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2015 (12) TMI 1242 - ITAT CHENNAI

2015 (12) TMI 1242 - ITAT CHENNAI - TMI - Validity of reopening u/s.148 beyond 4 years - disallowance of royalty payment and recomputation u/s.80HHC - Held that:- Reopening is permitted only if the AO has the satisfaction that the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return u/s.139 or in response to a notice issued under sec.142(1) or sec.148 or to disclose fully and truly all material facts necessary for the purpose of as .....

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sment year is wholly unsustainable as held by the Jurisdictional High Court in the case of CIT v. Schwing Stetter India P. Ltd. (2015 (6) TMI 497 - MADRAS HIGH COURT ). The same view was fortified by the judgment of the Supreme Court in the case of CIT v. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ). Being so, when the AO framed the original assessment u/s.143(3) of the Act after considering the materials on record and when there is no failure on the part of the assessee .....

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essee is directed against the order of the Commissioner of Income-tax(Appeals) for the assessment year 1997-98. 2. The facts of the case are that the assessee filed its return of income for the assessment year 1997-98 on 28.11.1997, admitting an income of ₹ 12,52,65,750/-. The assessment was made u/s.143(3) on 2.3.2000 determining the income at ₹ 14,31,70,390/-. Subsequently, the assessment was reopened u/s.147 of the Act by issuing a notice u/s.148 of the Act on 15.3.2004 and assess .....

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idity of reopening u/s.148 beyond 4 years. The Tribunal vide its order in ITA No.2837/Mds/2007 dated 17.4.2009 set aside the orders of the lower authorities. In view of the above directions of this Tribunal, the Assessing Officer completed the assessment u/s.143(3) r.w.sec.254 of the Act on 24.12.2010 assessing the income t ₹ 13,55,82,595/- by making (i) disallowance contribution to welfare funds, (ii) disallowance of royalty u/s.40(a)(i) and (iii) re-working the deduction u/s.80HHC of the .....

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all material facts fully and truly for the purpose of assessment. Further, it was submitted that there is no finding in the reopening assessment that the assessee has failed to disclose all material facts fully and truly necessary for the purpose of assessment. According to him, reassessment is barred by limitation. Further, it was submitted that the Assessing Officer discussed the issue of allowability of royalty payment while framing the assessment u/s.143(3) of the Act. He drew our attention .....

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as decided by the Jurisdictional High Court in favour of the assessee by observing that this expenditure is an admissible deduction while computing the business income of the assessee. Therefore, he submitted that there is no reason to reopen the assessment. The other two issues in dispute, were also considered by the Assessing Officer while completed the assessment u/s.143(3) originally. 6. On the other hand, the ld. DR submitted that where there is an assessable income for any of the assessmen .....

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ent u/s.143(3); or ii) Underassessment of taxable income, or assessing the income at too low a rate, or granting of excessive relief, or granting/computation of excessive loss or depreciation allowance or any other allowance, if the return was already subjected to scrutiny assessment u/s.143(3). 6.1 The ld. DR further submitted that in the instant case, the assessee has debited certain amounts, by way of royalty payments, in its P&L account and claimed the same as allowable expenses. However .....

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he Act. Further, the ld. DR submitted that the assessee failed to exclude 90% of the non-business income while computing the deduction u/s.80HHC of the Act. Thus, there is an underassessment of taxable incomes on account of excess allowance of expenses, within the meaning of sec.147 of the Act. According to him, this is sufficient reason for re-opening the assessment u/s.147 of the Act. Therefore, the ld. DR submitted that after recording these reasons, the Assessing Officer reopened the assessm .....

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doesn't apply to the facts of the present situation. 6.3 Further, the ld. DR submitted that when there is no discussion on the issue in the assessment order and no details were called for by the Assessing Officer or filed by the assessee on the issue, no finding either positive or negative was arrived at during the course of the original assessment proceedings, there is no question of change of opinion. To support his argument he relied on the following judgments: (i) A.L.A. Firm Vs CIT (10 .....

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lkata Bench of ITAT in the case of Sorn Dutt Builders (P) Ltd. vs. DCIT 98 ITD 78 (Kol). 7. We have heard both the parties and perused the material on record. Admittedly, in this case, the original assessment was completed u/s.143(3) of the Act vide order dated 2.3.2000 and the AO considered the issue relating to royalty payment u/s.40(a)(i) and he also applied his mind with reference to deduction u/s.80HHC of the Act, for which reasons were recorded for reopening the assessment. Further, notice .....

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