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2016 (6) TMI 105 - AT - Income TaxReopening of assessment - disallowance under section 40(a)(ia) - Held that:- Tax audit report not only contains all necessary information but gives an insight into the business and financial affairs of the assessee for the relevant financial year. Therefore, tax audit report is not only the primary and most important document but is the foundation on which assessment proceeds. That being the case, it is totally unacceptable that the Assessing Officer at the time of completing original assessment has not examined the tax audit report. On the contrary, presumption should be, at the time of completing original assessment, the Assessing Officer must have examined the tax audit report. Even otherwise also, if the Assessing Officer at the time of original assessment failed to examine the information contained in a document having statutory forces, the assessee cannot be penalized for such lapse on the part of the Department with re–opening of assessment. Thus, in absence of fresh tangible material there cannot be formation of belief in vacuum for re–opening the assessment under section 147 of the Act. Therefore, re–opening on mere reappraisal / review of material already considered at the time of original assessment tantamount to change of opinion and review of the order passed earlier. For this reason alone, impugned assessment order deserves to be quashed. As far as merits of the issue are concerned could be seen it is clearly evident that the payment of ₹ 8,79,32,213 by the assessee to RPPL is towards reimbursement of expenditure incurred on behalf of the assessee and not towards fee for managerial services. What RPPL received from the assessee towards services rendered is service charges of ₹ 8,79,322 being 1% of the actual expenditure. It is seen from the material placed on record that RPPL has raised two separate debit notes i.e., one for ₹ 8,79,32,213 towards advertisement expenses incurred on behalf of the assessee and another of ₹ 8,79,322 towards service charges. It is also evident, on the service charges of ₹ 8,79,322 paid to RPPL assessee has not only deducted tax at source but RPPL has declared such amount as its income. Therefore, in the aforesaid facts and circumstances of the case, when it is evident that the payment made by the assessee to RPPL is towards reimbursement of cost of expenditure incurred on behalf of the assessee such payment cannot be subject to deduction of tax. Consequently, no disallowance under section 40(a)(ia) can be made. - Decided in favour of assessee
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