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TMI Blog2010 (1) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer issued notice u/s.148 of the Income-tax Act, 1961 on 10.03.2006 after recording reasons thereof. In response to the notice, the Authorised Representative of the assessee requested that the revised return filed on 27.03.2001 be treated as return filed pursuant to the notice issued u/s.148. Subsequently the Assessing Officer completed the assessment by disallowing the claim of depreciation on stock exchange card and also making disallowances on account of software expenses, business promotion expenses and amortization of investments. Aggrieved, the assessee carried the matter in appeal before the first appellate authority. The first appellate authority granted part relief. Aggrieved, both the assessee as well as the Revenue filed cross appeals. The assessee also filed cross objection inter alia challenging all the additions made by the Assessing Officer. 3. We will first take up the assessee's appeal in ITA No. 3071/Mum/2008. 4. The grounds of appeal read as follows:- "1. The learned Commissioner of Income Tax (Appeals) erred in upholding the reopening of the assessment when the jurisdictional conditions prescribed u/s.147 were not satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfactorily integrated with its existing system, the assessee was compelled to scrap this software. The assessee submitted that under these facts this expenditure is a business loss and has to be allowed as such. He relied on the decision of the Hon'ble Bombay High Court in the case of Bralco Metal Industries Pvt. Ltd. vs. CIT [(1994) 206 ITR 477 (Bom.)] for the proposition that the expression "for the purpose of the business" is wider in scope than the expression "for the purpose of earning profits". He pointed that in that case the Managing Director had incurred some expenditure on foreign tour which did not result in purchase of plant and machinery. In such circumstances the Hon'ble High Court took a view that the expenditure should be allowed. 6. The learned Departmental Representative Mr.Keshav Sexena, on the other hand by controverting the submissions made on behalf of the assessee that as on the date of reopening the assessment, the assessee was not entitled to depreciation on membership card of Bombay Stock Exchange. He submitted that on the date of reopening the decision of the Tribunal in the case of Techno Shares and Stocks Limited though delivered on 4.1.2006, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a possible reason and can be said to be a reason which can lead to the A.O. to believe that income has escaped amount. Thus we are unable to accept the contention of the assessee and hold that the reopening is valid in law. 8. Coming to ground no.2 which is on the issue of allowance of expenditure incurred on software expenses we find that the facts are that the assessee had given certain advances i.e. 30% for development of software "Credence Midas Pride". A copy of the bill is placed in the paper book and a perusal of this copy reflects that this is simply an advance. The undisputed fact is that the assessee was not satisfied with the software as it could not be satisfactorily integrated with its existing system. The assessee states that the developer did not develop nor did further work on the software and the assessee was compelled to scrap the software. In view of these facts, we are of the considered opinion that the claim of the assessee for business loss had to be allowed. The assessee had submitted a bill, which evidences, not only the fact that the assessee had entrusted the deployment of software, but also the fact that advance payment had made. The purpose of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival contentions we find that the assessee had purchased 17% MTNL Bonds at Rs.106.50 per bond of the face value of Rs.100 on 29.5.1997 for the total consideration of Rs.2,46,01,500. The bonds were redeemed on 29.4.1999 on the face value of Rs.2.31 lakhs. The loss was calculated and claimed as business loss. The Assessing Officer disallowed the same. On appeal, the first appellate authority observed that the assessee had, as a consistent policy, for all the previous years disclosed profit on sale of investment, securities, bonds, etc. as business profit and the Assessing Officer always assessed the same to tax on that basis. He observed that valuing the assets at cost or market value whichever is lower, is a regular method of accounting followed by the assessee in all the years. The assessee has not attempted to offer any gains as long term capital gains in order to avail of the benefit of a lower rate of tax. The learned Counsel for the assessee relied on the judgement of the Hon'ble Supreme Court in the case of Investment Ltd. vs. CIT [(1970) 77 ITR 533 (SC)] wherein it is held that whether the method of accounting is adopted by the trader consistently and regularly, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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