9911796707
TMI Blog2022 (1) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... peal of assessee is as regards to the order of CIT(A) confirming reopening of assessment despite the fact that reopening and assumption of jurisdiction u/s.147 of the Act is invalid. For this, assessee has raised following Ground Nos.2 to 6:- 2. The CIT (Appeals) erred in sustaining the re-assessment after rejecting e technical grounds raised questioning the validity of the assumption of jurisdiction u/s 147 of the Act without assigning proper reasonsand justification. 3. The CIT (Appeals) failed to appreciate that the order of re-assessment under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law and went wrong in recording the findings in this regard from para 4.3.2 to para 4.3.11 of the impugned order without assigning proper reasons and justification. 4. The CIT (Appeals) failed to appreciate that the lack of fresh materials and change of opinion on the part of the Assessing Officer would vitiate the assumption of jurisdiction u/s 147 of the Act while nullifying the consequential re-assessment order passed for the Assessment Year under consideration. 5. The CIT (Appeals) failed to appreciate that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only and not in the nature of capital expenditure as alleged in the notice. The assessee in the reply letter has summarized the expenses as under:- * The expenditure incurred were only in the nature of current repairs. * No capital asset of enduring nature was created by the above expenditure. * We have not claimed any depreciation on the above items which were claimed as revenue expenditure and the book depreciation was added back to the total income and depreciation was reworked for Income Tax purposes by excluding the above items from the additions. * The treatment given by us in the books of account by treating the same as capital expenditure is not a conclusive or decisive factor in treating the expenditure as capital or revenue in nature. * The Scrutiny Assessment u/s 143(3) was made only after considering the above issue. Further, the assessee vide letter dated 18.02.2015 again reiterated the same. The Revenue after taking these explanations has not taken any action on the rectification notice issued by the Department. Subsequently, notice u/s.148 of the Act dated 11.03.2016 was issued, which was received by the assessee on 14.03.2016, for which the assessee req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f payment of Income Tax. The said expenditure had been treated as an addition to the existing assets in the former and as revenue expenditure in the latter. Though accounting practice may not be the best guide in determining the nature of expenditure, yet in the instant case they were indicative of what the assessee itself thought of the expenditure made on replacement of machinery; and that the claim of deduction under the Act was made merely to diminish the tax burden, and not under the belief that it was actually revenue expenditure." Therefore after going through all the material available on record, I have reason to believe that income chargeable to tax during the relevant assessment year has escaped assessment within the meaning of section 147." 4. The assessee raised objections against the issuance of notice u/s.148 of the Act, reiterating the above facts which are replied vide notice issued for rectification u/s.154 of the Act by the Department. The assessee also claimed that the original assessment was framed u/s.143(3) of the Act and these details were available before the AO during the course of original assessment proceedings and there is no fresh material / tangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made available by the appellant firm, either in the return or in the Audit Report filed to infer that these material facts necessary for completion of assessment have been reflected by it. Aggrieved against the order of CIT(A), assessee preferred an appeal before the Tribunal. 6. Before us, the ld.counsel for the assessee took us to the entire facts and stated that re-opening of assessment u/s.147 of the Act by the AO is carried out only in regard to expenses incurred by the assessee amounting to Rs. 28,02,794/- towards repairs to kitchen equipments and furniture by replacing the table top for dosa stone, dining tables and replacement of glasses etc., in different restaurant outlets at Triplicane, Velachery, Tiruvanmiyur, T.Nagar, etc. The ld.counsel for the assessee stated that the claim of this expenditure of Rs. 28,02,794/- was filed by the assessee during the course of original assessment proceedings framed by the AO u/s.143(3) of the Act and AO has disallowed a sum of Rs. 6,00,000/- on adhoc basis after examining every aspect. Again the Department has started rectification proceedings by issuing notice u/s.154 of the Act and assessee replied to the same and Department has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that this reopening is on the basis of audit objection and as per the reasons recorded there is no independent application of mind by the AO for recording reasons. 7. Since, the ld.counsel for the assessee has argued this reopening issue on these three facets, first we will take up whether the assessee's case fall under first proviso to section 147 of the Act or not. 8. On the other hand, the ld.CIT-DR, heavily relied on the order of CIT(A) and argued that there was confusion from the accounts of the assessee because the assessee has booked this expenditure as capital expenditure in the books of accounts but the said expenditure has been claimed in the computation of income as revenue expenditure. The ld. Senior DR also relied on the order passed by the AO rejecting the objection for reopening of assessment u/s.147 of the Act dated 17.11.2016 and stated that the AO has duly considered the submissions of the assessee and rejected vide his letter dated 17.11.2016. The ld. senior DR relied on the decision of Hon'ble Supreme Court in the case of Girilal and Company vs. ITO, [2016] 387 ITR 122. 9. We have heard the rival contentions and gone through the facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosure should be in return of income. We have gone through case law cited by ld. Senior DR and noted that the assessee has not correctly disclosed the actual asset of plots and hence, Hon'ble Supreme Court has rightly held that reassessment as valid because there was failure on the part of the assessee to disclose fully and truly material facts. But, in the present case before us the assessee has actually disclosed these expenses in the computation of income and even during the course of original assessment proceedings before the AO. The Hon'ble Allahabad High Court decision, affirmed by Hon'ble Supreme Court, in the case of Foramer France, supra held that 14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed. 15. It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The relevant part of the new Section 147 is as follows : "147. If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned notices were barred by limitation mentioned in the proviso." 11. In view of the decision of Hon'ble Allahabad High Court in the case of Foramer France which was affirmed by the Hon'ble Supreme Court, supra, we are of the view that in the present case the Revenue could not point out any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for relevant assessment year 2009-10, as the assessee has completely disclosed the facts relating to the claim of expenditure incurred towards repairs to kitchen equipments and furniture by replacing the table top for dosa stone, dining tables and replacement of glasses etc., for an amount of Rs. 28,02,794/-. This expenditure is towards stainless steel sheets for replacing the worn out sheets over the dining tables and dosa table tops, glass top etc. In view of the fact that original assessment was completed u/s.143(3) of the Act for the assessment year 2009-10 and notice u/s.148 of the Act was issued on 11.03.2016, which is beyond 4 years, we held that reopening is bad in law and hence, quashed. 12. Since we have quashed the reopening in term of the first proviso to section 147 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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