2009 (12) TMI 733 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of Rs. 34,04,667 being prior period expenses.
2. Assumption of jurisdiction for framing reassessment u/s 147 of the Income-tax Act, 1961.

Summary:

Issue 1: Deletion of Disallowance of Prior Period Expenses

The Revenue challenges the deletion of disallowance of Rs. 34,04,667 being prior period expenses allowed in this year. The Assessing Officer (AO) had disallowed these expenses on the grounds that they pertained to an earlier year and should not be allowed in the current year. However, the learned Commissioner of Income-tax (Appeals) held that the expenses were genuine and deductible, citing the jurisdictional High Court's decisions in CIT v. Vishnu Industrial Gases P. Ltd. and CIT v. Shri Ram Pistons and Rings Ltd. The Commissioner noted that the AO did not provide detailed reasons for deviating from the original assessment, which allowed these expenses, and thus, the disallowance was deleted. The Tribunal upheld this view, stating that the expenses were genuine and deductible, and there was no tax implication as both years resulted in a loss.

Issue 2: Assumption of Jurisdiction for Reassessment u/s 147

The assessee challenged the assumption of jurisdiction for framing reassessment u/s 147 of the Act. The original assessment was completed u/s 143(3) on December 30, 2005, at a loss of Rs. 8,21,41,827. The AO sought to reopen the assessment based on an audit objection regarding the disallowance of prior period expenses. The learned Commissioner of Income-tax (Appeals) held that the reassessment was valid as it was within four years from the end of the relevant assessment year, and the AO had jurisdiction if prima facie it was noticed that some income had escaped assessment. However, the Tribunal found that the AO did not agree with the audit objection and merely changed his opinion, which is not a valid ground for reassessment. Citing various judicial precedents, including CIT v. Kelvinator of India Ltd. and Jindal Photo Films Ltd. v. Deputy CIT, the Tribunal held that reassessment based on a mere change of opinion is not permissible.

Conclusion:

The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, holding that the deletion of disallowance of prior period expenses was justified and the reassessment u/s 147 was invalid due to being based on a mere change of opinion.

Pronounced in the open court on December 11, 2009.