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2014 (12) TMI 63 - HC - Income TaxReopening of assessment u/s 147 r.w section 148 - reasons to believe – Held that:- The Tribunal was rightly of the view that the “reasons to believe” correctly records that a provision made in accounts for an accrued and known liability is an admissible deduction - the amounts shown under the head “provision” per se is not to be disallowed as unascertained expenditure - The “reasons to believe” do not state why and how the AO came to the conclusion that the provision for expenses was an unascertained liability - assessee was following the mercantile system of accounting and any liability which had been incurred was to be allowed as a deduction, even when payment was not made in the said year - the “reasons to believe” must show live link and nexus with the formation of prima facie opinion that income which should be taxed has escaped assessment - In the absence of any cogent and relevant material or information to show that the amount shown under the head provision included unascertained liability, re-assessment proceedings could not have been initiated - There is a difference between “reasons to believe” and “reasons to suspect”. It was the responsibility of the Revenue to bring on record documents and material to show and establish that the “provisions” related to unascertained liability and the AO while forming his opinion and recording “reasons to believe” was in knowledge or aware of information or material to show that what was shown under the head “provision” was not a certain and accrued liability - in the absence of any material or information, “reasons to believe” it has to be held were not relevant and meet the test of satisfaction required to sustain the reopening - use of the heading or word “provision” in the balance sheet it is apparent became the material or information to reopen - the word/expression “provision” by itself and alone without other information/material, would not reflect and indicate unascertained liability - the assumption drawn by the AO in the “reasons to believe” is farfetched, vague and a mere pretence - “unascertained liability” had been claimed and allowed as expenditure – Decided against revenue.
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