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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI G.D. AGRAWALG.D. AGRAWAL & AND BEFORE SHRI G.D. AGRAWALG.D. AGRAWAL & AND SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVASHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA
PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP :- PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP This appeal by the Revenue for the assessment year 2005-06 is directed against the order of learned CIT(A)-XIII, New Delhi dated 14th May, 2013.
Ground No.1 of the assessee’s appeal reads as under:-
“On the facts and circumstances of the case and in law, the CIT(A) has erred in quashing the assessment order passed u/s 147/143(3) of the Act, by holding that reopening was based on change of opinion.”
We have heard the arguments of both the sides and have perused the material placed before us. The assessment year under consideration is 2005-06. Admittedly, original assessment was completed u/s 143(3) and the notice u/s 148 was issued on 27th March,
2 ITA-4525/Del/2013 2012. Therefore, admittedly, the notice u/s 148 was issued beyond four years from the end of the relevant assessment year. On these facts, proviso to Section 147 would be squarely applicable which reads as under :-
“Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:”
Thus, as per the above proviso, if the original assessment was completed u/s 143(3), the assessment cannot be reopened beyond the period of four years unless there is failure on the part of the assessee to disclose fully and truly all material facts. Since in this case, admittedly, the original assessment was completed u/s 143(3) and the assessment was sought to be reopened beyond the period of four years, it would be essential to examine whether there was failure on the part of the assessee to disclose fully and truly all material facts. The copy of reasons recorded for reopening of assessment reads as under:-
“FCC Rico Ltd. for A.Y. 2005-06 Reasons for notice u/s 148 of the IT act, 1961
The assessment u/s 143(3) of the IT act in the above mentioned case for AY 2005-06 was completed in December, 2008 determining total income of Rs.40,36,83,702/-. On the perusal of the record it is revealed that during the year the assessee had claimed an expenditure of Rs.18013616 on Technical, fee and royalty (Rs.90,60,330/- on foreign personnel deputation charges – technical fee and Rs.89,53,286 on Royalty).
3 ITA-4525/Del/2013
As per section 32 of the Income-tax act, 1961 w.e.f. 01.04.1998 know-how, patents, copyright, trademarks, licenses, franchises or any other business or commercial rights of similar nature are intangible assets and depreciation @ 25 per cent is allowable on these intangible assets. Therefore, the expenditure of Rs.1,80,13,616 on technical fee and royalty should be capitalized and depreciation @ 25 per cent should be allowed on these expenditure. By doing so, the assessee has not disclosed the total income correctly to the extent of Rs.1,35,10,212/- (Rs.1,80,13,616/- - Rs.45,03,404/- (25 per cent of Rs.1,80,13,616/-).
Based on the above facts, I have reason to believe that the income of the assessee chargeable to tax to the extent of Rs.1,35,10,212/- has escaped assessment. Yours faithfully, Sd/- (Gargi Sharma Goel) Dy. Commissioner of Income-tax Dated : 25 Mar 2012 Circle 11(1), New Delhi.”
From the above, it is evident that the Assessing Officer himself has mentioned “On the perusal of the record it is revealed that during the year the assessee had claimed an expenditure of Rs.18013616 on Technical, fee and Royalty (Rs.90,60,330/- on Foreign Personnel Deputation Charges – Technical Fee and Rs.89,53,286 on Royalty)”. Thus, the fact of disclosing of all relevant facts is admitted in the reasons recorded itself. The Assessing Officer is admitting that the details were available on record at the time of original assessment. As per Assessing Officer, such expenditure should not have been allowed and only 25% of the depreciation thereon would have been allowed. However, it is only an opinion. There is no dispute that the relevant facts were already disclosed in the original assessment proceedings. There is no mention in the reasons recorded that there was any failure on the part of the assessee to disclose any material facts which has resulted in under-escapement of income. In view of the above, in our opinion, the necessary condition for reopening of assessment is not fulfilled and the learned CIT(A) was justified in holding that the 4 ITA-4525/Del/2013 reopening of assessment was bad in law and consequentially, in quashing the assessment order. The same is upheld and ground No.1 of the Revenue’s appeal is rejected.
Ground No.2 of the Revenue’s appeal is against the deletion of disallowance by the learned CIT(A). In our opinion, once the assessment order itself has been quashed, any addition made in such assessment order does not survive and therefore, ground No.2 of the Revenue’s appeal does not require any adjudication on merits. The same is rejected because on account of quashing of the assessment order, no addition can survive.
In the result, the appeal of the Revenue is dismissed. Decision pronounced in the open Court on 13.12.2016.