TMI Blog2009 (12) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 8,26,968 and did not disallow the remaining amount of Rs. 34,04,667 though, it was following the mercantile system of accounting. The audit objection is not acceptable. A reply to audit dated September 20, 2007 has already been sent. However as a precautionary measure the case may be reopened under section 148 to re-examine the issue. Administrative approval of the learned Commissioner of Income-tax-V, is kindly solicited for initiating remedial action." (paper book) The assessee objected to reopening of completed assessment. The objection was overruled. In the reassessment the Assessing Officer held that since the expense pertained to earlier year, same is not allowable in the current year. Accordingly in reassessment the assessed loss was reduced to Rs. 7,87,37,165. Before the learned Commissioner of Income-tax (Appeals) the assessee made elaborate submission as to validity of reassessment as also on the merits of the allowability of expenses. The learned Commissioner of Income-tax (Appeals) held that since the reassessment is within the period of four years from the end of the relevant assessment year, there is no restriction put forth by the proviso to section 147 as ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or period expenses are not allowable. Therefore, on this ground also the addition made by the Assessing Officer cannot be held to be justified. Accordingly, the same deserves to be deleted." The Revenue is in further appeal whereas the assessee has filed cross objection. The learned Departmental representative, Shri Alok Singh, submitted that the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition of Rs. 34,04,667 made on account of disallowance of prior period expenses without appreciating the fact that each assessment year is a distinct and independent period/year or assessment year and the expenses relating to the year under consideration alone are allowable. He has further ignored the fact that the assessee has been following the mercantile system of accounting and hence disallowance made was based on correct appreciation of the legal provisions in this regard. Learned counsel for the assessee, Shri R. K. Kapoor, on the other hand, reiterated the submissions made before the Commissioner (Appeals). He submitted that the expenses pertained to the year in which the liability has crystallised. Hence in view of the decision of the hon'ble Gujarat Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat cannot be done directly cannot be done indirectly. If the Income-tax Officer does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment. In a case of this nature the Revenue is not without remedy. Section 263 of the Act empowers the Commissioner to review an order which is prejudicial to the Revenue . . . The scope and effect of section 147 as substituted with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987, and subsequently amended by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989, as also of sections 148 to 152 have been elaborated in Circular No. 549, dated October 31, 1989 ([1990] 182 ITR (St.) 1). A perusal of clause 7.2 of the said circular makes it clear that the amendments had been carried out only with a view to allay fears that the omission of the expression `reason to believe' from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on a mere change of opinion. It is, therefore, evident that even according to the Central Board of Direct Taxes a mere change of opinion cannot form the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer attempts to reopen an assessment because the opinion formed earlier by him was in his opinion incorrect, the reopening could not be done. The power to reopen an assessment was conferred by the Legislature not with the intention to enable the Income-tax Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods. If an expenditure or deduction was wrongly allowed while computing the taxable income of the assessee, the same could not be brought to tax by reopening the assessment merely on account of the Assessing Officer subsequently forming an opinion that earlier he had erred in allowing the expenditure or the deduction." In the present case we find that the original assessment of the company was made under section 143(3) vide assessment order dated December 3, 2005. All the details were filed by the assessee, loss was assessed by the then the Assessing Officer who was very much satisfied with the details, documents and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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