IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 2088/Del/2014 A.Y. : 2005-06 DCIT, CIRCLE 12(1), M/S GLOBAL ONE INDIA PVT. LTD., New Delhi VS. 7TH FLOOR, TOWER-C, DLF INFINITY TOWER, PHASE-II, SECTOR 25-A, GURGAON (AABCG2558B) (APPELLANT) (RESPONDENT) Department by : Sh. Amrit Lal, Sr. DR Assessee by : Ms. Geetika Gupta & Sh. Ravi Sharma, CAs Date of Hearing : 15-09-2016 Date of Order : 03-10-2016 ORDER PER H.S. SIDHU : JM Revenue has filed present appeal against impugned order dated 20/12/2013 passed by Ld. Commissioner of Income Tax (Appeals)-XV, New Delhi on following grounds:- ITA NO. 2088/DEL/2014 1. Whether Ld. CIT(A) was correct on facts and circumstances of case and in law in deleting addition of Rs. 1,00,10,209/- made by AO on account of disallowance of Network and other Equipment cost? 2. Whether Ld. CIT(A) was correct on facts and circumstances of case and in law in quashing proceedings initiated u/s. 148 of Act in this case? 3. appellant craves leave, to add, alter or amend any ground of appeal raised above at time of hearing. 2. facts in brief are that assessee filed return of income on 27.10.2005 declaring loss of Rs. 36,03,300/-. Later on, revised computation was filed on 10.10.2008 showing loss of Rs. 7,23,56,799/-, which was on ground that assessee could not finalise accounts as on date of filing original return. case was picked up for scrutiny under section 143(3) and order under section 143(3) was passed on 30.12.2008, in which as against loss of Rs. 7,23,56,799/- total income was assessed at Rs. 7,86,86,783/-. main ground of disallowance in original assessment order was disallowance of Circuit Expenses of Rs. 14,18,24,935/-. additions made were deleted by earlier Ld. CIT(A) vide his order dated 2.6.2010 which was also upheld by 2 ITA NO. 2088/DEL/2014 ITAT. Thereafter, AO issued notice u/s. 148 on 20.3.2012 and assessment was reopened by recording following reasons. In this case assessment under section 143(3) for assessment year 2005-06 was completed determining income of Rs. 78,68,673/- as against written (should be returned) loss of Rs. 36,03,300/-. On examination of file and documents placed on record it is seen that assessee has debited sum of Rs. 100,10,209/- for Network Other Equipment costs in provisional income and expenditure account. Since said expenditure is capital in nature, it is not allowable as revenue under provisions of section 37 of Income Tax Act. Therefore, I have reason to believe that income of Rs. 1,00,10,209/- had escaped assessment under meaning of section 147. Notice under section 148 is required to be issued in this case. 2.1 In response to aforesaid notice, assessee vide letter dated 15.5.2012 has submitted his reply, which was not accepted by AO and accordingly, AO treated addition of 3 ITA NO. 2088/DEL/2014 Rs. 1,00,10,209/- vide his order dated 29.8.2012 passed u/s. 143(3)/147 of I.T. Act, 1961. 3. Aggrieved with aforesaid order, assessee preferred appeal before Ld. CIT(A), who vide his impugned order dated 20.12.2013 has deleted addition and quashed reassessment thereby allowing appeal of Assessee. 4. Now Revenue is aggrieved against impugned order and filed present appeal before Tribunal. 5. At time of hearing Ld. DR relied upon order of AO and reiterated contentions raised by Revenue in grounds and requested that Appeal of Revenue may be allowed. 6. On contrary, Ld. Counsel of Assessee has relied upon order of Ld. CIT(A) and stated that Ld. CIT(A) has passed well reasoned order which does not need any interference on our part, hence, same may be upheld and accordingly, appeal of Revenue may be dismissed. 7. We have heard both parties and perused records, especially impugned order passed by Ld. CIT(A). We find that Ld. First Appellate Authority has elaborately discussed issue in dispute by considering submissions of assessee and 4 ITA NO. 2088/DEL/2014 adjudicated issue vide para no. 5.2 to 5.3 at pages 10 to 11 of impugned order. said relevant paras are reproduced as under:- 5.2 I find that while recording reasons for initiating proceedings under Section 147, AO has taken amount of returned income at Rs. 78,68,673/- and amount of assessed loss at Rs. 36,03,300/-. Both these figures are factually incorrect, as Ld. AO in original assessment under section 143(3) had assessed income at Rs. 7,86,86,783/-. Further, appellant had, during course of original assessment proceedings, revised computation of income as original computation was based on provisional financial account and accordingly, claimed loss of Rs." 7,23,56,799. Ld. AO in original assessment proceedings took, cognizance of financial accounts and made addition of Rs.15,1O,43,582 of the aforesaid revised computation of income in which loss of Rs.7,23,56,799 was claimed and based on this, income under Section 143(3), was assessed at Rs.7,86,86,783. I also find that main observation of AO that appellant had claimed 'Network and 5 ITA NO. 2088/DEL/2014 Other Equipments Cost' as 'Circuit Expenses, which were clubbed under the, head revenue expenses, is also factually incorrect. Such mistakes possibly occurred as AO did not bother to go through revised computation of income, which was placed before AO in original assessment proceedings and which was accepted by him while passing order under Section 143(3), In view of above, it is evident that main grounds on which reassessment proceedings were initiated were factually incorrect observation of Ld. AO. Moreover, assessment was reopened after four years and in which already order under Section 143(3) was passed, therefore, reopening of assessment could have been justified only where it was proved that appellant had failed to make full and true