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AO can reopen assessessment if, income had escaped assessment.
AO can reopen assessessment if, income had escaped assessment.
Company incorporated for production & maintenance of transformer filed income return with loss of Rs. 17,78,609. AO accepted loss returned at first but when observed that assessee has book profit of Rs.14,99,061 which has escaped assessment. Thus, reopened assessment proceedings. Assessee claims reopening orders to be wrong in law. CIT(A) & ITAT sustains reopening orders. As AO has reason to believes that income had escaped assessment.-501877
1. Assessee company is incorporated for production and maintenance of transformers.
2. It filed its income return with a loss of Rs. 17,78,609.
3. AO accepted the loss return.
4. But later, AO observed that assessee have profit books of Rs. 14,99,061 is not included in income returned.
5. Thus AO completed assessment with additions/disallowances which are as follow; a) Disallowance made 40A(2)(b) Rs.34,13,415
b) Sub Contract Payment made Rs.10,63,250 to Shri S.Srinivasa Rao, being excessive.
c) Disallowance u/s 40(a)(ia) (of Income Tax Act, 1961) Rs.36,79,951.
6. Assessee contended that AO cannot reopen assessed income again as its wrong as per law.
7. CIT(A) sustained the orders of AO as it is good and correct in law to reopen assessment once AO has a reason to believe that income had escape assessment.
8. HELD- ITAT sustained the orders of CIT(A).
9. As interpretation of CIT(A) is right in law. [In favour of Assessee]
Case Reference - M/s KK Rao Engineering Vs. Income Tax Officer.
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