TaxTMI 
TaxTMI 
2016 (2) TMI 801
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....nal disposal having regard to the facts and circumstances of the case. 3. The facts are as follows:- It is stated that the petitioner manages consumer loyalty programs for its partner organizations, whereby the customers of its partners become entitled to loyalty points on purchase of certain goods or services, which can be redeemed towards future purchases. The loyalty program is managed by the petitioner at an agreed price with its partners. For the assessment year 2008-09, the gross amount received from the partners towards the redemption of the loyalty points was accounted upfront as income and was offered to tax and the cost of redemption of points was claimed as a deduction in computing the said income. Insofar as the unredee....
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.... assessment year, by a notice dated 11.03.2014, the first respondent is said to have initiated re-assessment proceedings under Section 147 of the Income-tax Act,1961, on the ground that the provision towards unredeemed loyalty points ought not to have been allowed as a deduction, by virtue of which, there was income which had escaped assessment. In terms of the First proviso to Section 147 of the IT Act, where an assessment under Section 143(3) of the IT Act is completed, reassessment proceedings, according to the petitioner, cannot be initiated after a period of four years from the end of the relevant assessment year, unless income chargeable to tax has escaped assessment on account of nondisclosure of material facts by an assessee. Alt....
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.... that the assessing officer had not expressed any opinion on the claim of the petitioner and that it was silent as regards the aspect which the petitioner was claiming that the assessing officer had considered the same before finalizing the assessment. Since it is claimed that as per the Accounting Standards applicable to companies, the petitioner is entitled to make provision for accrued liability and assessment order should have considered this aspect while determining the income or loss in accordance with the mercantile system of accounting. This would indicate that all necessary material for determining the allowance or disallowance of expenditure on account of such provision being made was not before the assessing officer at the time o....
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....essment order. And as regards the audit objection there is material on record, whereby the assessing officer has replied to the audit objection as per letter dated 20.10.2011 explaining the business model of the petitioner and how the revenue recognition and cost booking by the company are done. The assessing officer has also narrated the essential features of accrual basis of accounting during the assessment proceedings and has concluded that the provision for the expenses for the unredeemed points was made since the liability thereof was certain, only its quantification was based on calculation based on past experience of such nature of transactions. And the liability or provisions for the unredeemed points was reversed as and when the li....