Tribunal upholds assessment reopening, remands business setup date determination for fresh review, dismisses interest claim.

The Tribunal upheld the reopening of the assessment based on a prima facie view by the AO. It remanded the determination of the business setup date and related expenses for fresh adjudication to the AO. The Tribunal dismissed the ground regarding interest u/s 234B as not pressed, resulting in a partial allowance of the appeal.

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Issues Involved:
1. Whether the reopening is bad in law.
2. Whether the assessee had set up its business during the impugned previous year and whether the expenses in question were to be allowed as revenue expenses.
3. Whether the assessee was entitled to claim for depreciation.
4. Whether the AO was right in levying interest u/s 234B.

Detailed Analysis:

1. Whether the reopening is bad in law:
The assessee argued that the reopening was unjustified as all facts were available before the AO, and the assessee had earned advertisement income during the year. The counsel for the assessee cited various case laws to support the claim that the AO could not have reasonably believed that income had escaped assessment. The Tribunal, however, found that the AO's view was a possible prima facie view based on the audited accounts, which indicated that the expenditure pertained to the pre-commencement period. The Tribunal upheld the reopening as valid, referencing the Supreme Court decision in Rajesh Jhaveri Stock Brokers 291 ITR 500, which supports the notion that the AO needs only a prima facie view for reopening.

2. Whether the assessee had set up its business during the impugned previous year and whether the expenses in question were to be allowed as revenue expenses:
The Tribunal noted that the test should be whether the business was set up, not whether it had commenced. Citing the Delhi High Court in CIT vs. ESPN Software India P. Ltd. and the Gujarat High Court in Hotel Alankar, the Tribunal concluded that the assessee had set up its business during the assessment year 2000-01, as evidenced by the acquisition of plant and machinery, earning advertisement income, and incurring related expenses. However, the Tribunal could not specify the exact date of the business setup due to a lack of detailed information and thus remanded the issue to the AO to determine the exact date and to treat the expenses incurred thereafter as revenue expenditure.

3. Whether the assessee was entitled to claim for depreciation:
The Tribunal held that the depreciation claim should be adjudicated afresh based on the determination of the business setup date. The AO was instructed to re-evaluate the depreciation claim in light of the newly established setup date.

4. Whether the AO was right in levying interest u/s 234B:
The assessee initially argued against the levy of interest u/s 234B but later did not press the issue due to the small amount involved. Consequently, the Tribunal dismissed this ground as not pressed.

Conclusion:
The Tribunal upheld the reopening of the assessment, remanded the issues of business setup date and related expenses to the AO for fresh adjudication, and dismissed the ground regarding interest u/s 234B as not pressed. The appeal was allowed in part.

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