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Issues involved: The judgment addresses the legality of the reassessment orders passed by the Assessing Officer (AO) under section 143(3) read with section 148 of the Income Tax Act for assessment years 2000-01 and 2001-02. The primary issue is whether the reassessment orders were beyond jurisdiction, bad in law, and void-ab-initio.
Assessment Year 2001-02: The AO reopened the assessment for this year based on the grounds that the assessee had debited royalty expenses in its profit and loss account, which the AO believed should have been treated partly as capital expenditure. The CIT(A) upheld the reassessment, stating that it was not a change of opinion and that the issue of royalty expenditure was not raised during the original assessment proceedings. The CIT(A) found that the AO had not applied his mind to the issue previously. The tribunal, however, disagreed with this assessment, citing that the reassessment was based on a mere change of opinion without any new material coming to the AO's knowledge. The tribunal quashed the reassessment for assessment year 2001-02. Assessment Year 2000-01: Similarly, for this year, the AO reopened the assessment after the expiry of four years from the end of the relevant assessment year, claiming that the royalty expenses should have been treated as capital expenditure. The tribunal found that the reassessment for this year was also beyond jurisdiction due to the application of the proviso to section 147, which prohibits reassessment after four years from the end of the relevant assessment year unless there was a failure on the part of the assessee to disclose all material facts. Since the royalty claim was clearly mentioned in the profit and loss account, there was no failure on the part of the assessee. Therefore, the reassessment for assessment year 2000-01 was deemed bad on this basis as well. Conclusion: The tribunal allowed both appeals by the assessee, quashing the reassessment orders for both assessment years. The tribunal did not delve into the merits of the issues, as the primary concern was the legality of the reassessment orders. The judgment emphasized that reassessment cannot be based on a mere change of opinion without any new material coming to light, as it would amount to reviewing the original assessment order, which is impermissible under the law.
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