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2015 (6) TMI 530 - ITAT DELHI

2015 (6) TMI 530 - ITAT DELHI - TMI - Reopening of assessment - CIT(A) quashed reopening - Held that:- CIT (A) has clearly mentioned that the escapement of income was not on account of failure on the part of the assessee to fully or truly disclose all material facts necessary for assessment. Further, there is nothing on record to suggest that there is a new material in possession of the Assessing Officer, indicating escapement of income, to initiate reassessment proceedings. Therefore, in the li .....

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ed:- 12-6-2015 - Shri N. K. Saini And Shri George George K, JJ. For the Petitioner : Shri Suresh Anantharaman, Advocate For the Respondent : Shri P. Dam Kanunjna, Senior DR ORDER Per George George K., JM : This appeal, at the instance of the department, is directed against the order of the Commissioner of Income-tax (Appeals)-XII, New Delhi dated 15.03.2013. The relevant assessment year is 2002-03. 2. The solitary effective ground reads as follows :- Ld. CIT (A) erred in law and on the facts of .....

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y issuing of a notice u/s 143(2) of the Act. The scrutiny assessment was completed vide order dated 28.02.2005 by accepting the returned income as declared by the assessee. Subsequently, a notice u/s 148 of the Act was issued and duly served upon the assessee on 31.03.2009 by recording the following reasons :- "1. In this case scrutiny assessment was completed on 28th February, 2005 for the assessee year 2002-03 at an income of ₹ 63,25,120/-. The assessee was allowed deduction u/s 80H .....

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penditure in any previous year by way of payment of any sum to an employee at the time of his voluntary retirement, one fifth of the amount so paid shall be deducted in computing the profit and gains of the business for that previous year and the balance-shall be deducted in equal installment for each of the four immediately succeeding previous year. The assessment of M/s Handicraft & handloom Exports Corporation for the assessment year 2002-03 was completed after scrutiny in February 2005, .....

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57,35,2001- with consequent short levy of tax ₹ 20,47,466/-. 3. Income Tax Act, 1961, provides that any expenditure not being expenditure of capital nature laid not wholly or exclusively for the purpose of business is allowable as deduction in computation of the income chargeable under the head ''profit & gains of business or profession" further it has been judicially held in the case of Hasinagar Industries and another V CIT 231 ITR 842 that if bad debt debited in the pro .....

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so resulted under assessment of income by ₹ 76,91,649/- involving short levy of tax of ₹ 27,45,909/-. The various objections raised by the assessee for reopening the assessment, was rejected by the Assessing Officer and reassessment u/s 147 read with section 143 (3) of the Act was completed by an order dated 30.12.2009, computing the total income at ₹ 1,24,24,380/-. 4. The assessee being aggrieved by the reassessment filed an appeal to the CIT (A). The CIT (A) quashed the reass .....

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ed the submissions made before the income-tax authorities and also relied on the recent judgment of Hon ble jurisdictional High Court in the case of Madhukar Khosla vs. ACIT reported in 367 ITR 165. The ld. Counsel submitted that without any new material coming into the possession of the Assessing Officer that indicate escapement of income, the reassessment is bad in law. 8. We have heard the rival submissions and perused the material on record. The CIT (A) had quashed the reassessment proceedin .....

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……………….. From the above, it is clearly evident that there is no allegation or whisper that there is failure on the part of the assessee to disclose fully and truly 'all material facts'. This very issue goes to the jurisdiction of the AO to issue notice under section 148 of the Act. The non recording of such satisfaction in the reasons recorded makes the entire reassessment proceeding bad in law and void. It is seen that the reopening u/s 147 was .....

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ributed to the assessee of not disclosing fully truly all relevant primary material facts necessary for completion assessment because in the reasons itself it is mentioned that - the assessee had debited to profit and loss account a sum of ₹ 71,69,000/- on account of payment under voluntary retirement scheme ... " It is evident that reasons recorded are based on the balance sheet of the assessee which were furnished with the return of income. Further it is self evident that the inform .....

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143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure OM the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts nec .....

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present case before us as discussed above the Assessing Officer during original assessment proceedings had raised a question on the issue of the claimed bad debt and on the provision of warranty and current liabilities vide query no.12 of the questionnaire and being convinced with the submission of the assessee made in this regard he had accepted the claim. The tax Audit Report filed by the assessee was already there on record on the basis of which reopening of assessment u/s 147 has been initia .....

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r under consideration ... We do not find reason to interfere with the findings of the Id. CIT(A) that initiation of reopening proceedings in the present case was barred under the proviso of section 147 of the Act and hence we are of the view that the ld. CIT(A) has rightly quashed the assessment u/s 147/143(3) of the Act made in furtherance to the invalid notice issued U/S 148 of the Act." Reliance in this respect is also placed on the following judgment is as under:- In the case of Commiss .....

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uot; are those facts which are material and relevant for the decision of the question before the Assessing Officer and non-disclosure of which would have a material bearing on the question of escapement of income from assessment. Whether or not "primary facts" have been disclosed is normally a question of fact and depends upon the facts and circumstances of each case. The requirement of Explanation 1 is that there should be full and true disclosure of the primary or material facts and .....

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ction 80HHC (4) of the Act. Similarly, the assessee had claimed deduction under section 80-IB of the Act, which was specifically mentioned in the audited accounts and the auditor's report. The special deductions were allowed. Subsequently, in March, 2006, reassessment proceedings were initiated by the Assessing Officer after recording that the computation of deduction under section 80HHC was allowed without reducing the deduction claimed and allowed under section 80-IB as required by section .....

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the assessee. It was not alleged that the assessee had suppressed, misrepresented or falsified the record/facts. It was also not alleged that there was any subsequent factual information on the basis of which it was found that the assessee had not fully disclosed the primary facts or had falsified or disclosed incorrect primary facts. The reassessment proceedings were not valid ... " Atma Ram Properties Pvt. Ltd. vs. DCIT[2012) 343 ITR 141(Delhi) the Delhi High Court has stated as under:- & .....

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state or explain the law ... " BLB Limited Vs Assistant Commissioner of Income-tax [2012] 343 ITR 129 (del.) " ... Held, allowing the petition, that the assessee had disclosed fully and truly all material facts relevant for the assessment. The reasons recorded did not disclose or state that there was failure or omission to disclose fully and truly all material facts. There was no indication and it was not alleged that there was some material or information available on record when reas .....

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ing Officer was legally wrong and had misapplied and wrongly understood the law/legal position." Further reliance is also placed in the case of CIT vs USHA International Ltd. In ITA No. 2026/2010 dated September 21, 2012 where in the court reiterated that onus is on AO to prove that there is failure on the part of the assessee to disclose truly and fully of all particulars of income which resulted into an escaped assessment. In case of the non-observation of the same, the entire proceedings .....

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ficer differs. In view of the above, it is submitted that, proceedings initiated u/s 147 of the Act and completion of assessment u/s 147/143(3) of the Act is illegal and is quashed. The CIT (A) has considered the precedent on the subject and held that the reopening is bad in law since the Assessing Officer has not mentioned in the reasons recorded that the income has escaped assessment on account of the failure of the assessee to fully and truly disclose material facts necessary for assessment. .....

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