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2014 (12) TMI 559 - AT - Income TaxValidity of reopening of assessment u/s 147 – Assessee contended that the assessment cannot be reopened after expiry of 4 years unless there is omission or failure on the part of Assessee to disclose fully and truly all the material facts necessary for assessment - Held that:- The addition ultimately made while completing assessment u/s 143(3) read with section 147 of the Act, has absolutely no nexus with the reasons recorded - action u/s 147 of the Act, was initiated after expiry of four years from the end of the relevant AY i.e. 2002-03 - neither there is any allegation by AO that escapement of income was due to failure on the part of assessee to disclose truly and fully all materials facts necessary for his assessment nor there is tangible material in possession of AO to show that there is escapement of income or under assessment of income - the addition ultimately made by AO has no nexus with the reasons recorded - reopening of assessment u/s 147 of the Act, beyond a period of four years from the relevant AY, that too in absence of tangible material is invalid in law – relying upon M/s. Rohini Biotech (P) Ltd. And Others Versus ITO (OSD) -2, Central, Hyderabad [2014 (1) TMI 129 - ITAT HYDERABAD] - there being no nexus or live-link with the reasons recorded and the ‘formation of belief’ to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being ‘no tangible material’ for the reopening of the assessment, the CIT(A) erred in confirming the order of the Assessing Officer – thus, the assessment order passed u/s 143(3) read with section 147 of the Act has to be quashed – Decided in favour of assessee. Addition on fixed assets by making investment in land u/s 69 – Held that:- The similar matter has been decided in M/s. Satabisha Biotech Pvt. Ltd. And Others Versus Income-tax Officer [2014 (12) TMI 431 - ITAT HYDERABAD] wherein it has been held that assessees have made investments in fixed assets and the source of such investments was the inflow available on the Liability Side of the Balance Sheet - Since the Assessing Officer has not properly appreciated the facts, before the CIT(A), the source was explained, and the same was accepted by the CIT(A) - there cannot be any addition made in this year and even in the subsequent year, i.e. in the year of sale, the source of investment cannot be disputed - it is not a fit case for making the addition u/s 69 of the Act – Decided in favour of assessee. Various expenses disallowed – Held that:- Assessee has not commenced its business activities during the year under consideration, hence, preoperative expenses, whatever has been incurred, have to be capitalized as there was no business income earned during the year against which it can be set off. In the aforesaid facts and circumstances, assessee’s claim of expenditure/allowances could not have entertained - the order of the CIT(A) is upheld – Decided against assessee. Verification of fresh evidences considered or not – Held that:- CIT(A) after considering the submissions of assessee in the context of facts and materials on record rightly deleted the addition made by AO as not only assessee has proved the identity of the creditor but also genuineness of the transaction as well as creditworthiness of the creditor was established - facts and evidences relating to unsecured loan from Shri B. Suryanarayana Raju were also part of the record before AO – thus, there was no merit in the contention that CIT(A) has considered fresh evidence while deleting addition – Decided against revenue. Assessment of agricultural income – Income treated as income from other sources – Held that:- CIT(A) did not accept the claim of assessee for the reason that assessee itself did not claim it as agricultural income and has shown it as business receipt – there was no infirmity in the assessment order for treating lease rental income as income from other sources - Similarly, decision of ld. CIT(A) in respect of allowance of administrative expenditure is just and reasonable as he has sustained a part of disallowance made by AO since assessee could not substantiate its claim fully – the order of the CIT(A) is upheld – Decided against assessee.
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