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Haryana Agro Industries Corporation, Versus The Assistant Commissioner of Income Tax., Panchkula Circle

2015 (9) TMI 1427 - ITAT CHANDIGARH

Reopening of assessment - disallowance of service charges payable on procurement of gunny bags - Held 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.

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in the year in which they arisen, we see that the learned CIT (Appeals) had directed the Assessing Officer to verify this aspect and give the assessee due relief - Decided against assessee - ITA No. 118/Chd/2015 - Dated:- 29-9-2015 - SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER For the Appellant: Shri B.K.Nohria For the Respondent: Shri S.K. Mittal, DR O R D E R PER RANO JAIN, A.M. : This appeal filed by the assess .....

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recording reasons to believe, the Assessing Officer issued a notice under section 148 of the Act to the assessee as on 14.2.2013. The reasons for reopening were that the Assessing Officer noted that the assessee has claimed expenses of ₹ 17.56 lacs 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 accou .....

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ng 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 ₹ 4,79,66,220/- after making an addition of ₹ 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 validity of reopening of assessm .....

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so held that though the service charges payable on purchase of gunny bags have been disallowed on account of being prior period expenses, the same are allowable to the assessee in the year in which these are incurred. In this way, he directed the Assessing Officer to verify and grant relief to the extent the expense on this account for which the expenses were incurred during the year under consideration and provide relief to that extent. 4. Now, the assessee has come up in appeal bef .....

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us only on the issue that reopening of assessment under section 148 of the Act were bad and liable to be quashed as the same were made on the basis of objections raised by the Audit Party. The learned counsel for the assessee during the course of hearing before us, raised an objection that the notice issued on the basis of audit objection for the assessment year 2008-09 was bad in law. For this, we were taken to number of pages appended with the Paper Book filed by the assessee, whereby the cop .....

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gment 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 .....

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nt of audit objection is quite valid. In this way, it was prayed that the orders of the authorities below be upheld. 7. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue raised before us is whether the notice under section 148 of the Act issued on the basis of audit objection is valid or not. We have seen the documents whereby it is quite evitable that the Audit Party .....

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corded at page 8, para 4.4, which read as under : 4.4 Regarding ground No. 3 on appellant's objection that notice u/s 148 was issued on the basis of audit objection and the preliminary objection was not disposed off by the AO. It is noted that though the audit has raised an objection vide their note dated 22.07.201 and sought the comments of the AO, the AO has replied that it would be looked into at the time of regular LAR. I do not find any infirmity in the action of the AO on t .....

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on the fact that the auditor's opinion in regard to application or interpretation of law cannot be treated by AO as information for reopening of the assessment. The decision of Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society (supra ) followed by Hon'ble P&H High Court in the case of Sant Ram Mangat Ram was on the fact that information before the AO was available on account of internal audit of the Income Tax Department on the interpretation of law. Howev .....

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ourt 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 prom .....

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iety (supra), it was held that no reopening can be made on the basis of audit objection which is on some interpretation of law. This judgment of the Hon'ble Supreme Court has been followed by the Hon'ble Punjab & Haryana High Court in the case of Sant Ram Mangat Ram (supra). In the judgment of P.V.S. Beedies Pvt. Ltd. (supra), it was held that reopening of the assessment on the basis of error pointed out by the Audit Party is valid. From the conjoint reading of all these .....

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rrent assessment year, which are not so allowable as per law. This information in the form of objection raised by the Audit Party, to the Assessing Officer, 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 fact .....

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nt of Government of Haryana, who buys the gunny bags for use of State of Haryana at lower rates and charges at 1% of the purchase. It is submitted that it is not a tax, by whatever name called. Since the expenditure 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 a .....

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one 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 appellant has not provided any evidence in support of its claim exce .....

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