9911796707
TMI Blog2014 (11) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... , ignoring that also as per decision of Hon'ble Supreme Court in CIT(A) vs. P.V.S. Beadies P. ltd., 237 ITR 13, the factual information provided by the internal auditor is to be treated as information for the purpose of reopening of assessment." 3. The brief facts of the case are that the assessee filed its return of income on 28.11.2003, declaring income of Rs. 1,40,81,107/- which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter 'the Act'). Later on, it was selected for scrutiny and assessment was completed on 3.3.2006 at assessed income of Rs. 1,43,56,410/-. Subsequently, the AO noted from the perusal of records that the assessee company had paid commission of Rs. 35,02,907/- to its directors who were also major sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been reopened u/s 147 of the Act. 4. The ld. CIT(A) quashed the reopening of assessment by holding as under: "I have carefully considered the submissions made by ld. AR and have gone through the assessment order. While explaining the reasons for reopening of the case, the AO has referred to the records which revealed that the assessee has claimed commission payment of Rs. 35,02,907/-. The AO was of the opinion that this amount is not allowable u/s 36(1)(ii) of the Act. It was also noticed by the AO from the records that the assessee has paid royalty amount of Rs. 20,11,115/- to M/s Chancellor Oil Tool, a company incorporated under the US laws. He was of the view that this amount should be capitalized. Similarly, the AO has observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve any jurisdiction to review its own order. His jurisdiction is confined only to rectification of mistake as contained in section 154 of the Act. The power of rectification of mistake conferred upon the ITO is circumscribed by the provisions of sec. 154. The said power can be exercised when mistake is apparent. Even mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Tribunal has limited jurisdiction u/s 254(2) of the Act. Thus, when the AO has considered the matter in detail and the view taken is a possible view, the order cannot be changed by way of exercising the jurisdiction of rectification of mistake." The above-said decision has been affirmed by Hon'ble Supreme Court (187 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income of Rs. 14356410/- on a/c of certain additions/disallowances made to the returned income. On perusal of asstt. Records for the A.Y. 2003-04 reveals that the assessee company had paid commission of Rs. 3502907/- to its directors of the company. Further, on similar grounds, addition had been made in this case by the AO in the A.Y. 2006-07 by observing as under: "It needs to be mentioned here that due to amendment in section 36(1)(ii) by the Direct Tax Law (Amendment) Act, 1987 and later in 1989, the proviso's to the main section have been omitted. In other words, there is no need to test the reasonableness of the amount of Bonus as well as commission paid to an employee. The allowability of Bonus/Commission paid to an employee is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the Indian Company." As seen from above agreement between the assessee company and the Chancellor Inc. USA the assessee company has an exclusive right over the technical know how provided to it in the right for continued and there use of the know how given by Chancellor Inc. Based on Hon'ble Apex Court's decision in case of M/s Southern Switch Gear Ltd. vs. CIT, 232 ITR 359 (SC), wherein it was held by the Hon'ble Court that 25% of royalty payment has to be capitalized, Rs. 502778/- (25% of 2011115/-) should have been capitalized. The perusal of the records for the same year also reveals that deduction u/s 80HHC of Rs. 3096114/- was allowed to the assessee whereas it was admissible to the extent of Rs. 2806599/- only. This resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the relevant assessment year. Therefore, as provided by the first proviso to sec. 147, the AO has to satisfy that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment. On a perusal of the reasons recorded by the AO, we find that the AO has made a bald statement, that the assessee's total income to the tune of Rs. 42,95,200/- has escaped assessment because of failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment. But for this bald statement of the AO, nothing emerges from the records to support the said observation of the AO. We find that all the three issues raised by the AO has been dealt during the original ..... X X X X Extracts X X X X X X X X Extracts X X X X
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