1993 (10) TMI 138 - AT - Income Tax

Summary

Issues:
1. Appeal against the order of CIT(A) for assessment year 1982-83.
2. Disallowance of foreign buyers' entertainment expenditure.
3. Reopening of assessment based on new information.
4. Application of section 37(2A) and Explanation 2.
5. Validity of reassessment under section 147(b).

Analysis:
1. The appeal was filed by the revenue against the CIT(A)'s order for the assessment year 1982-83. The original assessment was completed under section 143(3) on 13-8-1984, determining the total income at Rs. 4,03,770. Subsequently, a reassessment order was passed under section 143(3), read with section 147(b), disallowing a portion of foreign buyers' entertainment expenditure. The CIT(A) cancelled the reassessment order, stating that it was based on a change of opinion as the information was already disclosed during the original assessment proceedings.

2. The revenue contended that the reassessment should not have been cancelled as the Assessing Officer had discovered an error in not disallowing the foreign buyers' entertainment expenses under Explanation 2 to section 37(2A). The revenue argued that the discovery of the error constituted new information warranting the reassessment under section 147(b). The revenue cited various High Court decisions to support their argument and requested the restoration of the reassessment order.

3. The assessee's counsel, on the other hand, argued that all relevant information, including the foreign buyers' entertainment expenses, was disclosed during the original assessment proceedings. The counsel maintained that the error in not disallowing the expenses was not new information but a mere change of opinion. The counsel presented detailed evidence, including a paper book containing export promotion expenses for the relevant year, to support their argument.

4. After considering the submissions and relevant case law, the Tribunal upheld the reassessment and reversed the CIT(A)'s order. The Tribunal noted that Explanation 2 to section 37(2A) was applicable to the foreign buyers' entertainment expenses, which should have been disallowed in the original assessment. The Tribunal held that the Assessing Officer's failure to disallow the expenses was due to negligence or lack of vigilance, falling within the scope of section 147(b) for reassessment. The Tribunal concluded that the reassessment was valid and not merely a change of opinion, leading to the allowance of the revenue's appeal.

5. In conclusion, the Tribunal allowed the appeal filed by the revenue, upholding the reassessment order under section 147(b) and reversing the CIT(A)'s decision to cancel the reassessment. The Tribunal emphasized the importance of applying relevant provisions and ensuring diligence in assessment procedures to prevent errors and omissions that could lead to income escaping assessment.