TMI Blog2021 (1) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to point out specifically as to how the escapement of income from tax on this issue could be attributed to any fault on the part of the assessee. Therefore, in view of the categorical findings recorded by the Ld. CIT (A) that no adverse inference was drawn by the Assessing Officer and that the payment was duly supported and evidenced by documentary evidences and that the genuineness of expenditure incurred was not doubted by the AO. Addition pertaining to quota expenses - the quota was allotted on year to year basis and, therefore, it had no enduring benefit - HELD THAT:- In the Assessment Order passed u/s 147 of the Act, the Assessing Officer has not pointed out any reason for treating this expenditure as capital expenditure but has only as referred to the reasons recorded for reopening and has disallowed the same. Even the Ld. SR. DR could not point out any perversity in the findings of the Ld. CIT (A) on the issue - CIT (A) has also placed reliance on case of M.S. Kandappa Mudaliar vs. CIT [ 1957 (3) TMI 62 - MADRAS HIGH COURT ] wherein it was held that the expenditure for acquisition of quota rights is not a capital expenditure. Therefore, on this issue also, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of the Act and therefore, should have been added to the income of the assessee. Further, the assessee has claimed an expenditure of ₹ 4,32,39,948/- being Quota Expenses. This expenditure being in the nature of giving enduring benefit to the assessee should have been treated as capital expenditure and the added to the income of the assessee. In addition to the above, while calculating the taxable income an income an amount of ₹ 1,16,32,526/- relating to advance recoverable by way of income from financial transaction has not been included by the assessee. The escapement of income has been account of failure on the part of the assessee to truly and fully disclose all the material facts necessary for assessment. In view of the above, I have reason to believe that an income of ₹ 7,53,88,474/- has escaped assessment within the meaning of section 147 of the IT Act, 1961. 2.1 The assessee objected to the reopening but the objections were not found acceptable by the Assessing Officer and the assessment was completed at an income of ₹ 17,13,34,280/- after making total addition of ₹ 7,53,88,474/- i.e., on account of all the th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making the additions. 3.0 The Ld. Authorized Representative (AR) argued that the re-opening had been done after a period of four years and that there was no recording by the Assessing Officer that there had been any non-disclosure of material relevant facts by the assessee with respect to the issues which were the subject matter of re-opening. The Ld. Authorized Representative also submitted that the issues which were the subject matter of the reopening were duly disclosed in the audited financial statements of the assessee. It was also submitted that the issue pertaining to foreign office expenses had arisen after an audit objection being raised by the internal audit party of the Department and, therefore, the reopening was bad in law. 4.0 Per contra, the Ld. SR. Departmental Representative (DR) submitted that the assumption of jurisdiction u/s 148 was valid in law. 5.0 Arguing for the Department s appeal, the Ld. Sr. DR placed extensive reliance on the findings and observations of the Assessing Officer on all the three issues and vehemently argued that the Ld. CIT (A) had erred in deleting the additions while ignoring the observations of the Assessing officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, it was incumbent upon the Assessing Officer to point out specifically as to how the escapement of income from tax on this issue could be attributed to any fault on the part of the assessee. Therefore, in view of the categorical findings recorded by the Ld. CIT (A) that no adverse inference was drawn by the Assessing Officer and that the payment was duly supported and evidenced by documentary evidences and that the genuineness of expenditure incurred was not doubted by the AO, we find no reason to interfere with the findings recorded by the Ld. CIT (A) and, we upheld the same. 6.1 Ground No.2 of the Department s appeal pertains to deletion of addition amounting to ₹ 4,32,39,948/- pertaining to quota expenses. It is seen that the assessee company is into exports of Garments manufactured by it. The quota was allotted on year to year basis and, therefore, it had no enduring benefit. While deleting the addition, the Ld. CIT (A) has noted that the assessee company had been incurring quota expenses from year to year and in Assessment Year 2004-05 i.e. the immediately preceding assessment year, the assessee company had incurred quota expenses amounting to ₹ 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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