DCIT 9(2), MUMBAI V. NESCO LTD, MUMBAI

ITA 5611/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7904 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUMAN KUMAR
• Keywords: Rectification of order; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO. 5611/MUM/2014 ASSESSMENT YEAR: 2008-09 DCIT 9(2) ROOM NO. 218 2 ND FLOOR, AAYAKAR BHAVAN, M.K. RD, MUMBAI, PIN 400020 / VS. NESCO LTD NESCO ESTATE, WESTERN EXPRESS HIGHWAY GOREGAON (E) (APPELLANT) (RESPONDENT ) P.A. NO.AAACN1222E APPELLANT BY SUMAN KUMAR REVENUE BY SATISH R. MODY DATE OF HEARING: 6/3/2017 DATE OF ORDER: 22/03/2017 / O R D E R PER ASHWANI TANEJA, A.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-20 MUMBAI [IN SHORT CIT(A)], DATED 9.6.2014 PASSED AGAINST ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, DATED 13.12.2013 FOR ASSESSM ENT YEAR 2008-09 ON THE FOLLOWING GROUNDS:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN QUASHING THE NOT ICE ISSUED U/S-158 WHEN PROVISIONS FOR ISSUE OF NOTICE WERE COMPLIED W ITH AND REASONS FOR RE-OPENING WAS RECORDED BY THE A.O.? WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THE REASSESSMENT PROCE SSING U/S 147/148 OF THE INCOME-TAX ACT, 1961 WAS BAD IN LAW, BY HOLD ING IT TO BE BASED M/S. NESCO LTD. 2 ON A CHANGE OF OPINION WITHOUT APPRECIATING THE FAC T THAT NO INFORMED DECISION WAS TAKEN BY THE A.O. DUE TO FAIL URE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL F ACTS FOR MAKING THE ASSESSMENT? WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN ALLOWING THE COMPENSATION OF RS.6.50 CRORES HOLDING THAT THE SAME WAS AN ASCERTAINED LIABILITY, WITHOUT APPRECIATING THE FACT THAT THE SAME WAS ONLY A PROV ISION AND ALLOWING A PROVISION FROM THE INCOME OF THE ASSESSEE WILL GI VE A DISTORTED PICTURE OF THE PROFIT & LOSS ACCOUNT OF THE ASSESSE E? THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) BE SET ASIDE ON THE GROUNDS MENTIONED ABOVE AND THAT OF THE A.O. BE RESTORED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A LL OR ANY OF THE GROUNDS OF APPEAL. 2. DURING THE COURSE OF HEARING, IT WAS ARGUED BY THE LD. DR THAT ASSESSEE HAD CLAIMED IN THE PROFIT & LOSS ACCOUNT A N AGGREGATE AMOUNT OF RS.6.50 CRORE ON ACCOUNT OF COMPENSATION PAYABLE TO VARIOUS PARTIES. SINCE, THE AMOUNT OF COMPENSATION PAYABLE WAS NOT AT ALL C RYSTALIZED, THEREFORE, THE REOPENING WAS DONE TO EXAMINE THE CORRECTNESS O F THE CLAIM AND DISALLOWANCE WAS MADE, SINCE THE CLAIM WAS FOUND TO BE NOT CORRECT IN THE REASSESSMENT PROCEEDINGS. THEREFORE, ORDER OF THE A O SHOULD BE UPHELD AND APPEAL OF THE REVENUE SHOULD BE ALLOWED. 3. PER CONTRA, LD. COUNSEL OF THE ASSESSEE MADE DETAIL ED SUBMISSIONS IN SUPPORT OF THE ORDER PASSED BY THE LD. CIT(A). IT W AS SUBMITTED THAT REOPENING HAS BEEN DONE BY THE AO IN ABSENCE OF ANY FRESH TANGIBLE MATERIAL, THE REQUISITE DETAILS WERE SUBMITTED TO T HE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3), WHICH WERE EXAMI NED BY HIM AND CLAIM WAS FOUND TO CORRECT, AS PER LAW, THEREFORE, NO DIS ALLOWANCE WAS MADE THEREIN. THUS, REOPENING IS BEYOND THE PROVISIONS O F LAW. IT WAS FURTHER SUBMITTED BY HIM THAT LD. CIT(A) HAS ALSO EXAMINED SIX ISSUES ON THE MERITS AND FOUND THAT CLAIM HAS BEEN RIGHTLY ALLOWED BY LD . CIT(A). THEREFORE, VIEWED FROM ANY ANGLE, THE ORDER PASSED BY THE AO I S NOT TENABLE IN LAW M/S. NESCO LTD. 3 AND INCORRECT ON FACTS THUS, ORDER OF CIT(A) SHOULD BE UPHELD AND APPEAL FILED BY REVENUE SHOULD BE DISMISSED. 