TMI Blog2022 (11) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals)-5, Chennai, in ITA No.8/CIT(A)-5/16-17 dated 27.12.2017. The re-assessment was framed by the DCIT, Large Tax Payer Unit-1, Chennai for the assessment year 2010-11 u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the Act ) vide order dated 24.03.2016. The original assessment was framed by the ACIT, LTU-1, Chennai u/s.143(3) r.w.s. 92CA of the Act, vide order dated 29.03.2014. 2. At the outset, the ld.AR for the assessee drew our attention to additional ground raised in regard to reopening of assessment and petition filed for raising additional ground. The ld.counsel explained that the assessee had filed an appeal before the Tribunal on February 27, 2018, which is fixed for hearing on September 17, 2019. In relation to the same, the assessee raised an additional ground in the captioned appeal. The ld.AR requested to admit the additional ground for reason that during the course of the impugned proceedings, the assessee had challenged the re-opening of assessment under section 148 of the Act, as the same was based on audit objection raised and not based on any fresh material. He further stated that this claim is already covered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.07.2015. The AO provided the reasons, which read as under:- On perusal of records for AY 2010-11, the assessee is engaged in the business of manufacturing of Heavy Electrical equipments. It is seen from the P L Account for the year ended 31.03.2010 that under 'other manufacturing, administration and selling expenses, the assessee has debited a sum of Rs. 4419.85 lakh towards 'Data Management Charges'. Under SAP description, the details of such EDP expenses as furnished by the assessee were as under: Software Development charges : Rs. 66378056.00 Computer Stationery : Rs. 1004680.46 IST expenses SLE : Rs. 352984203.90 EDP consumables : Rs. 20944585.07 PC Software : Rs. 4962.50 Data processing charges : Rs. 668741.00 Rs.441985228.93 The assessee was not engaged in the production of computer software. So, excluding the expenditure on computer stationery, EDP consumables and data processing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is concerned, there is no force in the said contention since the respondent has given cogent reasons in his speaking order while rejecting the objections raised by the assessee, for reopening of the assessment and, therefore, it cannot be stated that the respondent has not applied his mind and solely resorted to based on the audit report. In fact, the audit party is entitled to point out a factual error or omission in the assessment and it is settled law that reopening of the case on the basis of a factual error pointed out by the audit party is permissible under law. 6.3.3 In the present case also, the Assessing Officer has given cogent reasons in his speaking order dated 29.10.2015 while rejecting the objections raised by the assessee, for reopening of the assessment. Hence respectfully following the above stated decision of the hon'ble High Court of Madras, ground of appeal that the reopening was based audit objection was also dismissed. Aggrieved, assessee came in appeal before the Tribunal. 6. Before us, the ld.AR drew our attention to the letter issued by Principal Director of Audit (Central) vide No.PDA(C)/Legal/25- 02(202)/2019-20/82 dated 19.08.2019 supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses SLE, EDP Consumable, PC Software, Data processing charges vide 11/IIA Incorrect Computation of Business Income and the relevant objection as obtained by assessee from Principal Director of Audit, Central, placed before us, perused and which reads as under:- Name of the assessee M/s. Alstom T D India Ltd (Formerly known as Areva T D limited) PAN Status AAACG2115R Company AY DOFR R.I (Rs.) AOD U/S A.I (Rs.) IAP 2010-11 9-10-2011 1089037600 29-3-2014 143(3) 1957766133 Not seen The assessee is engaged in the business of Maufacturing of Heavy Electrical equipments'. For the AY 2010-11, in the scrutiny assessment completed u/s 143(3), the total income of the assessee was determined at Rs. 1957766133 and the balance demand of Rs.367959380 was raised. It is seen from the Profit Loss Account for the year ended 31 March 2010 that under 'Ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Alstom Grid was taxable as Fee for Technical Services. and as such, the payment by the assessee company to Alstom Grid cannot be termed as capital expenditure. The reply was examined in audit. The assessee is a subsidiary of the French Company. It is seen from the ruling of the AAR that according to the department, neither the French company nor the assessee are in the business of providing services in the area of information technology. The business of the assessee being that of executing projects for transmission and distribution of power on turnkey basis, it is obvious that the French Company and other group companies continuously upgrade designs, model and other engineering plans and formulae which are used-by the assessee for the purposes of its business. The agreement is vague about the description of the services. The AAR while examining whether the services are 'made available' has come to the conclusion as regards the payment of tax by the foreign company on the following view: We have noted that under-the IT agreement, the French Company is to provide support service through a central team in the area of information Technology to the Applicant (assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.I (Rs.) AOD U/S A.I (Rs.) IAP 2010-11 9-10-2011 1089037600 29-3-2014 143(3) 1957766133 Not seen The assessee is engaged in the business of Manufacturing of Heavy Electrical equipments'. For the AY 2010-11, in the scrutiny assessment completed u/s.143(3), the total income of the assessee was determined at Rs. 1957766133 and the balance demand of Rs.367959380 was raised. In the statement of computation of income, the assessee had deducted an amount of Rs. 44219000 towards 'Relocation Expenses'. According to the Supreme Court's decision in Sitalpur Sugar Works Ltd vs. CIT (49 ITR 160), such expenses are required to be treated as capital expenditure. On this being pointed out, it was stated that the expenses were incurred in respect of the following three facilities which were relocated:- a) Factory at Kolkata to Baroda b) Factory at Bangalore to Hosur c) Factory at Perungudi to Padappai By citing the following decisions, it was replied that any expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court held in para 20 as under:- 20.Therefore, whether considered on the basis that the. nature and scope of the functions of the internal audit organisation of the Income Tax Department are co-extensive with that of Receipt Audit or on the basis of the provisions specifically detailing its functions in the Internal Audit Manual, we hold that the opinion of an internal audit party of the Income Tax Department on a point of law cannot be regarded as information within the meaning of section 147(b) of the Income Tax Act, 1961. 6.5 The ld.AR also relied on the Jurisdictional High Court in the case of Cholamandalam Investment Finance Co. Ltd., 89 taxmann.com 337, wherein on exactly identical facts, Hon ble High Court held that the reasons for reopening is verbatim repetition of the audit objections filed by the audit party. This position was clearly demonstrated by the assessee by comparing the audit objection and the reasons for reopening. Thus, it is clear that the Assessing Officer did not have any independent material to reopen the assessment, but merely proceeded to reopen the assessment on the ground that there was an audit objection. Accordingly, two issues arise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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