disclosure' of material facts. Further, I find that Ld. AO himself has, while recording reasons mentioned that observation that appellant had claimed 'Network and Other Equipment Cost' as revenue expenses, was based on examination of 'file and documents placed on record'. Since there was no independent source of such information and AO only 6 ITA NO. 2088/DEL/2014 re-examined file and documents, which was already subject matter of scrutiny under Section 143(3), it is evident that action of AO was clearly in nature change of opinion', on which reassessment cannot be sustained as was held by Hon'ble High Court in. case of (IT Vs. Usha International ltd. (ITA. No.2026/2010) (20l2). Moreover, AO has alleged that such 'Network and Other Equipment Cost' was booked under head 'Circuit Expenses'. Further, in original assessment proceedings under Section 143(3), disallowance was primarily made in respect of such 'Circuit Expenses' only. After assessment under Section 143(3), matter travelled upto ITAT, which gave relief to appellant. CIT(A) had also deleted addition made by AO, which was under section 40(a)(ia). CIT(A) has all powers of income tax authority and even while allowing original disallowance under section 40(a)(ia), CIT(A) was fully empowered to determine such expenses as capital in nature and would have disallowed it accordingly. However, no such finding was given by CIT(A). Moreover, finding of 7 ITA NO. 2088/DEL/2014 AO while recording reasons, was based on factually incorrect facts. 5.3 Keeping in view above, re-assessment order passed by AO is bad in law, without jurisdiction, and is required to be quashed. On merit of case as well, no, addition is called for. 7.1 After going through findings of Ld. CIT(A), as aforesaid, we are of considered view that AO while recording reasons for initiating proceedings under Section 147, has taken amount of returned income at Rs. 78,68,673/- and amount of assessed loss at Rs. 36,03,300/-. Both these figures are factually incorrect, as AO in original assessment under section 143(3) had assessed income at Rs. 7,86,86,783/-. Further, assessee had, during course of original assessment proceedings, revised computation of income as original computation was based on provisional financial account and accordingly, claimed loss of Rs.7,23,56,799. AO in original assessment proceedings took, cognizance of financial accounts and made addition of Rs.15,10,43,582 of aforesaid revised computation of income in which loss of Rs.7,23,56,799 was claimed and based on this, income under Section 143(3), was assessed at 8 ITA NO. 2088/DEL/2014 Rs.7,86,86,783. We also find that main observation of AO that assessee had claimed 'Network and Other Equipments Cost' as 'Circuit Expenses, which were clubbed under the, head revenue expenses, is also factually incorrect. Such mistakes possibly occurred as AO did not bother to go through revised computation of income, which was placed before AO in original assessment proceedings and which was accepted by him while passing order under Section 143(3). In view of above, it is evident that main grounds on which reassessment proceedings were initiated were factually incorrect observation of AO. Moreover, assessment was reopened after four years and in which already order under Section 143(3) was passed, therefore, reopening of assessment could have been justified only where it was proved that assessee had failed to make full and true disclosure' of material facts. Further, I find that AO himself has, while recording reasons mentioned that observation that assessee had claimed 'Network and Other Equipment Cost' as revenue expenses, was based on examination of file and documents placed on record. Since there was no independent source of such information and AO only re- examined file and documents, which was already subject matter of scrutiny under Section 143(3), it is evident that action of 9 ITA NO. 2088/DEL/2014 AO was clearly in nature change of opinion', on which reassessment cannot be sustained as was held by Hon'ble High Court in case of (ITO Vs. Usha International ltd. (ITA. No.2026/2010) (20l2). Moreover, AO has alleged that such 'Network and Other Equipment Cost' was booked under head 'Circuit Expenses'. Further, in original assessment proceedings under Section 143(3), disallowance was primarily made in respect of such 'Circuit Expenses' only. After assessment under Section 143(3), matter travelled upto ITAT, which gave relief to assessee. CIT(A) had also deleted addition made by AO, which was under section 40(a)(ia). CIT(A) has all powers of Income Tax Authority and even while allowing original disallowance under section 40(a)(ia), CIT(A) was fully empowered to determine such expenses as capital in nature and would have disallowed it accordingly. However, no such finding was given by CIT(A). Moreover, finding of AO while recording reasons, was based on factually incorrect facts. In view of above, Ld. CIT(A) has rightly held that re-assessment order passed by AO is bad in law, without jurisdiction, and is required to be quashed. On merit of case as well, no, addition is called for. 7.2 In background of above facts and circumstances of case, we are of considered view that Ld. CIT(A) has passed 10 ITA NO. 2088/DEL/2014 well reasoned order which does not need any interference on our part, hence, we uphold same and reject grounds raised by Revenue. 8. In result, appeal of Revenue is dismissed. Order pronounced in Open Court on 03/10/2016. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER Date 03/10/2016 SRBHATNAGAR Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches 11 DCIT, Circle 12(1), New Delhi v. M/s Global One India Pvt. Ltd