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2016 (2) TMI 462 - ITAT CHENNAI

2016 (2) TMI 462 - ITAT CHENNAI - TMI - Reopening of assessment beyond the time allowed - period of limitation - whether the date on which the block assessment was framed, the AO could have taken action by issue of notice u/s.149(1)(b)(iii) - addition u/s.43B - Held that:- When by an order of the Tribunal, the income is excluded from the total income of the assessee for the block assessment, then the assessment of such income for the assessment year 1998-99 shall be deemed to be one made in cons .....

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cannot be any further disallowance in the reopened assessment. In our opinion, this argument of the ld. AR is having no merit. The assessment was not completed as per return of income filed by the assessee, whereas it is completed on the income admitted by the assessee on its own admission as the assessee has made various claim u/s.10B, 80IA etc. which appears to be merely to offset the excess income booked in the window dressed profit & loss account. The disallowances u/s.43B were taken care of .....

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DICIAL MEMBER For The Appellant : Shri R. Venkatesh, FCA For The Respondent : Dr. B. Nischal, JCIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals) dated 12.12.2013 for the assessment year 1998-99. 2. The assessee has raised the following grounds: 1. The order of the ld. CIT(A) in ITA No.698/753/13- 14(A)-V is erroneous in law contrary to facts and untenable. 2.1 The ld. CIT(A) grossly erred in law i .....

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wance u/s.43B as per the Special Audit Report was made. 2.3. The ld. CIT(A) had grossly mistaken in concluding that the observation of the Hon ble ITAT in their order in ITA No.70/Mds/2004 in respect of the Block Assessment can be taken as directions in respect of disallowance u/s.43B, thus extending the jurisdiction u/s.150 of the ITACT, 1961. 3.1 The ld. CIT(A) grossly erred in confirming the disallowance of ₹ 7,02,87,355/- u/s.43B in respect of interest. 3.2. The ld. CIT(A) failed to ap .....

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llant as against the reopening cannot be accepted in toto, thus leaving still another view in his mind as the ld.CIT(A) seems to be in doubt. 5. The ld. CIT(A) had further grossly erred in holding that the AO having already rejected the rectification application, the same cannot be adjudicated again, thus failing to adjudicate the grounds raised in the appeal filed in the 154 proceedings in ITA No.753/2013-14. 3. At the time of hearing, the ld. AR stated that the assessee is not interested to pr .....

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oss, the then AO among many other additions had disallowed ₹ 13,29,74,324/- u/s. 43B relating to interest debited in the P&L account towards financial institutions and banks. The additions in the said assessment were based on the findings in the Special Audit report u/s.142(2A). dated 20.09.2001. While not allowing the determined loss to be carried forward, the taxable income of the assessee was taken by the AO at ₹ 3,00,000/- as declared in the return of income filed. It is stat .....

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2001. In the said Block assessment for AY 1998-99, the then AO, among many additions also made disallowance of ₹ 7,02,87,355/- u/s 43B being interest debited to the P&L account as payable to financial institutions. This block assessment was taken in appeal and the Tribunal, Chennai Bench B in its order dt. 05.06.2009 in ITA No. 70/Mds/2004 deleted the addition made u/s 43B on the ground that such additions cannot be made in the block assessment. 4.1 The assessee preferred a rectificati .....

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on dated ·06.01.2012 (which is also in appeal) the AO has refused to consider the plea for rectification stating that, "in the normal assessment order though the AO arrived at a loss after taking into account the disallowance u/s. 43B, he concluded and estimated the income at ₹ 3,00,000, i.e., the loss arrived was ignored. Therefore, the question on disallowance u/s 43B which is already been considered in the normal assessment order is not correct . 5. On appeal, the CIT(Appeal .....

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ails in the Special Audit Report dt. 20.09.2001 u/s 142(2A). In the block assessment order passed subsequently on 30.05.2001, prior to the original assessment, an addition of ₹ 7, 02, 87,355 was made u/s 43B, with the notings that interest of ₹ 8,42,38,418 was debited to the P&L account as payable to financial institutions remained unpaid and after deducting ₹ 1,39,51,063, being interest disallowed u/s 43B in the earlier year paid during the year, the balance is disallowed .....

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9.2001. According to the CIT(Appeals) even though the AR of the assessee has objected for reopening the assessment and made an addition of ₹ 7,02,87,355/- on account of unpaid interest u/s 43B to Financial Institutions, the Assessing Officer is justified in reopening the assessment following the directions given by the Tribunal view its order in ITA No.70/Mds/2004 passed in the block assessment, made an observation that those disallowances are not matter of false claim and are matter of re .....

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ent accordingly. According to the CIT(Appeals), the AO has correctly reopened the assessment by issuing a notice u/s 148 and, therefore, he dismissed this ground of appeal. Further, keeping in view of the findings of the Special Audit Report as well as the assessee could not distinguish the addition made u/s 43B at ₹ 7.02 crores being unpaid interest has already been taken care in the interest disallowed u/s 43B in the original assessment order passed u/s 143(3) on 12.11.2001, the CIT(Appe .....

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dy rejected the rectification application filed before him, the same cannot be adjudicated again afresh keeping in view of the observation made regarding the reopening of the assessment as well as confirming the addition made u/s 43B at ₹ 7.02 crores. Against this, the assessee is in appeal before us. 6. We have heard both the parties and perused the material on record. It is seen from the above that the assessment for the year 1998-99 was reopened on the basis of the findings of the Tribu .....

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se prescribed prior to the said date. Different time limits have been prescribed depending upon the amount, income chargeable to tax that has escaped assessment. Sec.150 makes provision for cases where an assessment made in pursuance of an order on appeal, reference or revision or an order of a Court in any proceeding under any other law. Subsec.( 1) of sec.150 says that the time limits prescribed in s.149 will not apply, which means that a notice u/s.148 may be issued at any time for the purpos .....

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made in respect of an assessment year where such an order of assessment, reassessment or recomputation could not have been made at the time the order, which was the subject matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken, then no notice u/s.148 can be issued. The rational behind this provisions is not to confer upon the AO the jurisdictio .....

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nding on appeal can be utilized to reopen the assessment for the assessment year 1998-99 without any time limit by virtue of the provisions of sec.150(1), the reason being that had the AO been aware even when he completed the assessment for the assessment year 1999-2000 that the income was assessable in the assessment year 1998-99, he would and could have included the income in that assessment year itself. This in turn postulates that an assessment or reassessment for the assessment year 1998-99 .....

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present case. The assessment for the block period 1989-90 to 1999-2000 was completed u/s.158BC vide order dated 30.5.2001. The assessment u/s.143(3) r.w.s.147 of the Act for the assessment year 1998-99 was passed on 11.11.2011. The assessment for the block period was subject matter of appeal before the Tribunal and the Tribunal in its order dated 5.6.2009 observed that the impugned payment may be hit by the provisions of sec.43B, but the same cannot be treated as false because the expenditure h .....

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1998-99. As it stood on 30.5.2001, no notice u/s.148 shall be issued for the relevant assessment year, if seven years but not more than ten years from the end of the relevant assessment year. Thus, on 30.5.2001, the AO could have issued notice u/s.148 in respect of assessment year 1998-99. Therefore, the AO could have validly issued notice u/s.148 on 31.3.2011 taking advantage of the direction issued by the Tribunal in the appeal for the block assessment. Such a notice is saved by sub-sec.(1) of .....

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r the provisions of sec.149, as they stood on 30.5.2001. As it clear from the words assessment year in respect of which on assessment, reassessment or recomputation could not have been made at the time the order which was the subject matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the recomputation may be taken. In the very nature of things, such other provision limiting the time for issue of notice u/s.149 has to be reckoned wi .....

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e Tribunal in the block assessment that the addition u/s.43B cannot be made in the block assessment, in view of the provisions of sec.150(2) of the Act, the extended time is available to issue notice u/s.148 for the AY 1998-99. Thus, notice for reopening of assessment issued on 31.3.2011 for the assessment year 1998-99 as the block assessment passed on 28.12.2006 was justified. Reading of sec.150(2) shows that such reopening of assessment is not barred by limitation and the provisions of sub-sec .....

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ority to taxation in another assessment year to which assessment year it is related. 10. Being so, when the Tribunal deleted the addition in the block assessment period and observed that it cannot be added in the block assessment, the AO has rightly brought to tax the same in the assessment year 1998-99. This view of our is supported by the judgment of the Karnataka High Court in the case of Dy CIT vs. Spences Hotel (P) Ltd. (208 CTR 224), wherein it was held that Notice under s. 148 for asst. y .....

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finding of the Tribunal in its order regarding escaped income of the assesse, notice under s. 148 was issued on 17th Nov., 1998. The provision of s. 150(1) begins with the words notwithstanding anything contained in s. 149 and it states that notice may be issued at any time to give effect to any finding contained in any order passed by any authority in any proceeding under the Act. The notice issued to the assesse was pursuant to the finding of the Tribunal referred to supra regarding the escape .....

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f the Tribunal, the income is excluded from the total income of the assessee for the block assessment, then the assessment of such income for the assessment year 1998-99 shall be deemed to be one made in consequence of, or to give effect to any finding or direction in that order (in appeal) for the purpose of lifting the ban of limitation under Explanation 2 to sec.153(3). Reliance is placed on the following judgments : (i) Kamlapath Motilal vs. CIT (SC) 193 ITR 338 (ii) Mahadeo Prasad Rais (Dec .....

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the concluded assessment. According to the ld. AR, the income was determined in the original assessment dated 12.11.2001 after taking into account all admissible expenses including depreciation and the disallowances towards inadmissible expenses such as donation, income-tax, expenses not paid before due date as per sec.43B, provision towards gratuity, commission to Managing Director etc, under the Act. Once it is observed as above, it means that there is no escapement of income so as to reopen .....

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