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TMI Blog2022 (11) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29.07.2005 passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad (Tribunal) in I.T.A.No.179/Hyd/2004 for the assessment year 2001-2002. 3. While admitting the appeal, no substantial questions of law were formulated. However, in the memo of appeal, the following two questions have been proposed as substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of reassessment under Section 148 of the Assessing Officer on a mere change of opinion? 2. Whether in view of the accounting policy followed by the appellant, the liability having been incurred by the appellant, (though to be quantified at a future date) during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not an allowable deduction, a view was taken that the aforesaid amount was an income chargeable to tax but had escaped assessment. Thereafter, notice under Section 148 of the Act was issued. Following reassessment proceedings, assessment order dated 29.09.2003 was passed by the Assessing Officer under Section 143(3) r/w Section 148 of the Act. 8. From a perusal of the assessment order, we do not find that appellant had questioned the competence of the Assessing Officer in initiating reassessment proceedings on the ground that the same was done on the basis of a mere change of opinion. 9. None the less, before the Commissioner of Income Tax (Appeals) - II, Hyderabad (briefly 'CIT(A)' hereinafter), appellant raised the ground that Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrectness of the claim since the return of income was processed under Section 143(1) of the Act. As rightly contended by the learned DR merely because the AO has not exercised the power of issuing a notice under Section 143(2) of the Act to convert a case into scrutiny he is not debarred from reopening the assessment under Section 147 of the Act. Identical issue has come up before the ITAT - B - Bench Hyderabad in the case of Elegant Chemicals Enterprises Pivate Limited wherein we have taken a view that it is not necessary for the AO to exhaust a remedy of issuing a notice under Section 143(2) of the Act before taking recourse to Section 147 of the Act. Since the return was processed under Section 143(1) without making investigation, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. We agree with the view taken by the Tribunal on this aspect. We are fortified in our view when we refer to Explanation (1) to Section 147 of the Act, as it existed at the relevant point of time as per which production before the Assessing Officer the account books or other evidence from which material evidence with due diligence could have been discovered by the Assessing Officer would not necessarily amount to disclosure within meaning of Section 147 of the Act. 13. That being the position we answer the first question against the appellant and in favour of the revenue. 14. This brings us to the second question relating to provision for warranty which incidentally was the reason for re-opening of assessment. We may mention that appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the following principles which are required to be taken into consideration for determining as to whether a liability could be construed to be contingent or uncertain: (i) If the business liability has definitely arisen in the accounting year, the deduction should be allowed although liability may have to be quantified and discharged at a future date; (ii) It should be capable of being estimated with reasonable certainty though the actual quantification may not be possible; (iii) The quantification should be based upon the 'prudence'. (iv) The notification issued prescribing accounting standards in exercise of powers under Section 145(2) of the Act, should also be taken into consideration. 17. Thereafter, Tribunal negatived the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only w.e.f. 01.01.2001. In other words, in this year the assessee decided to provide for warranty only on the sales made in the last quarter of the year. Thus looking at from any angle, the quantification of the liability has not been proved to be based on any scientific analysis. Under these circumstances the case law relied upon by he learned counsel for the assessee are distinguishable on facts. On the contrary the decision of the Apex Court in the case of Bharat Earth Movers, far from supporting the stand of the assessee, helps the plea of the revenue inasmuch as the material on record suggests that the assessee could not estimate the liability with reasonable certainty which is evidenced from the fact that 90% of the provision was writ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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