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TMI Blog2016 (4) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion. (iii) The Learned CIT(A) has erred on facts and in law in not appreciating that this is a case where no opinion was formed by the Assessing Officer and therefore reopening was outside the scope of change of opinion. (iv) The Learned CIT(A) has erred on facts and in law in not properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer in reason recorded for reopening the Assessment. 2. The Ld. CIT(A)'s order is contrary in law and on facts and deserves to be set aside. 3. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary." 3. The brief facts of the case are that the assessee company has filed its return of income declaring total income of Rs. 55,19,179/- on 05-12-2006 and the assessment was completed u/s 143(3) read with Section 143(2) of the Income Tax Act, 1961 (Hereinafter called "the Act") vide assessment orders dated 09-07-2008 passed by the learned assessing officer (Hereinafter called "the AO") u/s 143(3) determining the total income of the assessee company at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htra State which provided that the Sales Tax Payable by the eligible unit would be deemed to have been paid on due date and simultaneously the same amount would have been deemed to be disbursed by the Government as loan to the eligible unit. Hence, it was assumed that the revenue collection of statutory dues stood fully paid due to which no addition were required to be made u/s 43B of the Act. In other words the revenue liability was extinguished and a capital liability came into existence. The sales tax deferral amounts were payable in installments spread over a period of time and subsequently, the Maharashtra State offered to accept the NPV. (i.e. Net Present Value) of the deferral installments if paid in lump sum before due date of each installment. The assessee company availed the benefit of this scheme and paid NPV by reducing Rs. 10,72,897/-. The assessee company did not offer this amount for taxation as the benefit has accrued to the assessee company on extinguishment of a capital liability, which is not taxable. The assessee company submitted that the assessee company had taken the benefit of the scheme and paid the discounted value of loan which was payable in number of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued after expiry of 4 years from the end of the relevant assessment year was bad in law. The assessee company further submitted that as per proviso to Section 147 of the Act where the assessment is completed u/s 143(3) of the Act, no action shall be taken after the expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment by reason of the failure on part of the assessee company to disclose fully & truly all material facts necessaryJ for the assessment. In this case all the details & effect of Modvat on opening & closing stock were given under Annexure "D" of Tax Audit Report & also in computation of income which was attached with return of income filed by the assessee company with the Revenue and hence the assessee company has disclosed fully & truly all material facts necessary for the assessment. The assessee company submitted that the revenue audit team has raised objection on three issues out of which in respect of leave encashment, they have accepted the reply of the A.O. and in the case of other two objections, they have not accepted the A.O.'s reply. The objections raised by the revenue audit team are as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is very clear from the revenue audit team objection's . In nutshell, the assessee company submitted that the re-opening was bad in law on account of three following issues:- "(i) Re-opening has been done merely on the basis of audit objection; (ii) Re-opening is done after expiry of 4 years from the end of the asst. year when the scrutiny assessment is passed u/s. 143(3); and (iii) Since all the details are available on the record, which were supplied at the time of assessment, it cannot be said that the income escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts. (iv) Without prejudice, since all the details are available on the record and the AO has passed the order by not applying his mind on the facts as mentioned very clearly in para 2 of the original asst order passed on 09-07-2008, if any other view is taken which tantamount to change of opinion which is not permitted for re-opening of the assessment." In support, the assessee company relied on the following judgments:- (i) CIT v. Kelvinator of India Ltd. , 320 ITR 561(SC) (ii) ICICI Home Finance Co. Ltd. v. ACIT [2012] 210 Taxman 67(Bom.HC.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rral installments is cessation of liability and liable for tax. As per the provisions u/s 41, where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or liability incurred by the assessee and subsequently during any previous year the assessee has obtained whether in cash or in any manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the benefit obtained shall be deemed to be profits and gains of business. 4. Thus, there is an escapement of income to the extent of Rs. 82,80,557/- (Rs. 72,07,660/- + Rs.l0, 72,897). The escapement of income is by the reason of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment for A Y 2006-07. I, therefore, have a reason to believe that the income chargeable to tax has escaped assessment and therefore, it is a fit case of assessing the same u/s 147 of the Act by issuing notice u/s 148 of the Act." The AO issued notice u/s 148 of the Act dated 28-03-2012 which is admittedly issued after the lapse of four years from the end of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company to disclose fully and truly all material facts necessary for the assessment and since the reopening was made on the basis of change of opinion, the reopening of assessment was bad in law and therefore, deserves to be quashed. 7.Aggrieved by the orders dated 20-05-2013 passed by the CIT(A), the Revenue is in appeal before the Tribunal. 8. The ld. D.R. strongly supported and relied upon the order of the A.O. and submitted that the A.O. has reopened the assessment u/s 147 /148 of the Act by issuing notice dated 28.03.2012 u/s 148 of the Act as the assessee company has not shown Modvat credit in the closing stock. Section 145A of the Act mandatorily requires notwithstanding anything to the contrary contained in section 145, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head profits and gains of business or profession shall be in accordance with the method of accounting regularly employed by the assessee company and further adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee company to bring the goods to the place of its location and condition as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no failure on the part of the assessee company in fully and truly disclosing all the material facts and hence the reopening is bad in law. The ld. Counsel submitted that the reasons for reopening was recorded by revenue on 26-03-2012 which is at page 15 of paper book filed with the Tribunal which are on account of non-inclusion of Modvat credit of Rs. 72,07,660/- in the closing stock as required u/s 145A of the Act whereby it was submitted that the said change in method of accounting was bonafide and being revenue neutral as the lower amount of the closing stock will become lower amount of opening stock in the next year and tax impact will be neutral and no prejudice is caused to Revenue by the change in method of accounting which was bonafide and also the said changed method is thereafter consistently followed and secondly the reduction of Rs. 10,72,897/- being rebate on non-payment of sales tax deferral installments scheme whereby the assessee company has followed the scheme of Government and prepaid sales tax remission liability. It cannot be a rebate given by the government considering that net present value of the sales tax paid to the government. All the details were given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income from where the A.O. seeks all the prescribed information which is vital and necessary for framing the assessment. It cannot by any stretch of imagination be said that the A.O. has not gone through the tax audit report while framing assessment u/s 143(3) of the Act and in fact the A.O.is duty bound to go through the same before framing the assessment . The said information was also duly declared and disclosed in the computation of income filed with the Revenue Authorities. The Revenue is seeking reopening of the assessment based on the information received from the revenue audit team. Thus, as per section 147/148 of the Act change of opinion is not permitted as the AO while framing the original assessment u/s 143(3) of the Act vide orders dated 09-03-2008 has duly applied his mind to the issues as detailed above and is now re-opening the assessment merely on the basis of information received from revenue audit team while there is no independent application of mind by the AO before re-opening the assessment which is not permissible and more-so when the AO has passed scrutiny assessment u/s 143(3) of the Act in original assessment and four years have elapsed from the en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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