IMC LIMITED,KOLKATA vs. DCIT, CIR-11, KOLKATA, KOLKATA

The brief facts of the case are that the assessee is a company and dealing in the business of bulk liquid cargo storage & handling, trading and construction of storage tanks. The assessee filed its return of income declaring total income of Rs.5,58,54,861/- for the A.Y under consideration. The AO completed the assessment u/s. 143(3) of the Act determining the total income of Rs. 6,83,55,412/- on 30-12-09. Again the total income was revised to Rs. 5,54,94,650/- by an order passed u/s. 154/143(3)/115JB dt. 24-06- 2010. Subsequently, the AO noticed that the assessee did not pay the leave encashment amount before due date of filing of return, but claimed deduction in the original proceedings. Thereby, the AO added an amount of Rs.29,22,329/- on account of leave encashment to the total income of the assessee. The AO also added an amount of Rs.8,89,925/- on account of ‘advances written off’ by observing that the said amounts were not offered to tax in the previous year. 1 ITA No. 1429/Kol/2014

In challenge before the CIT-A, the CIT-A confirmed the addition made on account of leave encashment and restricted the addition to Rs.69,039/- on account of ‘advances written off’.

Before us the assessee raised the grounds challenging the re- opening proceedings as well as the grounds challenging in said two additions i.e. on account of leave encashment and advances written off.

The ld.AR of the assessee submits that the ground nos. 1 & 2 may be treated as preliminary issue. After hearing both the parties, we decided to hear the ground nos. 1 & 2 as preliminary issue. In response to notices issued u/s. 143(2) and 142(1) placed at[ pages 67-78 of the paper book the assessee produced all the required documents before the AO and considering the same he formed an opinion and determined the total income at Rs.6,83,55,412/-. Thereafter, it was revised to Rs.5,54,94,650/-. During the original assessment proceedings the assessee submitted audited accounts, tax audit report to the AO. Inspite of having everything before the AO, he initiated reopening proceedings on the same set of facts and circumstances and made the said two additions. The AO also did not bring on record any new material to show that the assessee willfully or truly not disclosed any details regarding the said two additions and prayed to allow the ground of appeal challenging the reopening proceeding filed by the assessee.

The ld. DR relied on the order of the AO.

Heard rival submissions and perused the material on record. We find that the AO issued notice u/s. 142(1) of the Act on 26-06-09, placed at pages 67-68 of the paper book, wherein he sought information from the assessee particularly the copies of audited financial accounts, tax audit report, TDS certificates and list of sundry creditors/debtors. Considering the information as supplied by the assessee, it appears that the AO did not make any addition in the original proceedings. We also find from page 24 of the paper books shows that provisions for doubtful advances and provisions for leave encashment was made. Admittedly the said audited accounts were available before the AO and provisions involved in said two additions were reflected in the said audited accounts. We also find that the reasons recorded by the AO for reopening of assessment at page 74 of the paper book, wherein it is noticed that no where the AO observed that basing on new material the amounts involved in two additions escaped assessment during the original assessment. Therefore, we find force in the arguments of the ld.AR that all the documents required by the AO u/s. 142(1) of the Act were produced before the AO. The AO did not bring any new tangible material to show that the assessee willfully not disclosed the said two amounts, which attracts the impugned additions on account of leave encashment and advances written off, in our opinion are not maintainable. Therefore, we are of the view that the AO basing on information supplied by the assessee in the original proceedings made the said additions, which are not permissible in the eye of law. Therefore, the AO was not justified in initiating reopening proceedings and making the said additions and thereby the CIT-A was not justified in confirming the same. The preliminary issue as raised in ground nos. 1 and 1.1 raised by the assessee are allowed.

In view of the above, the ground nos. 2 and 3 are not adjudicated. Ground no. 4 is general in nature and needs no adjudication.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 13-10-2017