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TMI Blog2009 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for AY 2002-03 is valid and whether the assessing officer by his order dated 15/9/2008 is justified in rejecting the objections raised by the petitioner regarding the reopening of the assessment are the two questions raised in this petition. 3. The petitioner is engaged in the business of manufacturing and marketing refrigerators, air conditioners and washing machines. 4. The petitioner had filed its return of income in respect of AY 2002-03 on 31/10/2002, declaring loss of Rs.72,57,26,992/-. 5. In the said return of income, the petitioner had claimed deduction of the entire "project launch expenses" incurred during the previous year as revenue expenditure even though in its books of accounts, the petitioner had shown the expenditure spread over a period of 3 years. Similarly, the petitioner had treated tools, dies, jigs and moulds as inventory items and claimed deduction on the basis of their balance useful life on the last day of the previous year. 6. On scrutiny of the return of income, the assessing officer issued notice under section 143(2) of the Act calling upon the petitioner to furnish particulars, inter alia relating to the above two claims and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of three years. It was, however, seen from the computation of income for A.Y. 2002-03 that though the assessee had debited Rs.341.77 lakhs to the Profit and Loss Account towards Pentacool launch expenses out of total expenditure of Rs.1025.30 lakhs Rs.683.53 lakhs being the remaining balance amount of expenditure has been claimed as deduction in computation of income for the purpose of Income-tax Act. Therefore, as per the practice followed by the assessee in its books of account the same should have been treated as deferred revenue expenditure. The accounting practice followed by the assessee company is correct because the expenditure incurred on product launch is of enduring nature and its benefits will not occur immediately in the year of expenditure. In view of the above, I have reason to believe that income chargeable to tax for A.Y. 2002-03 has escaped assessment for failure on the part of the assessing company to disclose fully and truly all the material facts requiring for assessment for A.Y. 2002-03. 9. The petitioner objected to the reopening of the reassessment. However, by his order dated 15/9/2008, the assessing officer rejected the objections raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lds are inventory items but ought to have considered those items as capital items and accordingly allowed depreciation instead of allowing deduction based on the useful life of the said items. The claim allowed on the basis of value determined by the petitioner is more than the claim allowable by way of depreciation and, therefore, the amount of the excess relief granted has escaped assessment. Secondly, the project launch expenses ought to have been considered as deferred revenue expenditure over a period of 3 years as amortized in the books of account maintained by the petitioner and allow deduction proportionately instead of allowing the entire project launch expenses. 14. It is pertinent to note that even in the past the petitioner has been incurring expenditure on acquisition of tools, dies, jigs and moulds and has been incurring from time to time expenditure to promote sales of the products manufactured by the petitioner. Even in the past, the same method of accounting was followed in respect of the above items as followed in AY 2002-03. In all the earlier assessment years and also in AY 2002-03, deduction on the above two claims has been allowed in the assessment orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture incurred by way of advertisements on television, newspaper advertisements, hoardings, seminars, exhibitions, etc. to promote the products launched by the petitioner being revenue in nature were allowable in full in the year in which those expenses were incurred. It was explained that the effect of the advertisements would ordinarily be in the mind of the public approximately for three years and, therefore, the advertisement expenses are spread over for a period of three years in the books of account. It was explained that by advertising, no tangible asset is acquired by the petitioner which could be considered to be of enduring nature. Moreover, there is no concept of deferred revenue expenditure in computing the income liable to tax. Therefore, irrespective of the fact that the petitioner in its books of accounts had spread over the product launch expenses over a period of three years, the assessing officer was bound to allow the entire cost of the product launch expenses in the assessment year in question. 18. After considering the aforesaid explanation the assessing officer arrived at a conclusion that the petitioner is entitled to the deduction as claimed and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised during the assessment proceedings and allowed after considering the explanation given by the petitioner. Similarly, the question, as to whether the project launch expenditure was allowable as revenue expenditure was raised during the assessment proceedings and allowed only after considering the explanation given by the petitioner. 22. What section 147 of the Act contemplates is the existence of material on record on the basis of which a prima facie opinion could be formed by the assessing officer that any income chargeable to tax has escaped assessment and not the material on record on the basis of which a final decision has already been taken at the time of assessment under section 143(3) of the Act. 23. Where the material on record has already been considered and adjudicated upon, it would not be open to the assessing officer to disagree with the view already taken on the material on record. In such a case, reopening of the assessment based on the materials already considered and adjudicated, would amount to reviewing the assessment order by reappreciating the material on record which is not contemplated under section 147 of the Act. It is not the case of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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