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2015 (5) TMI 899 - ITAT DELHI

2015 (5) TMI 899 - ITAT DELHI - [2015] 43 ITR (Trib) 754 (ITAT [Del]) - Re-opening of assessment - Technical know-how fees - CIT(A) deleted the addition holding that because at the time of initiation of proceeding u/s 147 the AO had not recorded reason towards claim of incorrect technical knowhow fees, the addition made on this ground subsequently in the assessment order could not survive - Held that:- The above issue for our consideration is no longer res integra, since in the case of Ranbaxy L .....

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alla, CA For the Respondent : Ms. Y. Kakkar, Senior DR ORDER Per George George K., JM : This appeal, at the instance of the revenue, is directed against the order of the CIT (A)-X, New Delhi dated 23.10.2012. The relevant assessment year is 2004-05. 2. The effective grounds raised are as follows :- 1. The Ld. CIT (A) has erred on facts in law in deleting the addition made on account of technical know-how fees amounting to ₹ 73248000/- ignoring the fact that the assessee company at the time .....

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ny engaged in the business of providing basic telephonic services. For the relevant assessment year, return of income was filed on 01.11.2004, declaring nil income. Assessment was completed vide order dated 29.12.2006 wherein the total income was assessed at ₹ 1.69 crores. Subsequently, assessment was reopened on 21.09.2007 by issuance of notice u/s 148 of the Income-tax Act, 1961 (for short, the Act), for the reason that the provision for doubtful debts ought to be taxed u/s 115JB of the .....

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ng that assessee had claimed technical know-how fees amounting to ₹ 7,32,48,000/- as revenue expenditure and why said expenses should not be treated as capital expenditure. The reassessment was completed vide order dated 29.12.2008 wherein the technical know-how fees claimed as revenue expenditure was disallowed as capital expenditure. 4. Aggrieved assessee preferred an appeal before the first appellate authority. Before the CIT (A), it was submitted that since the reasons recorded for iss .....

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ssee by holding that reopening of assessment is not valid. The CIT (A) followed the judgments of Hon ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (supra) and Hon ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (supra). The CIT (A) did not adjudicate the issue on merits, since the reopening was held to be invalid. The relevant finding of the CIT (A) read as under :- 4. The issue involved and the submissions made by the appellant have been considered. Fro .....

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nitiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Therefore the addition made the AO is deleted and the ground of appeal is allowed. 5. Since appeal is allowed on legal ground, ground of appeal no.2 is not adjudicated. 5. The revenue being aggrieved is in appeal before us. 6. The ld. DR submitted that the CIT (A) is not justified in following the judgment of Hon ble jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. v .....

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, help/advance the case of the revenue. 7. We have heard rival submissions and perused the material on record. The solitary issue that arises for our consideration is whether the CIT (A) is justified in quashing the reassessment. The CIT (A) has quashed the reassessment for the reason that when no addition is made for the reasons recorded for issuance of notice u/s 148 of the Act, the AO ceased to possess jurisdiction u/s 147 of the Act to tax any other income. In the instance case, reasons were .....

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baxy Laboratories Ltd. vs. CIT (supra) held that when reasons are recorded for bringing to tax X income and no assessment is made on the X income, the AO does not possess the jurisdiction to tax any other income in the reassessment order. The Hon ble jurisdictional High Court agreed with the judgment of Hon ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (supra). The relevant finding of the Hon ble Bombay High Court, after considering the Explanation 3 to section 147, reads as .....

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ch the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is .....

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s or reassess: (i). 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the p .....

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ess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under Section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of Section 147 with effect from 1st Apri .....

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s the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings However, if after issuing a notice under Section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some ot .....

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