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2019 (1) TMI 1146 - HC - Income TaxReopening of assessment - petitioner's claim for expenses in respect of “Colour Idea Store” as a part of its advertisement and sales promotion expenses - validity of reasons to believe - Held that:- During the regular assessment proceedings under Section 143(3) of the Act, the Assessing Officer had occasion to examine the petitioner's claim for expenses in respect of “Colour Idea Store” as a part of its advertisement and sales promotion expenses. Thus, there was a complete disclosure of all primary material facts on the part of the petitioner. (See Calcutta Discount Co. Vs. ITO - 1960 (11) TMI 8 - SUPREME COURT). Therefore, no failure to disclose all fully and truly material facts necessary for assessment. Thus, on the above ground itself the impugned notice is hit by the proviso to Section 147 of the Act and is without jurisdiction. The application of mind to these facts on the part of the AO can be inferred from the fact that the statement constituting the breakup of the total expenditure incurred on sales and promotions was considered in the assessment order as some of the expenses forming part of the breakup of sales and promotions expenses had been disallowed in the assessment order dated 18th March, 2015 passed under Section 143(3). This would clearly indicate that the impugned notice has been issued on account of change of opinion and it is an attempt to review the Assessment Order dated 18th March, 2015 passed under Section 143(3). AO is entitled to rely upon the order passed in assessment proceedings for the subsequent year, as tangible material to initiate reassessment proceedings. The tangible material so obtained must be processed i.e. its applicability to the assessee for the subject assessment year is to be examined so as to form a reasonable belief that income chargeable to tax has escaped assessment. The tangible material in the assessment order for A.Y. 2015-16 was the agreement dated 6th March, 2014. This is an agreement post the period with which the impugned notice is concerned. This, by itself could not form the basis for the AO to have come to a reasonable belief that income chargeable to tax has escaped assessment for the subject assessment year 2011-12. AO has not himself come to the reasonable belief that income chargeable to tax has escaped assessment Therefore, on this ground also the impugned notice is unsustainable. As the asset is not owned by the petitioner, the expenditure cannot be on capital account, is not examined in the context of the present facts. This as it is not necessary, as earlier submissions are sufficient to dispose of the petitioner's challenge to the impugned notice dated 28th March, 2018 seeking to reopen the assessment proceedings for Assessment Year 2011-12 - the impugned notice is quashed as being without jurisdiction. - Decided in favour of assessee.
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