9911796707
TMI Blog2014 (5) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier, all material facts were disclosed by the Petitioner in proceedings that were undertaken under sections 142(1) r/w 143(2), which finally culminated in the assessment order dated 30th December 2008 under section 143(3). It is therefore evident that Respondent No. 1 after passing the original assessment order dated 30th December 2008 has changed his opinion and issued the impugned notice under section 148. The reasons for the impugned notice as well as the impugned order proceed on the basis that a patent is a capital asset and hence expenditure incurred towards filing of patent applications should have been treated as capital expenditure. Since it was treated as a revenue expenditure, there was computation of excessive loss which resulted in income escaping assessment. Therefore now, despite the fact that in the original assessment order this very expenditure was allowed as a revenue expenditure, Respondent No. 1 now seeks to treat the same as a capital expenditure. This to our mind is nothing but a "change of opinion", and hence Respondent No.1 had no jurisdiction to re-open the assessment proceedings. - Decided in favour of assessee. - Writ Petition No. 1095 of 2013 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Auditor's Certificate under section 35(2AB) certifying the claim for weighted deduction in respect of research and development expenditure incurred at Lupin Research Park, Pune. Annexure VII to Enclosure IV clearly stated that the legal and professional charges included payment made towards patent applications filed outside India amounting to ₹ 2,70,97,115/-, ₹ 12,59,783/- towards consultancy charges paid, and ₹ 4,77,027/- paid to outsiders for collaborative study. (b) Thereafter, in the course of the assessment proceedings of the Petitioner, Respondent No. 1 issued a notice under section 142(1) of the Act dated 1st June 2007 by which Respondent No. 1 raised various queries and sought information thereof from the petitioner. One of the issues related to deductions claimed under section 35(2AB) of the Act. The relevant portion of the said notice dated 1st June 2007 read as under:- In connection with your scrutiny assessments for A.Y. 2005-06, you are requested to furnish the following details :- ** ** ** 7. Details of deduction claimed u/s 35(2AB u/s 35AC and 35DD with supportive evidence and also explain why expenditure incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 37(1) of the Act. It was further stated that non-allowing of the petitioner's claim for weighted deduction under section 35(2AB) did not act as a bar for allowing the same under section 35(l)(i) or section 37(1) of the Act. It was further brought to the notice of the Assessing Officer that such revenue expenditure had always been allowed in the past assessments of the Petitioner under the said sections. (g) Thereafter, Respondent No. 1, after scrutinizing all the details and applying his mind to all issues, passed his assessment order dated 30th December 2008 under section 143(3) of the Act. It is pertinent to note that where Respondent No. 1 disagreed with the Petitioner's contentions, he gave his reasons for doing so. However, where he accepted the contentions of the Petitioner, there was no discussion on the same in the said order. (h) Thereafter, Respondent No. 1 issued the impugned notice dated 28th March 2012 under section 148 of the Act wherein it was stated that he had reason to believe that the Petitioner's income chargeable to tax for the Assessment Year 2005-06 had escaped assessment within the meaning of section 147 of the Act. By a further lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expenses and other charges and the Assessing Officer, after considering the said details and facts, had passed an assessment order under section 143(3) of the Act. Since in the present case, the notice under section 148 was issued beyond the period of four years from the end of the relevant assessment year, and since there was no failure on the part of the Petitioner to disclose all material facts, the initiation of reassessment proceedings was bad in law by virtue of the first proviso to section 147 of the Act. It was further contended that the re-assessment proceedings were initiated only on a change of opinion which was impermissible in law. In view thereof, the Petitioner requested Respondent No. 1 to drop the re-assessment proceedings. (j) By his order dated 25th February 2013. Respondent No. 1 rejected the objections of the Petitioner. Respondent No. 1 took a view that patents being intangible assets, the expenses in relation thereto were in the nature of a capital expenditure and not revenue expenditure, due to which there was computation of excessive loss. In view thereof, Respondent No.1 justified the issuance of the notice under section 148 of the Act.' 5. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by reason of the failure on the part of the Petitioner to disclose fully and truly all material facts. Mr. Pardiwala, the learned counsel appearing on behalf of the Petitioner, submitted that apart from making a bald assertion that there was a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for its assessment, no details whatsoever were given with reference to the same. 7. On the other hand, Mr Gupta, learned counsel appearing on behalf of the Respondents, submitted that the reasons clearly stated that there had been a failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment and therefore, Respondent No. 1 was justified in initiating re-assessment proceedings. 8. It is true that the reasons for initiating the reassessment proceedings does in fact state that there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. However, merely making this bald assertion is not enough. It is now well settled that the reasons which are recorded by the Assessing Officer for re-opening the assessment, are the only reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 2008 under section 143(3) of the Act. 11. In the return of income filed on 31st October 2005, the Petitioner enclosed its balance-sheet as well as its Auditor's Certificate under section 35(2AB) certifying the claim for weighted deduction in respect of research and development expenditure incurred at Lupin Research Park, Pune, Note No.3 to Annexure VII to Enclosure IV of the Auditor's Certificate stated that legal and professional charges included payments made towards patent applications filed outside India amounting to ₹ 2,70,97,115/-, ₹ 12,59,783/- towards consultancy fees and ₹ 4,77,027/- paid to outsiders for collaborative study. It is not in dispute that these three figures are the subject matter of the notice issued under section 148 of the Act. In fact, the notice under section 148 proceeds on the basis that these expenses were wrongly claimed as a revenue expenditure when they were in the nature of a capital expenditure. 12. Thereafter, with reference to these very issues, Respondent No.-1 called for information from the Petitioner by its letters dated 1st June 2007 and 7th August 2007. As stated earlier, all details were furnished b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Respondent No. 1 that any new tangible material was brought to his notice which led him to believe that income had escaped assessment. As stated earlier, all material facts were disclosed by the Petitioner in proceedings that were undertaken under sections 142(1) r/w 143(2), which finally culminated in the assessment order dated 30th December 2008 under section 143(3). It is therefore evident that Respondent No. 1 after passing the original assessment order dated 30th December 2008 has changed his opinion and issued the impugned notice under section 148. The reasons for the impugned notice as well as the impugned order proceed on the basis that a patent is a capital asset and hence expenditure incurred towards filing of patent applications should have been treated as capital expenditure. Since it was treated as a revenue expenditure, there was computation of excessive loss which resulted in income escaping assessment. Therefore now, despite the fact that in the original assessment order this very expenditure was allowed as a revenue expenditure, Respondent No. 1 now seeks to treat the same as a capital expenditure. This to our mind is nothing but a change of opinion , an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
