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TMI Blog2014 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case and in law, the learned Commissioner of Income-tax (Appeals)-21, Mumbai ['the CIT(A)'] has erred in confirming the action of the Assessing Officer ('AO') for initiating reassessment proceedings by issuing notice under section 148 of I.T Act, 1961('the Act") and passing order under section 143(3) read with section 147 of the Act as said notice and order both, being bad in law and are liable to be quashed. 1.2 On the facts and in the circumstances of the case and in law, the CIT(A) has erred in confirming the action of the AO for initiating reassessment proceedings and passing an order under section 143(3) read with section 147 of the Act after expiry of four years from the end of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad escaped assessment on account of under assessment of income in respect of claim of deduction of expenditure for payment of royalty. The reasons recorded by A.O. u/s. 148 for forming such opinion were as under : "On examination of the records, it is found that the assessee had claimed revenue expenditure on account of royalty amounting to Rs. 1,14,88,000/- being paid for exclusive license, which is of enduring nature. The Royalty amounting to Rs. 86,16,000/- should have been disallowed after allowing depreciation (Rs.1,14,88,000 - 25 percent = 28,72,000/-). This has resulted into under assessment of income of Rs. 86,16,000/-. In view of the above, I have reason to believe that the income of Rs. 86,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 7. The ld. CIT(A) however observed that AO had formed his belief on the basis of information available on record that the capital expenditure of payment of 'Royalty' claimed by the assessee as revenue expenditure was wrongly allowed by the AO. The AO thus was having reason to believe that the income disclosed by the assessee had escaped assessment. However he agreed to the contention of the assessee that the notice u/s 147 of the Act in the case in hand was issued after expiry of four years from the end of assessment year under consideration and ttherefore, the proviso to section 147 of the Act was applicable. However he observed that the assessee had claimed manufacturing and other operating expenses in the P&L account. These expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same facts and circumstances, to say that he has reason to believe that income of the assessee has escaped assessment. Even otherwise it is a settled law that AO acquires jurisdiction to reopen assessment under section 147 read with section 148, only if, on the basis of specific, reliable and relevant information coming to his possession, he has reasons, which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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