TMI Blog2014 (10) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has to complete the income escaping assessment by following the provisions of the Act as if the return furnished against notice u/s. 148 as one filed u/s. 139 of the Act - as procedure to be followed is concerned, there is no difference between income escaping assessment and regular assessment because the provisions generally provide for issue of notice, hearing of the assessee and taking of evidence, etc., which are the same for regular assessment and income escaping assessment - Therefore, in the course of income escaping assessment, if it comes to the notice of the AO that any other item or items of income other than the item of escaped income for the assessment of which, assessment originally completed was reopened, also have escaped from original assessment, he is bound to assess such item or items of income also in the course of reassessment u/s. 147 - In view of the specific provision providing for assessment of other items of income that have escaped assessment, and that comes to the notice of the AO in the course of income escaping assessment, the reassessments made are valid – Relying upon Commissioner of Income-tax Versus TBS Publishers and Distributors [2009 (11) TM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some prescribed rule or mode of proceedings, it does not make the assessment orders null and void - Nullity is where there is a void act or an act having no legal force or validity – the AO have followed the rule prescribed, has given adequate opportunity of hearing to the assessee and there is no failure to consider the various objections raised by the assessee in its letters, does not amount to nullity in law – Decided against assessee. - I.T.A. No. 375/Coch/2014 - - - Dated:- 17-10-2014 - Shri N. R. S. Ganesan, JM And Chandra Poojari, AM,JJ. For the Petitioner : Shri Iype John, CA For the Respondent : Shri K. K. John, Sr. DR ORDER Per Chandra Poojari, Accountant Member: This appeal filed by the assessee is directed against the order dated 05-12-2013 passed by the CIT(A)-IV, Kochi for the assessment year 2005-06. 2. There was a delay of 160 days in filing the above appeal by the assessee before the Tribunal. The assessee has filed a petition seeking condonation of delay and also has filed an affidavit explaining the reasons for delay in filing the appeal before the Tribunal within the due date. The assessee submitted that one of the issues involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Ld. AR, there was no case for the AO that it was not agricultural income but the case was only that it was not credited to P L account. 7. The Ld. AR submitted that the CIT(A) referred to the Revenue's stand that profit or loss on the disposal of an asset was to be duly incorporated in the profit and loss account of a company prepared in accordance with Parts II KKK of Schedule VI to the Companies Act, 1956, the net profit per which is to be adopted by it for computing the 'book profit' under the MAT provisions including 115JB. As such there was no basis for excluding the profit derived from the sale of its agricultural land outside the Municipal limits and was exempt income under section 10. The Ld. AR submitted that the CIT(A) relied on the order of the Cochin Bench of the Tribunal in the case of Harrisons Malayalam Ltd. in I.T.A. No. 54/Coch/2009 and 60/Coch/2009 dated 12-05-2009 wherein it was held that profit accounted on sale of agricultural land namely Rubber Estate was not to be considered for the purpose of computing book profit under section 115JB of the Act. Accordingly, the CIT(A) held that the income was agricultural income and deleted the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of CIT vs. Shri Ram Singh (306 ITR 343) wherein it was held the tribunal was justified in holding that the proceedings for re- assessment under section 148/147 were initiated by the AO, on non-existing facts, because ultimately, the assessee has been able to explain the income, which was believed to have been escaped assessment, was explainable. It was further held that the AO was justified in initiating the proceedings under section 147/148, but then, once he came to the conclusion that the income, with respect to which he had entertained 'reason to believe' to have escaped assessment, was found to have been explained, his jurisdiction, to put to tax, any other income, which were found by him, to have escaped assessment. Thus when the very base of the reopening goes, the reason for reopening also goes. Thus, it was found that the action taken by the AO under section 147/148 was illegal and notice issued under section 148 was ab initio void and was thus quashed. 10. The Ld. AR submitted that the CIT(A) totally omitted to deal with the reasons recorded on objections and after holding that the income credited to P L account is agricultural income and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso doubted the genuineness of the sundry creditors, the same constituted sufficient reasons for re-opening of the assessment, even though no rental income was assessed in the reassessment. The assessee's claim that the Assessing officer could have issued notice u/s. 143(2) of the Act was not tenable as such a recourse open to the Assessing officer does not stand in his way of reopening the assessment u/s. 147 of the Act. He also relied on the judgment of Full Bench of the Kerala High Court in the case of CIT vs. Best Wood Industries and Saw Mills (2010) (331 ITR 63) (Ker.) (FB) wherein it was held that in the course of reassessment it comes to the notice of the Assessing officer of any item or items other than item of escaped income for which original assessment was reopened have also escaped assessment, he is bound to assess such item or items of income also in the course of reassessment. 