TMI Blog2014 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances, to say that he has reason to believe that income of the assessee has escaped assessment - the AO had not come to a conclusion that the full disclosure of the facts was not made by the assessee or that the income had escaped assessment on account of failure or omission of the assessee to make a true and full disclosure of material facts - assessment was reopened after four years and the AO had not attributed any failure on the part of the assessee to disclose truly and fully the material which required disclosure for making assessment, the action of the AO in reopening the assessment u/s 143(3) r.w. section 147 suffered from lack of jurisdiction - the reopening of assessment u/s 147 is set aside – Decided in favour of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be quashed. 1.3 The appellant prays that the reopening of the assessment be considered as bad-in-law and the reassessment proceeding be treated as void ab-initio. Ground No. 2: Disallowance of royalty expenditure - ₹ 11,488,000 2.1 On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in confirming the order of Learned AO, treating royalty payments amounting to ₹ 11,488,000 as capital in nature. The Appellant craves leave to add to, amend and / or alter the above Grounds of Appeal. Ground No.1 2. A perusal of the ground No.1 reveals that the effective issue which emerges out of it is regarding the validity of reopening of the assessment u/s 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year under consideration. During re-assessment proceedings, the A.O. asked for the submissions of assessee in respect of its claim of royalty payments of ₹ 1,14,88,000/-. The assessee filed its detailed submissions to the A.O. After considering assessee s submissions, the A.O. disallowed assessee s claim for deduction of royalty payment. Assessee preferred appeal before the CIT(A). 6. The assessee argued before the CIT(A) that the reopening had been made on the basis of information provided in the balance sheet and the profit and loss account, which were filed along with the tax return for the period and the original assessment was concluded taking into consideration the said documents. All the facts necessary for its assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the P L account or notes to the balance sheet suggesting that such royalty expense was revenue expenditure. He therefore observed that clubbing of the royalty expenses in the long list of items of manufacturing and other operating expenses in schedule 17 of the P L account would not amount to full and true disclosure of facts material for assessment. He therefore held that in the facts and circumstances, the initiation of proceedings under section 147 of the Act by the AO was not hit by the proviso to section 147 of the Act. Aggrieved from the above findings of the CIT(A), the assessee thus has come in appeal before us. 8. We have heard the Ld. Representatives of both the sides and have also gone through the records. In the case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts. However, in the instant case, the AO had not come to a conclusion that the full disclosure of the facts was not made by the assessee or that the income had escaped assessment on account of failure or omission of the assessee to make a true and full disclosure of material facts. Even as per the first proviso to section 147, the reopening cannot be resorted to after the expiry of four years from the end of relevant assessment order, unless any income chargeable to tax has escaped assessment for such assessment order by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for that assessment year. Since in the instant case assessment was reopened after four years and the AO had not attributed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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