TaxTMI 
TaxTMI 
2015 (10) TMI 952
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.... 3. Having heard learned counsel for the parties, the following question of law is framed: "Whether the ITAT erred in law in upholding the reopening of the assessment by the Assessing Officer under Section 147 of the Income Tax Act, 1961 in the facts of the case?" 4. The Assessee filed its return of income for the Assessment Year ("AY") 2002-03 on 31st October 2002 declaring income at Rs. 67,91,500. The Assessee"s case was selected for scrutiny under Section 143(1) of the Act on 24th June 2003. An order was passed on 31st January 2005 under Section 143(3), assessing the income at Rs. 71,46,170. One of the items of expenditure was a sum of Rs. 20,71,489 under the head "Royalty & Cess". 5. On 5th September 2005, the Assistant....
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....ection 37 of the IT Act, 1961, provides that any expenditure not being expenditure of capital nature laid out wholly or exclusively for the purpose of business is allowable as deduction in computation of the income chargeable under the head 'profit and gain of business and profession'. The Hon'ble Supreme Court had held (232 ITR 359 - Southern Switchgears Ltd. vs. CIT dated 11.12.1997) that grant of technical aid fees for setting up factory and right to sell the products as per collaboration agreement is not allowable as revenue expenditure and was to be treated as capital expenditure. The perusal of asstt. records for the AY 02-03 reveals that the assessee has debited an amount of Rs. 2071489/- under the head 'roya....
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....ient material to justify reopening of the assessment. 11. It requires to be noticed that in ALA Firm (supra) the relevant AY was 1961-62. An item of expenditure in respect of "house property" was allowed as deduction on the ground that it was not assessable either as revenue or capital expenditure. When for the subsequent AY 1962-63 the Assessee filed its return showing nil income, the Income Tax Officer issued notice on 3rd September 1963 stating that the amount ought to have been brought to tax in AY 1961-62 in view of the decision of the Madras High Court in Ramachari & Co. v. CIT (1961) 41 ITR 142. Following the reply given by the Assessee, the ITO issued a notice under Section 148 read with Section 147(b). The Assessee objected to r....
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....eve that the income of the Assessee has escaped assessment. However the proviso to Section 147 (1) as amended kicks in where the reopening is sought to be done after four years after the end of the relevant assessment year for which the original assessment was made. This brings in the requirement of the AO satisfying himself of the existence of either jurisdictional fact. The escapement of income should be occasioned "by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section(1) of section 142 or section 148" or "to disclose fully and truly all material facts necessary for his assessment, for that assessment year." 14. The Supreme Court in CIT v. Kelvinator ....
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....ding & Industrial Co. Ltd.) this Court, in a case where reopening of assessment was sought to be made four years after the expiry of the original assessment, held that "in order to reopen an assessment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty." 16. In the present case, there was no failure on the part of the Assessee to disclose the material particulars with the return originally filed. On the contrary, the AO himself replied to the audit objection pointing out that royalty was allowed to be claimed as revenue expenditure by t....