9911796707
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Issues Involved:
1. Deletion of disallowance of claim of license fee payable to Railway authorities. 2. Deletion of disallowance of excessive payment made to M/s Nikita Enterprises by invoking provisions of s. 40A(2). 3. Issuance of notice under s. 148 and consequent reassessment framed under s. 147 of the Act. Issue-wise Detailed Analysis: 1. Deletion of Disallowance of Claim of License Fee Payable to Railway Authorities: The assessee, engaged in the business of storage and handling of liquids and solids, had been allotted land by the Railways under agreements dated 15th March 1975 and 3rd January 1978, requiring payment of license fees. The Railways issued a letter on 23rd March 1988, terminating the license due to non-payment of dues and unauthorized structures, and provisionally increased the license fee to Rs. 7,07,065 per annum. The dispute was taken to the Estate Officer (Land), Northern Railways, who concluded that the enhancement was invalid and the assessee was not in unauthorized occupation. The Estate Officer's order, dated 28th March 1990, was not stayed or disturbed by any higher court, although the Railways appealed to the District Judge, Tis Hazari Court, which is still pending. The AO, during the assessment for AY 2001-02, disallowed the increased license fee claimed by the assessee, considering it a contingent liability as the payment was subject to the court's decision. The CIT(A) upheld the reopening of assessments but allowed the license fee deduction, considering it an actual liability under the mercantile system of accounting. The Tribunal, however, held that the increased liability was contingent upon the court's decision and not allowable as it had not crystallized during the relevant financial years. The Tribunal reversed the CIT(A)'s order and restored the AO's decision to disallow the increased license fee. 2. Deletion of Disallowance of Excessive Payment Made to M/s Nikita Enterprises by Invoking Provisions of s. 40A(2): The assessee entered into an agreement with M/s Nikita Enterprises to handle warehousing for Hindustan Coca Cola Northwest (P) Ltd. The AO disallowed the difference between the payment made to M/s Nikita Enterprises and the expenses incurred by them, considering it excessive. The CIT(A) deleted the disallowance, stating that the payment was not excessive or unreasonable, and the services were actually rendered. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not ascertain the fair market value of the services and failed to prove that the payment was excessive or unreasonable. The Tribunal emphasized that the onus to prove the excessiveness of the payment under s. 40A(2) rests on the AO. 3. Issuance of Notice under s. 148 and Consequent Reassessment Framed under s. 147 of the Act: The assessee challenged the issuance of notice under s. 148 and the consequent reassessment framed under s. 147. The AO reopened the assessments for AYs 1997-98, 1998-99, 1999-2000, 2000-01, and 2002-03 based on the observation that the assessee had claimed excess deduction by way of license fee payable to Railways. The CIT(A) upheld the reopening, stating that the original assessments were not completed under s. 143(3) but accepted under s. 143(1)(a), and there was no change of opinion. The Tribunal upheld the reopening of assessments, noting that the AO had relevant material to form a reasonable belief that income had escaped assessment. The Tribunal emphasized that the AO's belief need not be conclusively proven at the stage of issuing the notice, and the reopening was justified based on the information available. Conclusion: The Tribunal partly allowed the Revenue's appeals by upholding the disallowance of the increased license fee but dismissed the cross-objections by the assessee regarding the issuance of notice under s. 148 and the consequent reassessment framed under s. 147. The Tribunal also upheld the CIT(A)'s decision to delete the disallowance of payments made to M/s Nikita Enterprises under s. 40A(2).
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