147 requires the assessee to declare the material not merely fully but also truly The AO could not have applied his mind vis- -vis details of other liabilities produced before him at the time of regular assessment. Further, there exists no requirement under section 147 of the Act that the material forming basis for the reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t failure is not established, the reopening cannot be done. 9. Apart from that, there has to be some tangible material and information coming on record having live link nexus with the income escaping assessment, especially more so in the cases where assessment has been completed u/s. 143(3) and the details of entries in the profit and loss account and balance sheet had already been scrutinized and examined by the AO. From the bare perusal of the reasons recorded, it is seen that AO is trying to draw his own inference from the balance sheet and profit and loss account, which is evident from para 2,3 4 of the reasons recorded (supra). Once these figures and entries in the balance sheet and the profit and loss account have already been examined and scrutinized, then without there being any other tangible material coming on record to demonstrarte that there is no true and full disclousre of facts then perhaps reopening is justified beyond the period of four years. Here in this case, as pointed out by the ld. Counsel, the details of sundry creditors; details on account of loss on cancellation of sales and the sales recorded in the books of accounts were duly furnished in response to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the agreement (already submitted vide submission dated 7 January, 2014). However, the sale rate per sq. mt. was not fixed and hence the agreement was not registered with the ROC Authorities. The agreement got register with ROC Authorities during the year under consideration and they valued as per the market value of financial year 2010-11. Since there was a huge time gap between sale and registration this difference has arose, which sufficiently stands explained. Thus, on this point also there was a full disclosure made by the assessee and explanation which has been accepted by the ld. AO. Once that is so, then how the presumption can be drawn to draw another inference by the ld. AO without any material information contrary to the explanation given by the assessee. Thus on this point also there is no failure on the part of the assessee to disclose fully and truly material facts. 11. Lastly, with regard to loss on cancellation of sales also assessee vide letter dated 08/01/2014 has given working of loss on cancellation of sales. Before the authorities below and also before us it has been stated in the following manner:- Regarding disallowance of loss on cancellation of sale of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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