2014 (3) TMI 392 - HC - Income Tax

Reopening of Assessment Claim of depreciation was not considered earlier - Held that - The revenue has met with both the grounds of the petitioner - the original file containing the reasons recorded shown - statement cannot be read out of context and in any case as explained in the affidavit would not mean that the reasons were not recorded before issuance of notice - The original assessment was not framed after scrutiny - The issue of depreciation on meters and capacitors therefore was never examined by the Assessing Officer - The question of change of opinion therefore would not arise. Relying upon Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. reported in 2007 (5) TMI 197 - SUPREME Court - reopening in such a case would be permissible - The additional legal contentions raised by the assessee are based on factual matrix, foundation for which has not been laid in the petition - if there is no sanction as required under section 151 of the Act, the reopening would still be permissible the findings of the ITAT upheld Decided against Assessee.

Summary

Issues:
Challenge to notice of reopening for Assessment Year 1998-1999 based on depreciation claimed on meters and capacitors at 100%, reasons recorded, timing of reasons recorded, change of opinion, requirement of sanction under Section 151 of the Income Tax Act.

Detailed Analysis:

1. Challenge to Notice of Reopening: The petitioner challenged the notice of reopening for Assessment Year 1998-1999, citing the original return filed under Section 143(1) without scrutiny. The reasons for reopening highlighted the excess depreciation claimed on meters and capacitors at 100%. The petitioner contended that the reasons were not recorded before issuing the notice, raising concerns about the timing and validity of the notice.

2. Timing of Reasons Recorded: The respondent clarified that the reasons were recorded by the Assistant Commissioner on the same day as the notice was issued. It was explained that the Assessing Officer had already addressed the issue of depreciation on meters and capacitors during the assessment for the previous year, which justified the reference to the Assessment Year 2002-2003 in the reasons recorded.

3. Change of Opinion: The High Court noted that since the original assessment was not done under scrutiny, the question of change of opinion did not arise. Citing a Supreme Court decision, the Court deemed the reopening permissible in such circumstances, especially considering the unexamined issue of depreciation on meters and capacitors.

4. Requirement of Sanction under Section 151: The petitioner raised concerns about the lack of sanction from the Competent Authority before issuing the notice. However, the Court observed that these grounds were not included in the petition, and thus, were not examined. The Court left it open for the petitioner to raise these contentions in the future if needed.

5. Final Disposition: The Court disposed of the petition, discharging the rule and vacating interim relief. While acknowledging the possibility of raising additional contentions, especially regarding the requirement of sanction under Section 151, the Court found no reason to quash the notice of reopening based on the legal contentions presented in the petition.

In conclusion, the High Court upheld the validity of the notice of reopening for Assessment Year 1998-1999, emphasizing the timely recording of reasons, the unexamined issue of depreciation on meters and capacitors, and the permissibility of reopening in the absence of a prior scrutiny assessment. The Court also highlighted the petitioner's option to raise additional contentions, particularly regarding the need for sanction under Section 151 of the Income Tax Act, in future proceedings.