12. We have heard both the parties and perused the record. In this case, the assessment was reopened on the reason that while computing business loss under the normal provisions of the Act, the assessee added back to the income as per P L a/c., agricultural expenses amounting to ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginally completed was reopened, also have escaped from original assessment, he is bound to assess such item or items of income also in the course of reassessment u/s. 147. In view of the specific provision providing for assessment of other items of income that have escaped assessment, and that comes to the notice of the Assessing officer in the course of income escaping assessment, the reassessments made are valid. Being so, in our opinion, there is no infirmity in the order of the CIT(A) on this issue. More so, this issue is fully covered by the Jurisdictional High Court, cited supra. Accordingly, this ground is dismissed. 14. The next ground is with regard to disallowance of provision of sales tax of ₹ 2,36,99,806/-. 14.1. Ld. AR submitted that the disallowance of provision for sales tax of ₹ 2,36,99,806/- was not sustainable. According to the AO, the provisions relate to demands from A.Y. 1982-93 to 1999-2000 based on assessment orders and the matter was still in the stage of appeal, reassessment etc. and the assessee has not paid the demand. Therefore, as per section 43B, this amount cannot be allowed under normal computation. Against this, the Ld. AR submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eases of the old one. Being so, the Ld. AR submitted that the provision for sale tax is an ascertained liability and is to be deducted. According to the Ld. AR, the CIT(A) confirmed the addition by holding that the liability has not been quantified as the assessments were in various stages of appeal revision assessment etc. 17. On the other hand, the Ld. DR submitted that provision made on account of sales tax was not an ascertained liability. 18. The Ld. DR submitted that the liability has not crystallized as on date and has also raised the issue as to why the assessee has not provided any explanation as to why the provision was made in the previous year and not in any of the years preceding. It was also clear, according to the Ld. DR, that the liability would crystallize only on the outcome of such appeals/reassessment, etc. Further, the Assessing officer has applied the ratio in the case of Bharath Earth Movers vs. CIT (2000) (245 ITR 428), wherein it was held that if a business liability has arisen in the relevant accounting year the deduction should be allowed although the liabililty is quantified and discharged at a later date. According to the Assessing officer what sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to follow the applicable accounting standards. However, if the profit and loss account and the balance sheet do not comply with the accounting standards, such companies are required to disclose about the deviation, reasons thereof and the financial impact thereon. This is provided so in sub-section (3A) and (3B) of section 211 of the Companies Act. 22. The accounting standards prescribe the method of treating various types of income and expenditure for the purpose of preparing the financial statements. Hence, in order to ensure uniform accounting practices and disclosures, the accounting standards have been made mandatory for the companies and, hence, they are required to follow them while preparing the financial statements. If any company deviates from the prescribed accounting standards, it has to disclose, inter alia, the financial effect arising due to such deviation. Thus, there is an option for the companies not to follow the accounting standards, if it feels so for any reason. Such deviation may have impact to the profit disclosed in the profit and loss account prepared in accordance with Part II and part III of Schedule VI of the Companies Act. Hence in order to enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence brought on record by the assessee to suggest that these assessment orders have been received by the assessee in the assessment year under consideration. The assessee, having received the sales tax assessment orders not in this assessment year and the liability being quantified in the earlier assessment years, it cannot be claimed in the assessment year under consideration. In other words, it was not an ascertained liability of the assessment year under consideration. Being so, the provision made by the assessee cannot be considered as allowable expenditure in the assessment year under consideration. In such kind of situations, the Assessing officer would definitely be entitled to make suitable adjustment to the net profit shown by the assessee to nullify the effect of such kind of accounting entries. 25. In view of the foregoing discussion, we hold that the Assessing officer was entitled to adopt the net profit after suitable adjustment for the purpose of computing the book profit u/s. 115JB. The judgment relied upon by the assessee in the case of Apollo Tyres, cited supra, cannot be applied to the present facts and circumstances of the present case. Accordingly, this groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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