TMI Blog2014 (11) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for A.Y. 2003-04 was issued after expiry of four years from 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 ₹ 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 scrutiny assessment u/s 143(3) of the Act and, therefore, it is a clear case of change of opinion, which has been correctly held by ld. CIT(A) following the ratio-decidendi of the Apex Court in Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA ] wherein, it was held that ‘mere change of opinion’ cannot per-se be reason to reopen and does not confer jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decision in the case of M/s Southern Switch Gear Ltd. vs. CIT, 232 ITR 359, wherein it was held by the Hon ble Court that 25% of royalty payment has to be capitalized, the AO observed that out of the said sum of ₹ 5,02,778/- (25% of 20,11,115/-) should have been capitalized. Further according to the AO, the deduction u/s 80HHC was also allowed in excess. According to the AO, therefore, the said circumstances resulted in escapement of income to the tune of ₹ 42,95,200/- (Rs. 35,02,907 + 5,02,778 + 2,89,515). And so, the case 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 ₹ 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 ₹ 20,11,115/- to M/s Chancellor Oil Tool, a company incorporated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court has observed as under: One needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, section 147 would give arbitrary powers to the AO to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power of the Assessing Officer. Looking into facts of the case, I find that the AO was not justified in invoking the provisions of section 147 in the present case and hence, the reopening is held to be void-ab-inito. Consequently, the order u/s 143(3) read with section 147 stands annulled. 5. The ld. DR supported the AO s action of reopening the assessment u/s 147 of the Act and the ld. AR relied on the finding of ld. CIT(A). 5.1 We have heard both the sides. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of production of the Products whichever is later. The Indian Company shall be entitled, thereafter to the continued and free use of the know how and information given by Chancellor Oil Tool 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, ₹ 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 ₹ 3096114/- was allowed to the assessee whereas it was admissible to the extent of ₹ 2806599/- only. This resulted in excess allowance of deduction under this section of ₹ 289515/-. In view of the above facts and findings, I have reasons to believe that the total income to the tune of ₹ 4295200/- (502778/- + 3502907/-), has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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