4. IN RE-JOINDER, THE LD. DR SUBMITTED THAT LD. CIT(A) HAS OMITTED TO CONSIDER THE EFFECT OF IN EXPLANATION 1 TO SECTION 147 WHICH SAYS THAT MERE PRODUCTION BEFORE THE AO OF BOOKS AND OTHER EVIDENC ES WILL NOT NECESSARILY AMOUNT TO DISCLOSURE STIPULATED U/S 147 ACT. 5. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH T HE PARTIES AND THE ORDER PASSED BY THE LD. CIT(A). IT IS NOTED THA T THE ASSESSMENT PROCEEDINGS IN THIS CASE WERE ORIGINALLY COMPLETED U/S143(3) OF THE ACT VIDE ORDER PASSED ON 27.12.2010 AND THE AO RECORDED REA SONS DATED 28.3.13 (I.E. WITHIN 4 YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR) BEFORE ISSUING NOTICE U/S148, WHICH ARE REPRODUCED HERE UN DER:- UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 A NY PROVISION MADE IN THE BOOKS OF CONTINGENT LIABILITY IS NOT ALLOWABLE AS EXPENSES WHILE COMPUTING INCOME UNDER THE HEAD BUSINESS OR PROFESSION. IN THIS CASE THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE A.Y. 2008-09 ON 06.10.2008 DECLARING INCOME OF RS. 46,83,63,270/-. THE ASSESSMENT HAS BEEN COMPLETED A FTER SCRUTINY ON 27.12.2010 BY COMPUTING INCOME OF RS.46,52,72,576/-. ON PERUSAL OF RECORDS IT WAS OBSERVED THAT THE ASSE SSEE COMPANY DEBITED RS.6,50,00,000/-AS CLAIM FOR COMPEN SATION PAID/PROVIDED. FURTHER IT WAS STATED IN PARA NO.15( A) SCHEDULE 13 TO NOTES FORMING PART OF THE ACCOUNTS THAT PROVI SION FOR COMPENSATION PENDING SETTLEMENT AS ON 31 03 2008 WA S RS.131000000/-(INCLUDING THE PY 31.03.2008). HOWEVE R, THE PROVISION MADE IN THE ACCOUNTS IS REMAINED LOBE ADD ED BACK TO THE TOTAL INCOME. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEV E THAT INCOME OF RS.6,50,00,000/-CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961.' M/S. NESCO LTD. 4 6. WITH THE ASSISTANCE OF THE PARTIES, IT WAS NOTED BY US THAT ASSESSEE HAD PLACED BEFORE AO DURING THE COURSE OF ORIGINAL PROCEEDINGS, DETAILS ABOUT AMOUNT OF COMPENSATION DEBITED IN THE PROFIT & LOSS ACCOUNT FOR AGGREGATE AMOUNT OF RS.6.50 CRORES. THE ASSESSEE HA D SUBMITTED PARTY WISE DETAILS, GIVING JUSTIFICATION FOR ALLOWABILITY OF C OMPENSATION WITH RESPECT TO EACH PARTY WHICH WAS SHOWN IN SUBSEQUENT YEAR. THE AMOUNT OF COMPENSATION WAS PAID AS AND WHEN SETTLED BY THE CI VIL COURTS AND THE AMOUNT NOT PAID WAS WRITTEN BACK AS PART OF OTHER I NCOME. IT IS NOTED THAT NO FRESH TANGIBLE MATERIAL HAS COME INTO POSSESSION OF THE ASSESSING OFFICER, BEFORE RECORDING THE AFORESAID REASONS FOR DOUBTING THE ALLOWABILITY OF IMPUGNED AMOUNT OF CLAIM LD. AO HAS MADE REFEREN CE OF THE SAME DOCUMENTS WHICH WERE HELD ON RECORD OF THE ASSESSIN G OFFICER, FOR