2010 (8) TMI 698 - AT - Income Tax

Dis-allowance of expenses - assessee raised an additional ground of appeal wherein it has challenged the reopening of assessment - Held that no new information or material which came to the notice of the AO which can authorize him to form an opinion that income has escaped assessment appeal filed by the assessee is allowed

Summary

Issues Involved:
1. Disallowance of communication expenses by CIT(A)
2. Reopening of assessment under section 148 of the IT Act, 1961

Issue 1: Disallowance of Communication Expenses by CIT(A):
The assessee appealed against the CIT(A)'s order confirming the disallowance of Rs. 43,48,141 as communication expenses. The contention was that the communication expenses were considered a contingent liability by the CIT(A) and not an ascertained liability deserving allowance. The assessee raised an additional ground challenging the reopening of assessment under section 148. The Tribunal admitted this ground for adjudication without the need for fresh investigation of facts. The AO had reopened the assessment based on the claim of provision of communication expenses pending finalization of an agreement, treating it as a provision and not an ascertained liability. The AO disallowed the claim upon reassessment, leading to the appeal.

Issue 2: Reopening of Assessment under Section 148:
The Tribunal analyzed the facts of the case where the assessee, a subsidiary of a US company, was engaged in supply chain management services related to goods movement within and outside India. The AO had raised concerns regarding the nature of communication expenses claimed by the assessee, leading to the reopening of assessment under section 148. The assessee contended that all necessary details were disclosed during the original assessment proceedings, and no new material was presented subsequently. The assessee argued that the assessment was reopened based on a change of opinion, which was not sustainable in law. The Tribunal noted that the AO had already considered the communication expenses during the original assessment, and no fresh material warranted the reopening. The Tribunal referred to relevant case laws and upheld the assessee's contentions, ultimately quashing the assessment order.

In conclusion, the Tribunal allowed the appeal filed by the assessee, finding in favor of the assessee on both the issues of disallowance of communication expenses and the reopening of assessment under section 148 of the IT Act, 1961. The Tribunal's decision was based on the lack of new material justifying the reopening and the assessee's compliance with disclosure requirements during the original assessment proceedings.