1980 (2) TMI 154 - AT - Income Tax

Summary

Issues:
- Validity of reassessment under section 147(b)
- Claim for proportionate establishment charges disallowance

Validity of reassessment under section 147(b):
The case involved cross-objections filed by the assessee against the order of CIT (A) for the assessment years 1972-73 and 1973-74. The CIT (A) held that the appeals before him should be allowed on merits and the original assessment restored. The assessee raised the issue of the validity of reassessment, arguing that the first appellate authority should have given a decision on it. The Revenue audit raised an objection regarding the claim for proportionate establishment charges, leading to the reopening of assessments. The reassessments were challenged as being made solely on a difference of opinion between the ITO and central revenue audit, rather than on a change of opinion by the ITO. Citing a Supreme Court ruling, it was held that any error discovered on reconsideration of the same material does not give the ITO power to reopen the assessment. As the reassessments were based on the same material, they were deemed invalid in law.

Claim for proportionate establishment charges disallowance:
The ITO had allowed 5% of London office establishment charges as expenditure related to the Indian income of the assessee-company for the years 1972-73 and 1973-74, reducing it from 10% in earlier years due to reduced trading activities. The Revenue audit objected to this claim, stating that with practically no trading results for the relevant years, the charges should be disallowed, leading to additional tax liability for the assessee. The ITO justified the claim based on income and turnover, but it was argued that the decrease in profit and turnover rendered the proportionate charges incorrect and unreasonable. The reassessment was challenged on these grounds, and the cross-objections were allowed in favor of the assessee.

In conclusion, the Appellate Tribunal held that the reassessments made in the case were invalid in law as they were based on a difference of opinion between the ITO and central revenue audit rather than a change of opinion by the ITO. The claim for proportionate establishment charges disallowance was also upheld in favor of the assessee.