ITAT upheld quashing of reopening of assessment

1. The assessee company has filed its return of income declaring total income of Rs. 55,19,179/- on 05-12-2006 and the assessment was completed u/s 143(3) (of Income Tax Act, 1961), determining the total income of the assessee company at Rs.63,19,825/-. Subsequently it was noticed by the AO that the income chargeable to tax has been under assessed on account of Modvat being not included in closing stock u/s 145A (of Income Tax Act, 1961) of Rs. 72,07,660/- and rebate on non-payment of sales tax deferred installments of Rs. 10,72,897/-. Notice u/s 148 (of Income Tax Act, 1961) was issued to the assessee company. Assessee submitted that it was following the method of accounting of purchase and sales on net basis whereby the amount of sales and purchase are shown net of excise, sales tax etc. The assessee company availed the benefit of a scheme and paid NPV by reducing Rs.10,72,897/-. But did not offer this amount for taxation as the benefit had accrued to the assessee company on extinguishment of a capital liability, which is not taxable. The amount of Modvat credit on closing stock was Rs. 72,07,660/ was not added to closing stock of the assessee company. The value of closing stock was increased by Rs. 72,07,660/- and addition was made to the income of the assessee company u/s 145A (of Income Tax Act, 1961). Assessee's contention about the rebate on non-payment of sales tax deferral installments of Rs. 10,72,897/- was also not acceptable as section 41(1) (of Income Tax Act, 1961) r.w.s. 43B (of Income Tax Act, 1961), and it was added back to the income of the assessee company by the AO.

2. CIT(A) quashed the reopening of assessment.

3. On Revenue's appeal, the ITAT held as under:

"In our considered view, reopening u/s 147 (of Income Tax Act, 1961) in the instant case cannot be held to be valid as per the provisions of the Act and the same is liable to be quashed. The CIT(A) has passed a well reasoned detailed order in which we find no infirmity and we uphold the same. Thus addition made by the A.O. vide re-assessment orders dated 23-01-2013 passed u/s 143(3) (of Income Tax Act, 1961) read with Section 147 (of Income Tax Act, 1961) cannot be sustained and the order dated 20-5-2013 of the CIT(A) is upheld and the order dated 23-01-2013 passed u/s 143(3) (of Income Tax Act, 1961) read with Section 147 (of Income Tax Act, 1961) of the AO is hereby quashed. Since , we have adjudicated the legal issue regarding reopening of assessment u/s 147 (of Income Tax Act, 1961)/148 of the Act and the same is held to be illegal and bad in law and we have already quash the same as detailed above, we are refraining from deciding the issues on merit as the same has become purely academic and infructuous. We order accordingly.”

Case Reference - Dy. Commissioner of Income Tax vs M/s Aristocrat Luggage Ltd.

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI

BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND

SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER

./I.T.A. No. 5422/ Mum/2013

( / Assessment Year : 2006-07)