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TMI Blog2021 (8) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... d u/s.143(3) of the Income Tax Act, 1961 on 30.03.2014 by assessing a total income of Rs. 70,53,32,202/-. 3. Subsequently, a notice u/s.148 of the Income Tax Act, 1961 was issued to the Assessee for the Assessment Year 2011 - 2012 on 29.03.2018 on the ground that there is an escapement of income by recording the reasons as under: -------------------------------------------------------------------------------------- ANNEXURE "Vide response dated 08.06.2018 through e-proceeding seeking reasons for issue of notice u/s.148. As per your request, this office is furnishing the reasons for issue of notice u/s.148 as under: It is seen from the Schedule 11 of the Balance Sheet, an amount of Rs. 31,587.74 lakhs has been shown under Sundry Creditors. In the break up details in respect of the same, an amount of Rs. 6,390.95 lakhs has been shown as provision for cost (liability). The payment from the cost provision of Rs. 6,360.95 lakhs as on 31.03.2011 were made from April 2011 to September 2011. As seen the same was paid in the next year, which shows that the same was not paid during the year and a mere provision was only made. Therefore, the provision for cost amounting to Rs. 6,360.95 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 241 ITR 672 and submitted that in view of the above two decisions of the Hon‟ble Supreme Court and the Hon‟ble High Court the reopening u/s.147 of the Income Tax Act, 1961 is invalid. 8. On the other hand, the learned Departmental Representative strongly relied upon the order passed by the authorities below. 9. We have heard both the sides, perused the materials available on record and gone through the orders of the authorities below. 10. In this case, the original assessment was completed u/s.143(3) of the Income Tax Act, 1961 dated 30.03.2014. In the original proceedings, u/s.143(3) of the Income Tax Act, 1961, the Assessing Officer was asked the details in respect of the provisions for cost of Rs. 63.61 lakhs, (which is in page no.33 of the paper-book). In response to that, the Assessee has filed all the details in respect of the provisions of cost as required by the Assessing Officer, (which is in page no.35 of the paper-book), Annexure - III. 11. The Assessing Officer after considering the explanations given by the Assessee and also the details, the assessment is completed u/s.143(3) of the Income Tax Act, 1961. Therefore, it has to be considered that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the direction or finding contemplated by section 153(3)(ii) had to be a finding in relation to the particular assessee and the particular year and to be a finding it had to be directly involved in the disposal of the case; (iv) on the facts, the notices issued under section 148 on November 20, 1998, to the Assessee for reopening the original assessments for the assessment years 1988-89, 1989-90 and 1990-91, on the basis of the Appellate Tribunal's decision rendered in the case of Boudier Christian relating to the assessee's technicians deputed to India, the income of the assessee was to be treated as fee for technical services and not as business income as assessed in the original assessments for those assessment years, were without jurisdiction as they were barred by limitation in view of the proviso to section 147, as amended by the Direct Tax Laws (Amendment) Act, 1987, as that was the provision that was applicable on November 20, 1998, when the reassessment notices were issued and admittedly there was no failure on the part of the assessee to disclose fully and truly all material facts for assessment; (v) on the facts, the notices were bad as they were only on the basis of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losing all the material facts. The Assessee is not required thereafter to prepare a draft assessment order. If the details furnished by the assessee were in conformity with the requirement of all applicable laws and known accounting principles, it is for the Assessing Officer to reach such conclusion as he considered was warranted from such data and any failure on his part to do so cannot be regarded as the assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the Assessing Officer in understanding the details placed before him cannot confer jurisdiction for reopening the assessment, long after the period of four years had expired. Further, if the Assessing Officer chooses to entertain the belief that the assessment has been made in the background of the assessee's failure to disclose truly and fully all material facts, it is necessary for him to record that fact and in the absence of a record to that effect, it cannot be held that the notice is capable of being regarded as a valid notice." 16. Keeping in view all the facts and circumstances of the case and by considering the proviso to Section 147 of the Act and also by followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further noted that the Assessee has followed the accounting standard-VII consistently and the provision for cost made by the Assessee for the Assessment Year 2011 - 2012 is an ascertained liability. They were incurred subsequently and they are well supported with the technical estimates. Besides, there is no provision claimed by the Assessee Company for the year under consideration. 21. Further, the Assessee also recognized the income from such provision for the year under consideration and therefore the said provision to cost is not an ad hoc provision. The objection raised by the Revenue Audit Party‟ [RAP] may please be dropped. Subsequently, the Principal Commissioner of Income Tax vide letter dated 06.03.2018 addressed to the Principal Director of Audit accepting the proposal made by the Assistant Commissioner of Income Tax requested that the objection raised with regard to the issue may be dropped and intimation to that effect may be sent to this office at an early date. 22. Subsequently, the Assessing Officer had issued a notice u/s.148 of the Income Tax Act, 1961 on 29.03.2018. In this context, it is necessary to quote the CBDT Circular No.8/2016 dated 17.03.2016 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as on 31.03.2017 amounting to Rs. 5,30,99,960/- is treated as deemed dividend in the hands of the respondent / Assessee and it is an independent finding recorded dehors the contents of the audit objections and the Tribunal, in the impugned common order, had failed to deal with the said issue and merely recorded finding that the Assessing Officer did not apply his mind as to the income escaping assessment. The Assessing Officer after application of mind, found that there was no escapement of income and also requested the Audit Wing to dropping proceedings did change his mind and the said finding is per se unsustainable." 23. In this case, the Assessing Officer categorically stated that the Assessee is following consistently the same accounting methods and also cost of provision booked to Rs. 35.36 crores during the year under consideration is an ascertained liability and not an ad hoc provision and the same has been paid subsequently. The cost of provision claimed is allowable, as the Assessee is following Mercantile System of Accounting. The Assessee has not made any excess provision for the year under consideration and also recognized the income from such purchases for the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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