Case Law Details
Brief of the Case
Delhi High Court held In the case of Dr. Ajit Gupta vs. ACIT that the reason for reopening of the assessment was a mistaken factual premise that the Assessee had changed the system of accounting from the mercantile to the cash system. It was more than adequately explained by the Assessee that this was an inadvertent error. The Assessee has convincingly shown that he has consistently been following the mercantile system of accounting not only for AYs in question but for the earlier and later AYs as well. Hence reopening based on factual inadvertent error is not sustainable in law.
Facts of the Case
The Assessee filed a return of income on 31st October 2006 for AY 2006-07 which was picked up for scrutiny by AO. An assessment order was passed by the AO under Section 143(3) on 22nd December 2008 assessing the taxable income at Rs.14,40,226 as against the declared income of Rs.12,35,268. The Assessee filed a return for AY 2007-08 on 31st October 2007 which again was picked up for scrutiny. An assessment order was passed on 29th December 2009 assessing the taxable income at Rs.36,95,120 as against the declared income of Rs.36,00,313. The Assessee filed a return of income on 30th September 2008 for AY 2008-09 which was processed under Section 143(1) of the Act. The returned income was Rs.1,14,96,331. The Assessee filed a return on 29th September 2009 for AY 2009-10. This was picked up for scrutiny and an assessment order was passed by the AO on 26th April 2011. As against the declared income of Rs.2,10,82,780, the income was assessed at Rs.2,19,53,505.
On 25th March 2013, the DCIT issued a notice to the Assessee under Section 148 of the Act seeking to reopen the assessment order for AY 2006-07. Within three days of the earlier notice, i.e., on 28th March 2013, another notice under Section 148 of the Act was issued by the DCIT seeking to reopen the assessment for AY 2008-09. As far as AY 2007-08 is concerned, the notice was issued by the ACIT, on 5th March 2014. For AY 2009-10, the notice was issued two days later, i.e., on 7th March 2014. The main reason for the reopening of the assessment is admittedly the letter given by the Assessee while the assessment for AY 2010-11 was under scrutiny. The Assessee volunteered that we have followed the cash system of accounting until FY 2008-09 and shifted over to mercantile system of accounting for FY 2009-10 (AY 201011). The same has been confirmed by our Chartered Accountant in the tax audit report as well as the confirmation letter dated 01.10.2012.
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