TMI Blog2011 (4) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO u/s 148 of the Income Tax Act, 1961. 2. That the assessee craves to add, alter and/or delete any grounds of appeal at later stage, if necessary. 3. The assessee is a Government of India undertaking. As per computation of income its return of income was filed at Nil on 28.11.03 and subsequently the said return was revised on 17.3.05 showing loss of ₹ 96,06,000/-. Original assessment order came to be passed on 16.1.06 at a nil income, wherein two additions were made to the returned loss namely a sum of ₹ 2,93,000/- and 23,53,00,000/- on account of prior period expenses and penal interest respectively. Thereby assessing the income of the assessee at a sum of ₹ 22,60,87,000/- by reducing the aforementioned loss of ₹ 96,06,000/-. The said income was adjusted against the brought forward unabsorbed depreciation to that extent and income was assessed at nil. 4. Notice u/s 148 was issued on 11.10.07. In response to notice vide letter dated 16.11.07 the assessee submitted that return originally filed should be taken as return filed in response to notice u/s 148. The sole reason for initiation of reassessment proceeding was regarding the claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted merely on the basis of change of opinion. For the sake of convenience the relevant portion of the reply of the assessee filed on25.9.08 (copy of which is placed at pages 132 to 134 of the paper book) are reproduced below: - 03. During the course of assessment proceedings, initiated vide notice u/s 143(2) dated 24.10.03, the details as asked for by the then AO were filed during the course of assessment proceedings. In fact, during the proceedings a questionnaire along with notice u/s 142(1) dated 7th December, 2005 was issued to the assessee and as per Point 16 of the said questionnaire [issued along with notice u/s 142(1)] the assessee was asked to give details regarding Prior Period Expenses, if any claimed during the year. The said query was duly replied vide letter dated 4th January, 2006 and Page 10 of Paper Book filed during the course of assessment proceedings give details thereof. After considering the above reply and also the details furnished by the assessee, the then AO has specifically disallowed an amount of ₹ 2.93 lakhs booked under the head Prior period Expenses relating to missing and unconnected wagons and reply of the assessee on the other points w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es) PARTICULARS INCOME AMOUNT PARTICULARS EXPENSES AMOUNT Sales 626.18 Purchases 18.25 Liabilities Written back 7.31 Freight 9.64 (Cr.) Recovery from contractors Towards demurrages/handling Charges 0.28 Rent 190.28 (Cr.) Adjustment in respect of linking Of missing unconnected Wagons 1.51 Taxes 108.74 (Cr.) Income from claims 501.03 Repair Maintenance 10.77 Miscellaneous Income 96.07 Handling charges 101.30 Interest on Sugar Operations 1078.15 Salary, Wages Allowances 76.10 (Cr.) Purchase 36.35 (Dr.) Electricity charges 0.40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f crystallization of the items and thus, it was pleaded that no income has escaped from assessment. However, the AO made the addition and has added a sum of ₹ 1349.99 lakh on account of prior period expenses and after giving set off of loss returned and set off of unabsorbed depreciation brought forward from earlier year the income has been assessed at nil. 10. Ld. CIT(A) after examining all the details and contention of the assessee, though has upheld the validity of initiation of reassessment proceedings mainly on the basis of Consolidated Photo and Finvest Ltd. Vs. ACIT 281 ITR 394 (Del.), has deleted the addition after going through all the details submitted by the assessee and while deleting the addition on merits his findings are as under: - I have considered the submissions made by the ld. AR on the issue vis- -vis of the facts of the case. An addition of ₹ 1349.99 lacs has been made by the AO picking up the debits in various sub-head under the head Adjustment relating to Previous Years . On going through the details, it revels that the appellant booked ₹ 1346.13 lacs (Net) as Income towards Adjustments relating to Previous years. Further, it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method/system being followed by the appellant in the year under appeal or in the preceding years. The same has been duly accepted in all these years. The AO has not pointed out any specific instance as to why the same is not allowable as an expenses u/s 37 of the I.T. Act. As submitted, the appellant is a no profit/no loss organization, and any shortfall in operations of the appellant is met by subsidy from Govt. of India. The appellant has claimed Adjustment relating to Previous Years as a part of subsidy from Govt. of India, and this subsidy form part of income of the appellant. If a debit (expense) is disallowable by the AO then the corresponding subsidy forming part of income needs to be reduced from income. In view of the above, and also examination of the details of the expenses booked under the head prior period expenses and relying on the principles laid down by Hon ble Courts on the issue (judgment cited by the appellant) the addition made by the AO for an amount of ₹ 13,49,99,000/- towards Expenses related to Previous Year is directed to deleted. 11. The assessee in its cross objection has assailed the order of CIT(A) on the ground that ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessment needed to be reopened. On the other hand, if the AO did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequence of lapse. A finding that assessee had placed all the material before the AO and where there was a doubt even that was clarified by the assessee, the AO while passing the original assessment order, choose not to give any finding in this regard, that cannot give him or his successor-in-office a reason to reopen the assessment of the assessee or to contend that because the facts were not considered in the assessment order, full and true disclosure was not made. Since the facts were before the AO at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to change of opinion which cannot form the basis for permitting the AO or his successor to reopen the assessment of the assessee. Thus, it was pleaded by ld. AR that ld. CIT(A) has erred in holding this issue against the assessee. He submitted that Cross Objection filed by the assessee should be allowed. 14. On merits he submitted that assessee has filed exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o explain the details of only 2,93,000/- and no enquiry whatsoever was made by the AO with regard to other expenses incurred by the assessee relating to earlier years. Thus, there is no force in the contention of ld. DR that during the course of original assessment proceedings this issue was not raised by the AO and no reply was given by the assessee in that regard. Entire detail is subject matter of printed annual report of the assessee which is a Government of India undertaking and the accounts are duly audited. It cannot also be said that the veracity of these entries was subject matter of doubt by the AO either during the course of original assessment proceedings or during the course of reassessment proceedings. These have been only disallowed on the basis that these cannot be allowed as per mercantile system of accounting. Here, it has been the case of the assessee that it is a huge organization and certain items of income or expenditure are not crystallized during the year to which they are relate. As a matter of practice when they are crystallized they are considered as income or expenditure whatever the case may be. It is also evident from the earlier assessments that such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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