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TMI Blog2022 (1) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... ar written off fully. See FORAMER FRANCE case [ 2003 (1) TMI 101 - SC ORDER ] In the present case the Revenue could not point out any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for relevant assessment year 2009-10, as the assessee has completely disclosed the facts relating to the claim of expenditure incurred towards repairs to kitchen equipments and furniture by replacing the table top for dosa stone, dining tables and replacement of glasses etc This expenditure is towards stainless steel sheets for replacing the worn out sheets over the dining tables and dosa table tops, glass top etc. In view of the fact that original assessment was completed u/s.143(3) of the Act for the assessment year 2009-10 and notice u/s.148 of the Act was issued on 11.03.2016, which is beyond 4 years, we held that reopening is bad in law and hence, quashed. - Decided in favour of assessee. - ITA No.: 1509/CHNY/2018 - - - Dated:- 21-1-2022 - Shri Mahavir Singh, Vice President And Shri Manoj Kumar Aggarwal, Accountant Member For the Appellant : Shri S. Sridhar, Advocate For the Respondent : Shri AR.V. Sreenivasan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciate that the distinction between accounting for book purposes pertaining to incurring of expenses for kitchen equipments and the claim made for full deduction for income tax purposes was fully disclosed/captured and ought to have appreciated that in the light of the complete disclosure of material facts, the assumption of jurisdiction u/s 147 of the Act to pass the reassessment was bad in law. 3. Brief facts are that the assessee is running a hotel and restaurant business. The assessee filed its return of income for the relevant assessment year 2009-10 on 29.09.2009. The original assessment was completed under scrutiny assessment u/s.143(3) of the Act by the ACIT, Business Circle-VII, Chennai vide order dated 30.10.2011 after making disallowance of ₹ 6,00,000/- on the ground that assessee could not furnish supporting vouchers relating to expenditure incurred for the purpose of business other than self-made vouchers. This assessment was accepted by the assessee. Subsequently, a notice u/s.154 of the Act dated 18.12.2012 was issued for rectifying the mistakes apparent from record and the purposed rectification mentioned in the notice was, wrong claim of capital expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and replaced during the year written off fully while calculating Income from business and profession. They have, however, also shown additions in their depreciation schedule under the sub head kitchen equipments . This means that they have already capitalized expenses related to purchase of kitchen equipments. Also, there are no deletions in the depreciation schedule in this category to indicate that old items were discarded and replaced with new ones. The additions therefore seem to be new assets. What is also pertinent to note is that Repairs and maintenance charges amounting to ₹ 33,69,884/- have already been debited in the P L account in addition to the ₹ 28,02,794/- claimed by the assessee later on during Computation of income for tax purposes. The assessee has claimed this amount for a very specific purpose i.e. repair of kitchen equipments and their replacement. So if one were to argue that this is a revenue expense as it was just for repair, then it could have very well been debited in the P L account along with the Repairs and maintenance charges. The assessee as mentioned earlier has already debited an amount of ₹ 33,69,884/- under this head. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee case falls under the proviso to section 147 of the Act, the Revenue has to show the failure of the assessee to disclose the true and material facts for framing of assessment during the course of original assessment proceedings. But, in view of the reasons recorded there is no mention about any failure on the part of the assessee to disclose true and material facts rather the reason states that reasons are recorded only from facts available on record , But the AO rejected the objection of the assessee for reopening of assessment u/s.147 of the Act vide order dated 30.11.2016, whereby the AO disallowed the expenses claimed on account of repair to kitchen equipments as capital in nature instead of revenue as claimed by the assessee amounting to ₹ 28,02,794/-. Aggrieved assessee challenged reopening before CIT(A). 5. The CIT(A) confirmed the action of the AO and particularly as regards to the proviso to section147 of the Act, the CIT(A) recorded his finding in Para 4.3.3 as under:- 4.3.3 In this regard it is noticed that the assessment has been reopened beyond a period of 4 years. Therefore, as per the first proviso to S.147, it is to be seen as to whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee argued that the assessee s case squarely falls under the proviso to section 147 of the Act. The ld.counsel for the assessee took us to the reasons recorded and stated that these reasons recorded by the AO are from the assessment records. As the assessee has filed details and books of accounts and profit loss account before the Assessing Officer during the course of original assessment proceedings and the AO in the reasons recorded has nowhere mentioned or there is no iota of doubt created that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for its original assessment of that assessment year. The ld.counsel for the assessee stated that once there is no failure on the part of the assessee to disclose fully and truly all material facts and original assessment is framed u/s.143(3) of the Act and reopening is beyond 4 years, the same is not permissible as per proviso to section 147 of the Act. The ld.counsel for the assessee relied on the decision of Hon ble Supreme Court in the case of Indian Eastern Newspaper Society Vs. Commissioner of Income Tax, (1979) 119 ITR 996 (SC). 6.1 The ld.counsel for the assessee furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11.03.2016 for the reasons that the assessee claimed a sum of ₹ 28,02,974/- under the head Kitchen equipments repair and replaced during the year written off fully while computing income from business. Admittedly, during the course of original assessment proceedings, the AO disallowed adhoc business expenses of ₹ 6,00,000/-. We have gone through the reasons recorded and noted that the AO has taken the reasons mainly from the audited accounts and the claim made by the assessee of expenses of ₹ 28,02,794/- from the computation of income. The AO while recording the reasons has categorically noted that all these details are available on assessment records and the relevant line reads as under:- Therefore after going through all the material available on record, I have reason to believe that income chargeable to tax during the relevant assessment year has escaped assessment within the meaning of section 147. 9.1 We have gone through the reasons and noted that there is no charge levied by the AO that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther allowance, as the case may be, for the assessment year concerned (hereafter in this Section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under Sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. 16. This new Section has made a radical departure from the original Section 147 inasmuch as clauses (a) and (b) of the original Section 147 have been deleted and a new proviso added to Section 147. 17. In Rakesh Aggarwal v. Asst. CIT (1997] 225 ITR 496, the Delhi High Court held that in view of the proviso to Section 147 notice for reassessment under Section 147/148 should only be issued in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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