Whether the AO has power to issue a notice u/s 148 for reopening of assessment u/s 147 on the basis of reason to believe that income has escaped from assessment at the time of original assessment due to a wrong claim of capital expenditure as revenue expenditure?
The assessee had filed and furnished all details and particulars relating to the royalty payment including agreements, calculation and the approval before the Ld. AO during assessment proceedings. There was no failure on the part of the assessee to furnish true and correct all material facts. The facts were available before and were within the knowledge of the AO. The new AO as per the reasons recorded on the basis of the same facts, has observed that royalty payment should have been disallowed as it was capital in nature. This is a question of legal inference or interpretation which has been drawn from the same material facts on record. Therefore, the case falls in the category of change of opinion as at the time of original preceding the AO examined and gone into the question of royalty. Even if there was any legal error or illegality the same cannot be rectified and be made the subject matter of reassessment proceedings u/s 147/148 of the Act. The re-assessment order is also quashed.
HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 14th May, 2012.
W.P.(C) 4753/2011
Munjal Showa Ltd.
Versus
Deputy Commissioner of Income Tax
ORDER
