TMI Blog2005 (11) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure but is a capital expenditure. He reopened the assessment by recording following reasons : "In the return of income filed, claim regarding deferred revenue expenditure of Rs. 19,33,105 incurred on the premises taken on leave and licence basis has been allowed under section 37(1) of the IT Act, 1961 while processing the return under section 143(1)(9a). However, as per the provisions of Explanation 1 of sub-clause (1) of section 32 of the IT Act the expenditure incurred on the premises taken on leave and licence basis is to be treated as capital expenditure. Depreciation can be claimed if the said premises are owned by the assessee. The allowance of the claim of the deferred revenue expenditure of Rs. 19,38,105 under section 37(1) has resulted in under assessment of income". 3. Thereafter proceedings under section 143(2) took place and various other additions were made by the Assessing Officer in addition to disallowance of the impugned expenditure. The CIT(A) confirmed the reopening under section 147 on the ground that so long as ingredients of section 147 are fulfilled, the failure to take action under section 143(2) will not render the Assessing Officer powerles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the Assessing Officer has not recorded reasons for reopening of assessment but if Assessing Officer did not make any such recording of the fact for reopening of assessment, the reopening would not be valid. ( v )Thus, the learned counsel for assessee argued that the reopening is bad in law and entire re-assessment is required to be declared as invalid. 5. On the other hand, the learned DR submitted that there has been change in the law after 1-4-1981. The reopening of assessment has been made easy. In respect of assessment completed under section 143(1)( a ), the Assessing Officer is not required to establish on record that income has escaped assessment on account of failure on the part of assessee to disclose truly and fully all material facts necessary for assessment. Therefore, in the present case, the expenditure incurred by the assessee was capital in nature and it was claimed as revenue. There was an excessive claim and it fulfils requirement of reopening under section 147. He thus, supported the order of authorities below. 6. We have heard the rival submissions and considered the facts and material on record. We have also carefully considered the case l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in favour of the assessee. It was for this difficulty that deeming fiction by way of explanation to clause (1) to section 32 was created whereby assessee would be deemed to be owner of the building to the extent of capital expenditure incurred by him. We also find that Tribunal in assessee s own case held on this issue in the assessment years 1997-98 1998-99 that said expenditure cannot be treated as capital expenditure as assessee does not own the premises. Secondly, we also find that the Assessing Officer has not made any charge that income has escaped assessment. For resorting to section 147, it is necessary and incumbent on the Assessing Officer to make clear in the reasons recorded that income has escaped assessment. Therefore, sufficiency of material or sufficiency of escapement of income would not be relevant but what is relevant and crucial is the charge levied by the Assessing Officer that income has escaped assessment and this charge must have proximate nexus with the information or material on the basis of which he has reasons to believe. In this particular case, the basis for coming to conclusion that a sum of Rs. 19,03,105 should be treated as capital expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided on 25-4-2005) and assessment year 1998-99 (ITA No. 1005/M/02, para 2 decided on 12-8-2005). Since facts and circumstances being the same, following above orders of the Tribunal, we decide the issue in favour of the assessee. This ground of the assessee is allowed. 12. The third issue is to allow 1/5 depreciation on let out premises. Since in ground No. 2, we have held that income should be assessed under the head business, as a natural consequence, the depreciation has to be allowed. This ground of the assessee is, therefore, allowed. 13. In the result, the appeal of the assessee is allowed. ITA No. 1659/Mum./02(Assessment year : 1996-97) 14. The first issue is about deleting the addition on account of value of alleged unaccounted silver recovery on film processing. This issue has been decided in favour of assessee in assessment years 1995-96, 1997-98, 1980-81, 1982-83 to 1984-85 1989-90. Following the above order, as facts and circumstances of the case remain the same, we decide the issue in favour of the assessee. This ground of revenue is, therefore, rejected. 15. The second ground is about deleting the addition on account of saving of raw films. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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