IN THE INCOME TAX APPELLATE TRIBUNAL
`C' BENCH, CHENNAI
BEFORE Dr. O.K. NARAYANAN, VICE PRESIDENT AND
SHRI V.DURGA RAO, JUDICIAL MEMBER
ITA No.366/Mds/2012
(Assessment Year: 2005-06)
M/s. Chroma Print, The Assistant Commissioner of
C/o.Shri T.N.Seetharaman,Advocate Income Tax, Circle-II
384 (old No.196) Lloyds Road, Vs. Race Course Road,
Chennai-600 086. Coimbatore.
PAN:AAEFC1527C
(Appellant) (Respondent)
Appellant by : Mr. R.Kumar, Advocate
Respondent by : Mr. Vikramaditya, JCIT
Date of Hearing : 22nd May, 2012
Date of Pronouncement : 27th June, 2012
ORDER
PER V.DURGA RAO, JUDICIAL MEMBER:
This appeal by the assessee is directed against
the order of CIT(A)-I, Coimbatore dated 13.12.2011
relevant to the assessment year 2005-06.
2. The facts in brief are that the assessee had filed its
return of income for the year under consideration
declaring total income of `90,99,303/-. The assessment
was completed under section 143(3) on 21.08.2007.
Subsequently, the case was reopened and a notice
2 ITA No.366/Mds/2012
under section 148 was issued on 4.3.2010 and respond
to the notice assessee had filed return of income on 28th
May, 2010. Thereafter Assessing Officer had issued
notice under section 143(3) to the assessee. During the
course of the reassessment proceedings, the Assessing
Officer has observed that it is seen from the profit and
loss account for the year ending 31.3.2005, the
assessee had debited an amount of `24,04,453/- being
software expenses. The assessee had purchased a
software viz. "LIC PRINECT SIGNA STATION 74"from
Hiedlberg, Germany vide invoice no.1803015627 dated
15th December, 2004 through order no.1073009. From
the above details, the Assessing Officer has observed
that the assessee has purchased a new software and it
does not come under upgradation or for renewal of the
existing software. As per the provisions of section 32 of
the Act, computer includes software purchased and is
eligible for depreciation @ 60%. As per section 32(1)(ii),
the assessee owns licence to utilize the software for the
purpose of business. Manufacturing concern i.e.
3 ITA No.366/Mds/2012
Heidelberg, Germany holds patent but the right of
possession and usage was transferred to assessee by
Heidelberg, Germany through the form of licence which
is an asset. Moreover, the core software design is same
to be utilized for several years. The original software
itself is a capital asset and the expenses incurred were
capital expenditure. Since the purchase of software
made from Heidelberg, Germany is new software, it
cannot be allowed as revenue expenditure. Accordingly,
the Assessing Officer has made addition. The assessee
carried the matter in appeal before CIT(A). Before the
CIT(A), the contention of the assessee was that the
reopening was beyond four years and the original
assessment was completed under section 143(3) by
considering the same material and therefore, it
amounts to change of opinion and therefore, reopening
was bad in law. The CIT(A) after considering the
explanation of the assessee observed that the assessee
nowhere objected to issue notice under section 148 nor
questioned the same before Assessing Officer. The only
4 ITA No.366/Mds/2012
objection of the assessee before the Assessing Officer
was to pass a speaking order. The CIT(A) further
observed that only during the course of assessment
proceedings, that too in the month of December, a letter
dated 27th December, 2010 was filed before the
Assessing Officer where it is stated that proposed
reassessment under section 148 is not legally correct.
The CIT(A) with that observation without deciding legal
issue before him proceeded to decide the matter on
merits and confirmed the addition made by the
Assessing Officer. On being aggrieved, assessee carried
the matter in second appeal before the Tribunal.
3. At the time of hearing, counsel for the assessee
submitted that reopening was bad in law as it was done
beyond four years and in the original assessment
proceedings under section 143(3) the same material
was considered and thus it amounts to change of
opinion. He relied on the decision of a Third Member in
the case of ACIT Vs. Rolta India Ltd., reported in (2011)
132 ITD 98(Mum)(TM).
5 ITA No.366/Mds/2012
4. On the other hand, the Departmental
Representative supported the order of the CIT(A).
5. We have heard both parties and perused the
records. The issue before us for consideration is
whether the reassessment order passed by the
Assessing Officer by issuing notice under section 148 is
valid or not? In this context, the observation of the
CIT(A) vide para 5 of his order is reproduced as under:-
"5. I have gone through the information
furnished by the appellant and also the order
of the Assessing Officer. As seen from details,
in the letter filed on 27.12.2010 in one para,
the appellant submitted a case law ALA Firm
Vs. CIT 189 ITR 285, where the Supreme
Court held that reassessment cannot be
based on bare or mere change of opinion. The
appellant nowhere objected to the issue of
notice u/s.148 nor questioned the same. Even
during the course of initiation of proceedings
u/s.148, the appellant has not raised any
objection before the Assessing Officer to pass
a speaking order. It was only during the
course of assessment proceedings, that too in
the month of December, a letter dated
27.12.2010 was filed before the Assessing
Officer where it stated that the proposed
reassessment u/s.148 is not legally correct."
6. From the above order, we find that the CIT(A)
without deciding the issue in its right perspective by
6 ITA No.366/Mds/2012
simply saying that objection of the assessee was raised
before the Assessing Officer only by letter dated
27.12.2010 which is not valid in law. In our opinion,
CIT(A) has not considered the issue properly. We
therefore, set aside the impugned order and remit the
matter back to the CIT(A) to decide the matter afresh
by considering the case laws relied on by the assessee
and after giving reasonable opportunity of hearing to
the assessee.
7. In the result, the appeal filed by the assessee is
allowed for statistical purposes.
Order pronounced in the open court on Wednesday , the 27th of June,
2012 at Chennai.
Sd/- Sd/-
( Dr. O.K.Narayanan ) ( V.Durga Rao )
Vice President Judicial Member
Chennai,
Dated the 27th June, 2012.
somu
Copy to: (1) Appellant (2) Respondent (3) CIT
(4) CIT(A) (5) D.R. (6) G.F.
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