TaxTMI 
TaxTMI 
2020 (8) TMI 764
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.... reassessment order made under Section 143(3) r/w S. 147 of the Income Tax Act, on the ground that reassessment initiated after four years and no fresh material on record for such reassessment proceedings? 2. Whether the ITAT is correct in law in quashing the reassessment order without considering Explanation 1 and Explanation 29(c) to Section 147 of the Income Tax Act? 3. Whether the Appellate Tribunal was right in law in deleting the reassessment when the assessee has amortized a portion of the product development expenditure and the balance amount was claimed as deferred revenue expenditure, but the same was not debited in the profit & loss account which is against law?" 4. The appellant has filed the present appeal, aggrieved by the order of the Income Tax Appellate Tribunal (ITAT) dated 31.1.2017 made in ITA No.3176/Mds/2016. 5. Learned counsel for the appellant/department submitted that the appellant/department issued a notice under Section 148 of the Income Tax Act, 1961, (in short "the Act") on 11.06.2013 for re-assessment under Section 147 of the Act. The counsel referred to Explanation 2(c)(iii) of the Act which reads as follows:- "If the ....
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.... "Secondly, as per sub-clause (i) of clause (c) of Explanation 2 under Section 147 excessive under assessment of income chargeable to tax can be construed as escapement of income. In view of the above, the re-opening of assessment is as valid and holds well in the eyes of law. 5. Further, it is seen that a sum of Rs. 3,99,27,000/- has been claimed as deferred revenue expenditure in the computation of income statement. However, in the profit and loss account the assessee has amortized a sum of Rs. 1,33,49,000/- of product development expenditure and claimed as expenditure. The balance amount of Rs. 2,65,78,000/- has been claimed as deferred revenue expenditure. Any expense not debited to the profit and loss account is not allowable while computing the total income of the assessee. Hence, this expenditure of Rs. 2,65,78,000/- is disallowed and added back to the total income." 7. The counsel further submitted that against the said re-assessment order, the assessee preferred the appeal before the Commissioner of Income Tax (Appeals) - I, Coimbatore. The Commissioner of Income Tax (Appeals) - I, without appreciating all these facts narrated in the reassessment order passed ....
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....ce, issue of notice u/s 148 after four years from the end of the Asst. Year 2007-08 is without jurisdiction and invalid. When the reopening is invalid, the additions made does not stand the test of scrutiny and therefore stands deleted in the hands of the appellant". 8. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the appellant/department preferred an appeal before the Income Tax Appellate Tribunal (ITAT), Chennai. However, the Tribunal also refused to accept the contention of the appellant/department and dismissed the appeal and held as follows:- "5. We have carefully gone through the provisions of Section 147 of the Act. When the Assessing Officer has completed assessment under Section 143(3) of the Act, the completed assessment cannot be reopened under Section 147 of the Act unless there was negligence on the part of the assessee, after expiry of a period of four years from the end of the relevant assessment year. In this case, the four years period from the end of the relevant assessment year expired on 31.03.2012. However, the Assessing Officer issued notice under Section 148 of the Act only on 11.06.2013. Therefore, obviously, the assessment....
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....ndent submitted that the assessee had spent a sum of Rs. 3.39 crore, during the relevant assessment year 2007-08 towards the product development expenses. There is no dispute on either side with regard to the revenue nature of the expenditure. While so, the assessee is entitled to deduct the whole amount while making calculation for the purpose of payment of Income Tax. In the present case, the assessee has debited a sum of Rs. 1.33 crore in the profit and loss account for the year ending 31.03.2007 towards the amortization of 1/3rd amount of product development expenses, relating to the previous financial year ending 31.03.2006 relevant to the assessment year 2006-07. Therefore, both the Commissioner of Income Tax (Appeals) - I, Coimbatore, as well as the Income Tax Appellate Tribunal have appreciated these facts and held that the entire amount of Rs. 3.39 crores spent by the assessee towards product development expenses during the current year is revenue expenditure and that the assessee is entitled for deduction of the entire amount. 11. Further, the counsel for the assessee submitted that apart from the merits of the case, the present appeal is also barred by limitation sinc....
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....by the appellant/department for the following reasons.- (a) Both the department as well as the assessee had accepted the sum of Rs. 3.39 crore spent towards the product development expenditure as revenue expenditure, relevant to the assessment year 2007 - 08. (b) Further, we noticed that a sum of Rs. 4 crores was spent by the assessee towards the product development expenditure during the assessment year 2006-07. The assessee has amortized the 1/3rd of the product development expenditure of the previous year, namely a sum of Rs. 1.33 crore and debited in the profit and loss account during the assessment year 2007-08. But, the assessee has deducted the entire amount of Rs. 4 crores towards the product development expenditure of the previous year relevant to the assessment year 2006-07, while determining the income for the purpose of computing the income tax. Therefore, the assessee is entitled for deduction and the department cannot have any objection for the same. Therefore, in the previous year relevant to the assessment year 2007 - 08, though a sum of Rs. 1.33 crore was debited towards product development expenditure in the profit and loss account, the said amou....
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....the revenue authorities are well versed with the accounts, these types of problems would be arising at all times. 15. All the submissions made by the department are relating to the facts which both the Commissioner of Income Tax (Appeals) - I, and the Income Tax Appellate Tribunal have elaborately discussed and the Tribunal has also given its findings as stated supra. 16. In our considered opinion, the product development expenditure incurred to the extent of Rs. 3.39 crore by the assessee, is entitled to be amortized over the period of three years as per the accounting practice adopted by the Company and the assessee has rightly amortized the same. 17. Further, we are of the clear view that the re-assessment provisions under Section 147 of the Act do not provide for reassessment on a mere change of opinion. The re-assessment on a mere of change of opinion is not permissible under law. Such change of opinion amounts to review of the order of the assessment, which is not permissible under law. In support of our opinion, we would like to press into service the Judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Delhi Vs. Kelvinator of India L....