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2016 (7) TMI 907 - ITAT CHENNAI

2016 (7) TMI 907 - ITAT CHENNAI - TMI - Reopening of assessment - Held that:- Explanation-1 to Sec.147 of the Act gives power to the AO to re-open the assessment In our opinion, for reopening of assessment , it is not necessary that information must be derived from external source of any kind or that there must be a disclosure of new and important matters subsequent to re-opening of assessment. The re-assessment is permissible even if the information is obtained from proper investigation from th .....

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reopening of assessment made by the AO. - Treatment of expenditure on tools as capital expenditure - Held that:- Sub-section (3) of section 211 provides that until the Central Government prescribes an accounting standard in consultation with the National Advisory Committee as set up under section 210A of the Companies Act, 1956, pursuant to a recommendation of the Institute of Chartered Accountants of India the Accounting Standard issued by the Institute of Chartered Accountants of India sha .....

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nting which under the Act the Revenue is required to look at for computing income of the assessee chargeable under the head " Profits and gains" from business. The submission of ld.D.R that the accounting treatment to be meted out to a transaction in accordance with the Accounting Standard has no relevance for the purposes of the Income-tax Act, 1961, is a submission which does not commend to us. Thus, expenditure on tools is to be allowed as revenue expenditure - Decided in favour of assessee. .....

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A No.797/Mds./16 is with regard to reopening of assessment u/s.147 of the Act. 3. The facts of the issue are that the assessee company is engaged in manufacture of automobile component and also making dyes & moulds, jigs and fixtures and special purpose tools as per customer s requirements. The assessee filed e-return for assessment year 2008-09 on 29.09.2008 admitting an income of ₹ 1,12,41,631/- and the assessment u/s.143(3) was completed on 27.12.2010 accepting the income returned. .....

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ssment was re-opened within 4 years from the end of the assessment year. Just because an assessment was completed u/s.143(3), it does not mean the AO has considered all the issues and the relevant provisions of the Act. Ld.CIT(A) citing various judicial decisions in support of his decision, upheld the re-opening of assessment u/s.147 of the Act. Against this, the assessee is in appeal before us. 4. Before us, the ld.A.R submitted that at the time of original assessment, the AO called for various .....

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2010] 320 ITR 561 (SC). According to him, the reopening of assessment is bad in law. On the other hand, ld.D.R relied on the order of Ld.CIT(A). 5. We have heard both the parties and perused the material on record. The reopening of assessment notice was given to the assessee within four years from the end of the relevant assessment year and in view of the Explanation-1 to sec.147 of the Act, the AO is justified in issuing the notice u/s.148 of the Act for the purpose of re-assessment. After Firs .....

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Sec.147 with effect from 01.04.1989 where an income liable to be taxed as escaped assessment in the original assessment due to oversight and inadvertence or a mistake committed by the ITO, the AO has jurisdiction to re-open the assessment. The Explanation-1 below the proviso to 147 which reads as follows:- Explanation 1.- Production before the Assessing officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing officer w .....

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from the materials and records or from any enquiry or research into the facts or law. The tax payer cannot be allowed to take advantage of any lapse on the part of the AO. In the instant case, admittedly assessment is reopened within four years and the assessment was reopened for considering the disallowance expenditure of tools. As such, we cannot say that there is a change of opinion, since there is no opinion formed by the AO in the re-opening of assessment on this issue. Accordingly, we uph .....

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ture only and cannot be considered as capital expenditure. Ld.A.R placed reliance on the following judgments. 1. In the case of CIT Vs. Manohar Lal Hira Lal Ltd. reported in [2013] 39 Taxmann.com 110 (Allahabad) 2. In the case of CIT Vs. TVS Motors Ltd. reported in [2014] 45 Taxmann.com 94(Madras) 7. On the other hand, ld.D.R submitted that there were purchase of drills, milling tools, milling cutter, hydraulic turning fixture for fitting, casting, micor-bore cartridge, lathe fixture, hydraulic .....

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s. Saravana Spinning Mills Pv. Ltd., reported in 293 ITR 201. Further, ld.D.R submitted that the case laws submitted by the assessee s counsel cannot be applicable to the facts of the case. 8. We have heard both the parties and perused the material on record. It is clear upon reading the provisions of Accounting Standards (AS) 2 and (AS) 10 that, the opinion of the Council of the Institute of Chartered Accountants of India in respect of treatment of machinery spares is briefly that machinery spa .....

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ot exceeding the useful life of the fixed asset to which they relate. As a matter of fact, in case the fixed asset to which they relate, is discarded, the machinery spares will also have to be disposed of as these spares are integral parts of the fixed asset. It is to be noted that these Accounting Standards are mandatory in nature and applied to accounts prepared after April 1, 1999. In that sense the submission of the assessee has to be accepted that the change in the accounting policy had bee .....

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