TMI Blog2016 (10) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... 40(a)(ia), the CIT(A) was fully empowered to determine such expenses as capital in nature and would have disallowed it accordingly. However, no such finding was given by the CIT(A). Moreover, the finding of the AO while recording the reasons, was based on factually incorrect facts. In view of the above, Ld. CIT(A) has rightly held that re-assessment order passed by the AO is bad in law, without jurisdiction, and is required to be quashed. On the merit of the case as well, no, addition is called for. Appeal of the Revenue is dismissed. - ITA No. 2088/Del/2014 - - - Dated:- 3-10-2016 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Department : Sh. Amrit Lal, Sr. DR For The Assessee : M s. Geetika ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide his order dated 2.6.2010 which was also upheld by the ITAT. Thereafter, the AO issued notice u/s. 148 on 20.3.2012 and assessment was reopened by recording the following reasons. In this case assessment under section 143(3) for the assessment year 2005-06 was completed determining an income of ₹ 78,68,673/- as against the written (should be returned) loss of ₹ 36,03,300/-. On examination of the file and documents placed on the record it is seen that assessee has debited a sum of ₹ 100,10,209/- for Network Other Equipment costs in the provisional income and expenditure account. Since the said expenditure is capital in nature, it is not allowable as revenue under the provisions of section 37 of the Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y discussed the issue in dispute by considering the submissions of the assessee and adjudicated the issue vide para no. 5.2 to 5.3 at pages 10 to 11 of the impugned order. The said relevant paras are reproduced as under:- 5.2 I find that while recording the reasons for initiating proceedings under Section 147, the AO has taken the amount of returned income at ₹ 78,68,673/- and amount of assessed loss at ₹ 36,03,300/-. Both these figures are factually incorrect, as the Ld. AO in the original assessment under section 143(3) had assessed the income at ₹ 7,86,86,783/-. Further, the appellant had, during the course of original assessment proceedings, revised the computation of income as the original computation was based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and Other Equipment Cost' as revenue expenses, was based on examination of 'file and documents placed on record'. Since there was no independent source of such information and the AO only re-examined the file and documents, which was already subject matter of scrutiny under Section 143(3), it is evident that the action of the AO was clearly in the nature change of opinion', on which reassessment cannot be sustained as was held by the Hon'ble High Court in. the case of (IT Vs. Usha International ltd. (ITA. No.2026/2010) (20l2). Moreover, the AO has alleged that such 'Network and Other Equipment Cost' was booked under the head 'Circuit Expenses'. Further, in the original assessment proceedings under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putation was based on provisional financial account and accordingly, claimed the loss of ₹ 7,23,56,799. The AO in the original assessment proceedings took, cognizance of the financial accounts and made an addition of ₹ 15,10,43,582 of the aforesaid revised computation of income in which loss of ₹ 7,23,56,799 was claimed and based on this, the income under Section 143(3), was assessed at ₹ 7,86,86,783. We also find that the main observation of the AO that the assessee had claimed 'Network and Other Equipments Cost' as 'Circuit Expenses, which were clubbed under the, head revenue expenses, is also factually incorrect. Such mistakes possibly occurred as the AO did not bother to go through the revised computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3), disallowance was primarily made in respect of such 'Circuit Expenses' only. After the assessment under Section 143(3), the matter travelled upto the ITAT, which gave relief to the assessee. The CIT(A) had also deleted the addition made by the AO, which was under section 40(a)(ia). The CIT(A) has all the powers of an Income Tax Authority and even while allowing original disallowance under section 40(a)(ia), the CIT(A) was fully empowered to determine such expenses as capital in nature and would have disallowed it accordingly. However, no such finding was given by the CIT(A). Moreover, the finding of the AO while recording the reasons, was based on factually incorrect facts. In view of the above, Ld. CIT(A) has rightly held that r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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