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2016 (6) TMI 478 - ITAT HYDERABAD

2016 (6) TMI 478 - ITAT HYDERABAD - TMI - Reopening of assessment - Adoption of the income at the returned figure as against the income returned on the basis of the assessment completed u/s. 143 - Held that:- The action of the AO in treating the lease transactions and re-working the lease/ finance incomes has become final. Consequently, effect in the later year of 2006-07 was also upheld. Assessee in this year has not challenged the AOs order u/s. 143 as it is in tune with the stand taken by AO .....

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ing with the Ld. CIT(A) and hold that the reopening of assessment is bad in law. Consequently, the order u/s. 143(3) gets restored.

AO is directed to examine the order u/s. 143(3), whether the same is in tune with the directions/findings given in AY. 2005-06 and AY. 2006-07. With reference to quantification of financial leases after adjusting the so called claim of depreciation, in case the order u/s. 143(3) is on similar lines, no action is required. Otherwise, AO is directed to pass .....

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e order of the Commissioner of Income Tax (Appeals)-V, Hyderabad dated 16-09-2013. 2. Assessee is a Private Limited Company in the business of trading, leasing and services contracts in computers and peripherals, for the AY. 2007-08 filed its return of income on 31-10-2007 admitting income of ₹ 1,36,10,940/-. Subsequently, case was selected for scrutiny and in the scrutiny assessment, following the stand taken by the Assessing Officer (AO) in AY. 2005-06, the total income was determined at .....

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on at ₹ 39,35,902/, originally disallowed by the AO in the order u/s. 143(3), thereby determined the total income at ₹ 1,91,91,941/-. Assessee contested the same before the Ld. CIT(A). 2.1. Ground No.1 raised before Ld.CIT(A) was with reference to the adoption of the income at the returned figure as against the income returned on the basis of the assessment completed u/s. 143 dt. 29-12-2009. Following orders of the ITAT on similar facts in AY. 2006-07, Ld. CIT(A) directed to adopt in .....

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turned in response to notice u/s. 148 has validity and without proper working. 3. The CIT(A) ought to have observed that depreciation on leased assets was claimed by BHEL and the assessee-company. This led to double claim of depreciation on the asset in the year under consideration. 4. The CIT(A) ought to have upheld the disallowance made u/s. 40(a)(ia) since the CIT(A) in the order passed for the assessment year 2005-06 the transaction in question as financial lease . 3. After hearing the rival .....

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e appellant questioned the validity of reopening the case on the ground that by recomputing the income, i.e., estimating finance charge income at (29,87,268/- and reduction of lease rentals admitted at fl,46,88,356/- from the total income, has resulted in under assessment of income. This method was adopted by the Assessing Officer in the original assessment u/s 143(3), read with section 144A, dated 29.12.2008. However, as the income estimated [before disallowing depreciation and 40(a)(ia)] was w .....

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opted by the assessee and passes an order u/s 143(3) read with section 144A, dated 29.12.2008. The method of recognition of income adopted by the Assessing Officer was confirmed by the first appellate authority. Ignoring the fact that this method was confirmed by the first appellate authority, the Assessing Officer changes his mind on the ground that this resulted in underassessment of income, reopened the assessment. This change of mind by the Assessing Officer is nothing but seeking the appell .....

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ertain income which had escaped assessment. It was further held that a matter not agitated in concluded original assessment proceedings also cannot be permitted to be agitated in reassessment proceedings unless relatable to item sought to be taxed as 'escaped income'. In the case on hand, the income adopted by the Assessing Officer by following a particular method in the Assessment year 2005-06 is coming below the income admitted by the appellant for the subject Assessment year 2006-07 f .....

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vant portion of the decision of the Apex court referred to supra is reproduced hereunder: As a result of the aforesaid discussion we find that in proceedings under section 147 the ITO may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under section 148 and where reassessment is made under section 147 in respect of income which has escaped tax, the ITO's jurisdiction is confined to only such .....

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rder. The Assessing Officer cannot make an order of reassessment inconsistent with the original order of assessment. 5.4 All the actions of the Assessing Officer appear to have emanated from the fact that for the Assessment year 2005-06 the Assessing Officer treated the business transactions of the appellant as 'finance transactions' against the claim of 'lease transactions' and this treatment had the effect of disallowing deprecation claim of the appellant. Following the same me .....

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ingly, the reassessment order passed u/s 143(3) read with section 147 is not sustainable in the eyes of law and the Assessing Officer is directed to restore the income determined consequent to giving effect to the order of my predecessor dated 09.04.2010 against the original assessment order passed u/s 143(3) rws 144A . 4. Thus, as can be seen from the above, similar facts exist in this year also as the assessment was completed consequent to the action taken in AY. 2005-06, disturbing assessee s .....

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dify the same. But as seen from the orders of the ITAT, the ITAT following the decision of the Special Bench in the case of IndusInd Bank Ltd., Vs. Addl. CIT [135 ITD 165] (SB) (Mumbai) has confirmed the transactions on financial lease only. Consequently, the action of the AO in treating the lease transactions and re-working the lease/ finance incomes has become final. Consequently, effect in the later year of 2006-07 was also upheld. Assessee in this year has not challenged the AO s order u/s. .....

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