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M/s. Kores (India) Ltd. Versus ACIT, Central Circle - 41, Mumbai

2018 (2) TMI 977 - ITAT MUMBAI

Reopening of assessment - three items of income have escaped assessment - validity of reasons to believe - Held that:- A perusal of the reasons to believe reveals that the records on the basis of reasons for re-opening were recorded were available before the AO even at the time of original assessment proceedings as is apparent from the statement of computation of total income placed at page 1 of the paper book and also fortified by the discussions by the AO himself in the original assessment ord .....

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T OF INDIA ) - Decided in favour of assessee - ITA Nos. 2512 And 2513/Mum/2014 - Dated:- 13-2-2018 - Shri D.T. Garasia, Judicial Member And Shri Rajesh Kumar, Accountant Member For The Appellant : Shri Mani Jain For The Respondent : Shri Rajesh Kumar Yadav ORDER Per Rajesh Kumar, AM These appeals have been filed by the assessee against the orders of the CIT(A)-38, Mumbai dated 29.01.2014 and 30.01.2014 for assessment years 2006-07 and 2007-08 respectively. 2. Assessee has raised the following gr .....

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firming the action of A.O. in passing the impugned order which is illegal or otherwise void for the want of jurisdiction. 3. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of A.O. of disallowing a sum of ₹ 31,37,000/- on account of manufacturing and other expenses claimed by the appellant. 4. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of A.O. of disa .....

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on 22.12.2008 determining the total income at ₹ 18,90,05,530/-. Thereafter the case of the assessee was reopened under Section 147 of the Act by issuing notice under Section 148 dated 15.03.2011 by recording the following reasons: - On verification of records, it was observed that an amount of ₹ 31,37,000/- being charity and donations debited in P & L account under the head manufacturing and other expenses in Schedule - T. However, disallowance of ₹ 15,84,648/- only was ma .....

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/-. Subsequently notices under Sections 143(2) and 142(1) were issued and served upon the assessee. As regards income escaped of ₹ 31,37,000/-, the AO observed from the details filed by the assessee that the said amount was shown under the head manufacturing the other expenses as charity and donation which did not pertain to the business of the assessee and therefore not incurred for the purpose of business and accordingly was disallowed. As regards ₹ 1,80,437/- the AO noted that the .....

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58,18,347/-. According to the AO the said provision is not an allowable expenses under Section 43B(b) of the Act. Therefore he added the difference between the said two amounts of ₹ 3,91,653/- to the income of the assessee and finally assessed the income at ₹ 19,12,88,617/- by framing the assessment under Section 143(3) r.w.s. 147 of the Act vide order dated 24.11.2011. Assessee challenged the reopening of assessment before the First Appellate Authority by submitting that reopening w .....

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e issue for which the assessment is re-opened have not been examined by the assessing officer during the original assessment. The appellant contends that the reopening of the assessment by the A.O is based on mere change of opinion and it is bad in law and the same requires to be quashed. It is true that no assessment can be reopened by mere change of opinion. During the course of appeal proceedings, the appellant produced a questionnaire issued by A.O. in support of its contention that the issu .....

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the A.O. The relevant portion of the decision is reproduced herein under: We are also not in a position to accept the submission that the materials had been placed before the assessing authority and, therefore, there should be a conclusion that the authority has applied his mind to the same and there was no question of the Commissioner interfering by taking a different view, etc. The assessing authority performs a quasi-judicial function and the reasons for his conclusions and findings should be .....

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ion of this nature would be to give a free hand to the assessing authority, just to pass orders without reasoning and to spell out reasons only in a situation where the finding is to be against the assessee or any claim put forth by the assessee is denied. We are of the clear opinion that there cannot be any dichotomy of this nature as every conclusion and finding by the assessing authority should be supported by reasons, however brief it may be, and in a situation where it is only a question of .....

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the Revenue and therefore, while the Commissioner was justified in exercising the jurisdiction under section 263 of the Act, the Tribunal was definitely not justified in interfering with this order of the Commissioner in its appellate jurisdiction. 5.2 Since in the case of the appellant nothing came to light establishing application of mind by the A.O. on the issues under dispute in the original assessment proceedings, re-assessment proceedings u/s 147 of the Act do not suffer any infirmity. Acc .....

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he AO at the time of original assessment and the AO after re-examination of the same formed a belief that the income has escaped assessment. Thus the re-opening of assessment by the AO is a patent example of change of opinion which is not permissible under the Act. The learned A.R. also submitted that all the three additions, namely, donation and charity of ₹ 31,37,000/-, disallowance under Section 40(a)(ia) of ₹ 1,80,437/- and disallowance on account of provision for gratuity of  .....

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ance on account of gratuity of ₹ 1,58,18,347/-, statutory disallowance under Section 43B of ₹ 1,11,44,023/- and charity and donations of ₹ 15,84,648/-. The learned A.R. further referred to para 4 of the assessment order passed under Section 143(3) r.w.s. 153A dated 22.12.2008 wherein the AO has mentioned that details of purchase, details of major expenses, details of addition to fixed assets, confirmations from new depositors, details of TDS made and details of flats sold were .....

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e date of audit as stated in tax audit report form 3CD clause No. 21(1)(b). The learned A.R. submitted that the AO has reviewed his own order by reopening the already concluded assessment on the basis of information and records which were available before him at the time of original assessment to form an opinion that income has escaped assessment which is nothing but a change of opinion which is not permissible under the Act . In defence of his arguments the learned A.R. relied on a series of de .....

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n by the AO. 5. The learned D.R., on the other hand, relied on the orders of the Authorities below by submitting that the assessment was rightly reopened under Section 147 r.w.s 148 of the Act as the income on three issues, viz., donation and charity of ₹ 31,37,000/-, disallowance under Section 40(a)(ia) of the Act of ₹ 1,80,437/- as audit report and disallowance on account of provision for gratuity of ₹ 3,91,653/- have clearly escaped assessment and therefore the order of the .....

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The undisputed facts are that the AO has reopened the assessment under Section 147 of the Act after recording reason to believe that three items of income have escaped assessment, which are extracted in para 3 above. A perusal of the reasons to believe reveals that the records on the basis of reasons for re-opening were recorded were available before the AO even at the time of original assessment proceedings as is apparent from the statement of computation of total income placed at page 1 of the .....

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