AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (10) TMI 1145
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....l return of income on 30.11.98 which was revised on 29.03.2000. Regular assessment was completed on 30.3.2001. The AO thereafter had reason to believe that some income had escaped assessment and recorded the following reasons for reopening the assessment: "In the profit and loss account the Assesse has claimed software expenditure of Rs. 129.70 lakhs as revenue expenses. By treating the software expenses of Rs. 129.70 lakh in this year the income had been under assessed by Rs. 129.70 lakhs. Therefore, I have reason to believe that income to the tune of Rs. 129.70 lakhs had been under assessed. This has now been confirmed by the order of Hon'ble ITAT vide their order in appeal no. ITA No. 1240/Del/2003 dated 11th October, 2004 page ....
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....ssessment falls in the realm of a situation where AO is satisfied that assessee has failed to disclose primary and material facts truly. Hon'ble Delhi High Court addressed this issue which we have respectfully to follow as AO has failed in objective term to make out a case that assessee in objectivity failed to disclose any material facts or particulars truly. The re-assessment seems to be inspired by subsequent ITAT judgment in assessee's own case which held that the software expenses were capital in nature. On this point, we have been impressed by the arguments of Ld. Counsel that software expenses cannot be of static nature as they vary from year to year and use to use. From the details failed, we find that the assessee had given reasona....
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....icer 146 CTR 268. 5. Counsel further contended that initiation of reassessment proceeding based on the decision of a High Court (and for that matter even the Tribunal) is valid. He took support from ITO v. Saradbhai M. Lakhani 243 ITR 1 (SC), R.B. Bansilal Abirchand Firm v. Commissioner of Income Tax, Madhya Pradesh 70 ITR 74 (SC), Associated Stone Industries (Kotah) Ltd. v. Commissioner of Income Tax, Jaipur 224 ITR 560. 6. Counsel for the assessee, on the other hand, defended the Tribunal's decision. It was argued that notice for reassessment was served after lapse of four years, and, therefore, the additional requirements stipulated in the First Proviso to Section 147 had to be met with; and that such requirements were not met. His....
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....in the assessee's own case for a different assessment year, has merely made a bald statement that the assessee had failed "to disclose truly and fully all legal facts". It is borne out from the record that the assessee had provided in its P&L A/c software expenses as revenue in nature. The AO in the original assessment had, without any discussion in the assessment order, allowed these software expenses as revenue expenditure, and this was sought to be disturbed in the reassessment proceedings after expiry of four years. This is a clear case where the primary facts were available before the AO, and therefore, the assessee cannot be held to have failed to disclose "fully and truly all material facts". In our opinion, it was for the AO to draw....
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....) and several other cases and has become a settled principle. In the circumstances, Explanation 1 to Section 147 also cannot come to the rescue of the revenue. Therefore, by virtue of the applicability of the proviso, the additional condition which was required to be met has remained unsatisfied. The reassessment proceeding is vitiated on this ground alone. The decisions in Bawa Abhai Singh (supra) and Venketesan (supra) do not deal with the First proviso to Section 147, and that in Praful (supra) even though makes observations in this regard, it does not assist the revenue's case. 9. Furthermore, the assessee also placed reliance on Saradbhai (supra) and other cases. In that regard, another question that arises is whether under the exis....
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....rn under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in- his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 14....