TaxTMI 
TaxTMI 
2013 (4) TMI 599
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.... which the Assessing Officer desired to reopen, for which impugned notice dated 15.3.2001 came to be issued. At the request of the petitioner, the Assessing Officer supplied the reasons recorded by him for reopening the assessment. Such reasons read as under: "In this case, assessment u/s. 143(3) was completed on 28.3.2000 determining total income of Rs. 7,15,25,008/-. During the appeal proceedings for A.Y. 1995-96, it has come to the notice that the assessee has made payment of Rs. 187.54 lacs towards Voluntary Retired Scheme in F.Y. 1996-97 relevant to A.Y. 1997-98 which was allowed as revenue expenditure. Now, the CBDT has issued a Circular dated 23.1.2001 in which it has stated that any ex gratia amount which results in an enduring benefit to assessee should be treated as capital expenditure. In view of this, the said VRS payment is required to be disallowed as capital expenditure. I have therefore, reason to believe that the amount of Rs. 187.54 lacs chargeable to tax has escaped assessment. Therefore, notice u/s. 148 is issued for A.Y. 1997-98." (1.3) At that stage, the petitioner approached this Court challenging the very notice for reopening the assessment. 2. Taki....
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.... & Eastern Newspaper Society v. CIT [1979] 119 ITR 996, wherein the Apex Court held and observed that opinion of internal audit party on a point of law would not amount to information enabling the Assessing Officer to form a belief that income chargeable to tax had escaped assessment. (5.2) In the case of Sassoon J. David & Co. (P.) Ltd. v. CIT [1979] 118 ITR 261, wherein the Apex Court upheld the assessee's contention that the compensation paid by the assessee-Company to its directors and employees for termination of their services could be stated to have been expended wholly and exclusively for the purpose of the business. The fact that such expenditure was incurred voluntarily and without any necessity would be of no consequence. (5.3) In the case of Asstt. CIT v. Dhariya Construction Co. [2010] 328 ITR 515 wherein the Apex Court observed that the opinion of DVO per se is not an information for the purpose of reopening assessment under section 147 of the Act. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. (5.4) Our attention was drawn to the decision of the Calcutta High Court in the case of Bhartia Indu....
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.... record, or the facts disclosed thereby or from other enquiry or research into facts or law. 8. Having thus heard learned counsel for the parties and having perused the documents on record, we may recall that in the present case notice for reopening has been issued within four years from the end of relevant assessment year. The additional requirement therefore, that income chargeable to tax had escaped assessment due to the failure on the part of the assessee to disclose fully all material facts, before the assessee the Assessing Officer could assume jurisdiction to reopen the assessment, need not be satisfied. However, the question is whether the Assessing Officer could be said to have some tangible material to hold a belief that income chargeable to tax had escaped assessment. In this context, the question may arise whether the present circular of C.B.D.T could be stated to be a tangible material, on the basis of which, the Assessing Officer could form a belief that income chargeable to tax had escaped assessment. 9. Before taking note of the contents of the C.B.D.T circular in question, let us first examine in some detail, the material before the Assessing Officer and his ....
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.... the purpose of carrying on business of manufacture and marketing of textile. It was business consideration and expediency that required reorganisation of existing business in order to survive and make the business profitable in future. From the Director's Report you would note that the company has as a part of its long term business strategy purchased a textile unit, namely Ankur Textile from Arvind Mills Limited. They have restructured the production facilities to upgrade its voile production by improving quality and established a marketing network after acquiring the above unit. This has enabled it to get better quality product and introduce new products. On this account, the relalisation per meter has also gone up. This proves that due to retrenchment the business was never discontinued but on account of changed strategies the Assessee Company has been able to make more profits. We therefore contend that out claim for deduction of payments made on retrenchment under Voluntary Retirement Scheme is revenue deductible as it is wholly incurred as textile manufacture for continuing in the business of textile. Our claim rightly falls under section 28/37 of the Act and is not....
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....such assessment without any new additional material would amount to a mere change of opinion?. In this context, the Revenue's contention that in such a case the Assessing Officer cannot be said to be formed an opinion and that reopening would be permissible, was rejected. In the present case, it is not even the stand of the revenue that in the original assessment, the Assessing Officer had not formed any opinion with respect to this particular contested issue. On record, the revenue itself has produced a statement of fact prepared by the Assessing Officer, although after recording reasons for reopening. In such note prepared by the Assessing Officer himself, he had recorded that during the course of assessment proceedings for the year 1997-98 the Assessing Officer had called for details of retrenchment compensation and also asked the assessee-Company to justify why such expenses should not be disallowed. It was further recorded that after considering the submissions of the Company, the Assessing Officer accepted the company's stand and did not disallow the expenditure incurred on Voluntary Retirement Scheme. It is foregone conclusion that in the original assessment, the Assessing O....
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....laid out. Towards this purpose, the test of enduring benefit is a useful tool in considering the ex-gratia amount, prima-facie, as a capital expenditure. In this view of the matter, the expenditure, as said above, is to be treated as capital expenditure." 14. If we peruse the circular minutely, it only refers to general principles when a expenditure can be stated to be a revenue in nature and lays down general guidelines for the Assessing Officer to follow while examining the claims of the assessees for deduction as revenue expenditure amount expended as ex-gratia payment for retrenchment of employees under Voluntary Retirement Scheme. In fact the circular itself highlights that it is not ordinarily easy to evolve the full-proof test for ascertaining whether in a given case expenditure is capital or revenue. The circular further highlights that for the purpose of taking such a decision, the test of enduring benefit is a useful tool in considering the ex-gratia amount which would, prima-facie, be a capital expenditure. 15. We do not find that the C.B.D.T circular lays any firm guidelines for considering the expenditure in question as either revenue or capital in nature. It onl....