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2012 (10) TMI 209 - AT - Income TaxValidity of notice issued u/s 148 beyond a period of 4 years from the end of relevant AY - assessment reopened on ground that payment of royalty and FTS is not allowable as 100% revenue expenditure and was to be treated as 25% capital expenditure - Held that - It is observed that reasons recorded by the AO for issuing notice u/s 148 are based on the material which was before him at the time of original assessment. Also, reason to believe should come into existence only when some material facts have not been disclosed or furnished by the assessee at the time of assessment u/s 143(3) and which came to the knowledge of the AO subsequent to completion of original assessment. Assessee having made full disclosure of material facts in the return accompanied by several annexures and enclosures, the assessment could not be reopened beyond four years from the end of relevant assessment year only for the reason that certain income has been wrongly assessed under a wrong head of income. In present case, we are unable to see existence of any additional material or opinion subsequent to the completion of assessment for the year under consideration. Therefore, on merits, the action of the AO for reopening of assessment by issuing notice u/s 148 after substantial lapse of time and after expiry of four years from the end of relevant AY is not justified - Decided in favor of assessee Condonation of delay in filing appeal by Revenue - 48 days - Held that - It is observed that the initial decision and action was taken at appropriate time and a letter of authorization was sent. However, due to transfer and handing over and taking over charge by respective officers, this communication was delayed and finally this appeal could be filed with a delay of 48 days. Since there is no malafide or willful omission of duty on the part of the officers of the Revenue and the cause offered for the same seems to be bonafide and acceptable, delay is condoned
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Legality of the reassessment proceedings under Sections 147 and 148 of the Income Tax Act, 1961. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: Petition for Condonation of Delay: The Revenue appellant filed an application for condonation of a 48-day delay in filing the appeal. The delay was attributed to the transfer of the Addl. CIT, Range-9, New Delhi, and the subsequent administrative lapse in forwarding the authorization to the DCIT, Circle 9(1). The Assessee's representative did not object to the condonation of the delay. Tribunal's Decision: The Tribunal observed that the delay was not due to any malafide or willful omission but was a result of administrative procedures and officer transfers. Finding the cause bona fide and acceptable, the Tribunal condoned the 48-day delay and admitted the appeal for merits adjudication. 2. Legality of the Reassessment Proceedings under Sections 147 and 148: Ground of Appeal: The Revenue challenged the CIT(A)'s order quashing the assessment proceedings under Sections 147/144, arguing that there was an escapement of income. Facts of the Case: The assessee filed a return on 02.12.2003, which was processed under Section 143(1) and later assessed under Section 143(3). On 23.3.2010, a notice under Section 148 was issued on the grounds of escapement of income due to improper treatment of royalty and technical know-how fees. AO's Reasons for Reopening: The AO cited that certain expenditures claimed as revenue expenditures should have been treated as capital expenditures, referencing the Supreme Court judgment in Southern Switchgear Ltd. Vs CIT. The AO believed that an amount of Rs. 74,64,737/- and Rs. 51,19,992/- had escaped assessment. CIT(A)'s Observations: The CIT(A) noted that during the original assessment, all relevant details, including the technical collaboration agreement and TDS challans, were provided. The CIT(A) quashed the proceedings under Section 148, observing that the AO did not allege any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The CIT(A) relied on the judgment of Mercury Travels Ltd. and other precedents. Tribunal's Analysis: The Tribunal considered the rival arguments and the material on record. It noted that the AO's reasons for reopening were based on the same material available during the original assessment, indicating a change of opinion rather than new material evidence. The Tribunal relied on several judicial precedents, including the Supreme Court judgments in Shivnath Singh vs ACIT and Parashuram Pottery Works Co. Ltd. vs ITO, emphasizing that reassessment after four years requires a failure to disclose material facts by the assessee, which was not the case here. Conclusion: The Tribunal concluded that the reopening of the assessment was void ab initio as it was initiated after four years without any new material facts or failure of disclosure by the assessee. The Tribunal found no infirmity in the CIT(A)'s order quashing the reassessment proceedings and dismissed the Revenue's appeal. Final Order: The appeal of the Revenue was dismissed. The order was pronounced in the open court on 27.7.2012.
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