2010 (8) TMI 1045

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....to be invalid. According to the Revenue, production of account books or other evidence from which material evidence could, with due diligence, could have been discovered by Assessing Officer would not amount to disclosure. Revenue is also relying on the decision of the Hon'ble Delhi High Court in the case of Consolidated Photo and Finvest Ltd Vs. ACIT 281 ITR 394. 3. Short facts apropos are that the assessee had filed original return for the impugned assessment year declaring income of Rs. 35,64,40,434/- which was later revised through a revised return to Rs. 35,64,17,704/-. Assessment was completed u/s 143(3) of the Act on 25.3.2004. Thereafter, notice was issued on 28.3.2008 u/s 148 of the Act for reopening the assessment and the r....

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....n 31.3.2001 specifically mentioned R & D expenditure of Rs. 4,02,65,172/- as Revenue in nature and Rs. 8,33,520/- as capital in nature. Further, according to the assessee, Assessing Officer had, during original assessment proceedings, vide his letter dated 9.2.2004 required various clarification from assessee in relation to the assessment, which, inter alia, included details in respect of product development expenses being part of its R & D claim. Specific reason was also sought by the Assessing Officer, why such claim should be allowed as Revenue expenditure. According to the assessee, detailed reply was given by it to Assessing Officer on 17.2.2004 and break up also given for total expenditure of Rs. 4,02,65,172/-. This break up included ....

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....w before us, the ld. D.R. strongly supported the order of the Assessing Officer. 6. Per contra, the ld. A.R. submitted that the ld. CIT(A) had rightly relied on the decision of the Hon'ble Apex Court in the case of Kelvinator of India Ltd [supra] and held the reassessment proceedings to be invalid. 7. We have heard the rival submissions and perused the orders. During the course of original assessment proceedings, Assessing Officer had written a letter on 9.2.2004 to the assessee requiring various details. Item 3 of the said letter ran as under: "Details with respect to product development expenses and a detailed NOTE with regard to the claim of this expenditure as Revenue". Assessee, in reply to this letter, vide lette....

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.... activities, we now have products meeting Bharat stage II(Euro IT) emission norms for vehicular engines. In the same way, our" tractor engines meet the current Indian regulation Term II. For export of tractors, we have emissionised product meeting US tier II norms. In the genset segment, we have products which meet current CPCB norms. The engines offered for industrial application meets the norms applicable for this segment. These activities are carried out in a separate setup in our company. We are equipped with necessary testing and design facilities for carrying out this activity. For design, we have Pro E software to create 3D models of our engines and components. 20 drawings are made for manufacturing. In testing, we have faci....

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.... reopening proceedings were initiated after four years from the end of the relevant Assessment Year and therefore, proviso to section 147 clearly applied. We are of the opinion that there was no failure on the part of the assessee to furnish all particulars for its assessment at the time of original assessment and the reassessment proceedings were initiated without any rhyme or reason. Ld. CIT(A) had, therefore, rightly held such reassessment proceedings to be invalid. We decline to interfere with the order of the ld. CIT(A). 8. In the result, appeal of the Revenue stands dismissed. 9. Now we take up the appeal for Assessment Year 2006-07. Sole grievance of the Revenue is regarding a provision for warrantee of Rs. 10,06,000/- added by....

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....cision in the case of Rotor Control Ltd [supra] of the Hon'ble Jurisdictional High Court was reversed by the Hon'ble Apex Court in 314 ITR 62, held that provision for warrantee was allowable. 11. Now before us, the ld. D.R. assailing the order of the ld. CIT(A) submits that in the case of Rotor Control Ltd [supra] provisions were made in the earlier years also, whereas here in assessee's case this was the first year in which provision was made. 12. Per contra, the ld. A.R. supported the order of the ld. CIT(A). 13. We have heard the rival submissions and perused the orders. Without doubt, assessee had made the provision based on the figures of actual claim of warrantee for previous year relevant to Assessment Years 2004-05 ....