2017 (1) TMI 1528 - HC - Income Tax

Reopening of assessment - reasons to believe - Held that - In the absence of any tangible material, which can be the only basis for reopening a completed assessment, the Revenue could not have issued the impugned notice. As to the applicability of General Motors India Private Limited s case (2012 (8) TMI 714 - GUJARAT HIGH COURT) the Court is of the opinion that the view taken is sound and an added factor inhibited the Revenue from reopening the assessment. The benefit of carrying forward of depreciation was, in one sense, limited by the pre-existing rule that it can be done for eight years. All that the amendment did with effect from 01.04.2002 was to remove the cap which meant that the previously limited benefit was now not subjected to such restrictions. We also do not agree with the Revenue s contention with respect to non-application of mind. In view of the interpretation adopted by this Court, the occasion for disallowing itself would not have arisen given that the limit of eight years which existed prior to 2002 had been done away with on account of the amendment. This contention too is, therefore, rejected.

Summary

Issues:
Challenge to reassessment notice under Sections 147/148 of the Income Tax Act, 1961 for Assessment Year 2008-09 based on set-off of unabsorbed depreciation from previous years.

Analysis:
The petitioner challenges the reassessment notice proposing to reopen the completed assessment for AY 2008-09, arguing that the reasons to believe do not meet the required principles for valid reassessment, citing the Supreme Court's guidelines in Commissioner of Income Tax Vs. Kelvinator of India Ltd. The petitioner also relies on the Gujarat High Court ruling in General Motors India Private Limited case, emphasizing that the set-off of unabsorbed depreciation from past assessments should be allowed as per the law in force at the time of depreciation. Additionally, it is contended that the Assessing Officer did not correctly assess the depreciation claims.

The Revenue justifies the reassessment based on an audit objection, asserting that depreciation could only be carried forward for eight years as per the law applicable at the time. The Revenue argues that since the eight-year period had elapsed before AY 2008-09, the assessee was not entitled to claim the benefit of carrying forward the depreciation.

The Court observes that the reassessment notice is not sustainable as the Revenue did not have tangible material to support the reopening of the assessment. The Court agrees with the petitioner's interpretation that the amendment to Section 32(2) of the Act removed the previous restriction on carrying forward depreciation beyond eight years. Therefore, the impugned notice is quashed, and all related proceedings are annulled. The Court rejects the Revenue's contention of non-application of mind, emphasizing that the amendment removed the previous limitation on carrying forward depreciation, making the reassessment notice invalid.