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TMI Blog2016 (5) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of law:- "A. Whether in the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal and learned Commissioner of Income tax (Appeals) Panchkula have not erred in law in not quashing the action of the Assessing Officer regarding reopening of assessment under the provisions of section 148 of the Income Tax Act, 1961 without appreciating the fact that at the time of reopening of assessment, the proceedings under section 154 were pending and no evidence of the service or the disposal of the proceedings initiated under section 154 were provided to the appellant? B. Whether in the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal and learned Commissioner of Income Tax (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Companies Act, 1956. The return of income was e-filed by the assessee on 1.10.2008 declaring income of Rs. 2,70,18,880/- for the assessment year 2008-09 which was assessed under section 143(3) of the Act vide order dated 24.12.2010 at an income of Rs. 5,35,46,930/-. Later on, after recording reasons, a notice was issued under section 148 of the Act by the Assessing Officer to the assessee on 14.2.2013. It was noticed that the assessee had claimed expenses of Rs. 17,55,845/- for the financial year 2006-07 on account of service charges payable on procurement of gunny bags. It was observed by the Assessing Officer that since the assessee company was following mercantile system of accounting, the said expenditure could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been claimed in the current assessment year. Reliance was placed on the judgment of the Apex Court in CIT vs. P.V.S.Beedies Pvt. Limited, (1999) 237 ITR 13 holding that reopening on the basis of audit objection could be done if some factual error was pointed out by the audit party which had been overlooked by the Assessing Officer but no reopening on the basis of audit objection could be done if the objection pertained to some interpretation of law. The error pointed out by the audit party in the present case was held to be factual. Detailed reasons had been recorded by the CIT(A) justifying reopening on the basis of the audit objection. While concurring with the findings recorded by the CIT(A), it was concluded by the Tribunal as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, only provides the background for forming a belief that the income had escaped assessment. This is not an interpretation of law made by the audit party. This is just a factual error pointed out by the audit party. In this background, we hold that reopening on the basis of audit objection is as per law in the given facts and circumstances of the case and the learned CIT(Appeals) has very aptly analyzed the validity of notice under section 148 of the Act and we do not find any infirmity in the findings recorded by the learned CIT(Appeals). Therefore, we uphold the order of the learned CIT(Appeals) on this account. 9. On the merits of the case, the learned counsel for the assessee submitted that the assessee is paying service charges for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding in the assessment order. Therefore, I am not in agreement with the submissions made by the appellant and the payment made on account of prior period expenses as quantified by its auditors is disallowable as per provisions of section 37(1) of the Act. 6.3 Regarding the non disputed nature of expenditure it is noted that the expenses on account of service charge payable on purchase of gunny bags have been disallowed on account of being prior period expenses. However, any expense incurred by the appellant during the year on this account is allowable. The AO is directed to verify and grant relief to the extant the expense on this account for which the expenses were incurred during the year under consideration and provide relief to tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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