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2013 (12) TMI 445 - AT - Income TaxValidity of assessment u/s 143(3) - Held that - The notice under S.143(2) was served more than 12 months after the month of filing of the return - Following Kuber Tobacco Products (P) Ltd. V/s Dy. CIT 2009 (1) TMI 304 - ITAT DELHI - As per the amendment brought by the Finance Act, 2008 w.e.f. 1.4.2008 - Insertion of S.292BB has taken away the right of the assessee to challenge the validity of assessment or reassessment proceedings during the course of appellate proceedings. Disallowance of depreciation - Held that - The business of the assessee was not yet set up by the end of the previous year relevant to the assessment year under consideration - This is the factual finding given by the CIT(A), against which no contrary evidence is produced before the Tribunal. Reopening of assessment u/s 147 - Held that - In view of proviso to Explanation 3 to S.147 inserted by the Finance (No.2) Act, 2009, with effect from 1.4.1989 - The AO can go into other aspects which have not been recorded in the reasons for reopening the assessment and which only came to notice during the reassessment proceedings - The provision is applicable to all the pending proceedings. Preliminary expenses - Salaries, travelling and office maintenance expenses - Held that - Following Pohoomal Bros V/s. CIT 1958 (3) TMI 55 - BOMBAY HIGH COURT - The expenditure to be allowable should have been incurred for the business being carried on - The assessee was yet to commence the business, the expenditure claimed is not allowable - The CIT(A) directed the AO to consider the amortization of the expenses claimed under S.35B of the Act as preliminary expenses - Decided against assessee.
Issues:
1. Validity of assessment proceedings due to the timing of notice under S.143(2). 2. Allowance of depreciation for a business not yet set up. 3. Assessment of other items of income not specified in the notice for reopening assessment under S.147. 4. Disallowance of certain expenditures as preliminary in nature. Issue 1 - Validity of Assessment Proceedings: The appellant challenged the assessment proceedings, arguing that the notice under S.143(2) was served more than 12 months after filing the return, rendering the proceedings invalid. However, the Tribunal held that the belated service of notice was a curable mistake under S.292BB, and since the appellant did not raise this issue during the assessment proceedings, it stood cured. The Tribunal cited precedents and the procedural nature of S.292BB, applying it to pending proceedings despite the assessment year. Consequently, the plea was rejected, upholding the validity of the assessment. Issue 2 - Allowance of Depreciation: The appeal contested the disallowance of depreciation, claiming the business was not set up by the relevant assessment year. The Tribunal upheld the lower authorities' decision, noting the absence of contrary evidence to the finding that the business was not operational. Consequently, the claim for depreciation was rejected, affirming the action of the lower authorities. Issue 3 - Assessment of Other Income Items: Regarding the assessment of additional income items not mentioned in the notice for reassessment under S.147, the appellant argued that the assessing officer could only focus on the depreciation issue. However, the Tribunal referred to Explanation 3 to S.147, allowing the assessing officer to assess any issue that escaped assessment during the proceedings, even if not initially specified. The Tribunal emphasized the procedural nature of the provision, applying it to all pending proceedings, including the present case, and upheld the inclusion of additional income items in the reassessment. Issue 4 - Disallowance of Expenditures: The appellant disputed the disallowance of certain expenditures, contending they were necessary for the company's existence. The Tribunal reviewed relevant case law and upheld the CIT(A)'s decision that such expenses, incurred before the commencement of business, were not allowable. However, the CIT(A) directed the assessing officer to consider amortization under S.35B for claimed expenses. The Tribunal found no fault in this approach, supporting the disallowance of the expenditures as preliminary in nature. Consequently, the appellant's appeal was dismissed, affirming the lower authorities' decisions. In conclusion, the Tribunal addressed and resolved all issues raised by the appellant, upholding the validity of the assessment proceedings, denying depreciation for a non-operational business, allowing assessment of additional income items, and disallowing certain preliminary expenditures. The judgment was pronounced on 20th December 2011.
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