MAHANAGAR TELEPHONE NIGAM LTD.,,NEW DELHI vs. DCIT (LTU), NEW DELHI

Assessee prefers this appeal challenging the order dated 01.03.2013 in appeal no. 27/10-11/CIT (A)-LTU passed by the Commissioner of Income Tax (Appeals)-LTU, New Delhi (hereinafter for short called as the ‘Ld. CIT (A)’), where under the Ld. CIT (A) dismissed the appeal in respect of both the technical grounds and on merits.

Briefly stated facts are that the original return of income of the assessee was completed u/s 143(3) of the Income Tax Act (hereinafter for short called as the ‘Act’) by order dated 08.03.2006 at a total income of Rs. 834,33,29,518/- and book profits at Rs. 13,91,17,07,421/-. Thereafter the case was reopened vide notice u/s 148 dated 26.02.2010 in respect of two grounds namely provision of doubtful debts to be disallowed being unascertained liability and disallowance of set off of prior period income against prior period expenditure. However, during the course of assessment the issue relating to the doubtful debts to be disallowed was dropped but the AO made an addition of Rs. 49,50,000/- by disallowing set off of prior period income against prior period expenditure. AO challenged the same contending that the reopening of the matter without any fresh tangible material or information coming to the possession of the AO is bad and its nothing but mere change of opinion which is impermissible under law. Secondly, assessee contended that the assessee has been making provision on accrual basis in respect of rates and taxes every year and in terms of Section 43B of the Act the rates and taxes to the extent not actually paid or added back in every year in the computation of income, and mere writing back of the said amount cannot be considered as income since no deduction of the same has been claimed when the provision was made. However, Ld. CIT (A) turned down both the contentions of the assessee.

It is the contention of the Ld. AR that a perusal of the reasons recorded show that the AO did not have any fresh tangible material or information and only reopened the case on the basis of the record that was already available before him while concluding the assessment u/s 143(3) of the Act and as a matter of fact the computation of income showing the suo motto addition back of the amount relating to the prior period expenses, profit and loss account showing the prior period adjustment, Schedule ‘S’ showing the adjustment of the account of rates and taxes relating to the prior period were already available before the AO and basing on this record alone and without any fresh tangible material or information the AO reopened the matter. She further submitted that merely because the AO does not put any specific query in respect of prior period expenditure adjustment with reference to Schedule ‘S’, the same cannot be worked out against the assessee to reopened the concluded assessment. Reliance is placed on the decisions reported in CIT vs. Kelvinator of India Limited (2010) 320 ITR 561 (SC), CIT vs. Orient Craft Ltd. (2013) 354 ITR 536, Le Passage to India Tours & Travels Pvt. Ltd. vs. ACIT (Del.) (HC), Uttaranchal jal Vidyut Nigam Ltd. vs. ACIT (2016) 47 ITR 198 and ACIT vs. Responsible Builders Pvt. Ltd. (Del.), for the principle that the AO has no power to reopen the assessment when once the assessee discloses fully and truly all material facts, and no fresh tangible material or information came into his possession consequent to which the AO had reason to believe that income chargeable to tax has escaped assessment.

Here in this matter page nos. 2, 47, 59 and 169 of the Paper Book containing the computation of income showing the adjustment of the prior period expenses, profit and loss account reflecting the same and 59 where Schedule ‘S’ is incorporated relating to the prior period adjustments were very much before the Assessing Officer when he concluded the assessment u/s 143(3) of the Act. Vide item no. 6 under the caption added back at page 28 of the assessment order dated 08.03.2006 passed u/s 143(3) of the Act for the AY 2005-06 the Assessing Officer added back a sum of Rs. 2,44,63,711/-. This clearly shows that the Assessing Officer dealt with this aspect while considering the matter u/s 143(3) of the Act. Further in view of the decisions reported in M/s Mazagaon Dock Ltd. vs. ITO (Mum.) in DCIT vs. Airports Authority of India (Del.) in ITA No. 3841/Del/2011 dated 16.03.2012 and ITA No. 3074/Del/2010 for AY 2006-07 dated 12.10.2012 & ITA No. 1807/Del/2012 for AY 2008-09 dated 22.06.2012, the tax authorities are not justified in disallowing the entire amount of prior period expenses while assessing the entire amount of prior period income, without bringing support of any of the provisions of the Act and the assess the prior period income by disallowing the prior period expenses is bad under law.

Viewing from any angle, we are of the considered opinion that the AO is not justified in reopening the matter without bringing on record, any fresh tangible material or information more particularly when this aspect was considered by him at the time of assessment u/s 143(3) of the Act. Even on merits also, disallowance of the prior period expenses is bad when the prior period income was assessed to tax and no deduction was claimed or allowed at the time when the provision was made. With this view of the matter, we delete the addition of Rs. 49.50 lacs.

In the result, the appeal of the assesee is allowed.