There was no specific query and consequent submission regarding the general and education reserves as well as provision for gratuity which had been claimed by the assessee. In the assessment order it was mentioned that “on profit and loss appropriation account Rs. 3.77 lakhs transferred to the general reserve and Rs.15.103 had been transferred to the education reserve account in terms of the bye-laws of the society”. The AO had merely reproduced the accounting entries by way of transfer to the general reserve and the education reserve as reflected in the profit and loss appropriation account. In the absence of any specific query by the AO and in the absence of any specific finding in the assessment order, showing that the AO had examined the claim of the assessee regarding the general and education reserve and the provision for gratuity, there could not be any change of opinion when such an opinion had not been formed at the first place. There was no due and proper application of mind by the AO.

The Commissioner had given a clear reasoning and finding in order as to why the provisions of S.40A(9) were not attracted in the instant case. The Commissioner had examined the assessment records as well as the Revenue audit memo available on record. Accordingly the revision is held to be justified . (AY .2012 – 2013)