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Issues involved:
The issues involved in this case are the reopening of assessment u/s 147, disallowance of legal fees, and disallowance of depository charges. Reopening of assessment u/s 147: The appeal was against the order of the CIT(A) upholding the reopening of assessment u/s 147 of the Income-tax Act, 1961. The original return was filed in response to notice u/s 148, objecting to the reopening. The A.O. made additions including legal fees and depository charges, which the assessee claimed pertained to the current year. The CIT(A) confirmed the disallowances. Disallowance of legal fees: The legal fees paid to overseas lawyers were subject to RBI approval, received during the year under consideration. The claim was made in that year as the liability crystallized then. The assessee argued that the amount was allowable as a deduction for that year. Citing legal precedents, it was contended that the liability accrued only after RBI approval, making it a valid deduction for the year. Disallowance of depository charges: The depository charges were payable to various entities and were accounted for in the current year due to a disputed liability settlement. The assessee argued that even though the expenses related to an earlier year, they became payable and crystallized in the current year. Citing legal cases and section 43B, it was contended that the charges were allowable in the year of payment. The claim was upheld based on established judicial principles. Conclusion: The ITAT allowed the appeal, stating that the legal fees and depository charges were allowable deductions for the relevant assessment year. The liability for these expenses accrued in the year under consideration, making them valid deductions. The disallowances made by the A.O. were deemed incorrect based on legal principles and precedents cited. The appeal was allowed, and the issues raised were decided in favor of the assessee.
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