THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), VISAKHAPATNAM vs. M/S. K V MOHANA RAO AND CO PRIVITE LIMITED, VISAKHAPATNAM

O R D E R PER V. DURGA RAO, JUDICIAL MEMBER This appeal by the Revenue and the cross objection by the assessee are directed against the order of Commissioner of C.O.No. 151/VIZ/2019 (M/s. K.V. Mohana Rao and Co. Pvt. Ltd.)

Income Tax (Appeals)-1, Visakhapatnam, dated 28/06/2019 for the Assessment Year 2013-14. 2. The grounds of appeal raised by the revenue are as under:- 1) The Order of the ld.CIT(A)-1, Visakhapatnam is erroneous both on facts and in law. 2) The ld.CIT(A) has erred in quashing the notice issued u/s. 148 of the Act as invalid by holding that the reopening is not validly made, more particularly when the Assessing Officer has a reason to believe that the income chargeable to tax has escaped assessment and satisfied himself that it is a fit case for issue of notice u/s. 148 of the Act which was approved by the Addl. Commissioner of Income-tax. 3) The ld.CIT(A) has erred in directing the AO to delete the addition of Rs.2,00,19,879/- made towards disallowance of interest on service tax, more particularly when the AO has noted that the assessee is following the mercantile system of accounting and the accounts are prepared on accrual basis and the expenses incurred pertaining to the prior period are not to be debited to the P&L a/c as per the Accounting Standards prescribed u/s. 145(2) of the Act. 4) The appellant craves leave to add or delete or amend or substitute any ground of appeal before and/or at the time of hearing of appeal. For these and other grounds that may be urged at the time of appeal hearing, it is prayed that addition made on account of disallowance on interest on service tax be restored.”

3. Ground Nos. 1 & 4 are general in nature, no adjudication is required, therefore same are dismissed. Ground No.2 relates to reopening of the assessment.

4. Facts of the case in brief are that assessee filed its return of income by admitting total income of Rs. 23,82,54,770/-. Subsequently revised return is filed on 18/04/2014 admitting total C.O.No. 151/VIZ/2019 (M/s. K.V. Mohana Rao and Co. Pvt. Ltd.) income of Rs. 21,82,34,890/-. In the revised return assessee claimed deduction of Rs. 2,00,19,879/- paid towards interest on service tax. The revised return filed by the assessee was taken up for scrutiny and assessment was completed u/sec. 143(3) of the Act, dated 24/03/2016 by making addition of Rs. 42,13,819/- towards disallowance of certain expenditure on the ground that assessee could not submit proper bills and vouchers. Subsequently, Assessing Officer has reopened the assessment by issuing notice u/sec. 148, dated 28/03/2018 on the ground that an amount of Rs. 2,00,19,879/- paid towards service tax relates to A.Y. 2011-12 and is not admissible in the A.Y.2013-14, therefore total income was assessed at Rs. 24,24,68,590/-.

5. On appeal before the ld. CIT(A) it was submitted that expenditure relates to earlier year was mentioned in column No. 22(b) of the audit report filed in Form No.3CD and by considering the same, the Assessing Officer has completed the assessment on 24/03/2016 after calling the various details in respect of revised return filed by the assessee. Therefore, the Assessing Officer has already firmed opinion that the claim of the assessee of Rs.2,00,19,879/- paid towards service tax is an allowable expenditure and accordingly allowed. Subsequently, this C.O.No. 151/VIZ/2019 (M/s. K.V. Mohana Rao and Co. Pvt. Ltd.) expenditure relates to earlier year and allowable in the current year is amounting to change of opinion and is not permissible according to law. For that he relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. M/s. Kelvinator of India Ltd., [(2010) 320 ITR 561]. So far as merits of the case is concerned, ld. counsel for the assessee has relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Andhra Sugars Ltd., [(2014) 367 ITR 195]. The ld. CIT(A) by considering the submissions of the assessee quashed the notice issued by the Assessing Officer on the ground that it is clearly amounting to change of opinion and by relying on the judgment of the Hon'ble Supreme Court in the case of M/s. Kelvinator of India Ltd. (supra) decided the appeal in favour of the assessee.

on the decision of the Hon'ble Jurisdictional High Court in the case of Andhra Sugars Ltd. (supra).

the assessee is allowable deduction and accordingly allowed. Subsequently, on the basis of very same revised return and on the very same claim the Assessing Officer came to a conclusion that the expenses claimed by the assessee relates to the earlier year i.e. A.Y. 2011-12 and not relating to the assessment year under consideration, in our opinion is merely a change of opinion and is not permissible as per the decision of the Hon'ble Supreme Court in the case of M/s.Kelvinator of India Ltd. (supra). We, therefore, respectfully following the decision of the Hon'ble Supreme Court in the above referred to case, are of the opinion that reopening of assessment is not valid, therefore notice issued by the Assessing Officer has to be quashed. In view of the above, we find no infirmity in the order passed by the ld. CIT(A).