EXAMPLE, PARA 15(A) OF SCHEDULED 13 TO THE NOTES FO RMING PART OF THE BALANCE-SHEET. IN OUR VIEW, THE SAME BALANCE-SHEET WHICH WAS FILED BEFORE THE AO CANNOT BE REFERRED TO FOR MAKING THE SOLE BA SIS FOR REOPENING THE ALREADY CONCLUDED THE ASSESSMENT. IN ADDITION TO TH AT, WE HAVE EXAMINED THE AFORESAID NOTE NO-15(A) OF SCHEDULED NO 13. PE RUSAL OF THE SAME DOES NOT LEAD TO ANY CLEAR BELIEF THAT THESE AMOUNTS ARE NOT ALLOWABLE AND REMAINS TO BE ADDED BACK TO THE TOTAL INCOME OF ASS ESSEE. THE SAID INTERFERENCE HAS BEEN DRAWN BY THE AO OF HIS OWN. T HUS, IN OUR OPINION THERE IS NO FRESH TANGIBLE MATERIAL IN THE POSSESSI ON OF THE AO ON THE BASIS OF WHICH, A BELIEF COULD BE FORMED FOR ESCAPEMENT O F INCOME. 7. LD. DR MADE REFERENCE TO EXPLANATION 1 OF SECTION 1 47 TO SUBMIT THAT THE REOPENING MADE BY THE AO ON THE GROUND THAT AS PER EXPLANATION 1, MERE PRODUCTION OF THE EVIDENCES WOULD NOT NECESSAR ILY AMOUNT TO DISCLOSURE. WE HAVE CONSIDERED THE ARGUMENT OF LD. DR AND ALSO GONE THROUGH THE EXPLANATION 1 TO SECTION 147 WHICH READ S AS UNDER:- M/S. NESCO LTD. 5 PRODUCTION BEFORE THE AO OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HA VE BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. 8. WE HAVE CONSIDERED AND UNDERSTOOD THE CORRECT POSIT ION OF LAW IN THIS REGARD. FIRSTLY, THE EXPLANATION IS MAINLY TO DEFINE THE SCOPE OF FIRST PROVISO TO SECTION 147 WHICH POSTULATES LIMITATION OF REOPENING IN CASE REOPENING IS DONE BEYOND 4 YEARS FROM THE END OF RE LEVANT ASSESSMENT YEAR. THE SAID PROVISO CANNOT BE MADE APPLICABLE HE RE TO EXAMINE THE VALIDITY OR OTHERWISE OF THE REOPENING DONE BY THE ASSESSING OFFICER. SECONDLY, IN ANY CASE, OTHERWISE ALSO, THE SAID EXP LANATION CAN BE TAKEN HELP OF BY THE AO WHEN HE HAS FIRSTLY DEMONSTRATED THAT REOPENING HAS BEEN DONE ON THE FULFILMENT OF THE FOREMOST MANDATO RY CONDITION VIZ, AVAILABILITY OF FRESH TANGIBLE MATERIAL IN THE POSS ESSION OF THE AO TO ENABLE HIM TO FORM THE BELIEF OF ESCAPEMENT OF INCOME AND JUSTIFY THE REOPENING OF THE ASSESSMENT. THE SAID MANDATORY ELEMENT IS FO UND MISSING HERE, AS DISCUSSED ABOVE. THE UNDISPUTED FACT IS THAT THERE IS NO FRESH TANGIBLE MATERIAL IN THE POSSESSION OF THE AO TO FORM BELIEF OF ESCAPEMENT OF INCOME. UNDER THE CIRCUMSTANCES, IT WOULD NOT BE PO SSIBLE FOR THE AO TO TAKE SHELTER OF THE PROTECTION PROVIDED IN EXPLANAT ION 1 TO SECTION 147. THIRDLY, THE REAL INTENT OF THIS EXPLANATION SEEMS TO BE TO PROTECT THOSE CASES WHERE THE PROPER INFORMATION WAS NOT PROVIDED BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S OR IT WAS PROVIDED IN SUCH A MANNER WHICH WAS NOT POSSIBLE TO BE EXAMINED BY THE AO IN THE PECULIAR FACTS AND CIRCUMSTANCES OF A PARTICULAR CA SE. IT MAY ALSO PROVIDE PROTECTION IN THOSE CASES WHERE THE ISSUE WAS NOT E XAMINED AT ALL BY THE AO AS THERE WAS NO OCCASION WITH THE AO TO EXAMINE THE ISSUE UNDER CONSIDERATION. HOWEVER, IN THE CASE BEFORE US, THE IMPUGNED ISSUE WAS M/S. NESCO LTD. 6 EXAMINED BY THE AO IN VIEW OF THE QUERY ASKED BY HI M AND THE SAME WAS PROPERLY