TMI Blog2017 (9) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings, which amounts to “change of opinion”, impermissible in law. Accordingly, the assessment order passed in pursuance of such “reasons” is liable to be quashed. - Decided in favour of assessee. - ITA Nos. 5778 And 5806/Del/2013 - - - Dated:- 30-8-2017 - SHRIG.D. AGRAWAL, PRESIDENT AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Assessee : Shri V.K. Bindal, CA Ms. Sweety Kothari, CA For The Revenue : Shri Kailash Chand Tiwari, Sr. DR ORDER PER: AMIT SHUKLA, JUDICIAL MEMBER: The aforesaid cross appeals have been filed by the assessee as well as by the revenue againstimpugned order dated 16.08.2013, passed by the Ld. CIT(Appeals)-10, New Delhi for the quantum of assessment passed u/s 147/143(3) for the A.Y. 2007-08. The ground raised in the assessee s appeal reads as under: 1. The CIT (A) erred in law and on facts in holding the reopening of assessment it/s 147 as valid ignoring the fact that the notice u/s 148 has been issued by the assessing officer on the basis of audit objection. Thus the notice issued u/s 148 is bad in law and order passed under reassessment should be cancelled. 2. The CIT (A) erred in law and on facts in holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat though the reopening of the assessment has been done within the period of four years from the end of the relevant assessment year, however, perusal of the reasons recorded will reveal that there is no tangible material on record having live link nexus with income escaping assessment, albeit AO is only referring to the records already available during the course of the assessment proceedings, and in fact is borne out from Schedule R of audited profit and loss account. He further pointed that the reopening of the assessment is based on audit objection raised by the Revenue s Audit party, which is evident from the observation made by the Assessing Officer at page 6 of the assessment order. After the audit objection, the Assessing Officer without applying his mind has reopened the assessment without even bothering to refer to the assessment records which would have revealed that the same issue has been duly considered by the Assessing Officer during the course of the original assessment proceedings. In support of this contention he referred to original assessment order dated 4.12.2009 and drew our specific attention on page 2 of the assessment order, wherein the precise issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any information received from the audit party or any tangible material coming to his possession that the figure of closing stock on E-software has been undervalued or this issue has been failed to be examined/ considered by the Assessing Officer during the course of the original assessment proceedings. Reasons as recorded by the AO simply indicates that he is trying to reappraise the existing material simply based on audit objection without application of his mind independently. The reasons recorded alone is the foundational fact and point of jurisdiction which has to be examined while evaluating the validity of reopening u/s 147, if challenged before the Court or any quasi judicial authority. Such reasons recorded based on mere reappraisal of same record sans any tangible material or information coming on record cannot clothe the Assessing Officer with the jurisdiction to reopen the assessment which has been completed u/s 143(3). 7. Further from the perusal of the records of the original assessment proceedings as well as the original assessment order, it is seen that the Assessing Officer had specifically called upon the assessee to explain the issue of closing stock as app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible for implementing and supplying all the products during the same year. The assessing officer had treated the e-class items as work-inprogress on the logic that it was still not processed and, therefore, should be valued at cost. On the other hand, the A.R. of the appellant has contended that all its software development and eclass products were finished and ready for delivery but it could not be delivered due to the terms of agreement. The A.R. has also strongly argued that there was no material available with the A.O. to argue that these items were not finished products to say only part of work-in-progress. In view of these facts, the contentious issue is whether these items in the closing stock relating to e-class project should be treated as work-in-progress or finished goods. While the appellant has argued that it was in the best position to ascertain thatthese were finished goods, the A.O. has not brought any specific documents or facts on record to dispute the arguments and contentions of the A.R. of the appellant that these items relating to eclass software were not finished goods but were only work-inprogress. ( b) From the facts available it appears that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.R. has insisted upon the treatment of e-class software as finished product and not as work-in-progress. The assessing officer has not been able to dispute these ^arguments through any specific findings. Also keeping in view the consistent method of accounting being followed by the appellant, there is no reason to disturb the system of accounting and in any case this valuation of closing stock would have a direct impact on the opening stock of the next year, which would balance out the impact of valuation over the two years. Accordingly, in my opinion, the arguments of the A.R. of the appellant have reasonable logic to be accepted and the Assessing Officer has not brought anything on record to dispute these arguments. This addition is, therefore, directed to be deleted. This ground of the appellant is treated as allowed. 8. The aforesaid findings of the Learned CIT (Appeals) itself goes to show that there is no application of mind of the Assessing Officer from the materials already available on record and he has blindly gone by the observation of the audit party which cannot be reckoned as conclusive finding or opinion but mere suggestion. The Assessing Officer after h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proper inferences of fact and law therefrom and the Assessee cannot further be called upon to do so for him. In Indian Oil Corporation v. ITO [1986] 159 ITR 956, the Court pertinently observed it is for the taxing authority to draw inference. It is not necessary for the Assessee to draw inference. These observations apply on all fours to the case on hand. Here the Assessee had discharged its burden of disclosing folly and truly all the material facts before the Assessing Officer during the original assessments. There was no basis for the successor AO to conclude that no opinion with regard to taxation of the payments received for the services rendered had been pre-condition for invoking Section 147 did not exist. The assumption of jurisdiction under Section 148 of the Act was not valid. 9. Thus, we hold that the reopening in the present case is bad in law, firstly, no tangible material has come on record having live link nexus with the income alleged to have escaped assessment; and secondly, the issue which has been raised in the reasons recorded was already on record and duly considered by the AO in the course of original assessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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