TMI Blog2014 (2) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... diting remainder to the Profit and Loss account – thus, there was no failure on part of the assessee to disclose truly and fully all material facts - There was no suggestion that the income chargeable to tax had escaped assessment for the failure of the assessee to disclose truly and fully all material facts - There was no hint in the reasons recorded by the Assessing Officer that there was failure on part of the petitioner in disclosing true and full facts – Notice is liable to be set aside. Disallowance u/s 32A of the Act - Investment allowance – Agreement to sell – Held that:- The grounds relied upon by the Assessing Officer simply would not permit him to reopen the assessment that too after four years of end of relevant assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000. Beyond a period of four years from the end of relevant assessment year, the impugned notice came to be issued on 25.7.2003. 3. At the request of the petitioner, the Assessing Officer supplied the reasons recorded for issuing such notice. Such reasons read as under : In this case net profit as per account was Rs.5.5 crore. The said net profit arose only on account of profit on sale of assets shown in schedule 8 of the balance sheet to an extent of Rs.7.51 crores. However, no taxes were paid even under section 115JA on account of noting in schedule 12(3)(d) of the notes to the account, which stated that arrears of depreciation were to an extent of Rs. 6.25 crore. 2. It is also noticed that in schedule 12(3) of the notes to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished goods at market rate. 4. The petitioner raised objections to the proceedings of reopening under a communication dated 7.10.2004. The Assessing Officer however, rejected such objection on 3.2.2005. Hence this petition. 5. Drawing our attention to the reasons recorded by the Assessing Officer in issuing notice for reopening, counsel for the petitioner contended that : 1) there was no new material available with the Assessing Officer to reopen the assessment which was previously framed after scrutiny. 2) there was no allegation in the reasons recorded that the income chargeable to tax had escaped assessment for the failure of the petitioner to disclose truly and fully all material facts. 3) even otherwise, drawing our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the remainder was credited to Profit and Loss account. According to the Assessing Officer, entire amount of Rs. 7.51 crores should have been taken to Profit and Loss account without netting the said figure after adjustment of the brought forwarded the loss of MEK and Foods Division. 7.2 The second reason pertained to disallowance under section 32A of the Act of the investment allowance earlier granted to the assessee with respect to Carbon Black unit which was sold. It was noted that no such disallowance was made though required. 7.3) The third ground was that as per the agreement to sale dated 27.5.1996, the assessee company was required to transfer the packed finished goods at market value. From the assessment order, however, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee charged and received only the book value of its finished product, there was no reason for the Assessing Officer to tax the amount which the petitioner never received. There was simply no escapement of income chargeable to tax in this case. 10. This brings us to the more contested issue of reopening the assessment. Ground (1) pertains to sale of one of the unit of the petitioner company at Rs. 7.51 crores. According to the Assessing Officer, this entire sale proceeding should have been credited to Profit and Loss account. The petitioner instead adjusted the loss of MEK and Foods Division and only net amount was transferred to Profit and Loss account. 11. We are not concerned with sufficiency of the reasons recorded by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to PCBL. (d) The arrears of depreciation calculated under section 205 of the Companies Act 1956 will however, have to be first set off against future profit of the Company and only balance profit will be available for distribution of dividend. Such arrears of depreciation is Rs.625.10 lacs. Sales of Rs.3363.06 lakhs is net of Discount Rs.162.43 lakhs allowed to customers (Previous year Rs.202.14 lakhs) and inclusive of Rs. 104.23 lakhs being the stock of Carbon Black transferred to Phillips Carbon Black Limited. 12. From such notes, it can clearly be seen that the reason why the assessee did not credit the entire sale consideration of Rs. 7.51 crores to the Profit and Loss account was explained. Explanation whether valid in l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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