REPLIED WITH PROPER DETAILS AND THEREAFTER ONLY ORIGINAL ASSESSMENT U/S 143(3) WAS PASSED ACCEPTING THE IMPUGNED CLAIM. THUS, IN OUR CONSIDERED OPINION, THE AO DOES NOT HAVE THE SHIELD OF EXPLANATION 1 OF SECTION 147 TO JUSTIFY THE REOPENING WHICH HAS BEEN DONE WITHOUT THERE BEING ANY FRESH TANGIBLE MATERIAL IN THE POSSESSION OF THE AO. 9. WE FIND THAT LD. CIT(A) HAS RIGHTLY QUASHED THE REO PENING DONE BY THE AO BY OBSERVING AS UNDER:- I HAVE CIRCUMSPECTED THE ENTIRE SPECTRUM OF THE FA CTS AND'- CIRCUMSTANCES OF THE CASE AND HAVE ALSO CONSIDERED CAREFULLY THE FINDING OF THE ASSESSING OFFICER, RIVAL SUBMISS ION OF THE AR AND HAVE ALSO CONSIDERED THE VARIOUS JUDICIAL PROPO SITIONS REFERRED TO OR RELEVANT TO THE ISSUE UNDER APPEAL. I FIND THAT LD. ASSESSING OFFICER HAS WRONGLY INITIATED ESCAPEMENT ASSESSMENT PROCEEDING WITHOUT 'TANGIBLE' OR 'FRESH MATERIAL' O R ON THE BASIS OF ANY MATERIAL WHICH SUGGEST THAT THERE IS E SCAPEMENT OF ASSESSMENT. APPELLANT BY LETTER DATED 27.10.2010 APPEARING AT PAGE NO.36 OF THE PAPER BOOK, HAS SUBMITTED THE DETAILS OF COMPENSATION DEBITED IN PROFIT & LOSS ACCOUNT DURIN G THE ORIGINAL ASSESSMENT PROCEEDINGS AND PARTY-WISE ASCE RTAINED LIABILITY WAS EXPLAINED TO THE ASSESSING OFFICER. T HE XEROX COPY OF CLARIFICATION GIVEN TO THE ASSESSING OFFICER HAS ALSO BEEN SUBMITTED IN THE PAPER BOOK PAGE NO.41, REVEALS THE FACT THAT ISSUE UNDER CONSIDERATION WAS WELL WITHIN THE KNOWL EDGE OF THE ORIGINAL ASSESSING OFFICER WHO WAS OF THE RANK OF A DDL.CIT, RG.9(2) WHEREAS PRESENT ASSESSING OFFICER IS THE DC IT BELOW HIS RANK. IT IS VERY EVIDENT THAT AFTER RECEIPT OF EXPL ANATION AND DETAILS SUBMITTED BY THE APPELLANT, THE THEN ASSESS ING OFFICER HAD PASSED ORDER AFTER TWO MONTHS, I.E ON 27.12.201 0. IT IS ALSO IMPORTANT TO POINT OUT THAT AFTER SCRUTINIZING THE DETAILS OF EXPENSES, THE FIRST ASSESSING OFFICER HAS DISALLOWE D SOME EXPENDITURE U/S.37 OUT OF MISCELLANEOUS EXPENDITURE . THE DETAILS OF MISCELLANEOUS EXPENDITURE WERE ALSO SUBM ITTED BY THE SAME LETTER DT. 27. 10. 2010 WHICH MEANS THE IS SUE OF CLAIM OF COMPENSATION WAS VERY MUCH IN THE NOTICE OF THE ORIGINAL ASSESSING OFFICER WHO HAS ACCEPTED THE CLAIM OF THE APPELLANT. M/S. NESCO LTD. 7 THUS IT IS VERY EVIDENT THAT SUBSEQUENT TO THE ORIG INAL ASSESSMENT, THERE WAS NO ANY NEW MATERIAL, FRESH TA NGIBLE MATERIAL OR ANY NEW INFORMATION WHICH COULD SUGGEST ESCAPEMENT ASSESSMENT, THEREFORE, I FIND FORCE IN T HE ARGUMENT OF THE LD.AR THAT NO SUCH COMPLETED ASSESSMENT COUL D BE RE- OPENED. THUS THE PROCEEDING ITSELF IS NULL AND VOID . FURTHER, IT IS NOTICED FROM THE LETTER DT.05.12.2013 THAT APPELLAN T HAS CLARIFIED TO THE ASSESSING OFFICER THAT THE CLAIM O F COMPENSATION HAS BEEN EXAMINED TWICE AND THEREFORE THERE IS NO SCOPE UNDER THE LAW TO RE-EXAMINE OR REVIEW THIR D TIME THE SAME WITH SOLE INTENTION TO DISALLOW SUCH GENUINE C LAIM MERELY BY ADOPTING DIFFERENT VIEW ON THE SAME SET OF FACTS . SUCH REVIEW OR CHANGE OF OPINION CANNOT BE BASIS FOR REO PENING THE COMPLETED ASSESSMENT. THUS THE STAND