9911796707
TMI Blog2012 (10) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... ert above cause of delay in filing this appeal and he left this issue for adjudication by this Tribunal with a submission that he has no objection in condonation of delay if the Tribunal finds it just and proper in the facts and circumstances of the case. 2. After careful consideration of above submissions of the parties and perusal of record, we observe that undisputedly there is a delay of 48 days in filing of this appeal. As per unchallenged cause as offered by the appellant, we observe that the Revenue department is a department of Central Government. The initial decision and action was taken at appropriate time and a letter of authorization was sent to Addl. CIT, Circle 9, New Delhi for further communication to the DCIT, Circle 9(1), New Delhi and it was received on 17.8.2011. After this official proceeding, the communication was to reach the DCIT, Circle 9(1), New Delhi for filing of appeal but due to transfer and handing over and taking over charge by respective officers, this communication was delayed and finally this appeal could be filed on 2.11.2011 with a delay of 48 days. 3. On careful examination of circumstances leading to delay, we are of the view that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., Japan, in lieu of technical information and rights obtained by the assessee, to provide contract services in India. In view of the above mentioned provisions of the Act and judgment of Hon'ble Supreme Court, 25% of the expenditure should have been treated as capital expenditure and was not allowable as revenue expenditure. In view of this above, I have reasons to believe that an amount of Rs.74,64,737/- has escaped assessment within meaning of section 147 of the IT Act, 1961. The assessee had debited Rs.16,159,537/- to profit and loss account on account of Technical know-how, fees and out of this Rs.93,32,881/- being 'pre paid fee' was added back in the computation sheet by the assessee itself. In this way, Rs.68,26,656/- was claimed and allowed for the relevant previous year on account of technical know-how fee. As this expenditure was incurred for obtaining technical know-how/information pertaining to the business of the assessee, which would give an enduring benefit to the assessee and also the technical know-how, being intangible asset, it should have been capitalized and depreciation @25% should have been allowed. Hence, out of amount of Rs.68,26,656/- debited under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. 133 Taxman 238 Calcutta High Court. "...In the reasons for reopening it has not been alleged that there has been an omission or a failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment and also not noted in recorded reasons as to what other primary facts were required to be disclosed by the assessee and has not been disclosed before the AO at the time of assessment u/s 143(3)..." Therefore, considering the facts stated above the proceedings u/s 147/148 are quashed." 9. We have heard rival arguments of both the parties and carefully perused the entire record before us with all the relevant citations. Ld. DR submitted that the CIT(A) quashed the proceedings u/s 147 & 148 of the Act on baseless reasons and grounds as the assessee company had claimed and was allowed an expenditure of Rs.2,98,58,949 to the profit and loss account on payment of royalty on sales paid to Sumitomo Mitsui Construction Co. Ltd., Japan in lieu of technical information and rights obtained by the assessee company to provide contract services in India. He also submitted that in view of relevant provisions of the Act and judgement of Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of original assessment. The AR submitted that in the present case in hand, the AO has no reason to believe that the income has escaped assessment and he worked on the same material and facts which were before him at the time of original assessment and there was no new material or facts at the time of ordering for reopening of assessment u/s 147 and 148 of the Act. 12. We have carefully considered the rival arguments of both the parties in the light of material available on record. On bare reading of the order of ld. CIT(A), we observe that the ld. CIT(A) relied on the judgement of Hon'ble Supreme Court in the case of Shivnath Singh vs ACIT, Calcutta reported as (1971) 82 ITR 147(SC) wherein their lordships reversing the judgement of Kolkata High Court held that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The ITO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147 of the Act exist. Their lordships also observed that the assessment for the year in question cannot be permitted to be reopened in the absence of fulfillment of pre-requisite conditions as contained in the proviso to Section 147 of the Act. 15. In the case in hand, it is evident from the material on record that the AO reopened the assessment for the AY 2003-04 by issuing notice dated 23.03.2010 u/s 147 and 148 of the Act. Therefore, the proviso to Section 147 of the Act would come into play and the said proviso makes it clear that where the provisions of Section 147 of the Act are being invoked after the period of four years from the end of relevant A.Y. i.e. in the present AY 2003-04, the reopening of assessment would not be valid. The judgement of Hon'ble Apex Court in the case of Parashuram Pottery Works Co. Ltd. vs ITO (supra) is respectfully relied. 16. We finally observe that in the present case, the AO initiated the proceedings of reopening of assessment for the year under consideration after a period of four years from the end of relevant assessment year. Therefore, the initiation of proceedings were void ab initio which cannot be sustained on legal grounds an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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