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TMI Blog2017 (5) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... edge Park on 8th February, 2006 and claimed that the laboratory was fully functional by 8th February, 2006. For the year ending 31/03/2006, assessee filed its return of income declaring a loss of Rs. 2,04,42,891/-. The AO originally completed the assessment u/s 143(3) of the Act on November 25, 2011 allowing such loss subject to few disallowances. Later, assessment was reopened on the reason that the annual report of the company mentioned that business activity of the company commenced on 1st April, 2006 and hence, there is no business activity during the FY 2005-06. Due to this, AO was of the view that loss of Rs. 1,98,46,456/- has to be treated as preoperative expenses and the entire expenses has to be disallowed. In response to the reasons recorded for initiation of reassessment proceedings, assessee filed its objections stating that there is no fresh material available on record to form an opinion that the income has escaped assessment. It was submitted that all the information was already submitted at the time of original assessment proceedings. However, AO rejected the objections by a speaking order dated 12/06/2011 and completed reassessment u/s 143(3) r.w.s. 147 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure to the cost of the assets for allowing depreciation under section 32 of the Act. The Appellant craves leave to add, alter, amend or withdraw all or any of the above grounds of appeal at or before the time of hearing of the appeal." 6. Ld. Counsel for the assessee referring to the original assessment order submitted that assessee's business has commenced during the year and the AO has examined all the issues and allowed loss as claimed. He referred to the assessment order where AO has disallowed certain expenditure like payment for share capital, penalty u/s 201(1A) to submit that AO has examined all the issues and then only he has completed the assessment, therefore, there is no 'tangible material' to reopen the assessment subsequently by the AO and facts do not come with in the purview of 'tangible information' as held by the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd., [2010] 187 Taxman 312. 6.1 With reference to the merits, ld. Counsel referred to various explanations given to the AO in the course of proceedings to submit that assessee's laboratory was fully functional and due to non-availability of certain raw material, the commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, ld. Counsel submitted that action of the authorities below is not proper/valid. 7. Ld. DR, on the other hand, submitted that the AO has not formed any opinion, therefore, the principles laid down by the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. (supra) does not apply. He referred to the detailed order of CIT(A) to submit that reopening of assessment is justified and he also referred to nature of expenditure claimed by the assessee, as discussed by the CIT(A), and that assessee has not commenced the business during the current assessment year, but, has commenced on 1st April, 2006 pertaining to the next assessment year. 7.1 In reply, ld. Counsel however submitted that staff for technical lab was also employed and salary expenditure was claimed. In addition, there are orders placed for obtaining raw material while miscellaneous raw material was already purchased and put to use. All activities are activated much before February 8, 2006, but, assessee has only stated commercial operation on 1st April, 2006 as fullfledged business activity. 8. I have considered rival contentions and perused the documents on record. The assessment in this case has been completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe" but also inserted the word "opinion" in s. 147. However, on receipt of re-presentations from the companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the AO. Appeals are therefore dismissed-CIT vs. Kalvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 and CIT vs. Eicher Ltd. (2007) 213 CTR (Del) 57 affirmed." 8.2 The Hon'ble Delhi High Court (Full Bench) in the same case reported at [2002] 256 ITR 0001 has examined the contention of the revenue that AO has not expressed any opinion and issue that he has not expressly stated the opinion. The findings of the Hon'ble Delhi High Court in paras 22 & 23 are as under: "22. We are unable to agree with the submission of Mr. Jolly to the effect that the impugned order of reassessment cannot be faulted as the same was based on information derived from the tax audit report. The tax audit report had already been submitted by the assessee. It is one thing to say that the AO had received information from an audit report which was not before the ITO but it is another thing to say that such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es laid down by the Hon'ble Supreme Court that there should be 'tangible material' to form a different opinion would certainly come into play, since the very same material, which was examined at the time of original assessment, is the basis for recording reasons by the AO before the reopening of assessment. I am of the view that the conditions of section 147 have not been satisfied in this case. Accordingly, reopening per se is bad in law. 8.4 Even coming to the merits, it cannot be stated that assessee has not commenced business during the impugned AY. This is a fact on record that assessee commenced its lab facility, which is its main activity on 8th February, 2006 i.e. almost 50 days prior to the close of the accounting year. Not only there is an evidence that employees have been recruited and paid salaries to them, but also orders for procurement of raw material have been placed and some of the raw material purchased and utilized during the year and Assessee's claim of depreciation was allowed by the AO in the original assessment. In view of that facts, as placed on record and following the principles of law as established in various decisions some of which relied on by the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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