OF THE ASSESSI NG OFFICER IS NOT JUSTIFIED NOR IS MAINTAINABLE IN VIEW OF AME NDED PROVISION OF LAW U/S.147 OF THE I.T. ACT, 1961 AND CBDT CIRCULAR NO549 DT.31.10.2009. THUS THE OF THE APPELLANT IS F OUND ACCEPTABLE. IT IS IMPORTANT TO NOTE THAT STATEMENT NOTICE HAS BEEN ISSUED FOR VIRTUALLY SAME REASON FOR WHICH REC TIFICATION PROCEEDINGS HAD BEEN INITIATED BUT DROPPED. ASSESSI NG OFFICER HAS NOT RECEIVED ANY NEW MATERIAL THEREAFTER, HENCE SUCH NOTICE CANNOT BE HELD AS VALID VIDE DECISION OF HON 'BLE KOLKATA HIGH COURT IN THE CASE BERGER PAINTS INDIA LTD VS A CIT (2010) 322 ITR 369, 381 (KOLKATA). FURTHER, I FIND THAT TH ERE IS NO ALLEGATIONS RECORDED IN THE NOTICE U/S.148 BY THE A SSESSING OFFICER THAT APPELLANT HAD FAILED TO MAKE FULL AND TRUE DISCLOSURE OF THE RELEVANT FACTS. SINCE, INITIATION OF PROCEEDING IS BASED ON CHANGE OF OPINION OR BY REVIEWING THE ORIG INAL ORDER, SUCH NOTICE CANNOT BE HELD VALIDLY ISSUED VIDE DECI SION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AR THUR ANDERSON & COMPANY VS. ACIT (2010) 324 ITR 240, 246 (BOM). A LSO REFERENCE MAY BE HAD OF D.T. & T.D.C. LTD. VS. ACIT (2010) 324 ITR 234, 239 (DELHI). FURTHER, THE HON'BLE SUPREME COURT HAS DISAPPROVED SUCH ACTION OF THE ASSESSING OFFICER IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD (2010) 320 ITR 561 (SC) FURTHER, THE H ON'BLE JURISDICTIONAL HIGH COURT HAS ALSO NOT SUSTAINED SU CH REOPENING OF THE COMPLETED ASSESSMENT AND THEREFORE THE DECIS ION IN THE CASE OF DIRECT INFORMATION PVT.LTD VS. ITO (2012) 3 49 ITR 150 (BOM), IS APPLICABLE TO THE CASE UNDER APPEAL RECEN TLY, HON'BLE M/S. NESCO LTD. 8 DELHI HIGH COURT IN THE CASE OF BHARAT SANCHAR NIGA M VS. CIT (2013) 355 ITR 188 (DEL) HAS HELD THAT NO SUCH CASE CAN BE REOPENED ON THE BASIS OF CHANGE OF OPINION OR WITHO UT HAVING FRESH TANGIBLE MATERIAL BEFORE INITIATING REOPENING PROCEEDING. FURTHER, THE HON'BLE DELHI HIGH COURT (FULL BENCH), IN THE CASE OF CIT VS. KALVINATOR OF INDIA LTD. 256 ITR 1 (DELH I), AT PARA 12 TO 15 HAS HELD AS UNDER :- 'WE MAY ALSO NOTICE THAT A DIVISION BENCH OF THE GU JARAT HIGH COURT IN GARDEN SILK MILLS (P) LTD. (SUPRA), WHILE EXPRESSING SIMILAR VIEWS OBSERVED- 'THE REASONS RECORDED BY THE AO WHICH LED TO THE BE LIEF ABOUT THE ESCAPEMENT OF ASSESSMENT DISCLOSE THAT THE PRES ENT CASE IS NOTHING BUT MERE CHANGE OF OPINION ON THE FACTS WHI CH WERE ALREADY BEFORE THE AO WHILE MAKING THE FIRST ASSESS MENT TO WHICH CONSCIOUS APPLICATION OF MIND IS REFLECTED FR OM THE PROCEEDINGS, AND ALLOWED IN THE COMPUTATION AND WHI CH HAS NOT BEEN DISPUTED BY THE REVENUE.' ALTHOUGH THE REFERRING BENCH HAD PRIMA FACIE AGREED WITH THE DECISION OF THIS COURT IN JINDAL PHOTO FILMS (SUPRA ) BUT A DOUBT WAS SOUGHT TO BE RAISED BY THE REVENUE IN VIEW OF A DECISION OF THE GUJARAT HIGH COURT IN PRAFUL CHUNILAL PATEL'S C ASE (SUPRA). THEREFORE, LET US NOW CONSIDER THE DECISION OF THE DIVISION BENCH OF GUJARAT HIGH COURT IN THE SAID CASE, WHERE IT WAS HELD: 'IT WILL THUS, BE SEEN THAT IN THE PROCEEDINGS TAKE N U/S- 147, THE