2012 (8) TMI 491 - AT - Income Tax

ITAT dismisses department's appeal on advertisement expenses & assessment reopening validity.

Assistant Commissioner of Income Tax-11(1) Versus M/s. NGC Network (India) Pvt. Ltd.

Assistant Commissioner of Income Tax-11(1) Versus M/s. NGC Network (India) Pvt. Ltd. - TMI Issues Involved:1. Disallowance of advertisement expenses under section 37(1)2. Validity of reopening of assessment proceedings u/s 148Analysis:Issue 1: Disallowance of advertisement expenses under section 37(1)The department appealed against the order of CIT(A) allowing the expenditure on account of advertisement under section 37(1). The dispute regarding the disallowance of advertisement expenses has been ongoing since assessment year 2005-06. Previous decisions by co-ordinate Benches favored the assessee, leading to the dismissal of the department's appeal in the present case. The Tribunal upheld the decisions of the co-ordinate Benches in the assessee's favor, resulting in the dismissal of the department's appeal.Issue 2: Validity of reopening of assessment proceedings u/s 148The assessee objected to the reopening of its assessment proceedings under section 148. The AO initiated reassessment proceedings based on the disallowance of advertisement expenses in assessment year 2005-06. The AO disallowed a specific amount in the assessment order, which was later deleted by the first appellate authority. The department challenged this deletion in appeal, leading to the assessee raising the issue in the cross objections before ITAT. The department argued that the reassessment proceedings were valid as new material had been discovered in the subsequent assessment year. However, the assessee contended that there was no tangible material to support the reopening, citing a lack of a live link between the reasons recorded and the belief of income escapement. The Tribunal agreed with the assessee, holding that the reassessment proceedings were invalid due to a lack of connection between the reasons recorded and the formation of belief. The Tribunal upheld the decision of the CIT(A) and dismissed the department's appeal while allowing the cross objection filed by the assessee.In conclusion, the ITAT upheld the decisions in favor of the assessee regarding both the disallowance of advertisement expenses and the validity of the reopening of assessment proceedings. The department's appeal was dismissed, and the cross objection filed by the assessee was allowed.