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TMI Blog2016 (6) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld the order passed by the Commissioner of Income Tax (Appeals) ["CIT (A)"] and has confirmed the addition of Rs. 14,08,99,500 made by the Assessing Officer ("AO") holding that the trade discount given by the Appellant to Mahindra & Mahindra Limited ("MML") for obtaining exclusive vendor status was in the nature of a capital expenditure and not a revenue expenditure. 3. Admit. 4. The following question of law is framed for consideration: "Whether the ITAT was correct in law in holding that the reassessment proceedings initiated by the AO under Section 147/148 of the Act were valid in law" 5. This Court has heard the submissions of Mr. Rajat Navet, learned counsel for the Appellant and Ms. Vibhooti Malhotra, learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant to M&M. 8. For the AY 2005-06 the Appellant had filed its return of income on 28th October 2005 declaring an income of Rs. 23,03,25,050. Its return was picked up for scrutiny and notice was issued under Section 143 (2) of the Act on 19th October 2006. 9. During the course of the assessment proceedings, the AO raised various queries pertaining to the assessment by way of a notice dated 14th November 2007. Query No. 36 reads as follows: "Please refer to Para -12 of Notes on accounts relating to an Agreement. Please file complete details and manner in which the Assessing Officer gained in this agreement." 10. The Appellant pointed out that in para 12 of Schedule 21 of the Notes to Accounts of the said AY, it had been mentioned, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO furnished the reasons recorded under Section 147 of the Act for reopening of the assessment. The reason recorded for reopening of the assessment in respect of the amount of Rs. 18,78,66,000 as mentioned in Serial No. 12 of the Notes to Accounts is as under: "B. That as per the notes to accounts assessee had paid an amount of Rs. 18,78,66,000 to obtain exclusive vendor status and this amount was set-off against sales of current financial year. As the expenses incurred on exclusive commercial rights and covered under intangible assets, therefore, it needed to be capitalized. Only depreciation @ 25% was allowable on such capitalized amounts. Thus, depreciation of Rs. 4,69,66,500 was only allowable in the current financial year out of tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no evidence on record to indicate that the agreement entered into by the Assessee with M&M dated 11th January 1990 was filed before the AO. Therefore, the AO had no opportunity to peruse and draw any kind of inference about the nature of the agreement or the right acquired pursuant thereto. It was, accordingly, held that AO at the time of framing the original assessment had not formed any opinion on the said issue. Consequently, the plea of the Assessee that the initiation of the reassessment was prompted by change of opinion was rejected. 19. The Court has perused the documents on record and considered the submissions of learned counsel for the parties. The ITAT appears to have overlooked the fact that specific queries were raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to form an opinion on the question of the nature of the agreement between the Assessee and the MM. The AO did form an opinion thereon and after raising a specific query and examining the reply thereto of the Assessee. The original assessment was completed after accepting the explanation offered by the Assessee. 22. The reasons to believe did not refer to any fresh tangible material that came to the notice of the AO after the passing of the original assessment order. It may be recalled that the assessment proceeding under Section 143 (3) of the Act was completed after scrutinizing the documents produced by the Assessee and after specific queries were put to the Assessee which were replied to by the Assessee to the satisfaction of the AO. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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