AO MAY MAKE AN ASSESSMENT OR REASSESSMENT OR RECOMPUTATION, AS THE CASE MAY BE. THE WORD 'ASSESS ' REFERS TO A SITUATION WHERE THE ASSESSMENT WAS NOT MADE IN TH E NORMAL MANNER WHILE THE WORD 'REASSESS' REFERS TO A SITUAT ION WHERE AN ASSESSMENT IS ALREADY MADE, BUT IT IS SOUGHT TO BE REASSESSED ON THE BASIS OF THIS PROVISION. IN CASES WHERE THE AO HAS NOT MADE AN ASSESSMENT OF ANY ITEM OF INCOME CHARGEABLE TO TAX WHILE PASSING THE ASSES SMENT ORDER IN THE RELEVANT ASSESSMENT YEAR, IT CANNOT BE SAID THAT SUCH INCOME WAS SUBJECTED TO AN ASSESSMENT. IN THE ASSESSMENT PROCEEDINGS, THE AO WOULD ASCERTAIN ON CONSIDERATION OF ALL RELEVANT CIRCUMSTANCES THE AMO UNT OF TAX CHARGEABLE TO A GIVEN TAXPAYER. THE WORD 'ASSESSMEN T' WOULD MEAN THE ASCERTAINMENT OF THE AMOUNT OF TAXABLE INC OME AND OF THE TAX PAYABLE THEREON IN OTHER WORDS, WHERE TH ERE IS NOT OF THE AMOUNT OF TAXABLE INCOME AND THE TAX PAYABLE TH EREON, IT M/S. NESCO LTD. 9 CAN NEVER BE SAID THAT SUCH INCOME MERELY BECAUSE D URING THE ASSESSMENT PROCEEDINGS THE RELEVANT MATERIAL WAS ON RECORD OR COULD A DILIGENCE DISCERNED BY THE AC FOR THE PURPO SE OF ASSESSING A PARTICULAR ITEM OF INCOME CHARGEABLE TO TAX, IT CANNOT BE INFERRED THAT THE AO MUST NECESSARILY HAV E DELIBERATED OVER IT HE HAD FORMED ANY OPINION IN RE SPECT THEREOF. IF LOOKING BACK IT APPEARS TO THE AO, (WIT HIN (OUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR) THAT A PARTICULAR ITEM EVEN THOUGH REFLECTED ON THE RECORD WAS NOT SU BJECTED TO ASSESSMENT AND WAS LEFT OUT WHILE WORKING OUT THE T AXABLE INCOME AND THE TAX PAYABLE THEREON, I.E. WHILE MAKI NG THE FINAL ASSESSMENT ORDER, THAT WOULD ENABLE HIM TO INITIATE THE PROCEEDINGS IRRESPECTIVE OF THE QUESTION OF NON-DIS CLOSURE OF MATERIAL FACTS BY THE ASSESSEE. WE ARE, WITH RESPECT, UNABLE TO SUBSCRIBE TO THE AF ORE- MENTIONED VIEW. IF THE CONTENTION OF THE REVENUE IS ACCEPTED THE SAME, IN OUR OPINION, WOULD CONFER AN ARBITRARY POWER UPON THE AO. THE AO WHO HAD PASSED THE ORDER OF ASSESSME NT OR EVEN HIS SUCCESSOR OFFICER ONLY ON SLIGHTEST PRETEX T OR OTHERWISE WOULD BE ENTITLED TO REOPEN THE PROCEEDING. ASSESSM ENT PROCEEDINGS MAY BE FURTHERMORE REOPENED MORE THAN O NCE. IT IS NOW TRITE THAT WHERE TWO INTERPRETATIONS ARE POS SIBLE, THAT WHICH FULFILS THE PURPOSE AND OBJECT OF THE ACT SHO ULD BE PREFERRED. IT IS WELL SETTLED PRINCIPLE OF INTERPRETATION OF S TATUTE THAT ENTIRE STATUTE SHOULD BE READ AS A WHOLE AND THE SAME HAS TO BE CONSIDERED THEREAFTER CHAPTER BY CHAPTER AND THEN S ECTION AND ULTIMATELY WORD BY WORD. IT IS NOT IN DISPUTE THAT THE AO DOES NOT HAVE ANY JURISDICTION TO REVIEW ITS OWN ORDER. HIS JURISDICTION IS CONFINED ONLY TO RECTIFICATION OF M ISTAKE AS CONTAINED IN S. 154 OF THE ACT. THE POWER OF RECTIF ICATION OF MISTAKE CONFERRED UPON THE ITO IS CIRCUMSCRIBED BY THE PROVISIONS OF S. 154 OF THE ACT. THE SAID POWER CAN BE EXERCISED WHEN MISTAKE IS APPARENT. EVEN MISTAKE CANNOT BE RE CTIFIED WHERE IT MAY BE A MERE POSSIBLE VIEW OR WHERE THE I SSUES ARE DEBATABLE. EVEN THE