TMI Blog2019 (1) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... rder as some of the expenses forming part of the breakup of sales and promotions expenses had been disallowed in the assessment order dated 18th March, 2015 passed under Section 143(3). This would clearly indicate that the impugned notice has been issued on account of change of opinion and it is an attempt to review the Assessment Order dated 18th March, 2015 passed under Section 143(3). AO is entitled to rely upon the order passed in assessment proceedings for the subsequent year, as tangible material to initiate reassessment proceedings. The tangible material so obtained must be processed i.e. its applicability to the assessee for the subject assessment year is to be examined so as to form a reasonable belief that income chargeable to tax has escaped assessment. The tangible material in the assessment order for A.Y. 2015-16 was the agreement dated 6th March, 2014. This is an agreement post the period with which the impugned notice is concerned. This, by itself could not form the basis for the AO to have come to a reasonable belief that income chargeable to tax has escaped assessment for the subject assessment year 2011-12. AO has not himself come to the reasonable belief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, the impugned notice was issued seeking to reopen the assessment for Assessment Year 2011 12. The reasons in support of the impugned notice reads as under : In this case, the assessee filed original return of income of A.Y. 2011 12 on 24.11.2011 declaring total income at ₹ 972,95,45,281/ under normal provision of Income Tax Act, 1961 (the Act ) and 1122,83,00,000/ u/s 115JB of the Act. Subsequently, the assessment was completed u/s 143(3) r.w.s. 144C(3) of the Act on 18.03.2015 determining total income at ₹ 1058,42,40,442/ under normal provision of the Act and at ₹ 1122,83,00,000/ u/s 115JB of the Act. Since, the tax on income assessed under normal provision of the Act was more than the tax on Book Profit computed under MAT provision, income assessed under normal provision of the Act at ₹ 1058,42,40,442/ . 2. During the Course of the assessment proceedings for A.Y. 2015 16, it is seen that the assessee company has incurred an amount of ₹ 32,44,46,533/ towards Colour Idea Store and debited the expense in the profit loss account as Advertisement Sales promotion Expenses . In this regard, during assessment proceedings, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Designated Shop Area, by installing Asian Paints Decor, design, creatives and concepts; Based on the above representation of the Dealer, Asian Paints hereby agrees to associate with Dealer and the Dealer agrees to promote Asian Paints products through the Designated Shop Area, make displays and the Dealer has agreed to this business arrangement on the terms and conditions appearing hereunder; NOW THIS AGREEMENT WITNESSETH THAT for and in consideration of the mutual covenants and promises hereinafter set out the parties hereto agree as follows; (1) TERM : This Agreement is for a period of 5 years commencing on 1st February, 2014 and terminating on 31st January, 2019 unless otherwise terminated in writing by the parties. This Agreement may be renewed for such period and upon such terms and conditions as may be mutually agreed to by both the parties. (2) COMMERCIAL UNDERSTANDING : The Parties hereby agree that the said arrangement under this Agreement is for brand promotion activity of Asian Paints and through which the Dealer shall also benefit by way of consumer mileage. For the above purpose, the parties agree by way of sharing of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll get his Shop premises and the Designated Shop Area constructed designed and decorated in accordance with and in the manner suggested by Asian Paints and its consultants / contractors. The Inspiration Area shall be continuous and must have easy access to the customer. The Dealer must not use the Designated Shop Area in any other manner than as specified by Asian Paints. Any other product or display material shall be kept out of the Designated Shop Area unless specified by Asian Paints. The Designated Shop Area shall not be used for display of any other companies' products for either stocking or display. The dealer shall adhere to the design process of construction / fabrication as mutually agreed before the work commences. Any change in the same can be done only at the behest of Asian Paints. The dealer shall permit and cooperate in any every manner with the consultants and contractors of Asian Paints and their men / employees and agents to execute the construction / fabrication work inter alia the designing erection and installation of graphics, decors, visuals etc. The Dealer shall not share the design of the shop or any other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se permitted by Asian Paints. Any such changes, alterations or distortions or failure to make and sustain the arrangements in respect of the Designated Shop Area shall entail termination of this Agreement and the Dealer shall be liable to make good every loss and damage sustained by Asian Paints in this regard. The Dealer shall provide an unrestricted and unlimited access to any of the Asian Paints employees, agents and representatives and the records thereto at all reasonable times. The Dealer shall not charge in excess of the MRP declared by Asian Paints upon its products for the facilities provided to the customers in the Designated Store Area. The Dealer shall not be entitled to inter alia any special privileges, prerogatives, benefits discounts, rebates or schemes as compared to other dealers by virtue of this Agreement. 2.2. On perusal of the agreement, it clearly emerges that the assessee company and the dealer of the assessee has entered into an agreement to create a 'fixed assets' for promoting their business Interest under the concept of Colour Idea Store . As per the agreement, the assessee company and dealer shares the expenses incurred fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed facts emerge : (a) the impugned notice is beyond the period of 4 years from the end of the relevant assessment year; (b) the regular assessment proceedings were completed under Section 143(3) of the Act; (c) the material which forms the basis for the impugned notice is an assessment order passed for Assessment Year 2015 16; and (d) the order for Assessment Year 2015 16 came to be passed on the basis of an agreement dated 6th March, 2014 between the petitioner assessee and its dealers. 8. On the aforesaid facts, Mr. Agarwal, learned Counsel appearing in support of the petition submits that the impugned notice is without jurisdiction for the following reasons : (a) The impugned notice has been issued beyond the period of 4 years from the end of the relevant assessment year in respect of an assessment completed under Section 143(3) of the Act. Thus, in the absence of any failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment, the notice is hit by the first proviso to Section 147 of the Act; (b) The Assessing Officer, during the course of assessment proceedings had an occasion to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on Colour Idea Stores as a part of its Advertisement and Sales Promotion expenses. During the regular assessment proceedings under Section 143(3) of the Act, the Assessing Officer had occasion to examine the petitioner's claim for expenses in respect of Colour Idea Store as a part of its advertisement and sales promotion expenses. Thus, there was a complete disclosure of all primary material facts on the part of the petitioner. (See Calcutta Discount Co. Vs. ITO, 41 ITR 191 ). Therefore, no failure to disclose all fully and truly material facts necessary for assessment. Thus, on the above ground itself the impugned notice is hit by the proviso to Section 147 of the Act and is without jurisdiction. 11. In any case, the application of mind to these facts on the part of the Assessing Officer can be inferred from the fact that the statement constituting the breakup of the total expenditure incurred on sales and promotions was considered in the assessment order as some of the expenses forming part of the breakup of sales and promotions expenses had been disallowed in the assessment order dated 18th March, 2015 passed under Section 143(3) of the Act. This would clearly in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
