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2023 (5) TMI 1000 - AT - Income TaxDisallowance of Design and Development expenses - principal of res-judicata or consistency - contention of the assessee that similar expenses were incurred by the assessee in earlier and in subsequent years and amount was also paid to the same parties in those years but no disallowance of the expenses have been made by the AO while framing the assessment u/s 143(3) - HELD THAT:- DR Submission that the principal of res-judicata is not applicable to the assessment proceedings and each assessment year has to be considered on standalone basis. We do not dispute the aforesaid preposition of DR but at the same time the Hon’ble Supreme Court in the case of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through different assessment years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, then it would not be appropriate to allow the position to be changed in the subsequent year. No justification in AO for disallowing the expenses on adhoc basis and which was upheld by CIT(A). We, therefore, set aside the addition made by AO. Thus the ground of assessee is allowed. Addition on account of suppressed income from sale of Katran/Scrap material - waste generated known as “Katran” - HELD THAT:- We find that the basis of working out the alleged sale value of Scrap that assessee ought to have earned is only on the basis of the search conducted by the AO on the internet. AO has not brought any material on record to demonstrate that the Scrap Sales found by him on the internet by various other entities were engaged in dealing with similar business as of the assessee. AO has also not stated the basis of the selection of parties, the name of the parties on the basis of which he has concluded the sale of scrap to be understated. Assessee has also demonstrated the percentage of sale of Scrap in various preceding and succeeding assessment years and percentage of waste to the sale in the year under consideration are in the same range as that of earlier and subsequent years. AO has not brought on record any concrete material to demonstrate that the sale of Scrap recorded by the assessee is understated. On the contrary he has presumed it on the basis of the working made by him on the basis of research undertaken on the internet. AO was not justified in making the estimation of Scrap Sales. Set aside the addition made by AO and upheld by CIT(A). Thus the ground of assessee is allowed.
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