TRIBUNAL IT AS LIMITED JURISDIC TION UNDER S. 254(2) OF THE ACT. THUS, WHEN THE AO OR TRIBUNAL HA S CONSIDERED THE MATTER IN DETAIL AND VIEW TAKEN IS A POSSIBLE VIEW THE ORDER CANNOT BE CHANGED BY WAY OF EXERCISI NG THE JURISDICTION OF RECTIFICATION OF MISTAKE. M/S. NESCO LTD. 10 IT IS A WELL SETTLED PRINCIPLE OF LAW THAT WHAT CAN NOT BE DONE DIRECTLY CANNOT BE DONE INDIRECTLY. IF THE ITO DOES NOT POSSESS THE POWER OF REVIEW, IT CANNOT BE PERMITTED TO ACHI EVE THE SAID OBJECT BY TAKING RECOURSE TO INITIATING A PROCEEDIN G OF REASSESSMENT OR BY WAY OF RECTIFICATION OF MISTAKE. IN A CASE OF NATURE THE REVENUE IS NOT WITHOUT REMEDY. SEC. 263 OF THE ACT EMPOWERS THE CIT TO REVIEW AN ORDER WHICH IS PREJUD ICIAL TO THE REVENUE. 10. WE FIND THAT ORDER PASSED BY LD. CIT(A) DESERVES TO BE UPHELD ON THE ISSUE OF REOPENING IN VIEW OF THE DETAILED DISCUSSI ON MADE BY US IN EARLIER PART OF THE ORDER. 11. WITH REGARD TO MERITS OF THE CASE ALSO IT IS NOTED BY US THAT LD. CIT(A) UPHELD THAT VALIDITY OF THE CLAIM MADE BY THE ASSES SEE BY OBSERVING AS UNDER:- ON MERIT ALSO, THOUGH NOT REQUIRE TO DEAL WITH BECA USE OF ABOVE FINDING, THERE IS NO CASE FOR THE ASSESSING O FFICER TO DISALLOW THE GENUINE CLAIM ON THE BASIS OF PRESUMPT ION OR ON ACCOUNT OF WRONG NOTION OF CONTINGENT LIABILITY. IT IS VERY EVIDENT FROM THE DETAILS SUBMITTED BY THE APPELLANT BY LETTER DT.27.10.2010 THAT SUCH LIABILITIES WERE NOT A GENE RAL LIABILITY BUT WERE HAVING SPECIFIC BACKGROUND OF DISPUTE BETW EEN ASSESSE AND THE PURCHASING PARTIES AND SERVICE PROV IDER. WITH A VIEW TO MAKE IT MORE EVIDENT IT SEEMS NECESSARY TO BRIEFLY HIGHLIGHT THE FACTS OF THE COMPENSATION SO THAT THE RE WOULD NOT HE ANY SORT OF AMBIGUITY OR LACK OF CLARITY. THE AM OUNT OF CLAIM OF COMPENSATION OF RS.6,50,00,000/- COMPRISES OF RS .4 CRORES RELATED TO DISPUTE WITH MACEDON INDO AUSTRIAN VENTU RES PVT. LTD., RS.2.02 CRORES RELATED TO WESTERN RAILWAY MUM BAI AND RS. 49.50 LACS RELATED TO SHIVANGI CRAFTS KASHIPUR. IT CAN BE SEEN FROM PAGE NO.41 OF THE PAPER BOOK AND FROM THE COMPLAINT NO.CA51/2000 OF 1999-2000 THAT APPELLANT HAS SUPPLIED MACHINES WHICH WAS HAVING MANUFACTURING DE FECTS, HENCE, PRODUCTION WAS NOT COMING OUT PROPERLY AND T HEREFORE THEREAFTER DISPUTE AROUSED WITH THE ASSESSEE HENCE THAT AUSTRIAN COMPANY HAD FILED THIS COMPLAINT BEFORE MO NOPOLIES. TRADE PRACTICES COMMISSION NEW DELHI. CONSIDERING T HE TREATMENT APPELLANT HAS MADE NECESSARY PROVISION. A ND M/S. NESCO LTD. 11 THEREAFTER HAS PROVIDED IN BOOKS OF ACCOUNT, THE QU ANTUM OF COMPENSATION WHICH IS RS.4CRORES IN THIS YEAR. THIS ASCERTAINMENT IS ALSO BASED ON SENIOR LEGAL MANAGER 'S LETTER DATED 30.03.2008. SIMILARLY, THE COMPENSATION OF RS . 