Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 604 - AT - Income TaxReopening of assessment - change of opinion - huge anomaly in the percentage of profit ratio apportioned - absence of live link between the reasons recorded and the factual matrix of the case. - Held that:- Re-assessment proceedings are purely based on change of opinion and not attributable to the failure on the part of the assessee to disclose fully and truly all material information. Even under the amended provisions, we are of the firm opinion that the notice issued by the AO cannot be said to have been based on “reasons to believe that income chargeable to tax has escaped assessment”. He has proceeded mainly on the ground that there is a “huge anomaly in the percentage of profit ratio apportioned” which implies that there is a subjective approach and not objective approach on the part of the Assessing Officer. AO has not satisfied the pre-conditions specified in section 147 in order to assume jurisdiction for reopening of assessment, and accordingly the notice issued u/s 148 deserves to be quashed and, we hold accordingly. “Reasons to suspect” rather than “reasons to believe” which fact was impliedly accepted by the Learned Commissioner wherein he has attributed the issuance of notice on the ground that “excessive deduction claimed may be sufficient for formation of requisite belief to initiate proceedings u/s 147 of the Act”. Re-assessment proceedings are not valid and consequently the additions / disallowance made therein do not stand in the eye of Law. R & D expenditure and ESOP expenses - apportionment of cost to the units which claimed exemption u/s 10B, 80IB and 80IC - Held that:- both AO as well as CIT (A) have proceeded on presumption that R & D expenses will benefit the exempted units in the long run overlooking the fact that there is nothing on record to show that all the R & D inventions / patents were never sold in outside market but only captively utilised in the exempted units. Respectfully following the decision in Bush Boake Allen (India) Pvt Ltd vs. ACIT (2003 (12) TMI 10 - MADRAS HIGH COURT), we are of the view that the Revenue has not made out a case for apportionment of R & D expenditure and ESOP cost to the exempt units. In the result, we hold that the Tax Authorities were not justified in apportioning R & D expenditure and ESOP cost to the units which claimed exemption u/s 10B, 80IB and 80IC of the Act. Appeals filed by the assessee are allowed.
|