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2018 (8) TMI 2004 - AT - Income TaxReopening of assessment u/s 147 - No communication of reason to believe - HELD THAT:- AO had issued notice u/s 148 and the assessee has complied with the notice and requested for reasons. The AO completed the assessment without communicating the reasons. As relying on Trend Electronics [2015 (9) TMI 1119 - BOMBAY HIGH COURT] we hold that the assessment made u/s 147 r.w.s. 143(3) without communicating the reasons is bad in law. Accordingly, the orders framed u/s 147 r.w.s. 143(3) are quashed and the appeal of the assessee is allowed. Since, we have quashed the assessment made u/s 143(3), we consider it is not necessary to adjudicate the grounds on merits. In the instant case, it is established that the assessee has complied with the notice issued u/s 148 and requested for the reasons for reopening of the assessment. The AO failed to supply the reasons. Assessment made u/s 147 r.w.s. 143(3) without supplying the reasons is invalid and accordingly, we cancel the assessment made u/s 147 r.w.s.143(3) and dismiss the appeal of the revenue. Deferred revenue expenditure disallowance - Assessee not produced any corroborative evidence of expenditure - In the absence of bills, nature of payment, to whom it was paid etc., the AO doubted the genuineness of the expenditure and accordingly disallowed a sum - CIT-A deleted addition - HELD THAT:- Keeping in view of the nature of business and accrual of income and period of the scheme, we hold that Ld.CIT(A) has rightly held that under special circumstances, the law allows such expenditure to be amortized and to be claimed in coming years to avoid distortion of profits. The assessee is earning commission on purchase of ornaments from VEPL on redemption of purchase plans.The assessee also has not claimed the expenditure in the earlier years and there was no double claim or duplication of the claim. Since the assessee is claiming business expenditure on a rational basis, spreading the expenditure over life time of the schemes and the fact is that the assessee is canvassing for purchase plan schemes and the expenditure in question was business expenditure, we hold that the CIT(A) has rightly upheld the expenditure as revenue expenditure and deleted the addition - Decided in favour of assessee. Disallowance u/s 14A read with Rule 8D - HELD THAT:- There is no dispute that the assessee did not earn any exempt income during the year under consideration. In the absence of any exempt income, there is no case for making the disallowance u/s 14A r.w.Rule 8D of I.T.Rules, as held by Hon’ble Madras High Court in the case of Redington (India) Ltd. [2017 (1) TMI 318 - MADRAS HIGH COURT]. Thus we hold that there is no case for disallowance of expenditure relatable to earning of exempt income u/s 14A r.w.Rule 8D of I.T.Rules in the absence of exempt income in the year under consideration. - Decided in favour of assessee. Deemed dividend u/s 2(22)(e) - as argued transactions with VEPL. are business transactions, hence should not be considered as advances or loans u/s 2(22)(e) - HELD THAT:- There is no direct or indirect benefit derived by the assessee by withdrawing the amount receivable from the company. Hence, there is no case for making the addition on account of deemed dividend u/s 2(22)(e) of I.T.Act. Accordingly, we hold that the Ld.CIT(A) rightly deleted the addition and the order of the CIT(A) is upheld. Hence, the appeal of the revenue on this ground is dismissed.
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