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2016 (4) TMI 812 - ITAT MUMBAI

2016 (4) TMI 812 - ITAT MUMBAI - TMI - Reopening of assessment - Held that:- AO had not proved that the escapement of income was result of failure on part of the assessee to disclose fully and truly the material facts for making the assessment, we hold that the reopening was not valid. Effective ground of appeal (GOA-3)is decided in favour of the assessee. The other arguments like change of opinion or re-opening was based on an audit objection are not being decided, as there is basic legal flaw .....

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ing the order, dated 18. 10. 2010, of the CIT(A)-21, Mumbai, the assessee has filed the present appeal, raising five grounds of appeal. The first three grounds deal with re-opening of the assessment and the other two grounds are about addition made u/s. 14 A and computation of income u/s. 115JB of the Act respectively. Brief Facts: First, we would like to adjudicate the jurisdictional issue i. e. re-opening of the assessment. Assessee-company, engaged in the business of manufacturing of locks, s .....

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2. 2006 assessing the total income at Rs. Nil. Assessee was assessed on the Book Profit u/s. 115JB at ₹ 3, 21, 19, 8171/-. The Book Profit as disclosed by the assessee was accepted as such without making any adjustment. It is seen that while computing the Book Profit following items remained to be added- 1. The expenses attributable to earning of dividend (which is an exempt income) which was estimated at ₹ 36, 29, 828/- and disallowed vide Para 6 of the assessment order. However, th .....

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harging tax u/s 115JB resulted in escapement of income to that extent from charging to tax u/s 115JB of the IT. Act, 1961. I have reason to believe that the income of ₹ 15, 66, 65, 724/- which was chargeable to tax u/s. 115JB of the l. T. Act, 1961 has escaped assessment. Proceedings u/s 147 is being initiated. " Completing the assessment u/s. 143(3)r. w. s. 147 of the Act, on 16. 11. 2009 the AO determined the income of the assessee at Rs. NIL under the normal provisions of the Act a .....

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profit u/s. 115JB, that the reassessment notice was bad in law, that information was already on the tax record of the assessee maintained by the department at the time of original assessment, that no additional objective fact of material came into possession of the AO after original assessment was passed , that it was a case of change of opinion, that notice u/s. 148 was issued on the basis of audit objections, that there was no formation of belief and there was no application of mind with regar .....

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and (34) such expenditure was also required to be added in the book profit, that the AO inadvertently omitted to add the same in the book profit, that similarly he also did not consider the items of provisions of doubtful debts etc. while computing the income as per the MAT provisions, that the assessee had failed to demonstrate that during the original assessment proceedings he had examined the provisions to find out as to whether the provisions were on account of ascertained liability, that th .....

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rtained liability, that there could not be any reason to believe for re-opening the assessment in those circumstances, that the audit party had raised objection about exempt income also, that during the course of assessment the AO had discussed the disallowance u/s. 14A of the Act, that the AO could not have benefit of inadvertent mistakes, that the AO had applied his mind for calculating disallowance under section 14A and for computing of income u/s. 115JB of the Act, that it was a case of chan .....

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n Newspaper Society (119 ITR 996) and Jet Speed Audio P. Ltd. (372ITR762). The Departmental Representative(DR) stated that an audit objection could form basis for reopening the completed assessment. That letter sent by AO to audit could not be interpreted as change of opinion. 5. We have heard the rival submissions and perused the material before us. It is true that Section 147 of the Act, permits reopening of a completed assessment in a case where income liable to tax has escaped assessment. Ho .....

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. The third condition requires the AO to establish that there was any omission or failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment of the assessment year in question. In other words, merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond the period of four years. The escapement of income must also be occasioned by the failure on the part of the assessee to disclose material .....

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at all the relevant details for computing book profit as per the provisions of section 115JB of the Act. Therefore, it is apparent that there was no omission or failure on the part of the assessee as required by the provisions of the proviso to section 147 of the Act. Hence, the notice issued under section 148 of the Act, which was admittedly issued beyond a period of four years, was bad in law and without jurisdiction. Here, we would like to refer to the case of RPG Transmissions Ltd. (359 ITR .....

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