BHAWARALAL JAIN,NARASAPURAM vs. ITO, WARD-1, PALACOLE

For the A.Y.2012-13 the assessee raised additional ground challenging the validity of assessment made u/s 147 r.w.s 143(3). In the petition for admission of additional ground the assessee submitted that the Assessing Officer (AO) had issued the notice u/s 148 of the Income Tax Act, 1961 (hereinafter called as ‘Act’) on 16.06.2014 and in response to the said notice, the assessee had filed a letter dated 24.06.2014 requesting the AO to treat the return already filed on 28.07.2012 as a return in response to the notice u/s 148. It was further stated that the assessee has also requested for reasons for reopening the assessment. The Ld.AR submitted that though the assessee filed a letter requesting for reasons to reopen the assessment, the AO did not furnish the reasons and completed the assessment without communicating the reasons to the assessee. Further, the assessee stated that he did not raise this ground before the Ld.CIT(A)and only challenged the validity of reopening of assessment on the adequacy reasons for invoking the jurisdiction u/s 147 of the Act. Since the ground is a legal ground, the assessee has requested to admit the additional ground vide

On the other hand, the Ld.DR vehemently opposed the admission of additional ground.

We have heard both the parties and perused the material placed on record. The assessee raised additional ground stating that the reasons recorded for issue of notice u/s 148 was not communicated by the AO. This issue was neither raised before the Ld.CIT(A) nor agitated before the AO during the assessment proceedings. No evidence was placed before us to establish that the reasons were not communicated to the assessee. Before the Ld.CIT(A), the assessee challenged the validity of assessment on the ground that the reasons for reopening were inadequate for invoking the jurisdiction u/s 147 of the Act which indicates that the assessee was made aware of the reasons recorded for reopening the assessment. Since the assessee did not agitate the issue regarding reopening of assessment before the CIT(A) and no evidence was placed on record to show that the reasons were not communicated to the assessee in spite of making the request, we

In the grounds of appeal filed along with the return of income for the A.Y.2012-13the assessee challenged the validity of invoking the provisions u/s 147 of the Act stating that the reasons for reopening the assessment were not adequate. No arguments were advanced by the Ld.AR during the appeal hearing. Therefore, ground No.1 (a,b, and c)with regard to validity of assessment are dismissed as not pressed.

Ground No.2 is related to the disallowance of interest amounting to Rs.13,61,164/- for the A.Y.2012-13 and Rs.2,52,507/- for the A.Y. 2013-14. During the assessment proceedings, the AO found that the assessee is maintaining books of accounts on cash basis in respect of interest receipts. and in respect of interest payments, the assessee is following mercantile system of accounting i.e. interest is claimed as expenditure on accrual basis without actual payment. Therefore, the AO disallowed the difference of interest which remained unpaid amounting to Rs.13,61,164/- for the A.Y. 2012-13 and Rs.2,52,507/- for the A.Y. 2013-14.

On appeal before the CIT(A), the Ld.CIT(A) confirmed the addition and dismissed the appeal of the assessee.

We have heard both the parties and perused the material placed on record. As per section 145 of the act the assessee is bound to follow cash system of accounting or mercantile system of accounting for each source of income. For ready reference we reproduce hereunder relevant provisions of IT act section 145(1) which reads as under:

In the result, the appeals of the assessee are dismissed.