TMI Blog2007 (2) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... l reversing the decision of the CIT (A) were only related to unutilised Modvat credit. Thus, we fail to see any ground for reopening of the assessment for the assessment year 1999-2000 since the petitioner had very meticulously specified all the disclosures that were made in that assessment year. The reasons given by the Department for reopening the assessment u/s 148 of the Act do not disclose any failure on the part of the assessee to disclose fully and truly all material facts. Hence we hold in favour of the petitioner on this ground. Moreover the respondents had once held the notes in the balance-sheet of the petitioner to be a full and true disclosure but subsequently chose to alter their view. Hence we hold in favour of the petitioner on this ground. - Dr. S. Radhakrishnan And J. P. Devadhar JJ. For the Petitioner : P. Pardiwala with Jitendra Jain and A. K. Jasani For the Respondents : Vimal Gupta JUDGMENT 1. Dr. S. Radhakrishnan J. Rule. Rule is made returnable forthwith. By consent of parties, the petition is taken up for hearing. The petitioner has filed the present petition to challenge the issue of the notice dated March 13, 2006, under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sented an amount which pertained to the cost of purchase and hence had to be added to the valuation of the closing stock. 8. Being aggrieved by the said order, the petitioner preferred an appeal to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) deleted the addition made by the Assessing Officer, by his order dated October 14, 2002. Aggrieved by the said order of the Commissioner of Income-tax (Appeals), the Department and the petitioner had filed cross appeals before the Income-tax Appellate Tribunal. The Tribunal partly allowed both appeals. The petitioner was called upon to reply to the audit objections on January 10, 2005, which finds its place in the reasons recorded for reopening the assessment. The Tribunal had in detail discussed the issue of section 145A of the Act, and held that if Modvat is not included then the Assessing Officer will include the same without disturbing the opening stock. Thereafter on March 17, 2006, the petitioner received a notice dated March 13, 2006, under section 148 of the said Act whereby the respondents sought to reopen/reassess the completed assessment for the assessment year 1999-2000. The petitioner there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the first issue learned counsel for the petitioner submitted that as the excise duty paid on the inventories had not been debited to the profit and loss account, it could not form a part of the closing stock and as the amount was paid, it would be allowable under section 43B of the said Act and if the amount was treated as part of the closing stock then it should have been allowed for deduction under section 43B. Therefore, there could be no reasons to believe that income had escaped assessment. 12. Secondly, Mr. Pardiwalla stated that the petitioner had not claimed the amount on account of fraudulent invoicing as bad debts but had claimed it as business loss as this was detected in the business year 1999-2000 and there was no hope of recovery as stated and noted in the accounts. Therefore, he submitted that there was no material for the respondent to believe that any income had escaped assessment. 13. In relation to the third reason, learned counsel for the petitioner submitted that the issue for increase in value of opening stock by applying section 145A of the said Act was dealt with during the pendency of appellate and assessment proceedings. Hence, there was no ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the petitioner had wrongfully contended the fact that the respondent had issued a notice under section 148 of the said Act without jurisdiction and that it should be quashed and set aside as being bad in law. Learned counsel further submitted that the petitioners had failed to disclose material facts from the point of filing their returns of income till the completion of the assessment proceeding and up to the issue of notice under section 148 of the Act. Hence, they cannot be considered to be covered by the additional condition provided by the proviso to section 147 of the Act. (quote section). Learned counsel relied upon the judgment of Dr. Amin's Pathology Laboratory v. P. N. Prasad, Joint CIT (No. 1) [2001] 252 ITR 673 (Bom) which stated that under Explanation 1 to the proviso, merely a production of account books from which material evidence could have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the proviso. Therefore mere production of the balance-sheet, profit and loss accounts or account books will not necessarily amount to disclosure within the meaning of the proviso. In view of this judgment, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y actually paid or incurred and to bring the goods to the place of its location and condition as on the date of valuation. Learned counsel for the respondent further submitted in the light of this provision that the assessee had not included excise duty paid of Rs. 7.92 crores on finished goods forming part of closing stock. Learned counsel for the Revenue had submitted that since the value of the closing stock had full bearing on deducing the amount of profit, failure to include this amount gave the respondent sufficient reason to believe that the income to the extent of Rs. 7.92 crores had escaped assessment. Learned counsel had further submitted that there is no pre-condition that the amount of tax, duty or cess paid or incurred is first debited to the profit and loss account and then the same amount be included in the closing stock inventory. Hence, not allowing the deduction of the amount paid as excise duty under section 43B, the respondent believed that there was an escape of assessment to the extent of Rs. 7.92 crores. 20. Learned counsel for the Revenue also submitted that the petitioner's claim of detection of fraudulent invoices and bad debts in the same assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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