TMI Blog2017 (3) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... s not have the shield of Explanation 1 of section 147 to justify the reopening which has been done without there being any fresh tangible material in the possession of the AO. - ITA No. 5611/Mum/2014 - - - Dated:- 22-3-2017 - Shri Mahavir Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member For The Appellant : Suman Kumar For The Revenue : Satish R. Mody ORDER Per Ashwani Taneja, A.M: This appeal has been filed by the revenue against the order of Commissioner of Income Tax (Appeals)-20 Mumbai [in short CIT(A) ], dated 9.6.2014 passed against assessment order u/s 143(3) read with section 147 of the Income Tax Act, dated 13.12.2013 for assessment year 2008-09 on the following grounds:- Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in quashing the notice issued u/s-158 when provisions for issue of notice were complied with and reasons for re-opening was recorded by the A.O.? Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the reassessment processing u/s 147/148 of the Income-Tax Act, 1961 was bad in law, by holding it to be based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and other evidences will not necessarily amount to disclosure stipulated u/s 147 Act. 5. We have gone through the submissions made by both the parties and the order passed by the Ld. CIT(A). It is noted that the assessment proceedings in this case were originally completed u/s143(3) of the Act vide order passed on 27.12.2010 and the AO recorded Reasons dated 28.3.13 (i.e. within 4 years from the end of the relevant assessment year) before issuing notice u/s148, which are reproduced here under:- Under the provisions of the Income Tax Act, 1961 any provision made in the books of contingent liability is not allowable as expenses while computing income under the head business or profession. In this case the assessee company filed its return of income for the A.Y. 2008-09 on 06.10.2008 declaring income of ₹ 46,83,63,270/-. The assessment has been completed after scrutiny on 27.12.2010 by computing income of ₹ 46,52,72,576/-. On perusal of records it was observed that the assessee company debited ₹ 6,50,00,000/-as claim for compensation paid/provided. Further it was stated in para no.15(a) schedule 13 to notes forming part of the accounts that pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso . 8. We have considered and understood the correct position of law in this regard. Firstly, the Explanation is mainly to define the scope of First proviso to section 147 which postulates limitation of reopening in case reopening is done beyond 4 years from the end of relevant assessment year. The said proviso cannot be made applicable here to examine the validity or otherwise of the reopening done by the Assessing Officer. Secondly, in any case, otherwise also, the said Explanation can be taken help of by the AO when he has firstly demonstrated that reopening has been done on the fulfilment of the foremost mandatory condition viz, availability of fresh tangible material in the possession of the AO to enable him to form the belief of escapement of income and justify the reopening of the assessment. The said mandatory element is found missing here, as discussed above. The undisputed fact is that there is no fresh tangible material in the possession of the AO to form belief of escapement of income. Under the circumstances, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant, the then Assessing Officer had passed order after two months, i.e on 27.12.2010. It is also important to point out that after scrutinizing the details of expenses, the first Assessing Officer has disallowed some expenditure u/s.37 out of miscellaneous expenditure. The details of miscellaneous expenditure were also submitted by the same letter dt. 27. 10. 2010 which means the issue of claim of compensation was very much in the notice of the original Assessing Officer who has accepted the claim of the appellant. Thus it is very evident that subsequent to the original assessment, there was no any new material, fresh tangible material or any new information which could suggest escapement assessment, therefore, I find force in the argument of the Ld.AR that no such completed assessment could be reopened. Thus the proceeding itself is null and void. Further, it is noticed from the letter dt.05.12.2013 that appellant has clarified to the Assessing Officer that the claim of compensation has been examined twice and therefore there is no scope under the law to re-examine or review third time the same with sole intention to disallow such genuine claim merely by adopting dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclose that the present case is nothing but mere change of opinion on the facts which were already before the AO while making the first assessment to which conscious application of mind is reflected from the proceedings, and allowed in the computation and which has not been disputed by the Revenue. Although the referring Bench had prima facie agreed with the decision of this Court in Jindal Photo Films (supra) but a doubt was sought to be raised by the Revenue in view of a decision of the Gujarat High Court in Praful Chunilal Patel's case (supra). Therefore, let us now consider the decision of the Division Bench of Gujarat High Court in the said case, where it was held: It will thus, be seen that in the proceedings taken u/s- 147, the AO may make an assessment or reassessment or recomputation, as the case may be. The word 'assess' refers to a situation where the assessment was not made in the normal manner while the word 'reassess' refers to a situation where an assessment is already made, but it is sought to be reassessed on the basis of this provision. In cases where the AO has not made an assessment of any item of income chargeable to tax whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d power can be exercised when mistake is apparent. Even mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Tribunal it as limited jurisdiction under s. 254(2) of the Act. Thus, when the AO or Tribunal Has considered the matter in detail and view taken is a possible view the order cannot be changed by way of exercising the jurisdiction of rectification of mistake. It is a well settled principle of law that what cannot be done directly cannot be done indirectly. If the ITO does not possess the power of review, It cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment or by way of rectification of mistake. In a case of nature the Revenue is not without remedy. Sec. 263 of the Act empowers the CIT to review an order which is prejudicial to the Revenue . 10. We find that order passed by Ld. CIT(A) deserves to be upheld on the issue of reopening in view of the detailed discussion made by us in earlier part of the order. 11. With regard to merits of the case also it is noted by us that Ld. CIT(A) upheld that validity of the claim made by the assessee by observing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble High Court, appellant was under obligation to make provision of actual liability. The actual working has been given by Sr. Legal Manager vide his letter dated 30.03.2008, hence the entire amount of ₹ 6,50,00,000/- is found to be based on actual occurrence of financial incidence purely related to business activities. That is why first Assessing Officer has not made any addition of this claim of compensation on the basis of provision. It is also pertinent to mention that during the course of escapement assessment proceeding also appellant by letter dated 12.11.2013 has clarified to the Assessing Officer that such claim has been made as per the accounting practice and principle followed since several years and is continue, therefore, the accrued or recognized liability provided as per the accounting standards prescribed by ICAI, cannot be discarded. As per Accounting Standard-1 (AS-I) it is mandatory to make provision for known liability and losses even though no amount is determined with certainty but could be genuinely estimated on the basis of reliable information. Such liability as mention hereinabove has been accrued, hence is allowable. Reference may be had of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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