TMI Blog2022 (1) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... s, under which he feels that income chargeable to tax has escaped assessment. We are in agreement with the explanation offered by petitioner. Moreover, this point has been raised because of audit objections. The Assessing Officer cannot be stated to be satisfied that he had reasons to believe that this item has escaped assessment. The Income Tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has come to his notice he can reasonably believe that income had escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. The true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income Tax Officer. ( See Indian and Eastern Newspaper Society V/s. Commissioner of Income Tax, New Delhi 1 [ 1979 (8) TMI 1 - SUPREME COURT] Further there is nothing under this head to indicate that there was failure on the part of petitioner to truly and fully disclose any fact. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled in discharging its onus to show that petitioner has failed to disclose truly and fully all material facts. From the reasons itself as well as the documents annexed to the petition, it is quiet clear that there has been full disclosure by petitioner. Jurisdictional Assessment Officer (JAO) has raised 4 heads, under which he feels that income chargeable to tax has escaped assessment. The same for ease of reference are reproduced from the reasons which reads as under: Brief details of the information collected/received by the A.O.:- (1) It is found that the assessee has debited an amount of ₹ 29,30,000/- towards security deposit against the interest income under the head of other income in the profit and loss account. The security deposit being capital in nature is not an allowable expenditure u/s 37 of the Act. (2) Further, the assessee has debited an amount of ₹ 1,15,67,90,000/- under the head Exceptional items to the profit and loss account which included an amount of ₹ 22,08,18,000/- towards expenses on reationalisation initiative mainly relating to a manufacturing site. Out of this, an amount of ₹ 15,42,60,000/- was added back being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,30,000/- was not debited towards security deposit but was debited towards interest paid on security deposit. In their reply, petitioner has explained that the amount of ₹ 29,30,000/- being debited under the head of other income in the profit and loss account and is reduced from interest income represents interest expenditure incurred for security deposits. It was also brought to the notice of respondents that the interest on security deposit has been inadvertently considered as security deposits in the audit findings and, therefore, the amount of ₹ 29,30,000/- representing interest expenditure is deductible as a revenue expenditure and not capital in nature. We are in agreement with the explanation offered by petitioner. Moreover, this point has been raised because of audit objections. The Assessing Officer cannot be stated to be satisfied that he had reasons to believe that this item has escaped assessment. The Income Tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has come to his notice he can reasonably believe that income had escaped assessment. The basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... useful at this stage to quote the following paragraph from the judgment of the Apex Court in Kedarnath Jute Mgf. Co. Ltd. Vs. Commissioner of Income Tax (1971) 82 ITR 363 (SC). In Commissioner of Income-tax v. Royal Boot House [(1970) 75 ITR 507 (Cal.)] it was held that where the assessee followed the mercantile system of accounting and, without disputing the liability to pay the Sales Tax had made a provision for its payment in its account even though he had not actually paid the tax over to the authorities, the assessee was entitled to deduction in respect of the provision for sales tax from his income under Section 10(2)(xv) of the Act. It was, pointed out that under the provisions of the Sales Tax statutes, the liability to pay the tax was not dependent upon assessment or demand but was an obligation to pay the tax either annually, quarterly or monthly, as the case might be. This case was and has been sought to be distinguished by the Revenue on the ground that the liability to pay the Sales Tax had not been disputed and the assessee had made a provision for its payment in its account. As will be presently seen this distinction is without substance and does not affe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis for reopening is change of opinion and as held in various judgments an Assessing Officer cannot reopen an assessment even within a period of 4 years merely on the basis of a change of opinion ( Jainam Investments Vs. ACIT Central Circle-8(1) Mumbai Anr. (2021) 131 taxmann.com 327). 9. Therefore, we are holding that the petition has to be allowed in terms of prayer clause (a) which reads as under: (a) that this Hon ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the petitioner s case and after examining the legality and validity thereof quash and set aside the impugned notice under Section 148 of the Act (Exhibit H) and the impugned order (Exhibit K) issued by respondent no.1. 10. At this stage, Mr. Thakkar states that there has been an error committed by the Assessing Officer as regards item (4) namely the export incentives deduction of ₹ 64,48,000/-. Mr. Thakkar states that during the assessment proceedings, petitioner had, by its letter dated 24th February 2016, in reply to the notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO cannot take recourse to reopen to remedy the error resulting from his own oversight, petitioner in fairness is ready and willing to pay the amount as mentioned earlier provided it is not construed as an admission of liability and no penalty proceedings for this are initiated. 11. Mr. Walve states that the court may pass such directions as it deems fit. 12. Petitioner is therefore, directed to pay the amount of ₹ 30,54,398/- as mentioned in the revenue audit objections. Respondents are directed to raise the demand on petitioner for this amount and petitioner shall pay the amount within time prescribed in the demand. We are making it clear that as noted earlier, the entire 148 notice is quashed and set aside and we have held that assessment could not have been reopened at all by respondents. We have only included this portion in this order in view of the without prejudice offer made by Mr. Thakkar and that cannot be construed as an admission of any liability by petitioner. We also clarify that in view of our observation as above, no penalty proceedings can be initiated by respondents under this head. 13. Petition disposed. No order as to costs. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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