TaxTMI 
TaxTMI 
2015 (7) TMI 680
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.... been reopened vide notice under section 148 of the Income Tax Act, 1961 (the Act), which was issued and served on the assessee on 31/3/2010. Copy of reasons is filed at page 27 of the paper book, which read as under: "On perusal of assessee's letter dated 07.07.2003 to MSTC Ltd., in the last para the assessee has stated that "As mentioned in our letter dated, July'2003 we are trying to dispose of the silicon metal to another buyer. However, as assured by the MSTC Ltd., the amount of Rs. 11,00,000/- paid by us towards the above mentioned amount of Rs. 25,00,000/- may be returned to us as soon as the payment is received from M/s. Reliance Silicons (I) Pvt. Ltd."" In view of the above, the assessee did receive a part consignment of silicon metal which they tried to dispose of to another buyer. In this connection, the assessee gets business clients for big companies like Haldia, Petrochemicals, Usha Ispat and MSTC etc. and in process earns income being consultancy /broker charges as evidenced from TDS certificates. Further, the Audit also pointed out that the assessee's role is only that of introducing / initiating the 2 clients for the particular transaction. In the light of abo....
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....t with ledger copy of bank loan interest. j. Travelling expenses with details of person who has travelled, dates to and fro, designation, place, purpose, amounts k. Compensation charges Rs. 11,00,000/- with detailed note and copies of agreements. (Emphasis provided) l. Small balance w/off Rs. 36,352/-. m. Month wise Misc expenses with a note on these expenses n. Proof of payment of all provision of expenses." 3.1 It was further submitted that in reply to the aforementioned query raised by the AO, the assessee had submitted a letter to AO dated 3/5/2007, copy of which is filed at pages 32 to 45 of the paper book and the reply of the assessee as well as evidences filed to explain the impugned expenses has been stated in Sl.No.7 of the Index of the paper book and the same read as under: 7 Copy of Authorized Representative's letter dt.22.10.2010 filed with ACIT-25(3), Mumbai alongwith following enclosures: 28-31 i) Copy of Authorized Representative's letter dt.3.05.2007 filed during regular assessment before ACIT - 25(3) alongwith following enclosures: - Note on compensation Charges Paid of Rs. 11,00,000/- - Ledger Account of compensation Charges....
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....ng a public sector company could not refund the money received as advance whereas Bhairav Metal a private Ltd. company was insisting for immediate refund. As explained earlier the assessee has been mainly earning his consultancy fees from business generated through them; hence the assessee has no option but to pay additional amount as compensation to save the situation and not to affect adversely his business. A few letters relating- to the compensation paid by the assessee are enclosed herewith for your ready reference. On plain reading of these letters it is abundantly clear that assessee had to pay Rs. 11 lacs as compensation to Bhairav as MSTC did not pay the refund amount. 'While on the subject, we submit that MSTC has not paid any amount towards this deal till date and because of the business relation of the assessee with MSTC he can not take any other measure to recover the dues. Under these circumstances, H is submitted that compensation of Rs. 11 lacs paid to Bhairav by the assessee represents a business expenditure incurred ;n the I course of carrying oil the business and hence same shall be allowed as deductible expenditure. It is respectfully submitted that th....
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....rary, learned Counsel appearing for the Revenue submits that there has been no formation of opinion on allocation of expenditure amongst the three manufacturing units by the Assessing Officer as the Assessment Order dated 9th March, 2005 passed under Section 143(3) of the Act contains no discussion on the same. According to the Revenue, it could only be when the assessment order contains discussion with regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v Is. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to to the deduction/ claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter dated 6th August, 2007 addressed by the Assessing Officer to the Petitioner containing the reasons recorded for issuing the impugned notice also ....
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....Act. It must follow that there is due application of mind by the Assessing Officer to the issue raised. (emphasis provided) 15. Therefore, as there is a change of opinion in issuing the impugned notice having regard to the opinion formed while passing the assessment order under Section 143(3) of the Act, the Assessing Officer would cease to have any reason to believe as held by the Supreme Court in Kelvinator of India Ltd. (supra). Moreover, the power to re-assess under Section 147/148 of the Act is not a power to review an order of assessment passed under Section 143(3) of the Act." 4. On the other hand, Ld. DR relied upon the order passed by AO and Ld. CIT(A). 5. We have heard both the parties and their contentions have carefully been considered. The aforementioned evidence clearly demonstrate that the issue regarding debit of Rs. 11.00 lacs to the P&L Account was duly enquired into by the AO vide notice issued to explain several expenses debited to P&L Account. The detailed reply was submitted by the assessee to the AO alongwith documentary evidences to explain that the claim of the assessee regarding Rs. 11.00 lacs was legitimate claim. After considering those evidences the....