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2010 (6) TMI 64 - HC - Income TaxReassessment u/s 147 – Issue of notice u/s 148 - . The assessee, in Schedule 18 to its balance sheet as of 31 March 2004 made a provision for diminution in the value of assets of Rs.1.41 crores under the head of operating and other expenses. In the computation of income, among the items disallowed by the assessee, was an expenditure in the amount of Rs.1.12 crores incurred during the construction period, which was a write down. In the Tax Audit Report under Section 44AB, the assessee disclosed in Item 17 amounts debited to the Profit and Loss Account. Sub paragraph (a) of Item 17 deals with expenditure of a capital nature. While furnishing a break up under this item, the assessee disclosed that an amount of Rs.1.12 crores was a write down in the value of assets. This was stated to exclude an amount of Rs.29.23 lakhs which, according to the assessee, was a “write down in the value of slow/non moving inventory valued at estimated realizable value being considered as not in the nature of capital expenditure”. - The AO has purported to reopen the assessment on the ground that the assessee had debited a provision amounting to Rs.1.41 crores on account of diminution in the value of assets. – Held that: As a result of the amendment, clause (i) has been inserted in explanation (1) to the Section which defines the meaning of the expression “book profits”. By the amendment, the amount or amounts set aside as provision for diminution in the value of the assets is to be added to the net profit as shown in the Profit and Loss Account for the relevant previous year, prepared under subsection (2). When the reasons were recorded by the Assessing Officer, this provision was not on the statute book and hence, could not have been referred to and, as a matter of fact, has not been referred to in support of the notice of for reopening the assessment. – decided in favor of assessee
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