MANMOHAN EXIM P.LTD,MUMBAI vs. ITO WD 6(3)(3), MUMBAI

The instant appeal preferred by the assessee is directed against the order dated 1st August 2013, passed by the learned Commissioner (Appeals)–8, Mumbai, for the assessment year 2004–05. The assessee, in total, has raised ten grounds of appeal.

Briefly the facts are, the assessee, a private limited company filed its return of income for the impugned assessment year on 21st October 2004, declaring total income of ` 3,04,488. The assessment in assessee’s case was completed originally under section 143(3) of the Act vide order dated 28th December 2005, determining the income at ` 3,14,864. Subsequently, on the basis of objection raised by the internal audit party that deduction under section 80HHC of the Act has been allowed in excess to the assessee which has resulted in escapement of assessment, the Assessing Officer re–opened the assessment under section 147 of the Act by issuing notices under section 148 of the Act to the assessee on 25th March 2009. The assessee, after calling for the reasons of re–opening the assessment though objected to the initiation of proceedings under section 147 by alleging change of opinion but the Assessing Officer rejecting the objections of the assessee, proceeded to complete the assessment under section 143(3) r/w 147 of the Act vide order dated 7th December 2009, by restricting the deduction claimed under section 80HHC to ` 3,29,480, as well as making a further addition of ` 5,30,060, on M/s. Manmohan Exim Pvt. Ltd. 3 account of advance written of which resulted in determination of total income at ` 11,19,290. Being aggrieved of the assessment order so passed by the Assessing Officer, the assessee preferred appeal before the first appellate authority challenging the assessment order on the validity of re–opening as well as on the merits of additions made.

As far as the validity of proceedings initiated under section 147 of the Act is concerned, the learned Commissioner (Appeals) dismissed the ground raised by observing that the reasons recorded by the Assessing Officer for re–opening the assessment are valid.

The learned Counsel for the assessee, challenging the aforesaid findings of the first appellate authority, submitted before us that assessee has claimed deduction under section 80HHC, in terms with the statutory provisions and the Assessing Officer while completing the assessment originally under section 143(3) of the Act, has allowed the same after proper verification. Therefore, re–opening of assessment on some set of facts and material on record without any further new material coming into the possession of the Assessing Officer and merely relying upon the objection raised by the internal audit party is nothing but re–opening of assessment on a mere change of opinion. In this context, the learned Counsel for the assessee referred to the objections of the audit party at Page–75 of the paper book and reasons for re–opening of assessment communicated to the assessee

We have considered the rival submissions and have perused the material available on record. On going through the objections raised by the internal audit party, reasons for the re–opening communicated to the assessee, prima–facie it appears that the Assessing Officer has re–opened the assessment merely on the basis of objections raised by the audit party. As it appears, the Assessing Officer has initiated action under section 147 of the Act by relying upon the same set of facts and material which are already available on record and were considered by the Assessing Officer while completing assessment under section 143(3) of the Act originally. It is the contention of the learned Counsel for the assessee before us that though all these facts were brought on M/s. Manmohan Exim Pvt. Ltd. 5 record before the learned Commissioner (Appeals), without considering these materials or even affording adequate opportunity to the assessee to advance his case on the issue, the learned Commissioner (Appeals) has dismissed the ground raised on the issue. On a perusal of the order passed by the first appellate authority, we find merit in the aforesaid contention of the learned Counsel for the assessee. As it appears, the learned Commissioner (Appeals) has not considered the issue relating to validity of re–opening objectively and with the merit it deserves. The learned Commissioner (Appeals) should have dealt with assessee’s allegation that there are no fresh material before the Assessing Officer for re–opening the assessment and the re–opening on the basis of same set of facts and material available on record at the time of completion of original assessment and merely at the instance of audit party amounts to change of opinion. As the learned Commissioner (Appeals) has not decided the issue on proper appreciation of facts and materials on record and without adequate opportunity to the assessee to represent his case on the issue, we are inclined to restore this issue to the file of the learned Commissioner (Appeals) for deciding afresh after due opportunity of being heard to the assessee on the issue. Only in the event, the learned Commissioner (Appeals) upholds the validity of re–opening of assessment after meeting the objections of the assessee with proper

In view of our aforesaid decision, the other grounds raised by the assessee on merits of the addition made are also restored to the file of the learned Commissioner (Appeals) for adjudication on merit in case it is necessary to do so.