Revenue's Appeal Allowed on Expenses & TDS Disallowance, Assessment Reopened Despite No 143(2) Notice

The Tribunal allowed the Revenue's appeal on the grounds of disallowance of advertisement expenses and non-deduction of TDS on interest paid. The Tribunal upheld the reopening of assessment by the AO under section 147, despite the non-issuance of notice u/s.143(2) of the Act, as the assessee did not file a return in response to the notice u/s.148. The Tribunal considered advertisement expenses as revenue expenditure and applied section 40(a)(ia) to the interest paid. The decision was issued on 11th May 2017 in Chennai.

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Issues Involved:
Reopening of assessment and non-issuance of notice u/s.143(2) of the Act.
Disallowance of advertisement expenses.
Disallowance u/s.40(a)(ia) of the Act for non-deduction of TDS on interest paid.

Reopening of Assessment and Non-issuance of Notice u/s.143(2) of the Act:
The case involved the appeal against the reopening of assessment and the non-issuance of notice u/s.143(2) of the Act. The AO reopened the assessment after noticing discrepancies in the company's expenses and statutory dues, leading to the issuance of a notice u/s.148. The assessee did not file a return in response to this notice. The Tribunal held that the AO had the jurisdiction to reopen the assessment under section 147, even if the original assessment was processed u/s.143(1) of the Act. The Tribunal referred to a Supreme Court judgment to support the validity of the reopening. Additionally, the Tribunal ruled that the non-issuance of notice u/s.143(2) did not invalidate the assessment, as there was no return filed by the assessee in response to the notice u/s.148. Therefore, the ground regarding reopening of assessment and non-issuance of notice u/s.143(2) by the Revenue was allowed.

Disallowance of Advertisement Expenses:
The next common ground in the appeals was the disallowance of advertisement expenses by the AO. The AO treated the expenses as deferred revenue expenditure, amortizing it over five years. However, the assessee contended that the expenses were revenue expenditure. The Tribunal cited a previous order in the assessee's own case, where it was held that advertisement expenses incurred for the purpose of carrying on the business should be considered revenue expenditure. Relying on this precedent, the Tribunal decided in favor of the assessee, dismissing the Revenue's appeal on this ground.

Disallowance u/s.40(a)(ia) of the Act for Non-deduction of TDS:
The final issue in some of the appeals concerned the disallowance u/s.40(a)(ia) of the Act for non-deduction of TDS on interest paid by the assessee. The Tribunal referenced a Supreme Court case to affirm that the provisions of section 40(a)(ia) applied to both paid and payable amounts. Consequently, the Tribunal allowed the ground taken by the Revenue on this matter.

In conclusion, the Tribunal partly allowed the appeals of the Revenue on various grounds, including the disallowance of advertisement expenses and non-deduction of TDS on interest paid. The order was pronounced on 11th May 2017 in Chennai.

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