TMI Blog2019 (3) TMI 2037X X X X Extracts X X X X X X X X Extracts X X X X ..... me for the year under consideration. Sanction of the competent authority has been obtained by the AO for reopening under the provision of Section 151(1) of the Act whereas the sanction had to be obtained u/s 151(2) - Admittedly, the approval for re-opening of the assessment in this case has been given by the Joint Commissioner which is the Competent Authority as provided under the relevant provisions of Income Tax Act. Mere mentioning of the Section as 151(1) instead of 151(2), in our view, is nothing more than a clerical mistake and has not caused any prejudice to the assessee. Joint Commissioner has sanctioned the reopening of the assessment in a mechanical manner without application of mind - As gone through the form of recording reasons and grant of approval u/s 148 of the Act and find that the AO has recorded reasons in detail for forming of belief that the income of the assessee has escaped assessment and where upon the Joint Commissioner, in his own hand-writing has written that he is satisfied that it was a case for issue of notice u/s 148 - we do not think that the Joint Commissioner has not read over the reasons or he had not applied his mind to the reasons reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is a public sector undertaking and is a vast organization. The expenses when not reported or identified up to the close of the year are subsequently booked under prior period expenses. This system of accounting of the assessee has been regularly accepted by the Department in the past. There is no change in the facts and circumstance of the case. As submitted that necessary details were duly submitted before the AO that all of the expenses are supported by proper vouchers supporting evidence. It is not the case of the Assessing officer that any short coming has been noted in the vouchers. This is also not the case that any distortion in profit has been observed as compared to preceding year in view of the above said expenditure. Revenue has no cogent reason why the prior period expenses claimed by the assessee which have been consistently so claimed and allowed by the Department in earlier years should be disallowed in the current year. Addition on account of work in progress - AO noted that the assessee in the balance sheet had shown Rs. 6,80,90,888/- on account of machinery work in progress while on other hand the assessee had incurred huge interest expenses of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td Vs. Income Tax Officer Another (2003) 259 ITR 19(SC). 4. That the learned A0 has erred in adding Rs. 36,27,13,237/- under Section 35AD of the Act without going into the facts and merit of the case. 5. That the learned AO has not followed the law laid clown by the Hon'ble Supreme Conn in the case of CIT Vs Vegetable Products Ltd., [1973] 88 ITR 192 (SC) that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. 3. Apart from that, the assessee has also taken the following additional grounds of appeal : 1. That the learned A 0 has obtained the sanction under Section 151(1) of the Income Tax Act, 1961 whereas the sanction had to be obtained under Section 151(2) of the Act which means there is no sanction as well as no application of mind either by the learned A 0 or by the sanction authority and as such sanction taken and given is no sanction in the eyes of law. 2. That from the form for obtaining sanction under sanction 151(1) of the Act it is clear that the sanction given by the Joint CIT Panchkula Range Panchkula for issuance of notice u/s 148 of the Act is in a mechanical manner fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was a case of change of opinion. Though before forming the opinion, the AO has also noted that the aforesaid issue escaped the attention of the AO for the year under consideration and the AO was of the view that the assessee was not entitled to the aforesaid claim of deduction u/s 35AD of the Act. In view of this, it cannot be said that it is a case of change of opinion or that no tangible information had come into the possession of the AO to form the belief of escapement of income for the year under consideration. 6. The next point raised by the ld. Counsel through additional grounds of appeal is that the sanction of the competent authority has been obtained by the AO for reopening under the provision of Section 151(1) of the Act whereas the sanction had to be obtained u/s 151(2) of the Act. 7. The ld. counsel for the assessee in this respect has placed reliance on certain documents furnished today before the Bench, copies of which have been obtained by the assessee under Right to Information Act, 2005. Inviting our attention to the forwarding letter dated 15.09.2015, the ld. Counsel has submitted that while granting approval, the Joint Commissioner of Income Tax has ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to 3 and additional grounds of appeal. 9. In view of this, ground Nos. 1 to 3 and additional ground of appeal are hereby dismissed. 10. Now coming to the issue on merits taken by the assessee vide ground Nos. 4 and 5 of the appeal. The brief facts relating to the issue are that the assessee has claimed deduction u/s 35AD of the Act from its profits on account of construction of warehouses in different Districts of Haryana, however, the AO has disallowed the deduction observing that as per the proviso to Section 35AD of the Act, the expenditure incurred wholly and exclusively for the purpose of any specified business shall be allowed as deduction during the previous year in which the assessee commences operations of his specified business. The AO observed that though the assessee had taken up the construction of warehousing facility during the year which is covered under the specified business, however, in view of the proviso to Section 35AD, the deduction was available to the assessee whose date of commencement of business is on or after 01.04.2009 and since in this case the assessee has existing business of warehousing and hence, it cannot be said that the assessee had co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of business and has been duly capitalized in the books of account, the claim will be allowed in the year in which the assessee commences operations of his specified business. There is neither any overlapping nor any contradiction in the aforesaid provision. The assessee is covered in the first part i.e. the assessee has incurred the expenditure on the specified business during the year in which operations of his business of warehousing were already going on. In view of this, we do not find any justification on the part of the lower authorities in denying the deduction to the assessee u/s 35AD of the Act. This ground is, accordingly, allowed in favour of the assessee. 14. In view of this, the legal grounds relating to the reassessment are decided against the assessee whereas the grounds taken on merits regarding the allowability of the claim of deduction u/s 35AD are allowed in favour of the assessee. 15. Since identical questions are involved in all the appeals, therefore, all the appeals of the assessee are partly allowed in above terms and directions. Revenue s Appeals 16. Now coming to the revenue s appeals. ITA No. 367/CHD/2018 17. The Revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that all of the expenses are supported by proper vouchers supporting evidence. It is not the case of the Assessing officer that any short coming has been noted in the vouchers. This is also not the case that any distortion in profit has been observed as compared to preceding year in view of the above said expenditure. In these circumstances, in our considered opinion, the Revenue has no cogent reason why the prior period expenses claimed by the assessee which have been consistently so claimed and allowed by the Department in earlier years should be disallowed in the current year. 19. A perusal of the order of the CIT(A) also reveals that the ld. CIT(A) has also followed the order of the Tribunal dated 01.07.2016 for assessment year 2010-11 and 201112 as the facts and circumstances for the year under consideration are identical. We, therefore, do not find any reason to interfere in the order of the CIT(A). Ground of appeal No. 1 of the Revenue is hereby dismissed. Ground No. 2 20. Vide ground No. 2 the revenue has contested the action of the CIT(A) in deleting the addition on account of work in progress. The facts are that during the assessment, the AO noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of Rs. 199.43 Crores and share capital of Rs. 5.84 Crores while the capital work in progress is only Rs. 6.80 Crores. The opening capital work in progress was Rs. 3,01,17,406/-. The appellant has also submitted that no addition was made on this account in the previous assessment year and huge own funds were available. I find that the AO has not established that any interest bearing funds were utilized during the year for further investment in opening capital work in progress. In view of the decision in CIT Vs. Raghuvir Synthetics Ltd. 354 ITR 222 (Guj.), CIT Vs. Reliance Utilities Power Ltd. 313 ITR 340 (Bom.) and the decisions of jurisdictional ITAT as relied upon by the appellant (supra), since interest free funds available with the appellant were much more than the investment in capital work in progress, it can be presumed that the same would have been utilized for investment in capital work in progress made during the year. Therefore, no disallowance under the provision of 36(l)(iii) is called for on the facts of the appellant's case. Thus, the disallowance of Rs. 81,70,906/- is deleted. This ground of appeal is allowed. 22. A perusal of the above findings of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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