DCIT CORPORATE CIRCLE 2(1), CHENNAI vs. GEM SPINNERS, CHENNAI

Both the appeals of the assessee and Revenue are directed against the order of the Commissioner of Income Tax (Appeals) -6, Chennai, dated 01.09.2017 and pertain to assessment year 2003-

Let’s first take the Revenue’s appeal in I.T.A.

Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the assessment proceedings were reopened by issuing notice under Section 148 of the Income-tax Act, 1961 (in short 'the Act') on 25.03.2010. According to the Ld. D.R., even though the Revenue has raised grounds with regard to discrepancy found in the closing stock of cotton, the CIT(Appeals) by accepting additional material, in violation of Rule 46A(3) of Income-tax Rules, 1962, allowed the claim of the assessee. On a query from the Bench, the Ld. D.R. clarified that even though the Revenue has raised ground with regard to discrepancy found in the closing stock of cotton on merit, the main grievance of the Revenue is violation of Rule 46A(3). The Ld. D.R. clarified that the CIT(Appeals) by referring to ledger and financial statements, found that there was no discrepancy found in the closing stock of cotton.

We heard Sh. Philip George, the Ld.counsel for the assessee also. The reason recorded by the Assessing Officer for reopening assessment is reproduced at page 1 of the assessment order which reads as follows:-

From the above, it is very obvious that the Assessing Officer, after perusing Profit & Loss account, found that the case needs to be reopened. The CIT(Appeals) by placing reliance on the very same Profit & Loss account and other financial statements, including ledger, found that there was no discrepancy in the closing stock. Therefore, this Tribunal is of the considered opinion that the ledger and Profit & Loss account are not additional evidences / additional material as claimed by the Revenue in the additional grounds of the appeal filed before this Tribunal. On merit, the Revenue has no argument. As rightly submitted by the Ld. D.R., the main grievance of the Revenue is violation of Rule 46A(3) of Income-tax Rules, 1962. This Tribunal is of the considered opinion that the ledger and Profit & Loss account, including the schedules, were very much available before the Assessing Officer even before the reopening of assessment. The very basis for reopening the assessment is only the above documents/ material. Therefore, it may not correct to say that the CIT(Appeals) placed his reliance on the additional material in violation of Rule 46A(3). In view of the above, this Tribunal do not find any merit in the contention of the Ld. D.R. As rightly found by the CIT(Appeals), there was no discrepancy between the ledger and financial statements and Schedule No.5 of the balance sheet, therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Now coming to the assessee’s appeal, the only grievance of the assessee is reopening of assessment.

The CIT(Appeals) found that no discussion is required since the addition was deleted on merit. Admittedly, the assessment was reopened after the expiry of four years. It is also not in dispute that the original assessment was made under Section 143(3) of the Act on 16.03.2006. The financial statements, ledger, Profit & Loss account, balance sheet, etc. were very much available before the Assessing Officer. Therefore, it may not be correct to say that there was any negligence on the part of the assessee in furnishing relevant material for completing the assessment. Since this Tribunal confirms the order of the CIT(Appeals) deleting the addition made by the Assessing Officer on merit, the grounds relating to reopening of assessment need not be adjudicated. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(Appeals).

In the result, both the appeals filed by the assessee and the Revenue stand dismissed.