TaxTMI 
TaxTMI 
2009 (3) TMI 28
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....eturn of income in respect of AY 2002-03 on 31/10/2002, declaring loss of Rs.72,57,26,992/-. 5. In the said return of income, the petitioner had claimed deduction of the entire "project launch expenses" incurred during the previous year as revenue expenditure even though in its books of accounts, the petitioner had shown the expenditure spread over a period of 3 years. Similarly, the petitioner had treated tools, dies, jigs and moulds as inventory items and claimed deduction on the basis of their balance useful life on the last day of the previous year. 6. On scrutiny of the return of income, the assessing officer issued notice under section 143(2) of the Act calling upon the petitioner to furnish particulars, inter alia relating to the above two claims and after considering the reply filed by the petitioner, passed an assessment order under section 143(3) of the Act on 27/1/2005 allowing both the aforesaid claims of the petitioner. 7. On 2/12/2005 the assessing officer issued a notice under section 154 of the Act with a view to rectify the assessment order on the ground that excess relief was granted to the petitioner in respect of the above two claims. By its reply dated....
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...., as per the practice followed by the assessee in its books of account the same should have been treated as deferred revenue expenditure. The accounting practice followed by the assessee company is correct because the expenditure incurred on product launch is of enduring nature and its benefits will not occur immediately in the year of expenditure. In view of the above, I have reason to believe that income chargeable to tax for A.Y. 2002-03 has escaped assessment for failure on the part of the assessing company to disclose fully and truly all the material facts requiring for assessment for A.Y. 2002-03. 9. The petitioner objected to the reopening of the reassessment. However, by his order dated 15/9/2008, the assessing officer rejected the objections raised by the petitioner. Therefore, the present petition is filed to challenge the notice dated 30/3/2007 issued under section 148 of the Act and the order dated 15/9/2008 whereby the objections raised by the petitioner against the reopening of the assessment have been rejected. 10. Section 147 of the Act empowers the assessing officer to reopen the assessment in respect of any assessment year, if he has reason to belie....
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....t launch expenses ought to have been considered as deferred revenue expenditure over a period of 3 years as amortized in the books of account maintained by the petitioner and allow deduction proportionately instead of allowing the entire project launch expenses. 14. It is pertinent to note that even in the past the petitioner has been incurring expenditure on acquisition of tools, dies, jigs and moulds and has been incurring from time to time expenditure to promote sales of the products manufactured by the petitioner. Even in the past, the same method of accounting was followed in respect of the above items as followed in AY 2002-03. In all the earlier assessment years and also in AY 2002-03, deduction on the above two claims has been allowed in the assessment orders passed under Section 143(3) of the Act, after considering the accounting system adopted by the petitioner in its books of account. Thus, the deduction on the two items in question have been consistently allowed in the past after due scrutiny of the books of account maintained by the petitioner. 15. The question, therefore, to be considered in the present case is whether, on the basis of the material on record, th....
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....vertisement expenses are spread over for a period of three years in the books of account. It was explained that by advertising, no tangible asset is acquired by the petitioner which could be considered to be of enduring nature. Moreover, there is no concept of deferred revenue expenditure in computing the income liable to tax. Therefore, irrespective of the fact that the petitioner in its books of accounts had spread over the product launch expenses over a period of three years, the assessing officer was bound to allow the entire cost of the product launch expenses in the assessment year in question. 18. After considering the aforesaid explanation the assessing officer arrived at a conclusion that the petitioner is entitled to the deduction as claimed and accordingly allowed the deduction in the assessment order passed under section 143(3) of the Act. Thus, in the present case, specific query was raised by the assessing officer as to why the two claims in question should not be disallowed on the basis of the accounting system adopted by the petitioner. Detailed explanation given by the petitioner to the assessing officer are all to be found at pages 148 to 173 of the affidavit i....
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....cord on the basis of which a prima facie opinion could be formed by the assessing officer that any income chargeable to tax has escaped assessment and not the material on record on the basis of which a final decision has already been taken at the time of assessment under section 143(3) of the Act. 23. Where the material on record has already been considered and adjudicated upon, it would not be open to the assessing officer to disagree with the view already taken on the material on record. In such a case, reopening of the assessment based on the materials already considered and adjudicated, would amount to reviewing the assessment order by reappreciating the material on record which is not contemplated under section 147 of the Act. It is not the case of the revenue that the reopening of the assessment is covered under Explanation 2(c) to section 147 of the Act based on any material other than the material considered by the assessing officer at the time of assessment under section 143(3) of the Act. Therefore, in the facts of the present case, where, the materials on record have already been considered and conclusively decided in the regular assessment, we are clearly of th....