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2016 (6) TMI 292 - HC - Income TaxValidity of reopening of assessment - trade discount given by the Appellant to Mahindra & Mahindra Limited (“MML”) for obtaining exclusive vendor status was in the nature of a capital expenditure and not a revenue expenditure - Held that:- The ITAT appears to have overlooked the fact that specific queries were raised by the AO during the course of the original assessment proceedings as regards the agreement entered into between the Assessee and M&M which is referred to in para 12 of the Notes to the Accounts. Query No. 36, as already extracted hereinbefore, was specific to the issue. The reply dated 28th July 2008 by the Assessee to the above questionnaire was a fairly detailed one. Inter alia it was pointed out that this was merely a commercial arrangement entered into between the management of both the companies, providing for a committed overriding volume discount by the Appellant. While the AO could have insisted on seeing the agreement, he appears to have been satisfied with the above detailed reply of the Assessee explaining the nature of the agreement. Merely because the AO did not ask for the copy of the agreement to be produced cannot lead to the inference that he had no occasion to form an opinion thereon. Such a conclusion drawn by the ITAT is belied by the above specific query raised by the AO on the agreement and the detailed explanation offered by the Assessee in response thereto This Court is satisfied that there was occasion for the AO in the original assessment proceedings, to form an opinion on the question of the nature of the agreement between the Assessee and the MM. The AO did form an opinion thereon and after raising a specific query and examining the reply thereto of the Assessee. The original assessment was completed after accepting the explanation offered by the Assessee. The reasons to believe did not refer to any fresh tangible material that came to the notice of the AO after the passing of the original assessment order. It may be recalled that the assessment proceeding under Section 143 (3) of the Act was completed after scrutinizing the documents produced by the Assessee and after specific queries were put to the Assessee which were replied to by the Assessee to the satisfaction of the AO.- Decided in favour of assessee
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