Re-opening of Assessment not valid in absence of any justifiable doubtful circumstances – HC

Brief of the Case

High court held In the case of The CIT vs. M/s Kerala Kaumudi (P) Ltd that the fundamental basis on which the assessment was re-opened itself is untenable. We are fully agree with the contention of the Tribunal that in the absence of any justifiable vitiating circumstances, the AO cannot decline to accept the bill produced by Assessee and accordingly cannot deny the investment allowance and depreciation allowed in the last assessment year by re-opening of assessment.

Facts of the Case

The assessee company was engaged in printing and publishing of a newspaper by name ‘Kerala Kaumudi’. The assessee imported a Rotary Printing Press from Germany. The machine needs to be installed by local labour. On this basis, the assessee claimed investment allowance and depreciation which was allowed by the Assessing Officer. In the subsequent year, assessee claims expenditure towards installation of machinery which was denied on the ground that installation of machinery was not completed in the previous assessment year. Consequently AO re-opened the previous assessment year case and withdrew the exemption of Investment allowance and depreciation.

Contention of the Assessee

 To prove that machinery was installed and commissioned in the previous assessment year, the assessee produced a bill issued for undertaking printing work.

 Contention of the Revenue

 he revenue declined to accept the bill on the ground that it was issued to a related party.

 Held by CIT (A)

The order of re-opening of assessment and withdrew the investment allowance and depreciation allowed in last assessment year was set aside.

 Held by ITAT

The order of first appellate authority was confirmed by the ITAT.

 Held by High Court

It is clear from the orders passed by the Commissioner and Tribunal that the assessee has installed the imported machine by using local labour. Also to prove this the assessee produced a bill for undertaking printing work. The AO refusal to accept the bill on the ground that it is issued to a related party is not tenable. On this aspect, the Tribunal has rightly held that in the absence of any other justifiable vitiating circumstances, the Assessing Officer was wrong in declining to accept the bill produced by the assessee. We full agree with the Tribunal on this finding. Therefore the fundamental basis on which the assessment was re-opened itself is untenable.

Accordingly, the appeal was dismissed.