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Issues involved: Reopening of assessment u/s 147 based on advertisement and publicity expenses for A.Y. 2004-05.
Issue 1: Validity of reassessment proceedings The Revenue appealed against the CIT(A)'s decision to uphold the assessment completed u/s 143(3) for A.Y. 2004-05. The Revenue contended that the A.O. had valid reasons to believe that taxable income had escaped assessment due to disallowance of advertisement expenses in A.Y. 2005-06. However, the assessee argued that the reassessment was invalid as it was a mere change of opinion without new material. The CIT(A) held that the A.O.'s action of reopening the case for disallowance of expenses was a change of opinion and not valid u/s 147. The Revenue challenged this decision, citing the discovery of additional material in subsequent assessment proceedings as a valid reason for reassessment. Issue 2: Relevance of material for reassessment The assessee's counsel argued that there was no tangible material to support the reassessment for A.Y. 2004-05, as the A.O. had relied on facts from A.Y. 2005-06 without a live link to the current assessment year. Referring to the Third Member decision, it was highlighted that the advertisement income for the impugned year was not comparable to the subsequent year. The counsel emphasized the need for tangible material to form a belief of income escapement, as per legal precedents. The Tribunal found that the reasons for reassessment lacked a connection with the belief formation, as the facts of A.Y. 2005-06 differed significantly from A.Y. 2004-05. Consequently, the reassessment proceedings were deemed invalid based on the absence of substantial material supporting income escapement. Separate Judgement: The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and the assessee's cross-objection due to the invalidity of the reassessment proceedings.
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