2013 (9) TMI 489 - AT - Income Tax

Revision u/s 263 - Capital expenditure or Revenue Expenditure - Expenditure registration of trade mark - reasons for disallowance not given - Held that - it is obligatory on the part of the assessing officer to record reasons in the assessment order. Recording of reason would not only enable the revisional / appellate authorities to discharge their function effectively but also repose confidence in the system - there was an error in the order of the assessing officer inasmuch as that the assessing officer has not recorded his reasons for reaching a conclusion - Following decision of Commissioner of Income-tax vs Sunil Kumar Goel 2005 (1) TMI 34 - PUNJAB AND HARYANA High Court - Decided against the assessee.

Issues Involved:
1. Delay in filing the appeal.
2. Classification of expenses for registration of trade mark and rights registration as revenue or capital expenditure.
3. Disallowance of penalty as an infraction of law.
4. Requirement for recording reasons in quasi-judicial orders by the assessing officer.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 101 days. The assessee claimed that the delay was due to a technical error in emailing the scanned copy of the impugned order to the Chartered Accountant, which prevented the timely preparation and filing of the appeal. The Tribunal found that the assessee had a reasonable cause for the delay and condoned it, admitting the appeal.

2. Classification of Expenses for Registration of Trade Mark and Rights Registration:
The assessee incurred Rs. 3,37,000 for trade mark and rights registration and claimed it as revenue expenditure. The Administrative Commissioner classified these expenses as capital expenditure. The Tribunal noted that the assessing officer did not discuss these expenses in the assessment order. The Tribunal emphasized that the absence of reasons in the assessment order renders it erroneous and prejudicial to the revenue's interest.

3. Disallowance of Penalty as an Infraction of Law:
The assessee claimed a penalty of Rs. 18,046 as an allowable expense. The Administrative Commissioner disallowed it, stating it was for an infraction of law. The Tribunal found that the assessing officer failed to record reasons for allowing this penalty in the assessment order, which is a significant omission.

4. Requirement for Recording Reasons in Quasi-Judicial Orders:
The Tribunal underscored the necessity for the assessing officer to record reasons in the assessment order. This requirement ensures clarity, minimizes arbitrariness, and facilitates effective appellate or supervisory review. The Tribunal cited several judgments, including those from the Punjab & Haryana High Court, Allahabad High Court, and the Supreme Court, to reinforce this principle. The Tribunal concluded that the failure to record reasons constituted an error in the assessment order.

Conclusion:
The Tribunal found that the assessing officer's failure to record reasons for the classification of expenses and the allowance of the penalty was a significant error. The Tribunal directed the assessing officer to independently re-examine these issues and provide a reasoned order after giving the assessee a reasonable opportunity to be heard. Consequently, the appeal was dismissed.

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