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2015 (7) TMI 764 - ITAT DELHI

2015 (7) TMI 764 - ITAT DELHI - TMI - Reopening of assessment - CIT(A) quashed reopening orders - Held that:- In the reasons, the AO has nowhere mentioned about any kind of failure on the part of AO to disclose fully and truly all material facts. The AO adopted the figure of outstanding loan against the directors from audit report at ₹ 17,76,66,492/-, whereas in the balance-sheet it was ₹ 4,13,61,284/-. The reopening solely on the basis of different figures, appearing in the balance- .....

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ddition on this count. Therefore, reasons recorded on this count, were rightly not sustained by ld. CIT(A).

Addition on account of repair and maintenance, building expenses and design and Act work expenses - CIT(A) deleted additions - Held that:- Before AO itself the assessee had pointed out that a query was raised during assessment proceedings in respect of design and art work expenses and the same was specifically replied vide assessee’s letter . Similarly, it was pointed out that i .....

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s evident that there was no failure on the part of the assessee to disclose fully and truly all material facts, necessary for coming to a conclusion, whether the amounts claimed by assessee in its P&L a/c were revenue or capital in nature. The AO had applied his mind during assessment proceedings and after examining in detail the evidence furnished by assessee came to the conclusion that the amounts were allowable as revenue expenditure, after disallowing ₹ 5,88,350/- under the head “Repai .....

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- Dated:- 8-7-2015 - Shri S.V. Mehrotra and Shri A.T. Varkey, JJ. For the Petitioner : Shri Hiren Mehta CA For the Respondent : Shri B.R.R. Kumar Sr. DR ORDER PER S.V. MEHROTRA, A.M: This appeal, preferred by the revenue, is directed against CIT(A) s order dated 11-07-2012 relating to A.Y. 2004-05. Following grounds are raised: 1. The Ld. CIT(A) erred in law and on facts by quashing reassessment under section 147/148 of the Act as the failure is on part of the assessee to disclose truly and ful .....

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0/- on 1-11-2004. The assessment was completed u/s 143(3) on 22-3-2005. Thereafter, AO issued notice u/s 148 on 23-3-2011 after recording following reasons: During the year, the assessee company has shown an amount of ₹ 4,13,61,284/- as Unsecured loans from Directors in schedule 4 of the balance sheet whereas as per Annexure I-1 to Form 3CD of the Audit Report, the Outstanding unsecured loan against the Directors was shown at ₹ 17,765,66,492/-. This shows that the assessee has not ac .....

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essee. 3. The assessee vide its letter dated 14-4-2011 submitted that the return filed on 1-11-2004 may be treated as return of income in response to notice u/s 148. Assessee further requested for reasons recorded for reopening the assessment, which were also provided to it. The AO, subsequently issued notice u/s 142(1) and completed the assessment making addition of ₹ 45,51,667/- by treating the expenditure incurred on account of design and art work and expenditure incurred on repairs of .....

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ounsel for the assessee, quashed the reassessment proceedings, mainly for following reasons: (a) Reassessment proceedings were initiated after the expiry of four years. Therefore, in view of proviso to section 147, since there was no failure on the part of the assessee to disclose fully and truly all material facts, necessary for its assessment, no reopening could be done. (b) The reasons were based on form 3CD and not on any new material. Since the assessment was completed u/s 143(3), therefore .....

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reopening has been done after four years from the end of the relevant assessment year and, therefore, the proviso to section 147 was attracted. In view of this proviso, unless there was failure on the part of the assessee to disclose fully and truly all material facts, necessary for assessment, no reopening could be done. A bare perusal of the reasons recorded by AO makes it evident that the reopening has been done, firstly, on the basis of alleged difference between the unsecured loans from dir .....

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udit report at ₹ 17,76,66,492/-, whereas in the balance-sheet it was ₹ 4,13,61,284/-. The reopening solely on the basis of different figures, appearing in the balance-sheet and in form 3CD in respect of same item, could not be done without proper application of mind before recording the reasons. The cardinal principle is that before reopening the assessment the AO should apply his mind and reach a prima facie conclusion regarding escapement of income and should not mechanically recor .....

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ee had pointed out that a query was raised during assessment proceedings in respect of design and art work expenses and the same was specifically replied vide assessee s letter . Similarly, it was pointed out that in regard to repairs and maintenance of building and plant & machinery, the assessee was asked to furnish explanation for each and every item, which was duly complied with by filing a letter in this regard. Further, it was pointed out tht the details of machinery and building repai .....

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sessment proceedings and after examining in detail the evidence furnished by assessee came to the conclusion that the amounts were allowable as revenue expenditure, after disallowing ₹ 5,88,350/- under the head Repairs and maintenance , treating the same in capital field. . Therefore, it is evident that reopening has been done purely on the basis of change of opinion in regard to the items mentioned in the reasons recorded by AO, which is not permissible in view of the decision of Hon ble .....

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