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TMI Blog2015 (9) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... acs for the financial year 2006-07 on account of service charges payable on procurement of gunny bags for the financial year 2006-07. The Assessing Officer was of the view that since the assessee company was following the mercantile system of accounting, the said expenditure was not allowable in the assessment year 2008-09 and the income had escaped assessment within the meaning of section 147 of the Act. In response to the notice under section 148 of the Act, the assessee filed a return of income. A copy of the reasons recorded was duly provided to the assessee. The assessee filed preliminary objection to reopening, which were disposed off by the Assessing Officer by his interim order dated 15.1.2014. The assessee objected to the reopening of assessment on various legal issues as well as on merits of the case. However, rejecting all the contentions of the assessee, the Assessing Officer completed the assessment as on 6.2.2014 at an income of Rs. 4,79,66,220/- after making an addition of Rs. 17,55,845/- on account of prior period expenses. 3. Aggrieved by this order, the assessee went in appeal before the learned CIT (Appeals) where it raised specific issues with regard to the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposition that reopening only on the basis of audit objection is not as per law. This judgment was followed by Hon'ble Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. Sant Ram Mangat Ram (2009) 180 Taxman 177 (P&H). It was also submitted that the assessee has specifically raised this objection before the Assessing Officer that the notice has been issued only on the basis of audit objection. However, the same was not properly disposed off by the Assessing Officer. In this way, it was argued that reopening cannot be made on the basis of audit objection alone. 6. The learned D.R. relying on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. P.V.S. Beedies (P) Ltd., 237 ITR 13 (SC) argued that reopening of assessment on the basis of audit objection is quite valid. Further reliance was also placed on the judgment of Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., 291 ITR 500 (SC) wherein it has been held that reason to believe about the escapement of income on account of audit objection is quite valid. In this way, it was prayed that the orders of the authorities below be upheld. 7. We have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re AO is not on the interpretation of law but the factual position that the appellant has claimed prior period expenses during the current year. In this regard, the reliance is placed on the decision given by Hon'ble Supreme Court in the case of CIT Vs. PVS Beedies Pvt. Ltd. 237 ITR 13 wherein it was held that reopening of the assessment on the basis of error pointed out by the audit party is valid. Further, the Hon'ble Madras High Court in the case of CIT Vs. First Leasing Co. of India Ltd. 241 ITR 248 observed that the audit report brought to the attention of the Assessing Officer, the relevant provision of the law but has not interpreted the said provision under such circumstances, the issue of notice u/s 148 was valid. Further, the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 held that even if reason to believe about escapement of income on account of error is prompted by audit objection, the reassessment becomes valid. Therefore, the appellant's objection on this ground is not acceptable." 8. From the reading of the above, it is quite clear that reopening made by the Assessing Officer on the basis of audit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been accepted by the assessee during the year under consideration and accordingly, risen during the year under consideration, in this view, it was prayed that the same may be allowed in the year under consideration. In the alternative, it was submitted that same expenses may be allowed in the year in which they have arisen. 10. The learned D.R. relied upon the order of the learned CIT (Appeals). 11. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. We see that the learned CIT (Appeals) has given very detailed findings on this issue, which are recorded at page 13, paras 6.2 and 6.3 of his order, which read as under : "6.2 I have gone through the facts of the case, written submissions filed by the appellant and the assessment record. It is noted that the* AO has disallowed the amount considering it as prior period expenses as per annual report after issue of show cause notice and consideration of appellant's reply. Though, the appellant has submitted that the service charge liability on account of purchase of gunny bags arose during the year, but the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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