2.02 CRORES (TOGETHER WITH CHARGEABLE INTEREST) SHOWN IN THE NAME OF WESTERN RAILWAY, MUMBAI IS BASED ON LETTER NO.W. 580/2/6 VOL. V DATED 29.01.2008 OF SR. DIVISIONAL ENGINEERI NG (SOUTH) WESTERN RAILWAY, CENTRAL MUMBAI 400 008. SIMILARLY, COMPENSATION OF RS.49.50 LACS (TOGETHER WITH INTERE ST) IS IN RESPECT OF COMPLAINT FILED BY SHIVANGI CRAFT LTD. C ASE NO.1453 OF 2000 ON THE GROUND THAT APPELLANT HAS NOT MANUFA CTURED AND SUPPLIED THE TEXTILE MACHINERY INSPITE OF ACCEP TING THE ORDER DATED 19.10.1997 AND RECEIPT OF ADVANCE OF RS .20 LACS. THE REVISION PETITION FILED BY THE APPELLANT IN THE HIGH COURT OF BOMBAY HAS BEEN DISMISSED VIDE CRIMINAL MISCELLANEO US PETITION NO.164 OF 2002, ORDER DATED 11.12.2007. TH US, SUBSEQUENT TO THE DECISION OF HON'BLE HIGH COURT, A PPELLANT WAS UNDER OBLIGATION TO MAKE PROVISION OF ACTUAL LI ABILITY. THE ACTUAL WORKING HAS BEEN GIVEN BY SR. LEGAL MANAGER VIDE HIS LETTER DATED 30.03.2008, HENCE THE ENTIRE AMOUNT OF RS.6,50,00,000/- IS FOUND TO BE BASED ON ACTUAL OCC URRENCE OF FINANCIAL INCIDENCE PURELY RELATED TO BUSINESS ACTI VITIES. THAT IS WHY FIRST ASSESSING OFFICER HAS NOT MADE ANY ADDITI ON OF THIS CLAIM OF COMPENSATION ON THE BASIS OF PROVISION. IT IS ALSO PERTINENT TO MENTION THAT DURING THE COU RSE OF ESCAPEMENT ASSESSMENT PROCEEDING ALSO APPELLANT BY LETTER DATED 12.11.2013 HAS CLARIFIED TO THE ASSESSING OFF ICER THAT SUCH CLAIM HAS BEEN MADE AS PER THE ACCOUNTING PRAC TICE AND PRINCIPLE FOLLOWED SINCE SEVERAL YEARS AND IS CONTI NUE, THEREFORE, THE ACCRUED OR RECOGNIZED LIABILITY PROV IDED AS PER THE ACCOUNTING STANDARDS PRESCRIBED BY ICAI, CANNOT BE DISCARDED. AS PER ACCOUNTING STANDARD-1 (AS-I) IT I S MANDATORY TO MAKE PROVISION FOR KNOWN LIABILITY AND LOSSES EV EN THOUGH NO AMOUNT IS DETERMINED WITH CERTAINTY BUT COULD BE GE NUINELY ESTIMATED ON THE BASIS OF RELIABLE INFORMATION. SUC H LIABILITY AS MENTION HEREINABOVE HAS BEEN ACCRUED, HENCE IS ALLO WABLE. REFERENCE MAY BE HAD OF THE CASE OF CALCUTTA COMPAN Y LTD. VS. CIT (1959) 37 ITR 1 (SC). IT IS ALSO A FACT THAT IF ANY LIABILITY IS REDUCED AND EARLIER CLAIM WAS ON HIGHER SIDE, APPEL LANT IS TO OFFER AS INCOME IN THE YEAR OF FINALITY. THIS PRACT ICE IS VISIBLE M/S. NESCO LTD. 12 FROM THE EVIDENCES ON RECORD, HENCE, THE BONAFIDE C LAIM OF THE APPELLANT IS TO BE THE YEAR OF CLAIM AND SAME CANNO T BE DEFERRED TO BE ALLOWED YEAR. THUS, IN THE BACKGROUND OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE ABOVE DISCUSSION, I REACH T O THE CONCLUSION THAT NEITHER NOTICE U/S148 WAS VALID NOR DISALLOWANCE OF ALLOWED COMPENSATION HAS BEEN MADE ON ANY SOUND GROUND OR WITH LEGAL AUTHORITY, HENCE, DISALL OWANCE OF EXPENDITURE OF RS.6,50,00,000/- IS DELETED. 12. WE HAVE ALREADY DISCUSSED IN DETAIL IN EARLIER PART OF OUR ORDER ABOUT THE CORRECTNESS OF THE CLAIM MADE BY ASSESSEE. IT I S NOTED BY US THAT THE FINDINGS RECORDED BY THE LD. CIT(A) ARE WELL REASON ED AND FACTUALLY CORRECT. NOTHING WRONG HAS BEEN POINTED OUT THEREIN BY LD. D R, THEREFORE, SAME ARE UPHELD ON REOPENING AS WELL AS ON MERITS. 13. AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSED A ND ORDER PASSED BY THE LD. CIT(A) IS UPHELD. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONC LUSION OF HEARING. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 22.03.2017 V. P. SINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI