TMI Blog2007 (10) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,89,426/-, which is claimed as a deduction in assessment year 1999-00 is disallowed, then, to the extent it pertained to the previous year relevant to assessment year 1994-95, the same may be allowed as a deduction in computing the profits of this year. For the sake of ready reference, the three grounds of the revenue are reproduced below:- 1. The learned CIT(A) has erred in deleting addition of ₹ 2,89,84,79,013/- made by the A.O. under section 68 of IX Act, 1961. In doing so ld. CIT(A) has:- a) Simply accepted all the arguments and written submissions made by the assessee gospel truth without making any reference to the assessment records and ignored the exhaustive findings given in the assessment order. b) Ld. CIT(A) has ignored the fact that since deposits have been raised by the assessee, the duty is cast upon it to furnish details of deposits of ₹ 20,000/- and above raised during the year, as per the statutory requirement, as laid down in form 3CD being Tax Audit Report, which the assessee has failed to do. c) Ld. CIT(A) has ignored the fact that the assessee has categorically defied the order of the A.O. under section 142(2A) of IT. Act, 1961 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2.1998. As per paragraph 76 of the order, the learned CIT(A) held that the admissibility of the expenditure of ₹ 2,76,24,511/- may be again considered by the Assessing Officer after going through various details with a view to ascertain the specific expenditure which could be disallowed. She also referred to pages 248 to 250 of the paper book, being the order of the Commissioner of Income-tax dated 22.3.1999 u/s 263 of the Act. In paragraph 6 of the order, it was inter-alia mentioned that it cannot be said that the A.O. exercised his quasi-judicial power in respect of genuineness of various deposits and, therefore, his order was erroneous in as much as no final finding was given on this issue. Consequently, the order was also prejudicial to the interests of the revenue and the Assessing Officer was directed to verify the genuineness of the deposits, for which the order was set aside on the limited issue. In paragraph 8, the order of the A.O. was set aside and restored to his file on the limited issue of the admissibility of the interest on the aforesaid deposits. She also referred to the order of ITAT, Lucknow Bench, lucknow in ITA No. 510/All/1999, dated 15.7.2003 in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed auditor, the correct facts would have come to notice and addition on proper basis could have been made u/s 68. 3.1 In regard to disallowance of interest references were made to various sub-paragraphs of paragraph 5 of the order of the A.O, which show that expenditure of ₹ 18,38,03,645/- was debited in the books of account under the head interest on deposits received under financial schemes . The assessee was required to furnish the details of depositors who defaulted in compliance with the terms and conditions of various deposit schemes and the details of new depositors, who joined the scheme in this year and defaulted in this or subsequent year. Such details were not filed. The assessee also did not comply with the direction u/s 142(2A), because of which exact interest liability could not be worked out. Further, it is mentioned that various names appearing in the ledger account could not be treated as effective depositors as many of them had defaulted at one time or the other. Interest was also not payable on matured but unredeemed deposits and it was also not payable on interest. Thus, it was pointed out that the liability for interest ought to have been worked o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat while the books were produced, the Assessing Officer refused to examine them. The books of account were audited and proper vouchers were maintained. Therefore, the impugned disallowance was deleted. It was the case of the learned DR that the finding was based on wealth-tax proceedings in another case and, therefore, the finding was perverse. Thus, it was agitated that the findings of the Assessing Officer in respect of ground nos. 2 and 3 may be confirmed and the order of the learned CIT(A) may be set aside to that extent. 3.3 In reply, the learned counsel for the assessee pointed out that in far as ground no. 1 is concerned, it arises out of the order of CIT passed u/s 263 of the Act. The ground of the assessee in this behalf was decided in favour of the assessee by the Tribunal on its appeal against the order of the learned Commissioner. The order of the Tribunal has not been displaced in any manner by any other subsequent order or decision of the High Court. Therefore, the issue stands concluded in favour of the assessee as the Assessing Officer could not have made the addition on the basis of the order of the Commissioner which becomes inoperative because of the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998, it was found that there was a short provision to the extent of ₹ 1,20,89,426/-, the exact interest liability being ₹ 178,77,18,993/-, against which liability of ₹ 177,56,29,567/- was provided. Thus, for assessment year 1998-99, there was no excess liability provided in the books so as to attract the provisions of section 41(1) of the Act. It was argued that the statutory audit was conducted at the instance of the A.O. by the auditor selected by the revenue, who found for assessment year 1998-99 that there was a short provision rather than the excess provision. In view thereof, it was contended that there was no reason to hold that excess provision was made in the books of the instant assessment year. 3.5 In regard to disallowance of expenditure, he referred to the order of the learned CIT(A) dated 15.2.1998 against the original order of assessment passed u/s 144 of the Act. In paragraph 76 on page 328. it is mentioned that the third claim was regarding administrative and other expenses out of which an amount of ₹ 5,43,23,372/- was disallowed. These additions would be discussed with the remaining grounds taken by the assessee in appeal. However, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Tribunal holds good and it has not been reversed by the order or decision of any higher appellate forum or the jurisdictional High Court. In view thereof, this ground does not survive. Therefore, ground no. 1 is dismissed. 5. The learned CIT(A) deleted the disallowance of interest on the ground that it was consequential in nature after deletion of addition u/s 68. However, that is not the case, as we have seen that the Tribunal had directed the Assessing Officer to examine this issue and the order of the learned CIT was found to be proper on the facts and in the circumstances of the case on this issue. Thus, this ground requires decision from us. The issue is whether, the assessee has been making reasonable provisions in respect of interest liability on deposits mobilized under various schemes from year to year? If the provisions made are reasonable even if not of exact amount, then, it would be futile to make any disallowance from the interest as exactness of the calculation would always be a matter of dispute arising out of the disputes whether some accounts could be termed as default accounts or lapsed accounts. At the instance of the revenue, statutory audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion that the expenditure was genuine or it was deductible u/s 37 of the Act. In view thereof, we are also unable to concur with the finding of the learned CIT(A) that proper vouchers were maintained and books of account were audited, leading to an irrefutable conclusion that the amount was deductible in computing the income. In such circumstances., we think it fit to restore the matter to the file of the Assessing Officer for verification of these expenses with reference to the vouchers and decide the matter de-novo after hearing the assessee. Thus, ground no. 3 is treated as allowed for statistical purposes. 7. In the result, the appeal of the revenue is partly allowed, as indicated above. C.O. No. 52/Luck/2005-A.Y. 1994-95-Cross Objection of the assessee 8. Various grounds taken by the assessee in the cross objections are in support of the order of the learned CIT(A). We have dismissed ground nos. 1 and 2 of the appeal of the revenue and restored the matter of deduction of expenses to the file of the A.O. 9. The assessee had also taken additional ground that out of the amount of ₹ 1,20,89,426/-, claimed as deduction in assessment year 1999-00, the amount pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in - (i) canceling the assessment made u/s 147, (ii) holding that there was no valid reason for reopening the assessment, and (iii) canceling the order after consideration of all the facts and circumstances of the case. 11.1 From the assessment order, it is seen that original assessment u/s 143(3) was completed on 26.3.1993 at total income of ₹ 25,07,554/-. Thereafter, notice u/s 148 was issued and served on the assessee on 4.11.1996 by recording the following reasons:- i) The assessee company had kept through out the year average funds of approximately ₹ 8,75,74,400/-with its sister concern M/s Sahara India Firm, and interest thereon at 18% i.e., ₹ 1,57,67,392/- had failed to be charged and declared as an income for the year. ii) The assessee company claimed operational expenses being service charge of ₹ 1,50,40,582/- as reimbursed to sister concern M/s Sahara India Firm but only 3% i.e., ₹ 4,51,215/-were permissible as genuine and the balance of ₹ 1,45,89,367/-being not genuine were not allowable as deduction; iii) Income from interest on FDRs loans and advances was wrongly charged at a lower rate than charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and no addition was made on this reason. The third reason was regarding accounting of interest income accrued on fixed deposits. This issue was explained to the A.O. on 16.9.1992 and the detailed working was given about the accrual of interest. The reasons recorded by the assessee did not specify as to how it was concluded by him that income from interest on FDRs, loans and advances was charged at lower rate. Thus, there was no non-disclosure on the part of the assessee on this ground also and there was no reason to believe for the Assessing Officer to come to the conclusion that the income has escaped assessment. Apart from this, it was argued that the notice was issued after four years of the end of the relevant assessment year and it was for the Assessing Officer to show that there was any error or omission on the part of the assessee in disclosing all material facts for assessment. Since all the facts had been disclosed, the Assessing Officer could not have reopened the assessment. The learned CIT(A) concurred with the arguments of the assessee and cancelled the assessment. 12. Before us, the learned DR pointed out that she has not prepared the case for lack of time and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out that if is held that an order which had been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen proceedings without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its wrong. Further, he relied on the decision of Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. Vs. R.B Wadkar and others, (2004) 268 ITR 332, a case dealing with reopening the assessment after four years from the end of the relevant assessment year. The Hon'ble Court pointed out that it has to be shown in the reasons that there was any failure on the part of the assessee to disclose all material facts necessary for his assessment. The reasons must provide a live link between the evidence on record and the conclusion of escapement of income drawn by the Assessing Officer. Such a link, if absent in the reasons recorded by the Assessing Officer, cannot be supplemented by filing an affidavit or tendering oral evidence at a later stage. It was his case that queries had been raised in the original assessment proceedings, which had been replied to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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