2010 (2) TMI 974 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the reopening of assessment under section 147/148 of the Income-tax Act.
2. Justification of disallowance of depreciation and expenses by the Assessing Officer.

Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 147/148:
The primary issue was whether the reopening of the assessment by the Assessing Officer (AO) under section 147/148 was valid. The AO issued a notice under section 148 on September 18, 2006, believing that income had escaped assessment because the assessee claimed depreciation and expenses despite no manufacturing activity during the year. The assessee contended that all relevant details were provided during the original assessment under section 143(3), and no new facts had emerged to justify reopening. The Commissioner of Income-tax (Appeals) (CIT(A)) quashed the notice, holding that the reopening was based on a mere change of opinion, which is not permissible. The CIT(A) relied on multiple judicial precedents, including the Full Bench decision in CIT v. Kelvinator of India Ltd. and the Supreme Court's affirmation of this principle, stating that "mere change of opinion" cannot justify reopening an assessment.

2. Justification of Disallowance of Depreciation and Expenses:
The AO disallowed the depreciation on plant and machinery, factory building, dies and moulds, and expenses on power and fuel, wages, job charges, and miscellaneous expenses, citing no manufacturing activity during the year. The assessee argued that these expenses were incurred to maintain manufacturing facilities at the behest of overseas buyers, and the same were allowed in the original assessment. The CIT(A) found that the AO had already scrutinized these details during the original assessment and allowed the expenses. The reassessment was thus deemed a mere change of opinion, not supported by any new material facts. The ITAT upheld the CIT(A)'s decision, agreeing that the reassessment was invalid as it was based on the same facts and materials available during the original assessment.

Conclusion:
The ITAT dismissed the Revenue's appeal, confirming that the reopening of the assessment under section 147/148 was invalid as it was based on a mere change of opinion without any new material facts. Consequently, the other grounds of appeal regarding the disallowance of depreciation and expenses were rendered redundant.